On January 29, 2021 Astellas Pharma Inc. (TSE: 4503, President and CEO: Kenji Yasukawa, "the Company") reported the financial results for the first nine months (April 1, 2020 – December 31, 2020) of the fiscal year 2020 (FY2020) ending March 31, 2021 (Press release, Astellas, JAN 29, 2021, View Source [SID1234574380]).
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1. Qualitative information on consolidated financial results for the first nine months of FY2020 (1) Business performance
Revenue, core operating profit and core profit decreased across the board. Revenue-Sales of main products XTANDI for the treatment of prostate cancer and XOSPATA for the treatment of acute myeloid leukemia continued to grow.
In addition, growth of the co-promotion revenue of PADCEV for the treatment of urothelial cancer, which was launched in the United States in December 2019, contributed to revenue.
-Moreover, sales of Betanis / Myrbetriq / BETMIGA for the treatment of overactive bladder ("OAB") showed steady progress, and new product group in Japan achieved sales growth, including those of EVENITY for the treatment of osteoporosis, Suglat and SUJANU Combination Tablets for the treatment of diabetes mellitus.
-However, revenue decreased mainly due to the loss of market exclusivity of Vesicare for the treatment of OAB in Europe and Celecox for the treatment of inflammation and pain in Japan, and the termination of sales agreements for Symbicort for the treatment of asthma, human vaccines of KM Biologics Co., Ltd. and Micardis family for the treatment of hypertension. Sales were also negatively impacted due to the spread of COVID-19.
As a result of the above, revenue in the first nine months of FY2020 decreased by 4.8% compared to those in the corresponding period of the previous fiscal year ("year-on-year") to ¥940.9 billion. Core operating profit / Core profit-Gross profit decreased by 1.8% year-on-year to ¥753.2 billion.
The cost-to-revenue ratio fell by 2.5 percentage points year-on-year to 20.0%, mainly due to changes in product mix.-Selling, general and administrative expenses increased by 2.7% year-on-year to ¥363.0 billion.
There was a decrease in expenses due to refraining from promotional activities, etc. due to the spread of COVID-19, but total selling, general and administrative expenses increased due to the increase of co-promotion fees associated with the growth of sales of XTANDI in the United States, and there was a one-off reducing factor on expenses from a reversal of loss allowances in the corresponding period of the previous fiscal year.-Research and development (R&D) expenses increased by 5.7% year-on-year to ¥168.8 billion.
There was a decrease in development expenses due to the impact of the spread of COVID-19 on the execution of a portion of clinical trials, but total R&D expenses increased due to an increase in development expenses for key post-POC pipeline projects, and the addition of R&D expenses from Audentes Therapeutics, Inc., which was acquired in January 2020. The R&D cost-to-revenue ratio was up 1.8 percentage points year-on-year to 17.9%.-Amortisation of intangible assets increased by 12.0% year-on-year to ¥17.3 billion.
As a result of the above, core operating profit decreased by 13.6% year-on-year to ¥203.7 billion, and core profit decreased by 13.1% year-on-year to ¥166.6 billion. 3 Impact of exchange rate on financial results The exchange rates for the yen in the first nine months of FY2020 are shown in the table below. The resulting impacts were a ¥7.3 billion decrease in revenue and a ¥3.6 billion decrease in core operating profit compared with if the exchange rates of the first nine months of FY2019 were applied.
Average rate First nine months
As "Other expenses," the Company recorded impairment losses of ¥30.2 billion in relation to the termination of development for the anti-TIGIT antibody ASP8374/PTZ-201 in the first six months of FY2020, and as a result, the decrease in profit was larger compared to the financial results on a core basis. * Prograf: Includes Advagraf, Graceptor, and ASTAGRAF XL.-Sales of XTANDI increased by 15.0% year-on-year to ¥342.7 billion. Sales increased in all regions of Japan, United States, Established Markets, Greater China, and International.-Sales of XOSPATA increased by 80.7% year-on-year to ¥17.6 billion. This was due to its sales growing in Japan and United States in addition to the contribution of its sales in Established Markets, where it was launched in November 2019.-Co-promotion revenue of PADCEV amounted to ¥9.4 billion in United States.-Sales of Betanis / Myrbetriq / BETMIGA increased by 1.0% year-on-year to ¥122.3 billion.
While sales grew in United States, Established Markets and Greater China, sales decreased in Japan and International due to decreased demand, etc. associated with the reduction of patient visits to hospitals/clinics as a result of the impact of the spread of COVID-19.-Sales of Vesicare decreased by 31.8% year-on-year to ¥24.7 billion mainly due to the impact of the effect of generic drugs resulting from the loss of market exclusivity for the drug in Europe.
-Sales of Prograf decreased by 5.4% year-on-year to ¥138.3 billion. While sales grew in Greater China, sales decreased in other regions.
-In Japan, new product group sales continued to increase, including those of EVENITY, Suglat and SUJANU Combination Tablets. On the other hand, the main factors for the decrease in sales were the loss of market exclusivity for Celecox and the termination of sales agreements for Symbicort, human vaccines of KM Biologics Co., Ltd. and Micardis family.
-In United States, sales of pharmacologic stress agent Lexiscan decreased due to decreased demand associated with the reduction of patient visits to hospitals/clinics as a result of the impact of the spread of COVID-19, mainly in the first three months of FY2020. 6
(2) Financial position i. Assets, equity and liabilities In the first three months of FY2020, the consolidated statement of financial position as of March 31, 2020 was retrospectively revised due to adjustments of fair value of assets acquired and liabilities assumed for Audentes Therapeutics, Inc., which was acquired in January 2020.
As a result, goodwill increased, and intangible assets and deferred tax liabilities decreased in comparison to the figures prior to the retrospective adjustment. The Company is still in the process of finalizing the fair value measurement as of December 31, 2020. An overview of the consolidated statement of financial position as of December 31, 2020 and the main changes from the end of the previous fiscal year after the retrospective adjustment are shown below. Assets Total assets as of December 31, 2020 saw a decrease of ¥18.3 billion compared to the end of the previous fiscal year to ¥2,296.8 billion.
As of December 31, 2020: ¥1,433.5 billion (a decrease of ¥14.1 billion)-Property, plant and equipment decreased by ¥13.4 billion compared to the end of the previous fiscal year to ¥255.2 billion.-Goodwill decreased by ¥10.5 billion compared to the end of the previous fiscal year to ¥267.8 billion, and intangible assets decreased by ¥27.6 billion compared to the end of the previous fiscal year to ¥697.2 billion. Intangible assets decreased mainly due to the recording of impairment losses in relation to the termination of development for the anti-TIGIT antibody ASP8374/PTZ-201 in the first six months of FY2020.
Equity Total equity as of December 31, 2020 saw an increase of ¥79.4 billion compared to the end of the previous fiscal year to ¥1,368.6 billion, making the ratio of equity attributable to owners of the parent to gross assets 59.6%.-While profit stood at ¥132.9 billion, the Company paid ¥76.2 billion of dividends of surplus. 8 Liabilities Total liabilities decreased by ¥97.8 billion compared to the end of the previous fiscal year to ¥928.2 billion.
.-Income tax paid decreased by ¥20.0 billion year-on-year to ¥10.5 billion. Cash flows from investing activities Net cash flows used in investing activities in the first nine months of FY2020 was ¥67.7 billion, a decrease in outflow of ¥6.7 billion year-on-year. Cash flows from financing activities Net cash flows used in financing activities in the first nine months of FY2020 was ¥171.3 billion, an increase in outflow of ¥46.1 billion year-on-year.
-While proceeds from long-term borrowings amounted to ¥80.0 billion, the balance of bonds and short-term borrowings decreased by ¥161.0 billion. Dividends paid increased by ¥2.6 billion year-on-year to ¥76.2 billion.
As a result, cash and cash equivalents totaled ¥306.5 billion as of December 31, 2020, a decrease of ¥11.9 billion compared to the end of the previous fiscal year.(3) Consolidated business forecasts for FY2020 and other forward-looking statements The Company’s business forecasts are presented on a core basis and full basis. The consolidated full-year business forecasts for FY2020 are shown below.
The Company has left its business forecasts unchanged from the consolidated full-year business forecasts announced in October 2020.Business Combinations For the nine months ended 31 December 2020 Audentes Therapeutics, Inc. On 15 January 2020, Audentes Therapeutics, Inc. became a consolidated subsidiary of the Company through a cash tender offer followed by a merger. During the three months ended 30 June 2020, further facts came to light and additional analysis was performed on the fair value measurement of the assets acquired and liabilities assumed at the acquisition date. As a result, the provisional fair values were adjusted as follows.
The initial accounting for the business combination is incomplete as of 31 December 2020 as Astellas Pharma Inc. and its subsidiaries are still in the process of finalizing the fair value measurement.Goodwill mainly comprises the value of expected synergies arising from the acquisition and future economic benefits, which is not separately recognised. Financial assets at FVTOCI (debt instruments) are included in "Other financial assets" in the condensed interim consolidated statement of financial position.
Along with this adjustment, the Company retrospectively revised the corresponding balances in the condensed interim consolidated statement of financial position as of 31 March 2020. As a result, intangible assets and deferred tax liabilities decreased by 13,734 million yen and 2,992 million yen respectively, and goodwill increased by 10,743 million yen.