< Half Year Financial Results (Core results, January to June 2023)>

Chugai reported increased revenue and operating profit for the first half year (Core-basis) consistent with first-quarter results, compared to the same period of the previous fiscal year.

Revenue increased in 15% overall, with growth in both domestic and overseas sales and other revenue. Domestic sales increased by approximately 15%. In the oncology field, the growth was approximately 3% year-on-year due to the contribution of steady market penetration of new product Polivy, and the mainstay product Tecentriq despite the impact of biosimilars and NHI drug price revisions on mature products such as Avastin^® and Herceptin^®. In the specialty field, sales increased by 24%, driven by the penetration of new products Vabysmo and Evrysdi, as well as the contribution of mainstay products Hemlibra and Enspryng, and the supply of Ronapreve to the government in the first quarter. Overseas sales increased by 17%. Sales of Alecensa doubled year-on-year, and sales of Hemlibra were also solid. Other revenue increased by approximately 11%, mainly due to the increase in milestone revenues. Revenue on IFRS basis, including Non-Core items, decreased due to the one-time impact of the lump-sum income from the settlement agreement with Alexion Pharmaceuticals, Inc in the previous year.

Cost to sales ratio rose by 3.5% points year-on-year to 46.3%, mainly due to the impact of foreign exchange. Research and development expenses increased mainly due to investments into drug discovery and early development, including the start of operation of Chugai Life Science Park Yokohama, and increases associated with the progress of development projects. Selling, general and administration expenses were comparable to the same period of last year. Other operating income (expense) was an income of ¥16.2 billion, mainly due to the recognition of income from disposal of product rights and gain on sale of property, plant and equipment. As a result, Core operating profit totaled ¥232.0 billion (+15.2%).

<R&D activities>

The company also made good progress in research and development. Among our in-house projects, anti-complement C5 recycling antibody crovalimab was filed in Japan, the U.S., and Europe in addition to filing in China, for paroxysmal nocturnal hemoglobinuria (PNH). Anti-IL-31 receptor A antibody nemolizumab was also filed for approval in Japan for additional indication of prurigo nodularis, and pruritus associated with atopic dermatitis (pediatric), by Maruho, the licensee of the drug in Japan. Furthermore, ROSE12 entered the clinical development phase for solid tumors, as the second Switch Antibody ^TM project applying Chugai’s proprietary antibody engineering technology. Overall, in-house projects which will contribute to the company’s mid to long term growth, is progressing steadily. As for projects in-licensed from Roche, anti-IL -6 antibody RG6179 newly entered the company’s pipeline, as an ophthalmology project for noninfectious uveitic macular edema.

In June, Chugai announced its decision to establish a corporate venture capital (CVC) “Chugai Venture Fund, LLC,” which will make investments in drug discovery targets, drug discovery technologies and digital technologies that will lead to the creation of innovative new drugs. Primarily targeting drug discovery start-ups, it will invest an overall US $200 million, as well as providing technical advisory support and promoting partnership with Chugai. Through co-creation with investment partners, this CVC aims to combine Chugai’s strengths with external technologies, and to further accelerate our drug discovery engine.

[2023 half year results]

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.

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