4519.T

Financial Performance

• Both revenue and profit grew year-on-year in the first half of FY 2026, driven by steady domestic and overseas product sales and a large increase in other revenue. Progress is on track to meet full-year forecasts.
• Weaker yen against the Swiss franc delivered a positive 26.9 billion yen impact on revenue and 19.8 billion yen impact on operating profit compared to the prior year.
• The company maintains a strong balance sheet, with 962.6 billion yen in net cash and an equity ratio of 82.8%.

Commercial Highlights

• NEMLUVIO (for prurigo nodularis and atopic dermatitis) recorded global first half sales of USD 433 million, with 42% new-to-brand prescription share for prurigo nodularis, showing strong momentum. It has launched in multiple European countries and is undergoing filings in other markets.
• Foundayo, a GLP-1 product for obesity, launched in the U.S. in April 2026, and royalty revenue from local sales started being recognized in Q2. It is primarily prescribed to GLP-1-naive patients, with expansion to type 2 diabetes indications and additional country launches planned.
• Domestic Vabysmo sales grew 25.8% YoY in H1, reaching over 30% market share in its core indication, outperforming initial forecasts due to accelerated adoption after the 2025 launch of pre-filled syringes.
• Elevidys is progressing on plan, with prioritization of treatment for patients under 8 years old to avoid missed treatment opportunities.

R&D Pipeline Highlights

• 8 regulatory filings were completed in Japan in H1, putting the company on track to hit its target of the highest annual number of filings in company history. Divarasib for second-line non-small cell lung cancer had its filing accelerated from 2027 to 2026, bringing the planned 2026 total filings to 16 (up from the initial 15).
• Multiple new approvals were received: Alecensa for advanced/recurrent ALK fusion-positive solid tumors, Avastin for neurofibromatosis type 2, and Rituxan for adult-onset relapsing/steroid-dependent nephrotic syndrome.
• Key pipeline updates: Two Phase III studies for NXT007 (zemocimig, a next-generation hemophilia A treatment) were initiated. Enspryng for thyroid eye disease was filed in the U.S. and granted priority review with an October 15 PDUFA date. Phase III for PiaSky (for atypical hemolytic uremic syndrome) met all endpoints, with regulatory submissions planned in Japan, the U.S. and Europe by the end of 2026.
• AQUA07, an in-house developed allosteric ALK inhibitor using the company's proprietary SnipeTide macrocyclic peptide platform, received U.S. FDA fast track designation, and the first patient has been dosed in its Phase I study for ALK-positive non-small cell lung cancer. It is designed to work against existing ALK inhibitor resistance and improve efficacy when combined with existing therapies.
• DONQ52, a multi-specific antibody for celiac disease (a high unmet need indication with no approved treatments), is now in a Phase IIa study after slower-than-planned development in the early exploratory phase.

Strategic Updates

• A new Strategic Investment Department has been established to drive open innovation and strategic deployment of accumulated cash, focused on external investments, acquisitions, and in-licensing to complement in-house R&D and accelerate long-term growth. The company will continue to pursue a stable dividend payout, with a planned full-year dividend of 132 yen per share, marking 10 consecutive years of dividend increases.

• Management confirmed that first half performance is slightly ahead of the initial full-year plan, and the company remains on track to achieve its full FY 2026 financial and operational forecast, with no upward or downward revision to the full-year guidance announced in January 2026.
• The 2026 regulatory filing target was increased to 16 from the initial 15, after divarasib's filing was accelerated from 2027 to 2026, and management confirms progress is on track to hit this updated target.
• The planned full-year ordinary dividend of 132 yen per share is maintained, representing the 10th consecutive annual dividend increase, in line with the company's stable dividend payout policy.
• No changes were made to the existing long-term R&D milestone timeline, with the exception of accelerating divarasib's filing and pushing back the filing for inavolisib in endocrine therapy-sensitive breast cancer from 2028 to 2029.

For the first half of FY 2026, Chugai Pharmaceutical recorded total consolidated revenue of 663.3 billion yen, an increase of 84.8 billion yen (14.7%) year-on-year. Core operating profit reached 329.1 billion yen, up 57.1 billion yen (21%) year-on-year, with a 2.6 percentage point expansion in operating margin to 49.6%. Net income after tax was 238.4 billion yen, an increase of 44.9 billion yen (23.2%) year-on-year.

By revenue segment:

• Product sales: Total 566.5 billion yen, up 55.1 billion yen (10.8%) year-on-year, accounting for 85.4% of total revenue
  • Domestic product sales: 237.9 billion yen, up 14.6 billion yen (6.5%) year-on-year, accounting for 35.9% of total revenue. Domestic oncology sales reached 117.4 billion yen (+0.7% YoY), while domestic specialty sales hit 120.5 billion yen (+12.9% YoY). Growth from mainstay and new products offset the negative impact of NHI drug price revisions and generic penetration.
  • Overseas product sales: 328.6 billion yen, up 40.5 billion yen (14.1%) year-on-year, accounting for 49.5% of total revenue. Growth was driven by increased export volumes of Hemlibra and NEMLUVIO and positive foreign exchange impacts, which offset declines in export unit prices.
• Other revenue: Total 96.8 billion yen, up 29.8 billion yen year-on-year, accounting for 14.6% of total revenue. Growth came from higher one-time income and increased royalty income related to Hemlibra and NEMLUVIO, plus newly recognized royalty revenue from Foundayo starting in Q2.

• The implementation and final impact of U.S. Medicare drug price reforms and international reference pricing remains uncertain, as policy details and stakeholder negotiations are still ongoing.
• NXT007's efficacy, safety, and market positioning relative to existing standard-of-care treatments (including Hemlibra) have not been confirmed, and clinical trial results may not meet the company's expectations.
• Early-stage pipeline assets including AQUA07 and DONQ52 still have unknown safety and efficacy profiles that will only be confirmed through ongoing clinical testing, and may not ultimately deliver the expected therapeutic or commercial benefits.
• Quarterly overseas sales can fluctuate due to shipment timing and partner inventory planning, which can create volatility in quarterly results even when underlying demand is stable.
• Generic penetration and mandatory NHI drug price revisions in Japan continue to create downward pressure on sales of older legacy products.

Q: How is Foundayo's U.S. launch progressing relative to the full-year forecast, and what is sparsentan's domestic market potential?

A: Foundayo sales are managed by partner Eli Lilly, so Chugai cannot provide detailed sales updates. Overall, first half performance for the full company is ahead of plan, and the full-year forecast remains achievable. For sparsentan, an oral once-daily treatment for IgA nephropathy, it offers strong efficacy and convenience compared to competing pipeline products, and is expected to launch earlier than alternatives, giving it high potential to capture significant domestic market share.

Q: Why was the new Strategic Investment Department established, and what is its expected role?

A: As part of the company's TOP I 2030 strategy, Chugai has already built successful in-house drug discovery platforms and expanded early collaboration with academia and biotech ventures. The new department formalizes the next step of open innovation: enabling more active strategic investments, M&A, and co-development partnerships to combine external innovation with Chugai's internal capabilities. It also enables more effective deployment of the company's accumulated net cash balance to drive long-term shareholder value growth.

Q: Why is NEMLUVIO royalty revenue flat between Q1 and Q2 despite strong reported Galderma sales growth, and why did export volume decline quarter-over-quarter?

A: Chugai does not disclose the detailed royalty calculation methodology or breakdown, but flat Q1-Q2 royalty is consistent with existing contractual terms. Galderma local sales and Chugai export volumes do not align directly, because Galderma adjusts purchase volumes based on their own inventory planning, not just monthly local sales. There are no issues with underlying demand, and Chugai meets all of Galderma's shipment requests.

Q: Is share buyback technically possible for Chugai, and what size of strategic acquisitions is the new department targeting?

A: Share buyback is technically possible, and the company evaluates all options for returning capital to shareholders. The company prioritized a special dividend this cycle to maintain Roche's existing ownership ratio and floating share requirements, so that option was selected. For investment size, the company will set investment limits based on available cash and required operational funding, and no specific target size will be disclosed publicly at this time.