Takeda(TAK) - 2023 Q1 - Quarterly Report

Notice of Convocation of the 146th Ordinary General Meeting of Shareholders Meeting Details and Objectives Takeda's 146th Ordinary General Meeting of Shareholders, scheduled for June 29, 2022, will report on fiscal year 145 and address five key proposals, with attendance limited due to COVID-19 - The 146th Ordinary General Meeting of Shareholders is scheduled for June 29, 2022, at the Imperial Hotel, Osaka[1][11] - Due to COVID-19 precautions, shareholders are encouraged to vote in advance, with in-person attendance restricted to a maximum of 500 shareholders[1][11] Matters to be Resolved | Proposal Number | Description | | :--- | :--- | | First Proposal | Appropriation of Surplus | | Second Proposal | Partial Amendment to the Articles of Incorporation | | Third Proposal | Election of Eleven (11) Directors who are not Audit and Supervisory Committee Members | | Fourth Proposal | Election of Four (4) Directors who are Audit and Supervisory Committee Members | | Fifth Proposal | Payment of Bonuses to Directors who are not Audit and Supervisory Committee Members | Guidance on Voting and Participation Shareholders can vote in writing or online by June 28, 2022, with electronic votes taking precedence; a live stream and advance question submission are available - The deadline for exercising voting rights, either in writing or via electronic means, is 5:30 p.m. on June 28, 2022[8][9] - If voting rights are exercised multiple times or through different methods, the last vote cast via electronic means will be considered valid[13] - A live internet stream of the meeting will be available for shareholders, with advance questions accepted online from June 8 to June 24, 2022[27][28][29] Reference Document for the General Meeting of Shareholders First Proposal: Appropriation of Surplus The company proposes a 90 JPY year-end dividend, maintaining a 180 JPY total annual dividend per share, consistent with its capital allocation and shareholder return policy Proposed Dividend | Dividend Type | Amount per Share (JPY) | Total Amount (billion JPY) | Effective Date | | :--- | :--- | :--- | :--- | | Year-end | 90 | 140.36 | June 30, 2022 | - The total annual dividend is 180 JPY per share, consistent with the prior fiscal year and the company's established dividend policy[35][36] Second Proposal: Partial Amendment to the Articles of Incorporation The company proposes amending its Articles of Incorporation to implement electronic provision of shareholder meeting materials, aligning with the amended Companies Act effective September 1, 2022 - The amendment is proposed to comply with the revised Companies Act, which mandates a system for electronic provision of shareholder meeting materials, effective September 1, 2022[37] - Key changes include establishing a new Article 14 for electronic provision of information and limiting the scope of materials sent in hardcopy to shareholders who specifically request them[40] Third Proposal: Election of Eleven (11) Directors who are not Audit and Supervisory Committee Members The company proposes electing eleven directors not on the Audit and Supervisory Committee, including eight re-elections and three new candidates, with seven designated as External Directors Candidates for Director (not ASC Member) | Candidate Name | Status | Role | | :--- | :--- | :--- | | Christophe Weber | Re-elected | President and CEO | | Masato Iwasaki | Re-elected | Representative Director | | Andrew Plump | Re-elected | President, R&D | | Costa Saroukos | Re-elected | Chief Financial Officer | | Olivier Bohuon | Re-elected | External Director | | Jean-Luc Butel | Re-elected | External Director | | Ian Clark | Re-elected | External Director | | Steven Gillis | Re-elected | External Director | | Masami Iijima | Newly elected | External Director | | John Maraganore | Newly elected | External Director | | Michel Orsinger | Newly elected | External Director | - The proposal includes the election of seven External Directors to ensure robust corporate governance and oversight[48] Fourth Proposal: Election of Four (4) Directors who are Audit and Supervisory Committee Members The company proposes electing four External Directors to the Audit and Supervisory Committee, including two re-elections and two new candidates, all designated as Independent Directors Candidates for Director (ASC Member) | Candidate Name | Status | Role | | :--- | :--- | :--- | | Koji Hatsukawa | Re-elected | External Director, Head of ASC | | Emiko Higashi | Re-elected | External Director, ASC Member | | Yoshiaki Fujimori | Newly elected | External Director, ASC Member | | Kimberly A. Reed | Newly elected | External Director, ASC Member | - All four candidates for the Audit and Supervisory Committee are External Directors, reinforcing the independence of the committee's oversight function[106] Fifth Proposal: Payment of Bonuses to Directors who are not Audit and Supervisory Committee Members The company proposes bonuses up to 500 million JPY for three non-ASC Directors, based on fiscal year KPI achievement, including Consolidated Revenue and Core Operating Profit - A total bonus amount of up to 500 million JPY is proposed for three Directors (excluding overseas and External Directors) who are not ASC members[127] - The bonus payment is linked to the achievement of fiscal year key performance indicators such as Consolidated Revenue, 14 Global Brands + New Product Incremental Revenue, and Core Operating Profit[127] Business Report Current State of the Takeda Group Takeda is a global R&D-driven biopharmaceutical company focused on key therapeutic areas, leveraging its pipeline and cash flow for growth, deleveraging, and shareholder returns - Takeda's R&D efforts are concentrated in four main therapeutic areas: Oncology, Rare Genetics and Hematology, Neuroscience, and Gastroenterology (GI)[130] - The company's strategy focuses on delivering top-line growth, maintaining competitive margins, and generating strong cash flow to fund R&D, reduce debt, and provide shareholder returns[131] Business Performance for Fiscal 2021 Takeda's FY2021 revenue grew 11.6% to 3,569.0 billion JPY, driven by core therapeutic areas, but operating profit declined 9.5% to 460.8 billion JPY due to lower divestiture gains FY2021 Consolidated Financial Results (Billion JPY) | Metric | FY2021 (ended Mar 2022) | FY2020 (ended Mar 2021) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 3,569.0 | 3,197.8 | +11.6% | | Operating profit | 460.8 | 509.3 | -9.5% | | Net profit for the year | 230.2 | 376.2 | -38.8% | - Revenue growth was supported by all core therapeutic areas, particularly Gastroenterology, where ENTYVIO sales increased 21.5% to 521.8 billion JPY[135][138] - The decline in operating and net profit was largely due to a significant decrease in 'Other operating income', which included a 228.9 billion JPY divestiture gain in the prior year[152][156][160] FY2021 Underlying Results | Metric | Growth Rate | | :--- | :--- | | Underlying Revenue Growth | +7.4% | | Underlying Core Operating Profit Growth | +5.4% | | Underlying Core EPS Growth | +9.4% | Activities and Results of Research & Development Takeda's FY2021 R&D expenses were 526.1 billion JPY, with key FDA approvals for EXKIVITY and LIVTENCITY, strategic partnerships, but also the discontinuation of the TAK-721 program - R&D expenses for the fiscal year totaled 526.1 billion JPY[178] - Key U.S. FDA approvals were secured for EXKIVITY (mobocertinib) for NSCLC and LIVTENCITY (maribavir) for post-transplant CMV infection[200][216] - The development program for TAK-721 (budesonide oral suspension) for eosinophilic esophagitis was discontinued after receiving a Complete Response Letter from the FDA[228] - Takeda expanded R&D capabilities through external collaborations, including exercising its option to acquire GammaDelta Therapeutics to advance its gamma delta T cell therapy platforms[246] Issues for the Takeda Group to Address Takeda addresses a dynamic pharmaceutical landscape through its 'Patient, People, Planet' philosophy, focusing on innovation, digital transformation, sustainability, and a capital allocation policy prioritizing growth, deleveraging, and 180 JPY per share dividends - Takeda's strategy is guided by its imperatives: Patient (innovative medicines), People (exceptional employee experience), and Planet (sustainability and environmental leadership)[249][250] - The company leverages data, digital, and AI to enhance clinical trials, manufacturing, and employee experiences[255] - In response to the Ukraine-Russia conflict, Takeda suspended new investments and promotions in Russia while maintaining essential medicine supply to patients in the region[273][274] - The company's capital allocation policy prioritizes investing in growth drivers, rapid deleveraging (targeting 2x net debt/adjusted EBITDA by FY2023), and shareholder returns, including an annual dividend of 180 JPY per share[277] Financial Forecast for Fiscal 2022 Takeda forecasts FY2022 reported revenue of 3,690.0 billion JPY (+3.4% YoY), operating profit of 520.0 billion JPY (+12.8% YoY), and net profit of 292.0 billion JPY (+26.9% YoY), driven by growth products FY2022 Full Year Reported Forecast (Billion JPY) | Metric | FY2022 Forecast | Change vs. FY2021 (%) | | :--- | :--- | :--- | | Revenue | 3,690.0 | +3.4% | | Operating profit | 520.0 | +12.8% | | Net profit for the year | 292.0 | +26.9% | | Core Operating Profit | 1,100.0 | +15.2% | - Growth is expected from products like ENTYVIO, TAKHZYRO, and newly launched LIVTENCITY and EXKIVITY, which will offset the impact of VELCADE's loss of exclusivity in the U.S[280] - The forecast includes approximately 50.0 billion JPY in revenue from COVID-19 vaccines[289] Executives of the Company As of March 31, 2022, Takeda's Board comprises 16 members (4 internal, 12 external), with compensation designed to attract global talent and align with long-term value, overseen by an external director-led Compensation Committee - As of March 31, 2022, the Board of Directors is composed of 4 internal directors and 12 external directors, with an external director chairing the board meetings[298] Total Director Compensation for FY2021 (million JPY) | Category | Number of People | Total Compensation (million JPY) | Basic Compensation (million JPY) | Bonus (million JPY) | Performance Share Units (million JPY) | Restricted Stock Units (million JPY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Directors (not ASC members) | 12 | 3,010 | 677 | 443 | 1,182 | 708 | | Directors (ASC members) | 5 | 174 | 98 | - | - | 76 | - The Director's Compensation Policy is designed to be competitive in the global market, linking pay to performance through short-term bonuses (based on annual KPIs like revenue and profit) and long-term stock incentives (based on 3-year performance and share price)[312][314][330] - The Compensation Committee, comprised entirely of External Directors, has the authority to make decisions on individual compensation for Internal Directors to ensure appropriateness and transparency[335][336] Financial Statements Consolidated Financial Statements For FY2021, Takeda's consolidated revenue increased 11.6% to 3,569.0 billion JPY, but operating profit decreased to 460.8 billion JPY, and net profit to 230.1 billion JPY Consolidated Statement of Profit or Loss (billion JPY) | Item | Amount (FY2021, billion JPY) | Amount (FY2020, billion JPY) | | :--- | :--- | :--- | | Revenue | 3,569.006 | 3,197.812 | | Operating profit | 460.844 | 509.269 | | Net profit for the year (attributable to owners) | 230.059 | 376.005 | Consolidated Statement of Financial Position (billion JPY) | Item | As of Mar 31, 2022 (billion JPY) | As of Mar 31, 2021 (billion JPY) | | :--- | :--- | :--- | | Total Assets | 13,178.018 | 12,912.293 | | Total Liabilities | 7,494.495 | 7,735.116 | | Total Equity | 5,683.523 | 5,177.177 | Unconsolidated Financial Statements Takeda's unconsolidated FY2021 net sales increased to 764.3 billion JPY, with net income rising to 324.5 billion JPY, and total assets at 9,641.6 billion JPY Unconsolidated Statement of Operations (billion JPY) | Item | Amount (FY2021, billion JPY) | Amount (FY2020, billion JPY) | | :--- | :--- | :--- | | Net sales | 764.301 | 602.557 | | Operating income | 293.709 | 121.071 | | Net income | 324.450 | 247.513 | Unconsolidated Balance Sheet (billion JPY) | Item | As of Mar 31, 2022 (billion JPY) | As of Mar 31, 2021 (billion JPY) | | :--- | :--- | :--- | | Total Assets | 9,641.648 | 10,856.450 | | Total Liabilities | 5,346.749 | 6,421.561 | | Total Net Assets | 4,294.899 | 4,434.889 | Audit Reports Independent Auditor's Report KPMG AZSA LLC issued an unqualified opinion on Takeda's consolidated and unconsolidated financial statements for FY2021, affirming fair presentation under IFRS and Japanese GAAP, respectively - The auditor, KPMG AZSA LLC, opined that the consolidated financial statements present fairly, in all material respects, the financial position and results of operations of the Company and its subsidiaries[393] - The auditor also opined that the unconsolidated financial statements and supplementary schedules present fairly, in all material respects, the financial position and results of operations in accordance with Japanese GAAP[414] Audit Report of the Audit and Supervisory Committee The Audit and Supervisory Committee confirmed the accuracy of the Business Report, found no director misconduct, and deemed KPMG AZSA LLC's audit methods and results for both financial statements reasonable - The Business Report and its supplementary schedules were found to accurately present the status of the Company in accordance with laws, regulations, and the Articles of Incorporation[438] - No misconduct or material violations of law or the Articles of Incorporation were found with respect to the directors' performance of their duties[438][440] - The committee found the methods and results of the audit by the accounting auditors, KPMG AZSA LLC, to be reasonable for both the unconsolidated and consolidated financial statements[442]