Takeda(TAK)2024-08-02 19:21Financial Data and Key Metrics - Revenue grew by 2.1% at constant exchange rate (CER) in Q1, driven by strong performance of Growth & Launch Products, which grew 17.8% at CER and now represent 46% of total revenue [3][4] - Core operating profit margin was 31.6% in Q1, benefiting from phasing of R&D investment, reduction in other OpEx, and temporarily lower-than-anticipated generic erosion of VYVANSE in the U.S. [4] - Reported operating profit declined by 1.3% to JPY 166.3 billion, impacted by restructuring expenses and impairment of soticlestat after Phase III study readouts [7] - Core EPS was JPY 176, while reported EPS was JPY 61 [8] - Operating cash flow was JPY 170.3 billion, and adjusted free cash flow was JPY 23.7 billion, reflecting significant business development activity [8] Business Line Performance - ENTYVIO growth accelerated to 7.6% at CER, supported by the launch of ENTYVIO Pen in the U.S., with 2 out of 3 patients having access as of July [10] - TAKHZYRO grew 19.8% at CER, capitalizing on its leading position in the expanding prophylaxis market for hereditary angioedema (HAE) [10] - Immunoglobulin portfolio grew 21.9%, while albumin declined 14.2% due to anticipated phasing of supply to China, with recovery expected later in the year [10] - FRUZAQLA and QDENGA showed strong initial uptake, with FRUZAQLA generating JPY 11.9 million in revenue and QDENGA now available in 21 countries [11] Market Performance - Growth & Launch Products grew 17.8% at CER, offsetting the loss of exclusivity impact from products like VYVANSE in the U.S. and AZILVA in Japan [9] - The depreciation of the yen versus major currencies provided an additional revenue tailwind of JPY 127.2 billion, resulting in 14.1% growth on an actual FX basis [9] - QDENGA saw strong demand in both endemic and non-endemic markets, with WHO pre-qualification and Gavi support expected to drive further awareness and access [11] Strategic Direction and Industry Competition - The company is focused on improving core operating profit margin through a multiyear efficiency program, targeting organizational agility, procurement savings, and leveraging data, digital, and technology [5] - Two option agreements were signed for mid- and late-stage programs: olverembatinib for chronic myeloid leukemia and ACI-24.060 for Alzheimer’s disease, complementing the existing pipeline [6] - The company is advancing its R&D pipeline, with significant opportunities in zasocitinib (TYK2 inhibitor) and TAK-861 (orexin 2 receptor agonist), both poised for near-term Phase III readouts [17] Management Commentary on Operating Environment and Future Outlook - Management expects VYVANSE generic erosion to align with projections in the coming quarters, while R&D investment will increase as multiple programs move into Phase III [4][12] - The company remains committed to transforming patients' lives while driving long-term business growth and profitability [6] - The full-year FY 2024 outlook remains unchanged, with continued monitoring of VYVANSE generic erosion, portfolio performance, and FX rates [13] Other Important Information - The company issued a new hybrid bond of JPY 460 billion in June and executed USD 3 billion of debt financing in July, both aimed at refinancing existing debt and smoothing out the debt maturity ladder [14] - The company introduced the term "adjusted free cash flow" in FY 2024, with the calculation remaining consistent with the previous year's free cash flow metric [8] Q&A Session Summary VYVANSE Generic Erosion and Plasma Business - VYVANSE demand declined by over 30% year-over-year, with further erosion expected as generic supply improves [27] - The plasma business saw strong growth, with donor fees remaining stable and margins improving due to optimized supply chain and manufacturing capacity utilization [28] Pipeline and Partnerships - The company ended its partnership with JCR for Hunter syndrome candidate JR-141 as part of pipeline prioritization [30] - The deal with AC Immune for Alzheimer’s disease reflects confidence in the amyloid beta target, with potential for earlier intervention and improved efficacy [31][32] ENTYVIO Growth and Market Share - ENTYVIO is expected to accelerate growth in the second half of the year, driven by improved access and the recent approval of the Crohn’s indication for ENTYVIO Pen [38][40] - The company maintains its leadership in first-line bio-naive IBD patients, with SKYRIZI impacting second-line and beyond [47] R&D Efficiency and Biosimilar Threats - The R&D organization is undergoing restructuring to improve productivity, with a focus on automation and leveraging data, digital, and technology [54][56] - The company expects ENTYVIO biosimilars to enter the market no earlier than 2030-2032, with no change to current assumptions [58] QDENGA and Immunoglobulin Performance - QDENGA is off to a strong start, with demand exceeding supply capacity, and the company is ramping up manufacturing to meet demand [61] - Immunoglobulin growth was strong in Q1, driven by the approval of CIDP indications and continued demand in primary immune deficiency markets [64][68] TYK2 Inhibitor and Competitive Landscape - The company believes TAK-279 has a differentiated profile and strong potential in IBD, with Phase III trials expected to read out in 2026 [43][44] - The slow uptake of BMS’s TYK2 inhibitor is not seen as indicative of TAK-279’s potential, given its differentiated profile and commercial strategy [67]