Takeda Pharmaceutical Company Limited Q4 FY2023 earnings call

Management Statement and Operational Highlights

• Fiscal Year 2023 Performance: Core revenue grew 1.5% at constant exchange rate; core operating profit declined 13.3%; core EPS declined 15.7%.
• Pipeline Progress: 3 new therapies approved in the U.S. (FRUZAQLA, ADZYNMA, EOHILIA); life cycle management approvals for ENTYVIO PEN, HYQVIA, GAMMAGARD LIQUID; QDENGA approved in over 20 countries.
• Pipeline Development: TAK-279 (zasocitinib) in Phase III for psoriasis and Phase II for ulcerative colitis/Crohn's disease; TAK-861 met primary/secondary endpoints in Phase IIb for narcolepsy type 1, planning Phase III in the first half of fiscal year 2024.
• Restructuring and Efficiency Program: Initiated a program to drive 100-250 basis points core operating profit margin improvement annually from fiscal year 2025, focusing on organizational agility, procurement savings, and data/digital/technology. JPY 140 billion restructuring expenses in fiscal year 2024 for this program.
• Data, Digital, Technology: 100% of applications and 96% of data migrated to cloud; innovation capability centers in Bratislava, Mexico, Bangalore; leveraging AI, real-world evidence, digital tools in clinical trials and manufacturing.

Segment Performance

• Growth & Launch Products: Grew 12.8% year-over-year at constant exchange rate in fiscal year 2023, representing 43% of total revenues.
• ENTYVIO: Revenue grew 6.6% in fiscal year 2023, with strong double-digit volume growth, maintaining #1 market position in the U.S. for IBD bio-naïve new starts. ENTYVIO PEN launched in over 50 markets globally, driving incremental growth.
• PDT Business: Achieved double-digit growth driven by immunoglobulin products and subcutaneous therapies, with core operating profit margin improving since the first half of fiscal year 2023.

Guidance

• Fiscal Year 2024: Revenue flat to slightly declining at constant exchange rate; core operating profit expected to decline approximately 10%; core EPS expected to decline mid-10s%; dividend increased to JPY 196 per share.
• Long-term: Expect return to sustainable revenue growth from fiscal year 2025; aim for 100-250 basis points core operating profit margin improvement annually from fiscal year 2025 towards low to mid-30s%; Growth & Launch Products to continue double-digit growth, vaccines as stand-alone business area from fiscal year 2024.

Risks

• Generic Headwinds: Significant generic exposure for high-margin products like VYVANSE in prior years, continuing impact in fiscal year 2024.
• Pipeline Setbacks: Discontinued development of 3 Phase II oncology programs; voluntary withdrawal of EXKIVITY globally; not pursuing regulatory filing for ALOFISEL in the U.S.
• Market and Competitive Risks: Competition in IBD market with new entrants; competitive landscape in rare diseases and other therapeutic areas.

Question and Answer

• Q: About restructuring and vaccine strategy A: Christophe Weber discussed restructuring including redundancy and streamlining, and mentioned seeking vaccine strategic partner.
• Q: PDT business margin and TAK-861 efficacy A: Giles Platford on PDT margin; Andy Plump on TAK-861 data and dosing.
• Q: ENTYVIO market share and TAK-007 in autoimmune diseases A: Julie Kim on ENTYVIO market share; Andy Plump on TAK-007 in autoimmune diseases.
• Q: Core OP margin recovery and PDT collection centers A: Milano Furuta on margin recovery; Giles Platford on PDT collection centers.
• Q: ENTYVIO growth and mezagitamab in IgAN A: Julie Kim on ENTYVIO growth; Andy Plump on mezagitamab in IgAN.
• Q: Zasocitinib trial timing and ENTYVIO exclusivity A: Andy Plump on zasocitinib trial timing; Julie Kim on ENTYVIO exclusivity.
• Q: ENTYVIO patient return and VYVANSE generics A: Julie Kim on ENTYVIO patient return and VYVANSE generics supply.
• Q: Margin improvement program and TAK-861 dosing A: Milano Furuta on margin improvement; Andy Plump on TAK-861 dosing.
• Q: R&D pipeline prioritization and TAK-360 in NT2 A: Milano Furuta on R&D prioritization; Andy Plump on TAK-360 in NT2.