Takeda Pharmaceutical Company (NYSE:TAK) Limited (TSE: 4502), a global biopharmaceutical leader, reported a 2.1% revenue growth at constant exchange rates during its first quarter earnings call for the fiscal year 2024. The growth was primarily driven by the strong performance of Growth & Launch Products, which now represent 46% of total revenue.
Takeda's core operating profit margin reached 31.6%, benefiting from reduced operating expenses and lower-than-expected generic erosion of VYVANSE in the United States. The company also highlighted the successful launch of ENTYVIO Pen in the US and robust growth in its immunoglobulin portfolio.
Key Takeaways
- Takeda's revenue grew by 2.1% at constant exchange rates, with Growth & Launch Products accounting for 46% of total revenue.
- ENTYVIO Pen launch in the US contributed to revenue growth.
- Core operating profit margin stood at 31.6% due to R&D investment phasing and reduced operating expenses.
- The company is executing an efficiency program aimed at increasing organizational agility and procurement savings.
- Advancements in the pipeline were made through option agreements with Ascentage and AC Immune.
- Takeda reiterated full-year guidance but expects VYVANSE generic erosion to accelerate.
Company Outlook
- Takeda anticipates a core operating profit margin improvement through increased efficiency.
- The company's pipeline shows promise with candidates like zasocitinib and TAK-861 nearing Phase III readouts.
Bearish Highlights
- Takeda reported a 1.3% decline in reported operating profit.
- Phase III trials for soticlestat in Lennox-Gastaut syndrome failed to demonstrate clinical benefit.
- Full-year guidance remains unchanged, but the company faces potential challenges from VYVANSE generic erosion and increased R&D investments.
Bullish Highlights
- Takeda experienced accelerated growth of ENTYVIO and a strong immunoglobulin portfolio.
- The company is optimistic about the potential regulatory path for soticlestat in Dravet syndrome.
- Positive Phase IIb data for TAK-861 and mezagitamab were reported.
Misses
- The IBD trial failed its primary endpoint, although positive effects were observed in a more objective endpoint.
Q&A Highlights
- Takeda addressed questions regarding VYVANSE's performance and the generic erosion challenge.
- The company discussed ENTYVIO's market leadership in first-line treatment and its competition with SKYRIZI in the UC indication.
- Queries about Takeda's immunoglobulin business and the TYK2 inhibitor product were also addressed, with the company showing confidence in its product portfolio.
In conclusion, Takeda Pharmaceutical remains focused on driving growth through its key products and advancing its pipeline, despite facing challenges such as generic competition and R&D investment needs. The company's financial performance and strategic initiatives suggest a proactive approach to sustaining its market position and delivering innovative treatments to patients globally.
InvestingPro Insights
Takeda Pharmaceutical Company Limited (TSE: 4502) has demonstrated resilience in its financial performance despite the challenges posed by generic competition and the need for increased R&D investments. As per the latest data from InvestingPro, Takeda is trading at a high earnings multiple with a P/E Ratio of 44.32, indicating investor confidence in its future earnings potential. However, when adjusted for the last twelve months as of Q1 2025, the P/E Ratio stands at a more moderate 16.49, reflecting a nuanced valuation landscape for the company.
InvestingPro Tips suggest that Takeda's valuation implies a strong free cash flow yield, which is a positive sign for investors looking for companies with the ability to generate cash and potentially return it to shareholders. Additionally, with a Gross Profit Margin of 66.07% in the last twelve months as of Q1 2025, Takeda maintains a robust profitability in its operations, underscoring its efficiency in managing costs relative to revenue.
It's worth noting that Takeda has maintained dividend payments for 33 consecutive years, showcasing its commitment to providing shareholder returns. The dividend yield as of 2024 was 3.39%, which may attract income-focused investors, especially when considering the stock is trading near its 52-week low, as indicated by the price being 85.91% of its 52-week high.
For investors interested in exploring more about Takeda's investment potential, there are additional InvestingPro Tips available at https://www.investing.com/pro/TAK, offering deeper insights into the company's financial health and market position.
In conclusion, Takeda's recent financial data and the InvestingPro Tips reinforce the company's position as a prominent player in the Pharmaceuticals industry, with a solid track record and a strategy aimed at sustaining growth and shareholder value.
Full transcript - Takeda Pharmaceutical Co Ltd (TAK) Q1 2025:
Christopher O’Reilly: Thank you very much for taking time out of your very busy schedule to join us for this first quarter earnings call by Takeda for FY ‘24. I’m the master of ceremony today. My name is O’Reilly from IR, I’m the Head of IR. I would like to explain the language setting first. Please find the language button at the bottom on the Zoom (NASDAQ:ZM) window. If you wish to listen in Japanese, please select the Japanese; if English, please select the English. If you want to listen to the original, please turn them off. Before starting, I would like to remind everyone that we’ll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those discussed today. The factors that could cause our actual results to differ materially are discussed in the most recent Form 20-F and in our other SEC filings. Please also refer to the important notice on Page 2 of the presentation regarding forward-looking statements and our non-IFRS final measures, which will be also discussed during this call. Definitions of our non-IFRS measures and their reconciliations with the comparable IFRS financial measures are included in the appendix of the presentation. Now without further ado, we would like to move on to the presentation of the day, which will be given by Christophe Weber, President and CEO; Milano Furuta, Chief Financial Officer; and Andy Plump, R&D President. Following the presentations, we have the time for Q&A. Now let us begin. Christophe, over to you.
Christophe Weber: Thank you, Chris, and thank you, everyone, for joining us today. It’s a pleasure to be with you all. Overall, we had a very positive start to fiscal year 2024. In the first 3 months, revenue grew 2.1% at constant exchange rate. Performance was driven by the continued strong momentum of our Growth & Launch Products, which grew 17.8% at constant exchange rate, and they now represent 46% of our total revenue. ENTYVIO growth has started to accelerate since last quarter with the launch of ENTYVIO Pen in the U.S. Still early days as we are getting full access coverage, but encouraging. We also saw robust growth of our immunoglobulin portfolio, TAKHZYRO, QDENGA and FRUZAQLA. We are also managing actively the life cycle of our Growth & Launch portfolio. In Q1, we further expanded our main product geographic reach with approval of LIVTENCITY in Japan and FRUZAQLA in Europe. In the first quarter of the fiscal year, our core operating profit margin was at 31.6%, benefiting from phasing of R&D investment, reduction in other OpEx and temporarily lower-than-anticipated generic erosion of VYVANSE in the U.S. Over the remainder of the fiscal year, we expect multiple pipeline programs to progress into Phase III, and we are awaiting our R&D investment towards future quarter accordingly. We also expect VYVANSE generic erosion to come back in line with projection. We continue to be very focused on improving our core operating profit margin through our multiyear efficiency program. This program is focused on 3 areas of opportunity: increasing organizational agility, improving procurement savings and strengthening how we leverage data, digital and technology across Takeda. Our progress on this program is on track. In Q1, we took concrete steps to improve organizational agility, for example, in R&D and in our U.S. commercial organization. We also identified and executed new procurement-led efficiencies. For example, we have been using data, technology and AI to optimize our supplier selection process. We believe that our investment in data, technology and AI will yield productivity and efficiency gain across our value chain. For example, in manufacturing and quality, our goal is to accelerate the release of drug batch, which will improve our working capital and our ability to supply it. We also took steps to further enrich our pipeline. We signed 2 option agreements for mid- and late-stage programs: one with Ascentage for olverembatinib for chronic myeloid leukemia and other hematological concerns; the other with AC Immune for ACI-24.060, an active immunotherapy designed to delay or slow Alzheimer’s disease progression. Agreements such as these complement our existing pipeline and portfolio and all promise for enriching our pipeline in the future. We also made notable advancements in our organic pipeline, too, and Andy will discuss this in more depth in his presentation. In closing, we are very pleased with the progress we made in this first quarter, which reinforced our ability to deliver on our mission to transform the life of patients while driving long-term business growth and profitability. I will now hand over to Milano to discuss our financial results. Thank you.
Milano Furuta: Thank you, Christophe, and hello, everyone. This is Milano Furuta speaking. And Slide 6 summarizes our Q1 financial results. Revenue was just over JPY 1.2 trillion, an increase of 14.1% or 2.1% at constant exchange rate, we call it CER. Top line performance of CER was driven by our Growth & Launch Products with some upside from milder-than-anticipated VYVANSE generic erosion. Core operating profit, or core OP, was at JPY 382.3 billion, a year-on-year increase of 17.1% or 4.5% at CER. This core OP growth benefited from phasing of R&D investments, which we expect to be weighted more heavily in the remainder of the year. Reported operating profit was JPY 166.3 billion, a decline of 1.3%, including the impact of restructuring expenses for the cost efficiency program and the impairment of soticlestat after the Phase III study readouts. Core EPS and reported EPS were JPY 176 and JPY 61, respectively. Operating cash flow was JPY 170.3 billion, primarily driven by core OP improvements. And adjusted free cash flow was JPY 23.7 billion, reflecting almost JPY 100 billion of business development activity in Q1 and including the in-licensing of rusfertide from Protagonist and our option agreement with AC Immune. Please note that we have introduced the term adjusted free cash flow in fiscal year ‘24, but the calculation is exactly the same as we used for free cash flow in our presentations last year. Let’s look at the year-on-year revenue dynamics on Slide 7. Takeda’s Growth & Launch Products grew 17.8% at CER in Q1, more than offsetting the loss of exclusivity impact such as VYVANSE in the U.S. and AZILVA in Japan. Additionally, net positive growth in other brands contributed to 2.1% revenue growth at CER. The depreciation of the yen versus major currencies was an additional revenue tailwind of JPY 127.2 billion, resulting in a 14.1% growth on actual FX basis. Takeda has a balanced portfolio across 6 key business areas, which are all growing, except neuroscience due to VYVANSE LOE. These are driven by Growth & Launch Products, as Christophe said, which now represent 46% of total revenue and is now growing at 17.8% at CER. All of these products performed broadly line with expectations in Q1. ENTYVIO growth was 7.6% at CER. We have seen an uptick from the prior quarter supported by the launch of ENTYVIO Pen in the U.S. As of July, 2 out of 3 patients have an access to ENTYVIO Pen based on U.S. health plan adoption. We expect growth to further accelerate this year with expansion of access. TAKHZYRO continues to have a strong momentum with growth of 19.8% of CER. It is capitalizing its leading position in the expanding prophylaxis market in HAE. Within PDT, immunoglobulin grew 21.9%, while albumin declined 14.2% due to anticipated phasing of supply to China. We expect albumin revenue to recover and reaffirm the full year forecast to single-digit growth at CER. We are happy to see the first launch uptake of FRUZAQLA and QDENGA. For FRUZAQLA, it is still early days, but the first quarter sales are slightly better than we expected with revenue of JPY 11.9 million. We expect momentum to continue with EU approval in June and approval in Japan anticipated soon. QDENGA, our dengue vaccine, is now available in 21 countries. We see strong demand in both endemic and non-endemic markets. Recently, the WHO added QDENGA to their list of pre-qualified vaccines; and Gavi, the Vaccine Alliance, approved its support for our dengue vaccine program. These acknowledgments should drive further awareness and access for QDENGA going forward. Slide 9 shows the year-on-year bridge for core operating profit. You can see how LOE had a proportionally larger impact on profit than revenue due to the high gross margin of products like VYVANSE and AZILVA. In Q1, this was offset by phasing of expenses, particularly in R&D. R&D investment in Q1 decreased by 7.7% at CER, but we still expect a modest increase for the full year as multiple programs move into Phase III in the coming months. In other OpEx, we saw a decline versus prior year benefiting from initiatives, including the rationalization of real estate we executed last year. The cost efficiency program that we announced in May is also progressing on track. We expect savings from this program will ramp up in coming quarters. When it comes to reported operating profit, higher impairment of intangibles, mostly for soticlestat, and higher restructuring costs associated with efficiency program more than offset the core OP growth. Restructuring costs in Q1 totaled JPY 40.9 billion, tracking in line with our expectations for the full year. Also in Q1, we booked a legal provision in other expenses according to our agreement in principle to resolve U.S. product liability litigation related to Prevacid and Dexilant. The full year FY ‘24 outlook is unchanged from what we provided in May. We will continue to monitor the VYVANSE generic erosion alongside performance of the rest of our portfolio and FX rates. We will provide an update at the Q2 earnings in October. A brief update on the financing activities. In June, we issued a new hybrid bond of JPY 460 billion. All the proceeds will go towards refinancing the JPY 500 billion of hybrid bonds from 2019 that we’ll call in -- we will call in October 2024. The balance of JPY 40 billion will be refinanced with hybrid-backed loans, which will come into effect on the call date. In July, we executed USD 3 billion of debt financing. We used this to prepay USD 1.5 billion of bonds maturing in 2026 and to pay down another USD 1.5 billion of outstanding commercial paper. I just want to clarify, as all these are refinancing activities, they are leverage neutral, and they have smoothed out our debt maturity ladder, as you can see. We maintained 100% of our debt at a fixed interest rate, and the weighted average cost is now approximately at 2%. Thank you for your attention, and I’ll now pass over to Andy.
Andy Plump: Thank you very much, Milano. Hello to everybody on today’s call. So if we go to the next slide, please, Chris. Thank you. We start with soticlestat, which recently completed Phase III trials in 2 indications: Lennox-Gastaut and Dravet syndrome. As previously communicated, soticlestat failed to demonstrate clinical benefit in Lennox-Gastaut. Soticlestat also failed to meet its primary endpoint in the Dravet syndrome Phase III trial, narrowly missing with a p-value of 0.06. However, the totality of data from this study with meaningful effects on key secondary endpoints, combined with the highly significant results from the large Phase II study, suggest clear clinical benefits for soticlestat in Dravet patients with a differentiated safety profile. Given the large unmet medical need in Dravet, we are investigating a potential regulatory path forward. This quarter, we had important Phase IIb data presented for TAK-861 and mezagitamab that we will describe later in the presentation. FRUZAQLA and LIVTENCITY had additional approvals that expand their geographic reach. Maralixibat was filed in Japan for Alagille syndrome and progressive familial intrahepatic cholestasis. In addition, we continue to expand the depth and breadth of our pipeline by signing 2 option deals, as Christophe mentioned, for mid- and late-stage programs. From percentage Ascentage Pharma, olverembatinib is a third-generation PCR-able tyrosine kinase inhibitor to treat CML and other hematological malignancies. From AC Immune, ACI-24.060 is an active immunotherapy aimed at slowing Alzheimer’s disease by targeting toxic amyloid beta. Building on the optionality we have gained with these 2 deals, let’s now turn our attention to the overall momentum we are generating in our pipeline. Next slide, please. Our rich R&D pipeline continues to advance with 2 significant opportunities: zasocitinib, our selective TYK2 inhibitor; and TAK-861, our orexin 2 receptor agonist, both poised to deliver near-term Phase III readouts. Zasocitinib has the potential to be the leading oral treatment for patients with moderate to severe plaque psoriasis, addressing a significant unmet medical need for patients seeking clear skin. The Phase III trials are enrolling rapidly, and we expect to complete enrollment in fiscal year 2024. TAK-861 is also advancing rapidly as we have initiated global Phase III trials in narcolepsy type 1. We will provide updates on the zasocitinib and TAK-861 pivotal trial designs, our overall program time lines and market potential later this year at our R&D Investor event. Beyond these 2 programs with significant revenue potential, we have significant depth and breadth in our late-stage program -- pipeline that will further contribute to Takeda’s long-term growth. Our partners at Protagonist have been making strong progress with rusfertide, which continues to enroll well with a target filing expected in fiscal year 2025. Fazirsiran continues to advance, and mezagitamab will begin Phase III trials for immune thrombocytopenia or ITP in the second half of fiscal year 2024. Near-term Phase II readouts that can expand our growing late-stage pipeline include ADZYNMA in immune thrombotic thrombocytopenic purpura or ITTP and TAK-227 in celiac disease. We have additional data inflections within our early-stage pipeline and intend to continue targeted business development activities to further enhance our maturing pipeline. Now let’s review some of the exciting data that was presented this past quarter. Next slide, please. These transformative Phase IIb data presented at the SLEEP conference demonstrate the potential to revolutionize the treatment of narcolepsy type 1 or NT1. Unlike existing treatments, by addressing the underlying pathophysiology of the disease, TAK-861 has shown the ability to significantly improve patients’ quality of life and, in many cases, normalize the entirety of their symptoms. Greater than 80% of the NT1 patients on the mid to high twice-daily doses were within the normal ranges for the Epworth Sleepiness Scale and the Maintenance of Wakefulness Test. Weekly rates of cataplexy were driven to near 0. This efficacy was stained over an 8-week treatment period, and 95% of patients rolled over into a long-term extension study with no patients discontinuing due to treatment-related adverse events. We are observing sustained efficacy in our long-term extension study with no evidence of hepatotoxicity. Over 100 patients have now been treated for at least 6 months on active therapy and approximately 20 patients for greater than 1 year. We intend to present long-term efficacy and safety data at a medical conference this fall. It’s worth noting that current NT1 therapies have shown maintenance of wakefulness times ranging from 3 to 10 minutes and Epworth sleepiness scores around 12 to 15, underscoring the unmet need for patients with narcolepsy. We are committed to bringing this exciting therapy to patients as quickly as possible. Let’s now focus on the mezagitamab immune thrombocytopenia or ITP data. Next slide, please. Mezagitamab is an anti-CD38 antibody which depletes antibody-producing plasma cells as well as impacting a range of other cells involved in inflammatory processes. This leads to a rapid onset of response and a long-lasting immunomodulating effect. The unmet medical need in ITP is high with relatively few approved therapies and as many as 1/3 of patients not well controlled on existing therapies. In this Phase IIb trial, we assess the efficacy of mezagitamab in a deeply treatment-experienced population of patients with persistent or chronic ITP. The study demonstrated consistent dose response and high response rates at the high doses. There also appears to be the potential for durable and long-term remission after therapy is stopped. The treatment of emergent adverse effects were similar between treatment and placebo arms. We will be starting a Phase III program in ITP in the second half of the fiscal year. Finally, I would like to take this opportunity to invite you to our R&D Day to be held December 12 in the evening, Eastern Standard Time, and the morning of December 13 in Japan. We will review data, development plans, time lines and our assessment of the market opportunities for zasocitinib, TAK-861 and other late-stage pipeline programs. Please save this date in your calendars. Thank you very much, and I will now turn it over to Chris to open the Q&A session.
Christopher O’Reilly: We would like to invite questions. In addition to Christophe, Milano and Andy; Julie Kim, President of U.S. Business Unit, will also join the Q&A. [Operator Instructions]
A - Christopher O’Reilly: The first question, from Jefferies, we have Barker-san. Steve, please unmute your microphone and ask your question. It looks like he put his hand down. So let’s move on to the next question, Matsubara-san from Nomura Security.
Hiroyuki Matsubara: Yes, this is Matsubara from Nomura Securities. Can you hear me okay?
Christopher O’Reilly: Yes.
Hiroyuki Matsubara: I have two questions. First question is about VYVANSE. The generic supply will start again in August. So what is the current situation? And in the second quarter, do we see a decline in revenue? Or do we see that in the third quarter? What is your view? And the second question is about immunoglobulin. I understand that it’s growing right now. But donor fee or other measures, maybe you can implement measures to improve OP margin? Are you doing that right now? And have those measures changed since the last quarterly call?
Christopher O’Reilly: Okay. Thank you for your question. So the first question on the latest status of VYVANSE in the U.S. and the [soticlestat] generic supply and when we expect that to accelerate, I’d like to ask Julie to comment on that question. And then the second question about any changes in our plasma business, particularly around donor fees, margin improvements, any commentary on that? I’d like to ask perhaps Christophe to take that question. Julie?
Julie Kim: Thank you, Chris, and thank you for the question, Matsubara-san. In terms of VYVANSE, as you’ve noted, we have seen the supply from generics companies improve over the past quarter and, therefore, our VYVANSE demand has declined, although it was above what we were expecting. Quarter-over-quarter, we do expect the supply situation for the generics to improve, but it is very difficult for us to accurately predict exactly what their supply might be. So we are monitoring this closely for VYVANSE. We do not have any supply challenges. And as I said, we do expect the overall supply for the generics to improve quarter-over-quarter. And so we saw, from a VYVANSE perspective, roughly just over 30% decline versus last year, and we expect our continued erosion of VYVANSE to proceed as planned. Thank you.
Christophe Weber: Thank you, Matsubara-san, for the question regarding PDT. A strong quarter indeed in terms of growth. We expect the growth to be slightly lower for the full year, but very strong demand. Our margin has been improving now for a few quarters, starting just after COVID, in fact. This is due to the fact that we are optimizing our supply chain. We are growing our revenue using our manufacturing capacity fully. And the donor fee has been stable now for a couple of quarters. So -- and we expect them to remain stable, but we will see how this is evolving. So overall, this is really how we are increasing our margin. We are actively managing donor fee. We are growing our revenue. Our subcu also is growing faster, which is helping our overall margin. And then we are optimizing the utilization of our manufacturing capacity. Thank you.
Christopher O’Reilly: Now Jefferies, Mr. Steve Barker, it seems you raised your hand. Please go ahead, Steve.
Steve Barker: Thank you for giving me this opportunity to ask two questions, both are related to pipeline. Firstly, I was wondering if you could comment on your decision to end your partnership with JCR for Hunter syndrome candidate JR-141. And then second question is regarding your deal with AC Immune for Alzheimer’s. And given the regulatory challenges that Eisai’s LEQEMBI continues to suffer, I think there are questions in people’s minds about the amyloid thesis in general, but this deal seems to indicate that Takeda believes that this is a very legitimate target. And I was wondering if you could comment on that topic generally and on this program more specifically.
Christopher O’Reilly: Thank you, Steve. Andy, would you like to take those 2 questions, please?
Andy Plump: Sure. Steve, it’s Andy Plump. So firstly, as you know, we’ve undergone a very significant prioritization of our pipeline over the last year to increase capacity to support our emerging late-stage pipeline, and the JCR-121 decision was really just a part of that prioritization. So we’re quite enthusiastic about the program. We hope for patients and for JCR that that’s a successful program. For the ACI-24.060 program, actually, I have a different -- slightly different take than the one that you just described. I think that the benefits that we’ve seen with the amyloid beta clearing passively administered antibodies are unequivocal. There’s clear clinical benefit. The benefits are modest, which many people believe reflects the timing of intervention. We think that with the active immunotherapy, the vaccine, firstly, we have the potential to generate a safer profile based on the kinetics of raising these antibodies. And secondly, if -- and of course, we need to wait and see the Phase II data. We still haven’t seen the Phase II data. This is a very early program. But if we’re seeing the kind of amyloid beta clearing that the passively administered antibodies have seen, we think we have the potential to go in even earlier in these patients with a very convenient administration. And we and many believe that by going in earlier, you have the potential to significantly increase the level of efficacy. It’s clear that the uptake of these antibodies has been slow. But we think that the vaccine has a very different profile that could really potentially transform the treatment of this disease.
Steve Barker: Just to follow up on the first topic. Takeda already has the best-selling treatment for Hunter disease, ELAPRASE. And presumably, you thought that the new asset you were developing with JCR had the potential to displace that. Is there something that you’ve seen in the market performance of -- is cargo in Japan, for example, that made you rethink that view? Do you think that ELAPRASE can continue to be the most popular treatment for Hunter syndrome going forward?
Andy Plump: Well, maybe I’m going to ask Julie to step in here, but maybe just to level set, so there was -- the JCR, the 141 asset actually was unique relative to ELAPRASE that it had a shuttle mechanism that allowed it to traverse the blood-brain barrier. And so our hope and our continued hope for JCR and for patients with this asset was the ability to expand the treatment potential of this replacement enzyme to treat children that have neurological manifestations as well. But Julie, maybe you want to comment as well?
Julie Kim: Sorry, just trying to get myself off mute. So yes, in terms of ELAPRASE, we continue to be pleased with the presence of ELAPRASE on the market. And there are a couple of small competitors, as you are aware, in some of our markets for the Hunter patients. And we also had, as you know, another program that we were studying in terms of Hunter that did not meet its endpoints in the Phase III. So we continue to see that there is interest in developing further treatments for Hunter patients. But at least for now, ELAPRASE continues to serve the needs of those patients. Thank you.
Christopher O’Reilly: Moving on to the next question, Morgan Stanley (NYSE:MS), Mr. Muraoka.
Shinichiro Muraoka: This is Muraoka from Morgan Stanley. My first question is about ENTYVIO. I think ENTYVIO Pen is a wonderful story. And the CER for full year is 16%, that’s the target. And if you think about the gap against the target, you have to really accelerate the growth in the second quarter. Otherwise, you cannot really achieve the full year target on a constant currency basis. Do you believe that you can catch up before the end of the year? And if so, do you have any evidence? Why do you think that? Sorry, that was the first question. And the second question is at the time of our R&D Day, 079, mezagitamab IgAN POC data, can we expect to see that on the R&D Day? That’s the second question.
Christopher O’Reilly: Okay. Thank you for your question. So the first question on ENTYVIO and the confidence in the full year target of 16% growth. Considering the importance of the Pen launch in the U.S., I’d like to ask Julie to comment on our expectations for the rest of the year for ENTYVIO and the Pen uptake. And then the second question on whether we will see TAK-079, mezagitamab IgAN data at the R&D Day later in the year, I’d like to ask Andy to comment on that.
Julie Kim: Yes. Thank you for the question, Muraoka-san. And in terms of ENTYVIO in the U.S., as you’ve noted, the Pen launch has gone well thus far, and we are continuing to increase our access for patients. We’ve seen 6.5% growth in Q1 in the U.S. And we do expect, since the Crohn’s indication was also just approved a couple of months ago, that we will see further acceleration as we continue to pull through not just the UC indication on Pen, but also the Crohn’s indication on Pen. As Christophe mentioned in the presentation and Milano as well, we are continuing to increase the access for patients in the U.S. And with the combination of the 2 indications, plus improved access, we do expect to see an acceleration in the second half of the year for Pen in the U.S. I would also note that last year, we had, across the globe, 12% growth in volume, and we do expect to see lower EU clawbacks this year, so that will also contribute to our ability to achieve the 16% growth year-on-year for ENTYVIO, which we acknowledge is ambitious. But we do have positive indications in terms of our ability to achieve that. And as I said, we continue to push in the U.S. and growth in Europe continues to be strong as well. Thank you.
Andy Plump: Yes. Muraoka-san, thank you. It’s Andy. So obviously, we’ll take a deep dive into the mezagitamab program as one of the key areas of focus at the R&D Day in December. It’s including ITP, IgAN and other indications that we’re considering this, the mechanism of action for this molecule suggests the potential for benefits across a range of indications. We’re clearly committed to ITP. We have very robust Phase Ib data in IgAN. IgAN is an extraordinarily competitive field. We think our profile is equal to or better than anything that’s been reported, but we’re being thoughtful in terms of how we proceed. Our intent right now is to disclose data at a medical conference in the fall and to have that data available to share with you at the R&D Day, but we’re also thoughtful of the competitive landscape. And so more to come. Thanks.
Christopher O’Reilly: Okay. Thank you very much. I’d like to call on the next question, Mike Nedelcovych from Cowen.
Mike Nedelcovych: I have two. My first is on TAK-279. So as I’m sure you’re aware, another competitor TYK2 inhibitor failed in a mid-stage IBD trial. Relative to deucravacitinib, you have noted in the past that TAK-279 is being tested at higher equivalent doses, and that could make the difference in IBD. Should we apply the same logic when comparing to the Ventyx molecule? Or are there additional factors to consider? And my second question relates to guidance. VYVANSE again performed better than expected this quarter and, at least by our estimation, all of your key products as well. So I’m curious if your reiteration of full year guidance is meant to lean cautious or if there may be headwinds in the rest of the fiscal year that we’re not considering?
Christopher O’Reilly: Thanks, Mike. So I think the first question for Andy. And then the second question on guidance, I’d like to ask Milano to comment on that, please.
Andy Plump: Mike, thanks for the question. So of course, we’ve seen essentially what you’ve seen with respect to the Ventyx disclosure, which is just a press release. So we don’t have all the data in front of us. What we know from that press release is that it was a relatively small study that was running Crohn’s disease at doses that were equivalent to the doses that were used in their psoriasis Phase II program. We know from the psoriasis program that the data were -- subclinical data were suboptimal relative to our 30-milligram dose in 279, directionally slightly better than deucravacitinib, slightly worse than 279. Those are the same doses that were used in IBD. The disclosure for the IBD trial was that they failed in their primary endpoint, which is a very subjective endpoint, very unusual to use this endpoint, which is called the CDAI in a Phase II study and that they showed dose-dependent positive effects and a much more robust objective endpoint, which is endoscopy. So of course, we’re going to have to wait to see these data. But our internal sense is it’s actually encouraging for 279. We continue to have strong belief in the potential in IBD, and both the Crohn’s and ulcerative colitis studies are enrolling, and we expect to see them read out in 2026.
Milano Furuta: Thank you, Mike, and then I’m going to answer to the second question, so the -- about the guidance. So we don’t change the guidance. It’s not about the headwinds, but rather maybe 2 components for the both the top line and the expense side as well. So top line, you commented about VYVANSE, but yes, we did have some upside in VYVANSE at the beginning of this quarter. But we do see now VYVANSE generic erosion is coming back to our sort of expectation. And then we do expect that generic erosion is going to be accelerated the coming quarters. And for expense side as well, the R&D investments are weighted toward the rest of the year. So all in all, if you look at the full year, there is not much the big, big component at this moment we think we should change the guidance as of now. But we will monitor the situation, and we will come back at the Q2 announcement in October.
Christopher O’Reilly: Moving on to the next question, JPMorgan (NYSE:JPM), Mr. Wakao, please.
Seiji Wakao: Yes, this is Wakao, JPMorgan. I have two questions. My first question is about ENTYVIO. SKYRIZI was approved for the indication of UC recently. And does it impact ENTYVIO’s share or revenue in a negative way? That is my question. What is your view on this? And the second question is about the gross profit margin -- gross margin. 65.5%, I think, is the target for the full year, and the first quarter was at 68%. So what are the factors that would lower this number from the second quarter and beyond? That’s all.
Christopher O’Reilly: Thank you, Wakao-san, for the question. So the first question on ENTYVIO impact from the approval of SKYRIZI in UC, any impact on market share? I’d like to call on Julie to comment on that. And then second question for Milano on gross margin, 68% in Q1 with an outlook for 65% for the full year. What are the reasons why it will decline in the coming quarters?
Julie Kim: Thank you for the question, Wakao-san. In terms of the UC indication, ENTYVIO continues to hold our strong position as market share leader in first line. Where we do see churn in terms of patients is in second line and beyond, and this is where SKYRIZI had their initial impact with CD and that’s where we are seeing their initial impact for UC as well. So again, from a mechanism of action perspective, ENTYVIO remains the only gut-selective therapy that’s out there for IBD patients, both in UC and CD, and the new entrants seem to be impacting more within the other classes, the other MOAs. Thank you.
Milano Furuta: Thank you, Mr. Wakao. This is Furuta speaking. In terms of outlook of gross margin, after the first quarter, for the remainder of the year, VYVANSE and AZILVA, high gross margin products will be shrinking, especially VYVANSE. So that’s the impact. And also albumin, lower-margin products, we will see recovery in terms of demand as well as revenue, and this is why we expect the gross margin to lower somewhat. Q1 gross margin is in line of our expectation. So currently, we want to maintain the existing guidance.
Christopher O’Reilly: Moving to the next question, I’d like to call upon Tony Ren from Macquarie.
Tony Ren: So I want to ask about your IVIG, your immunoglobulin in CIDP. So we saw some data, some results coming out of argenx. Their VYVGART was approved in CIDP, I believe, quite late in June. And they said the uptake in CIDP is exceptionally strong. I think that’s their wording in their transcript. So I just want to see what type of -- are we being -- so we’ve had competition from them for about a month now. I just want to see, what are you seeing in the market? And then I also want to go back to the market share for ENTYVIO as my second question. If you look at AbbVie’s pronouncements and what they say during their earnings about IBD, they are obviously very aggressively targeting the frontline bio-naive IBD setting. And I just want to see your view on that. And also, I believe you guys used to show a longitudinal market share graph of ENTYVIO and its competitors in IBD. I don’t believe I see it in this presentation for the first quarter. I just wanted to see if I’m not missing anything here. So that’s my second question.
Christopher O’Reilly: Thank you, Tony. I think we can call on Julie to answer both of these questions. Julie?
Julie Kim: Yes. Thank you, Tony, for the questions. So let me start with your first one in regards to CIDP. So in terms of CIDP, our expectations have not changed in terms of the long-term position for IGIV or IGs in general, not just IV, both our GAMMAGARD LIQUID and HYQVIA in CIDP. And so, of course, for patients, it is always a positive situation when they have more choice, especially with the disease area like CIDP where the patients are heterogeneous and we know that not all patients respond to IG therapy. But IG does remain the gold standard. And we are pleased with our launch of CIDP and HYQVIA over the past several months. Moving to ENTYVIO. So you had a couple of questions on ENTYVIO. So let me see if I remember them correctly. So the first, in terms of ENTYVIO share in first-line vis-à-vis AbbVie (NYSE:ABBV). So as I mentioned for first-line bio-naive share, we are still the market share leader both in overall. And then when we talk about the market share graph, which I think is your second question, so as you are aware, I’m sure everyone is aware, there was a cyber-situation earlier this calendar year that impacted claims and claims processing. And because of that, at this point, we’re not able to show the current share data. As soon as that has been sorted and worked through in terms of the claims data in the U.S., we will be able to revert and show the share data again. But in terms of first-line bio-naive, ENTYVIO is still the market share leader. I hope that addresses your questions. And if I missed something, please ask again.
Christopher O’Reilly: Moving on to the next question, UBS Securities, Haruta-san.
Kasumi Haruta: Yes, this is Haruta, UBS Securities. My first question is about R&D organization. Margin improvement program is in place. And within FY ‘24, in terms of headcount, organizational structure, I understand that you’ll finish reorganizing, and you mentioned that. I think some of the functions will be centralized and the efficiency will be improved. But with a fewer headcount, how can you improve productivity? And how do you intend to run, operate the new organization? So that’s my first question. My second question is about the ENTYVIO biosimilar. I think some companies are advancing in the development, not necessarily in all indications, but in ‘25 or ‘26, some of the Phase III studies will be completed according to my estimation. Now status of biosimilar development, considering this status, do you think ENTYVIO can protect itself against the biosimilar until 2030, 2032? Do you maintain this assumption? Or do you have any updates on how long you can protect yourself against biosimilars?
Christopher O’Reilly: Thank you, Haruta-san, for your questions. So the first question on R&D organization, with the restructuring of the organization that’s taking place this year, how can we make sure that we are improving productivity through this period of change? And then the second question was on ENTYVIO biosimilar timing. So I think the first question, for Andy; and then second question, I think perhaps, Christophe, if you could comment on our latest biosimilar entry timing assumptions for ENTYVIO.
Andy Plump: Thanks, Chris, and thanks, Haruta-san. So we’re continually looking at our pipeline. We’re continually making data and strategic-driven decisions to prioritize our pipeline, and we’re continually looking at how we operate to ensure that we’re operating in the most effective and efficient way possible. We, over the course of the last year, as I mentioned earlier, we went through quite a significant pipeline prioritization to ensure that we were concentrating our resources as much as necessary to support our growing late-stage pipeline, which now has 6 programs in it and the potential for more programs to come. As Christophe has mentioned, previously, we’ve also year-on-year been increasing our R&D budget to ensure that we can support that pipeline. So the efficiency program that we’ve undertaken over the past year, and that’s in full swing right now, is really designed to ensure that we have an organization that can drive fully that pipeline forward. Given the prioritization, we feel that we’re rightsized to deliver on that pipeline. We’re also, as we’ve mentioned in many different settings, we’re also looking to leverage more and more efficiencies in automation from data, digital and technology. And we’re starting now to realize some of the benefits of that strategy. Thank you.
Christophe Weber: Thank you for the question regarding ENTYVIO biosimilars. Look, based on what we know and we look at, of course, development stage of biosimilars, but also we look at the defense of our patent set, we don’t see any reason to change our current assumption is that the earliest biosimilar could enter the market in the U.S. will be 2030 to 2032. So no change to our assumptions so far based on what we know. I will also mention, because we get the question very often, that the ENTYVIO Pen, which is very important right now, as Julie mentioned, it does allow us to keep our leadership in bio-naive patients. We have not seen a market share decline because of the ENTYVIO characteristic. But the ENTYVIO Pen is not allowing us to have a longer protection. So this is why we have no change to our assumptions when it comes to biosimilar entry. Thank you.
Christopher O’Reilly: Next question, from Citi, Yamaguchi-san.
Hidemaru Yamaguchi: This is Yamaguchi from Citi. I have two questions. The first question that might be in the presentation, but I may have missed it, but the QDENGA, Q1 looks very strong. And is there any kind of onetime factor why this is the kind of basic number for this quarter, which I can think over the 4x more than this one? So that’s the first question, QDENGA situation. The second question is kind of a repeated question, but the progress rate in the Q1 as far as earnings is concerned, except currency, except VYVANSE, is it in line or is it still pretty looks good as far as the earnings progress is concerned, except currency and then VYVANSE?
Christopher O’Reilly: Thank you, Yamaguchi-san. So the first question on QDENGA performance, I’d like to ask Christophe to comment on that. And then the second question on Q1 progress rate versus the full year, excluding FX, I’d like to ask Milano to comment on that, please.
Christophe Weber: Thank you, Yamaguchi-san. Look, I think QDENGA is off to a strong start. We see a very significant demand where it is -- I mean, in endemic countries as well as countries where there is a travel market. We are ramping up our manufacturing capacity. This is a limiting factor right now. The demand is way greater than our supply capacity. We are expanding this supply capacity. So yes, we are very pleased with the takeoff. I don’t think there is any special case in here. There is -- there will be in the future, by the way, because there is a private market that is quite predictable and linear, if you like, but more and more because we are going into public immunization programs. They are not obviously phased, if you like, depending on the order, on the supply that we can provide to a government. But really, product is off to a fantastic start. And as we all know, dengue is a major issue in many countries. Thank you.
Milano Furuta: Thank you, Yamaguchi-san, for the question. So the -- overall, I think on the top line side, we are -- we think it’s on track. It’s according to our expectation. And VYVANSE indeed have some upside at the beginning -- especially beginning of the quarter. But we do expect it’s coming, by that generic erosion, will come back to our expectation level going forward. For the expense side, the -- there was some phasing in R&D. So we spent less in R&D for the first quarter. And then those development costs are weighted toward the rest of the year. So it’s going to ramping up. So the -- yes, we did have less expense in Q1, but it will catch up. So all in all, according to our expectation, and then that’s why we don’t change the guidance at this moment. Thank you.
Christopher O’Reilly: I think we have time for just one final question, so I’d like to call on Miki Sogi from Bernstein.
Miki Sogi: So first question is the TAKHZYRO and immunoglobulin. It seems like these 2 products had a really strong growth in first quarter. Is there any market dynamics that -- can you explain this -- the growth? And also, is this something you are expecting to sustain over the year?
Julie Kim: Thank you, Miki. Julie...
Miki Sogi: On the second -- maybe I should have asked the second question...
Christopher O’Reilly: Okay, you have a second. Yes, please.
Miki Sogi: Yes, exactly. Yes. And so for the second question is the -- so TYK2 from the BMS. We have been hearing that these products, TYK2 inhibitor, the first in class has been -- its launch has been quite underwhelming. And this is due to the fact that the payer coverage has been quite slow. I just wanted to see, is it the kind of pace that your TYK2 inhibitor would also have? Or if not, what would you do differently?
Christopher O’Reilly: Great. Thank you, Miki. So Julie, would you like to comment on both of those questions?
Julie Kim: Okay. So the first one, in terms of TAKHZYRO and the immunoglobulin growth, I’ll speak primarily to the growth in the U.S. versus rest of world. I’d make a couple of comments on that. But in terms of U.S., what we continue to see for TAKHZYRO is a very strong growth in terms of patients year-over-year. And so even though the product has been on the market for quite a number of years and we’ve had new entrants like orals come on, we continue to see a strong growth in patients. So for example, in Q1 of this year, we had roughly 25% of our start forms come from prescribers who are writing TAKHZYRO for the first time. So we’re quite pleased with the continued growth of TAKHZYRO in the U.S. And outside of the U.S., we continue to see further patient growth as well as launches in our markets outside of the U.S. So that’s what’s driving the strong growth for TAKHZYRO. In terms of the immunoglobulins in the U.S., we’ve had, as I mentioned in an earlier answer, the approval of our CIDP indication for HYQVIA and GAMMAGARD LIQUID. And we’ve had very strong growth overall for our IGs in general because of the continued ramp that there is in terms of diagnosis and optimization of treatment in primary immune deficiency and now with the addition of the CIDP indication, strong growth in the U.S. Outside of the U.S., there continues to be more demand than supply, which is contributing to growth outside of the U.S. And Chris, remind me of the second question? Apologies, I’ve -- it slipped my mind.
Christopher O’Reilly: Thoughts on the TYK2 uptake in the U.S. and implications for TAK-279.
Julie Kim: Sure. Sure. On the TYK2 uptake, so look, it’s not our place to comment on our competitors’ performance. But as you heard from Andy, in terms of TAK-279, we believe in the differentiated profile that we’ve seen thus far for TAK-279. And from a commercial perspective, if that data bears out in Phase III, that will give us a very strong position from a commercial standpoint to launch successfully against the existing products in the space in psoriasis as well as vis-à-vis the existing TYK2 product as well. Thank you.
Christophe Weber: Sogi-san, sorry, maybe let me add some comments around IG. So yes, the IG’s growth in Q1 was pretty strong comparing to our annual guidance, but the growth rate in a quarter-by-quarter growth rate of PDT can fluctuate a bit. So the -- we expect to stay the full year growth would be within the guidance, which is in the 5% to 15%.
Christopher O’Reilly: Great. Thank you, Sogi-san. With this, we’ve reached the end of the call. So thank you, everyone, for joining us today, and we wish you all the best. Thank you very much.
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