TKPHF - Takeda Pharmaceutical Company Limited (TAK) Fiscal Year 2023 Earnings Call Transcript

2024-05-10 01:27:10 ET

Takeda Pharmaceutical Company Limited (TAK)

Fiscal Year 2023 Earnings Conference Call

May 09, 2024 6:00 AM ET

Company Participants

Christopher O’Reilly – Head-Investor Relations

Christophe Weber – President and Chief Executive Officer

Andy Plump – President of R&D

Milano Furuta – Chief Financial Officer

Ramona Sequeira – President of Global Portfolio Division

Julie Kim – President of U.S. Business Unit

Giles Platford – President, PDT Business Unit

Conference Call Participants

Steve Barker – Jefferies

Hidemaru Yamaguchi – Citi

Mike Nedelcovych – Cowen

Shinichiro Muraoka – Morgan Stanley

Tony Ren – Macquarie

Hiroyuki Matsubara – Nomura Securities

Kasumi Haruta – UBS

Geoff Watson – SMBC Nikko Securities

Presentation

Christopher O’Reilly

Thank you very much for your participation in the Conference Call for the Financial Results for Fiscal Year 2023 of Takeda Pharmaceutical Company Limited. My name is O'Reilly, Head of Investor Relations. First, I'd like to explain about language settings. There are language selection button at the bottom of Zoom window. If we wish to listen in Japanese, please select Japanese. If you wish to listen in English, please select English or if you wish to listen to the raw original audio, please select off.

Before starting, I'd 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 our 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 the forward-looking statements and our non-IFRS financial measures, which will also be discussed during this call. Definitions of our non-IFRS measures and reconciliations with a comparable IFRS financial measures are included in the appendix to the presentation. And I would like to move on to the presentation. Christophe Weber, President and CEO; Andy Plump, President of R&D; and Milano Furuta, Chief Financial Officer, will make a presentation. After that, we will have a question-and-answer session.

Now I would like to begin.

Christophe Weber

Thank you, Chris. Thank you all for joining our fiscal year 2023 earning call. It's really a pleasure to be with you all today. In fiscal year 2023, we continued to demonstrate our ability to discover and deliver life-transforming treatments. This vision, along with our values, is central to our strategy and daily execution. I will now review our full year performance and our priorities ahead. First, fiscal year 2023. To summarize, fiscal year 2023, it was a well managed, but tough year. Despite significant generic headwinds, our top line performance exceeded management guidance with core revenue growth of plus 1.5% at constant exchange rate. This growth was driven primarily by the performance of our growth and launch products, which increased 12.8% year-over-year and now represent 43% of our total revenues.

Our core operating profit declined 13.3%, which was in line with management guidance and reflect the loss of exclusivity for high margin products including guidance and our continued investment in R&D and data, digital and technology. Core EPS declined 15.7%, which was above our projected low 20s percentage decline. We made significant progress in our pipeline in fiscal year 2023 with three new therapies approval in the U.S.: FRUZAQLA for metastatic colorectal cancer, ADZYNMA for congenital thrombotic thrombocytopenic purpura; and EOHILIA for EoE eosinophilic esophagitis.

We also expanded our existing portfolio with several important lifecycle management approvals. Takeda received USFDA approval for ENTYVIO PEN in ulcerative colitis in September and in Crohn last month. We also received approval in the U.S. for PDT therapies, HYQVIA and GAMMAGARD LIQUID in chronic inflammatory demyelinating polyradiculoneuropathy, or CIDP. And our dengue vaccines, QDENGA, is now approved in more than 20 countries, including where the disease is endemic. In addition, we progressed two important potential clinical therapies, TAK-279 and TAK-861, into advanced stage of development. TAK-279, now also known as zasocitinib, has moved into Phase 3 for psoriasis and Phase 2 for ulcerative colitis and Crohn's disease. We expect to initiate a Phase 3 trial in psoriatic arthritis soon. TAK-861 is a lean molecule in our Orexin franchise, met primary and secondary endpoint in a Phase 2B trial in narcolepsy type 1, and we plan to present the trial data at the SLEEP Conference in June this year.

We are in discussion with the FDA to advance to Phase 3 in the first half of fiscal year 2024. Including the Zasocitinib and TAK-861, we expect to have up to six programs with high revenue potential in Phase 3 development in fiscal year 2024. But amid this strong progress, we had some setback too. We made a tough decision based on the thoughtful analysis of the data, and we discontinued development of three Phase 2 pipeline program in oncology, modakafusp alfa, subasumstat, and TAK-007. We also initiated the voluntary withdrawal of EXKIVITY globally and took the decision not to pursue regulatory filing for ALOFISEL in the U.S. These decisions are not easy, but they are part of the journey of innovative drug discovery. They are also a reminder of the importance of financial resilience, agile data driven decision making and rigorous prioritization.

Turning to the next slide, I will discuss how we return to sustainable revenue and profit growth beginning in fiscal year 2025 and the path to delivering on our margin expansion target. We expect fiscal year 2024 to be the final year of significant headwinds from VYVANSE loss of exclusivity in the U.S. This is reflected in our management guidance for the year, where we expect revenue to be flat to slightly declining, core operating profit to decline approximately 10% and core EPS to decline in the mid-10s percent at constant exchange rate. Milano will speak in more detail about our full year outlook in his presentation.

After VYVANSE, we expect no significant generic exposure until the early 2030s. In fact, the total generic exposure we expect over the coming seven years is less than the impact from VYVANSE decline in the two years of fiscal year 2023 and 2024. That is important because we also project that our growth and launch product will continue to deliver double-digit percent growth at constant exchange rate in fiscal year 2024. So we are very confident that we can return to sustainable revenue growth from fiscal year 2025. This will support stabilization and a slight improvement in our gross margin, which has been impacted by generic erosion of high margin therapies. This is a welcome progress following two very tough years of generic headwinds in fiscal year 2023 and 2024....

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