On February 4, 2021 Takeda Pharmaceutical Company Limited (TOKYO:4502/NYSE:TAK) ("Takeda") reported financial results for the third quarter of fiscal year 2020 (period ended December 31, 2020) (Press release, Takeda, FEB 4, 2021, View Source [SID1234574582]).
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TAKEDA CHIEF FINANCIAL OFFICER COSTA SAROUKOS commented:
"Our third-quarter results demonstrate the resilience of our business model and the depth of our portfolio, with strong growth generated by our 14 global brands. As a values-based and R&D driven biopharmaceutical company, we remain focused on bringing life-transforming treatments to people with high unmet needs around the world. With the first of our seven potential filings in the next 12 months complete, we look forward to delivering the next generation of potentially transformative medicines and maintaining our commitment to patients, our people and the planet.
"While maintaining business momentum, we also continue to deliver on our financial commitments, realizing strong year-to-date margins and cash flow, and exceeding our target for non-core asset divestitures. This progress reflects our ability to effectively and efficiently integrate the operations of Takeda and Shire, as we capture synergies and focus investment in our key business areas.
"Takeda’s strong financial performance in Q3 allows us to confirm management guidance for FY2020, with further growth acceleration expected in Q4 as we conclude the fiscal year. Reflecting on the transformation of Takeda over the past few years and the world-class R&D engine we have built, we look to 2021 as an important inflection point, filled with a number of pivotal milestones that will position us for long-term sustainable growth."
(1) Further information on certain of Takeda’s Non-IFRS measures is posted on Takeda’s investor relations website at View Source
(2) Underlying growth compares two periods (quarters or years) of financial results under a common basis and is used by management to assess the business. These financial results are calculated on a constant currency basis and excluding the impact of divestitures and other amounts that are unusual, non-recurring items or unrelated to our ongoing operations.
(3) Core Operating Profit represents net profit adjusted to exclude income tax expenses, the share of profit or loss of investments accounted for using the equity method, finance expenses and income, other operating expenses and income, amortization and impairment losses on acquired intangible assets and other items unrelated to Takeda’s core operations, such as purchase accounting effects and transaction related costs.
(4) Free Cash Flow represents cash flows from operating activities, excluding acquisition of plant, property and equipment, and including proceeds from sales of plant, property and equipment, as further adjusted to exclude the acquisition of intangible assets and the acquisition of investments, and to include the proceeds from sales and redemption of investments and proceeds from sales of business, net of cash and cash equivalents divested.
FY2020 Q3 YTD RESULTS DEMONSTRATE TAKEDA’S CONTINUED RESILIENCE
Reported revenue, at JPY 2,427.5 billion (~$23.5B), was impacted primarily by foreign exchange and divestitures, however Takeda delivered year-to-date underlying revenue growth of 1.1% in the third quarter of FY2020, which was driven by strong growth in ENTYVIO, TAKHZYRO, and Immunoglobulin, and was consistent with full year guidance of "low-single-digit growth."
Takeda delivered reported operating profit of JPY 358.7 billion (~$3.5B), which grew 120.7%, reflecting lower purchase price accounting (PPA) and integration costs. Core operating profit, which adjusts for PPA and non-recurring items, declined year-on-year to JPY 780.6 billion (~$7.6B) owing to foreign exchange impact and divestitures. The core operating profit margin was 32.2%. Underlying core operating profit grew 8.5% year-on-year. Underlying core operating profit margin, which adjusts for the impact of foreign exchange and divestiture effects, was 32.1%, driven by synergies and OPEX efficiencies.
Takeda’s reported net profit was JPY 178.9 billion, a 320.8% increase compared with the same period in the prior year.
Operating cash flow increased by 25.9% to JPY 610.0 billion, strengthening Takeda’s balance sheet and more than enabling the Company to satisfy dividend, debt, and interest payments. Free cash flow, which also reflects capital expenditures and proceeds from asset sales, was JPY 717.5 billion (~$7.0B). This represented a decrease of 3.8% in reported free cash flow versus the prior year; the growth rate was impacted by the ~JPY 375.5BN cash received in July 2019 for XIIDRA. Robust cash flow enabled further de-leveraging in Q3 and led to a 3.6x net debt/adjusted EBITDA ratio at the end of the period.
The overall impact of the global spread of COVID-19 on Takeda’s consolidated financial results for the nine-month period ended December 31, 2020 was not material, with several offsetting factors. There were adverse effects due to COVID-19 observed in certain therapeutic areas, especially in Neuroscience during periods when stay-at-home restrictions were in place reducing patient visits to medical care providers. This trend has fluctuated throughout the nine-month period, especially in recent months, as transmission of COVID-19 has increased significantly in many parts of the world. These adverse impacts have been partially offset by benefits from prescribing trends during the pandemic, such as an expansion of certain products with a more convenient administration profile that was observed in the early phase of the outbreak. With regard to operating expenses, voluntary suspension of certain business activities such as business travel and events in response to COVID-19 led to lower spending. As a result of these factors, the impact on Takeda’s profit was immaterial.
For the latest Takeda communications regarding COVID-19, please click here to visit the COVID-19 Information Center on Takeda’s website.
COMMERCIAL UPDATES ACROSS FIVE KEY BUSINESS AREAS
Takeda’s five key business areas — Gastroenterology, Rare Diseases, Plasma-Derived Therapies, Oncology and Neuroscience — with JPY 1,982.1 billion of reported revenue representing approximately 82% of total Q3 YTD revenues – delivered year-on-year underlying revenue growth of 4.4%. Takeda’s 14 global brands, with reported revenue of JPY 910.3 billion (~$8.8B) in aggregate, delivered a 15.4% increase in Q3 YTD underlying revenue growth compared to a year before.
Gastroenterology
The Gastroenterology franchise with JPY 588.8 billion in reported revenue represented 24% of sales, with underlying revenue growth of 14%. This was spearheaded by continued exceptional growth through expanded first line share of gut-selective ENTYVIO in the U.S., EU, and Japan.
Rare Diseases
The Rare Diseases franchise with JPY 446.7 billion in reported revenue represented 18% of sales, with underlying revenue growth declining 3%. The hereditary angioedema portfolio saw 16% underlying revenue growth, driven by continued excellent performance from TAKHZYRO, which continues to expand the hereditary angioedema prophylaxis market. Rare Hematology declined 11% on an underlying basis, with the competitive landscape in line with expectations. Rare Metabolic declined 1% on an underlying basis, but excluding NATPARA the portfolio saw 7% growth. Takeda is working closely with the U.S. Food and Drug Administration (FDA) on a proposed plan to resupply NATPARA in the U.S. and had announced earlier in FY2020 that the required device modifications and product testing will likely delay availability beyond FY2020.
PDT Immunology
PDT Immunology with JPY 313.0 billion in reported revenue represented 13% of sales, with underlying revenue growth of 9% driven by continued strong Gammagard-Liquid demand in the U.S. and subcutaneous IG worldwide. Albumin sales declined 10% versus prior year, partially due to phasing and supply dynamics in China in 2019 and in some part due to a temporary interruption in submitting batches of Albumin Glass for release in China in Q3, for which we expect a resolution soon.
Oncology
Oncology with JPY 318.5 billion in reported revenue represented 13% of sales, with underlying revenue growth of 3%. Takeda’s portfolio continues to expand indications as growth brands offset the decline of older products in the portfolio.
Neuroscience
Neuroscience with JPY 315.1 billion in reported revenue represented 13% of sales, declining 2% on an underlying basis. The portfolio experienced a slowdown in momentum attributable to COVID-19 stay-at-home restrictions that reduced patient visits and diagnoses. A recovery of prescribing trends has been noted, but new patient starts are not yet back to pre-COVID levels.
Q3 YTD Global Brand Highlights
COST SAVINGS AND DIVESTITURES
Synergy deliverables and operational efficiencies supported margin performance, as Takeda delivered a year-to-date underlying core operating profit margin of 32.1%. Takeda is also deleveraging rapidly, with a net debt/adjusted EBITDA ratio of 3.6x at the end of Q3 (December 31, 2020), down from 3.8x in March 2020, even after the full-year dividend payment. Gross debt principal has reduced JPY 1.3TN (~$12.5B) in two years since the quarter ending March 31, 2019 (close of the Shire acquisition was announced on January 8, 2019), and Takeda is on course to meet its medium-term deleveraging goal of 2x within FY2021-FY2023.i
Takeda exceeded its $10B non-core asset divestiture target and has announced 11 deals since January 2019 to date for a total aggregate value of up to ~$11.6 billion, most recently including:
The completion of the previously announced sale of a portfolio of select OTC and prescription products to Hypera S.A. for a total value of $825 million USD. (Press Release)
The completion of the previously announced sale of TachoSil Fibrin Sealant Patch to Corza Health, Inc. for €350 million. (Press Release)
The completion of the previously announced sale of a portfolio of select prescription products to Cheplapharm for a total value of $562 million USD. (Press Release)
The completion of the previously announced sale of a portfolio of select products to Celltrion Inc. for a total value of $278 million USD inclusive of milestone payments. (Press Release)
An agreement to divest a portfolio of non-core prescription pharmaceutical products sold in China to Hasten Biopharmaceutic Co., Ltd. for $322 million USD, subject to customary legal and regulatory closing conditions. (Press Release)
Takeda further exceeded its original $700 million target and Q2 total of $1.1B for incremental cash from sales of real estate and securities, receiving ~$1.4B to date. As a result, the Company is raising its full year FY2020 Free Cash Flow forecast by JPY 50 billion to JPY 750 – 850 billion.
PIPELINE UPDATE: R&D PROGRESS WITH SUBMISSION OF TAK-721, THE FIRST OF SEVEN POTENTIAL FILINGS IN THE NEXT 12 MONTHS
Takeda has built a world-class, state of the art R&D engine and has generated a diverse and dynamic pipeline of approximately 40 clinical-stage new molecular entities (NMEs) that is beginning to deliver. The company’s Wave 1 pipeline NMEs, representing potential best-in-class/first-in-class therapies, has a number of notable anticipated near-term late-development milestones, pivotal data readouts or pivotal study starts.
Takeda’s pipeline portfolio has the potential to contribute significantly to its growth over the next decade, and remains on track to deliver on its milestone goals. Since Q2, one of its twelve near-term pivotal milestones has already been met (Maribavir phase 3 data readout). This is also one of five pivotal data readouts expected through fiscal year 2022, with additional near-term development milestones expected across all Wave 1 programs.
Takeda’s R&D engine continued to advance its Wave 1 pipeline, with recent highlights including:
TAK-721 has been granted priority review from the FDA and remains on track to be the first FDA-approved agent to treat eosinophilic esophagitis. TAK-721 previously received both Breakthrough Therapy designation and Orphan Drug designation from the FDA. (Press Release)
TAK-003, Takeda’s tetravalent dengue vaccine candidate, continued to protect against dengue illness with an acceptable safety profile in the two years safety and efficacy follow-up published in The Journal of Infectious Diseases in December 2020. Regulatory submissions to the EMA and dengue endemic countries are expected in FY2020 Q4, containing three years of safety and efficacy follow-up; this data is to be presented at a medical meeting in FY2021.
Mobocertinib (TAK-788), a potential new oral standard of care for NSCLC patients with EGFR Exon20 insertion mutations, demonstrated clinically meaningful and durable responses in data presented at the 2020 World Conference on Lung Cancer (WCLC), with a confirmed objective response rate of 35% as assessed by investigator and a median duration of response of 17.5 months. It remains on track for FDA submission in Q4 2020 for Platinum Pretreated Patients with EGFR Exon20 insertion mutations. (Press release)
Maribavir (TAK-620) met its phase 3 primary endpoint for the treatment of transplant recipients with refractory/resistant cytomegalovirus infections (Press release). Positive Phase 3 data for TAK-620 will be presented at the Transplantation & Cellular Therapy Meetings (TCT) on February 12 and the European Society for Blood and Marrow Transplantation (EBMT) Annual Meeting on March 14-17. Takeda anticipates FDA filing for maribavir as a treatment for CMV infection and disease in transplant patients resistant or refractory to prior therapy in H1 FY2021.
Other Notable Updates
In 2020, Takeda ranked first in NDA approvals in China, with four approvals including TAKHZYRO (Press Release), ENTYVIO, ADCETRIS, and REPLAGAL.
At the virtual 62nd American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting & Exposition in December 2020, Takeda presented nine abstracts on key learnings from real-world data and retrospective studies. Takeda continues to gather and apply real-world evidence in the treatment of hemophilia, von Willebrand disease (VWD) and sickle cell disease (SCD) and advance personalized treatment in its ongoing commitment to people living with bleeding disorders. (Press Release)
At the 2020 American College of Allergy, Asthma and Immunology (ACAAI) Virtual Annual Scientific Meeting, Takeda shared final results from the Phase 3 HELP Study Open-Label Extension that demonstrate TAKHZYRO (lanadelumab-flyo) injection as a potential long-term preventive treatment option in patients with Hereditary Angioedema. The results were also published in the November 2020 issue of ACAAI’s journal Annals of Allergy, Asthma & Immunology. (Press Release)
Lastly, Takeda is excited about the recent regulatory progress of a number of transformative therapies, including the FDA approval for the Supplemental New Drug Application (sNDA) of ICLUSIG (ponatinib) for Adult Patients with Resistant or Intolerant Chronic-Phase CML. (Press Release)
KEY CORPORATE INITIATIVES
Several examples of corporate achievements in Q3 demonstrate Takeda’s progress toward its vision — "discover and deliver life-transforming treatments, guided by our commitment to Patients, our People and the Planet."
Patients:
Takeda Demonstrates Industry Leadership in 2021 Access to Medicines Index
Takeda was ranked sixth overall in the 2021 Access to Medicine (AtM) Index. A rigorous, biennial research project, the AtM Index combines data-collection, verification, scoring and analysis to compare 20 of the world’s largest pharmaceutical companies on their efforts to address access to medicines. The company achieved notable high scores in all three technical areas evaluated by the Index, including being ranked first in "Governance of Access". Takeda also demonstrated strong performance in the areas of health strengthening and compliance. This ranking demonstrates Takeda’s values-driven strategy and how an ‘Access First’ approach across its Growth & Emerging Markets region is helping patients overcome access challenges in a more sustainable manner. (Press Release)
People:
Takeda Receives Global Top Employer Recognition
Takeda was one of only 16 companies to be named as a global Top Employer for 2021, an accolade the company has now received for a fourth consecutive year. The Top Employers Institute provides annual award certification to companies with outstanding culture, work environments, benefits and opportunities for their people based on the results of its HR Best Practices Survey. Takeda excelled globally in the areas of Values, Ethics & Integrity, Organizational Change, Leadership, Sustainability, Performance Management and Engagement and was also certified as a Top Employer in four regions and 38 countries. This honor demonstrates Takeda’s continued commitment to creating an exceptional people experience for its global workforce. (Press Release)
Planet:
Takeda Achieves Carbon Neutral Goal
Takeda recently announced it achieved carbon neutrality in its value chain for its fiscal year 2019. This milestone was met by a continued focus on internal energy conservation measures, procurement of green energy, and investment in renewable energy certificates and high-quality, verified carbon offsets. Such actions collectively address 100 percent of Takeda’s fiscal year 2019 scope 1, 2 and 3 emissions and represent a significant step forward in Takeda’s sustainability journey. Minimizing the environmental impact of its business is a critical priority for Takeda and at the heart of its purpose: achieving Better Health for People, Brighter Future for the World. (Press Release)
Read more about how Takeda continues to deliver on its commitments to patients, people and the planet through its purpose-led sustainability commitment in its 2020 Sustainable Value Report: View Source
COVID-19 UPDATE
Guided by its values, Takeda’s response to COVID-19 has focused on protecting the health and safety of employees, striving to ensure its medicines are available to patients who rely on them and playing a part to reduce transmission and support the communities where its employees live and work. Takeda has also undertaken a number of efforts to help the world respond to COVID-19, most recently including:
World’s Leading Life Science Companies Now Enrolling COMMUNITY, A Global Platform Trial For Hospitalized Patients with COVID-19
Press Release
Takeda initiates a clinical phase 1/2 study in Japan of TAK-919, Moderna’s COVID-19 vaccine candidate
Press Release
Takeda licensed TAK-919 (Moderna) and TAK-019 (Novavax) COVID-19 vaccines in Japan, with approvals expected in FY2021
(Press Release), (Press Release)
FY2020 GUIDANCE
Full-Year Management Guidance Confirmed; Reported EPS Upgrade on More Favorable Tax Rate Assumption and Increased Forecast for Free Cash Flow Reflecting Additional Sale of Securities
Takeda has solid growth momentum heading into Q4 FY2020 and potential for accelerated underlying growth and achieving an underlying core operating profit margin in the mid-30s over the medium term.
Core and underlying guidance for FY2020 remains unchanged.
Key Assumptions in FY2020 Forecast
Company guidance reflects management’s expectations for continued business momentum across Takeda’s five key business areas, underlying revenue growth of its 14 global brands, and accelerated realization of cost synergies.
FY2020 guidance also reflects the following key assumptions, including (i) that there will not be an additional 505(b)2 competitor for subcutaneous VELCADE launched in the U.S. within FY2020; (ii) includes the impact of divestitures disclosed by Takeda as through February 4, 2021, with the exception of the divestment of Takeda Consumer Healthcare Company and non-core assets in China; and (iii) management’s current expectations regarding COVID-19.
Based on currently available information, Takeda believes that its financial results for FY2020 will not be materially affected by COVID-19 and, accordingly, Takeda’s FY2020 forecast reflects this belief. However, the situation surrounding COVID-19 remains highly fluid, and future COVID-19-related developments in FY2020, including new or additional COVID-19 outbreaks and additional or extended lockdowns, shelter-in-place orders or other government action in major markets, could result in further or more serious disruptions to Takeda’s business, such as slowdowns in demand for Takeda’s products, supply chain related issues or significant delays in its clinical trial programs. These events, if they occur, could result in additional impacts on Takeda’s business, results of operations or financial condition, as well as resulting in significant deviations from Takeda’s FY2020 forecast.
For more details on Takeda’s Q3 FY2020 results and other financial information, please visit: View Source
Further Information
Takeda will share details regarding its commercial strategy in emerging markets and progress on its pipeline at its upcoming Growth & Emerging Markets Strategic Update call on March 11, 2021 and part 2 of its Wave 1 Pipeline Market Opportunity call on April 6, 2021, respectively.