On May 13, 2020 Takeda Pharmaceutical Company Limited (TOKYO: 4502) (NYSE: TAK) ("Takeda") reported financial results for the year ended March 31, 2020 (FY2019) (Press release, Takeda, MAY 13, 2020, View Source [SID1234557929]). As a top 10 global R&D-driven biopharmaceutical company, Takeda is demonstrating its innovation and values in its response to COVID-19 and in positioning itself for long-term success.
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
FY2019 reported revenue JPY 3,291 billion, up 57% in first full year following acquisition of Shire.
FY2019 reported operating profit greatly exceeded initial guidance to reach over JPY 100 billion, despite significant non-cash acquisition-related impact.
Core operating profiti increased 110% year on year to JPY 962 billion.
Takeda raised its cost synergy target to $2.3 billion and is on track to deliver on its targets to rapidly pay down debt and continue to divest non-core assets.
Free cash flow up sharply by 156% to JPY 968 billion, enabling Takeda to sustain its well-established dividend policy of 180 yen per share.
Takeda delivered positive reported net profit of JPY 44 billion for FY2019.
Reported operating profit forecast to more than triple to JPY 355 billion in FY2020; Takeda’s growth momentum expected to continue this year and accelerate in the medium term.
Takeda President and Chief Executive Officer Christophe Weber commented:
"Our transformation into a top 10 global biopharmaceutical company accelerated this year and helped us deliver another set of excellent results. We’re fully operating as one Takeda, with growth driven by our five key business areas and a geographic footprint aligned with global market opportunities. Above all, we’re a values-based company that is translating science into life-changing medicines.
"In line with our values, Takeda is taking a lead in meeting the challenges of the COVID-19 outbreak. We initiated a global industry alliance, sharing our world-class Plasma-Derived Therapy R&D, plasma collection and manufacturing capabilities to work collaboratively with other global and regional plasma companies to accelerate development of CoVIg-19, a potential plasma-derived therapy for patients at risk from serious complications of COVID-19. Clinical trials are on track to begin in the summer and if successful, CoVIg-19 has the potential to be one of the earliest approved treatment options."
"Our guidance for FY2020 reflects confidence in Takeda’s growth momentum," Weber continued. "We are positioned for success with our next wave of growth driven by promising product candidates in our R&D pipeline targeted for launch in the next five years, and a potentially transformative early-stage pipeline for longer-term growth."
HIGHLIGHTS
Solid Results as Takeda’s Transformation Accelerated in FY2019
5 key business areas, which represent approx. 79% of total FY2019 revenues, grew 6% year on year pro forma on an underlying basis.
Our leading GI therapy, ENTYVIO, our treatment for rare hereditary angioedema, TAKHZYRO, and our Plasma-Derived Therapies all delivered strong growth. Notable contributors to underlying FY2019 growth include:
ENTYVIO +33% (Gastroenterology);
TAKHZYRO +318% (Rare Diseases);
NINLARO +29% (Oncology);
TRINTELLIX +25% (Neuroscience); and
ALBUMIN/FLEXBUMIN +20% (PDT Immunology).
Our PDT Immunology business area delivered a strong improvement with 9% underlying revenue growth year-on-year.
Revenue growth of Immunoglobulin products accelerated to 17% in Q4 on a pro forma underlying basis compared to the same period last year, driven by successful expansion of subcutaneous IG (SCIG).
During Q4 Takeda received approval for ENTYVIO (Vedolizumab) in China for the treatment of patients with moderate to severe active Ulcerative Colitis (UC) and Crohn’s Disease (CD).
Reported operating profit was over JPY 100 billion, greatly exceeding initial guidance, despite significant non-cash items related to the acquisition of Shire.
Cost synergies and operating expenditure efficiencies contributed to a 110% increase in core operating profit year-on-year to nearly 1 trillion yen (JPY 962 billion), and to a 7 percentage point improvement in underlying core operating margin from 22% last year to 28.9% for FY2019.
Strong free cash flow of nearly 1 trillion yen (JPY 968 billion) from operations and divestitures enabled debt repayment of JPY 701 billion and supported a 180 yen per-share dividend, in line with Takeda’s long-standing dividend policy.
FY2020 Guidance: Growth Momentum Expected to Continue
Takeda has strong growth momentum heading into FY2020 and prospects for accelerated underlying revenue and underlying core operating profit growth and underlying core operating profit margin in the mid-30s over the medium term.
FY2020 reported operating profit is forecast to more than triple as the company will be less impacted by the non-cash acquisition related expenses taken in FY2019. Takeda expects underlying core operating profit growth in the high single digits and underlying core earnings per share growth in the low teens for FY2020. Takeda expects to maintain its dividend to shareholders of 180 yen per share.
Company guidance reflects management’s expectations for continued business momentum across Takeda’s 5 key business areas, underlying revenue growth of our 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 to launch in the U.S. within FY2020; (ii) no impact of any potential further divestitures beyond what has already been disclosed by Takeda; and (iii) management’s current expectations regarding COVID-19.
To date, Takeda has not experienced a material effect on its financial results as a result of the global spread of the novel coronavirus infectious disease COVID-19, despite the various effects on its operations as detailed in Takeda’s Quick Report for the quarter and year ended March 31, 2020, released today. 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 result in significant deviations from Takeda’s FY2020 forecast.
Strategic Update: Multi-year Transformation to Top 10 Global Biopharma Company
Takeda’s FY2019 results underscore the extent of our multi-year transformation. Since FY2014, Takeda has risen from a top 20 to a top 10 global biopharmaceutical company in revenue terms, with revenues nearly doubling to JPY 3,291 billion. Underlying core operating margin has improved by 12 percentage points in that time and is on a medium-term trajectory to industry top-tier levels.
Takeda’s prospects are driven by a much-transformed global business platform and innovation engine for delivering patient impact and shareholder value. The business is focused on 5 key business areas with growing brands – Gastroenterology (21% of FY2019 sales), Rare Diseases (20%), Plasma Derived Therapies (12%), Oncology (13%), and Neuroscience (13%), with growing brands and a strong R&D pipeline of promising therapies in these areas.
Takeda’s geographic footprint is now strongly aligned with global biopharmaceutical industry growth opportunities: United States (48% of FY2019 sales), Japan (18%); Europe and Canada (20%) and Growth and Emerging Markets (14%). Our increased scale strengthens our competitive position and platform for growth from developing and delivering innovative therapies in key geographic markets.
Strong Progress on Cost Synergies, Deleveraging and Divestiture Programs
The integration of Shire is now almost complete, and we are operating fully as one Takeda. We raised our cost synergy target to an annual run rate of $2.3 billion from $2.0 billion by the end of FY2021, with a run rate of $1.1 billion of cost savings already achieved. Takeda paid down JPY 701 billion debt in FY2019, including JPY 230 billion of prepayments, bringing the net debt to EBITDA ratio down to 3.8x as of March 31, 2020 from 4.7x as of March 31, 2019. The company’s $10 billion divestiture program is on track, with 5 transactions worth up to $7.7 billion completed or announced to date.
Next Wave of Growth with Strong R&D Pipeline
Takeda has built a world-class, state-of-the-art R&D engine leveraging our internal research capabilities, while also actively engaging with innovative ecosystems around the world to translate science into highly innovative medicines.
The main drivers for new product launches are 12 unique New Molecular Entities (NMEs) in Wave 1, which represent several potential best-in-class / first-in-class therapies targeted for launch by FY 2024 with potential peak sales of >$10 billion. Our research engine is quickly advancing next generation therapies designed to provide transformative or curative potential for targeted populations with high unmet needs for FY 2025 onward. These programs are based on targets with strong human validation, represent diverse modalities and leverage new platform capabilities in cell therapy, gene therapy and data sciences.
14 global brands with more than 20 ongoing pivotal studies in new indications / geographies.
Expanding in China with more than 15 planned approvals over the next 5 years.
12 best-in-class / first-in-class NMEs with potential approval through FY 2024 and 9 ongoing registration enabling studies.
Sustained growth (FY2025 and beyond) through ~30 clinical-stage early development NMEs and next generation platforms.
38 new R&D collaborations with biotech and academia signed in FY2019, adding to the more than 200 partnerships already in place.