On October 31, 2018 Takeda Pharmaceutical Company Limited (TOKYO:4502) (Press release, Takeda, OCT 31, 2018, View Source [SID1234530432]):
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Underlying Revenue +4.2%, led by Growth Drivers, with growth in every region
Underlying Revenue was solid at +4.2%, with continued strong momentum from Takeda’s Growth Drivers (Gastroenterology, Oncology, Neuroscience and Emerging Markets), which grew +9.8%.
Key growth products Entyvio (+33.1%) and Ninlaro (+38.0%) were important contributors to revenue, as were the products acquired from Ariad in 2017. Every region achieved positive growth versus prior year (U.S. +9.2%, Japan +4.1%, Europe & Canada +4.3%, Emerging Markets +2.4%).
Reported revenue decreased -0.1%. Although our Growth Drivers remained strong, there was a negative impact from foreign exchange rates (-1.0pp) and divestitures (-3.2pp). The divestiture impact included the sale of additional products to the Teva JV in FY2017, and Multilab and Techpool in FY2018.
Underlying Core Earnings +31.8% with margin +5.1pp driven by strict OPEX discipline
Underlying Core Earnings grew +31.8%, reflecting revenue growth and a margin step-up of 5.1pp, of which two-thirds (3.3pp) was driven by OPEX improvements. This was a result of the Global OPEX Initiative being fully integrated into ways of working at Takeda.
Reported operating profit declined -26.6%. This was impacted by two large one-time gains booked in FY2017: the sale of Wako shares for 106.3 billion yen, and the sale of additional products to the Teva JV. Furthermore, Takeda booked one-time expenses in FY2018 related to the proposed acquisition of Shire. Excluding these major one-time items, Operating Profit grew +64.5%.
Underlying Core EPS was up +32.7%, and reported EPS declined -26.9% to 162 yen per share, impacted by divestitures and Shire related costs.
Several important pipeline milestones achieved in first half of FY2018
Ninlaro post-stem cell transplant multiple myeloma maintenance (TOURMALINE-MM3 study), Alunbrig first line ALK+ non small cell lung cancer (ALTA-1L study), Adcetris frontline CD30+ peripheral T-cell lymphoma (ECHELON-2 study), and Entyvio subcutaneous formulation in ulcerative colitis (VISIBLE 1 study) all met their primary endpoints.
7 New Molecular Entities have entered the Phase 1 pipeline since April 2018.
On track with plan to divest non-core assets
Year-to-date Operating Free Cash Flow decreased -29.7% mainly due to the impact of the sale of additional products to the Teva JV in FY2017.
Sale of real estate and marketable securities generated an additional 44.2 billion yen of cash, and sale of non-core businesses Techpool and Multilab generated a further 27.2 billion yen.
Net debt / EBITDA ratio is 1.7x, improved from 1.8x in FY2017 Q4 and 2.7x in FY2016 Q4.
Christophe Weber, Chief Executive Officer, commented:
"Strategic focus and superior execution has driven a robust performance in the first half of fiscal 2018, as we continue to deliver against our key priorities to grow the portfolio, strengthen the pipeline, and boost profitability. Our Growth Drivers continue to contribute significantly to both revenue and profit, and I am pleased to report that two thirds of the 510 basis points of underlying Core Earnings margin improvement was driven by cost discipline as a result of the Global OPEX Initiative.
In the first half of the year we have also achieved several important regulatory and financial milestones towards the proposed acquisition of Shire plc. I want to emphasize that Takeda’s current strategy is working, and that the Takeda Board, Takeda Executive Team and I are confident that the acquisition of Shire will enable Takeda to significantly accelerate its transformational journey to become a global, values-based, R&D-driven, biopharmaceutical leader headquartered in Japan."
Core Earnings represents net profit adjusted to exclude income tax expenses, our 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 intangible assets associated with products and other items that management believes are unrelated to our core operations, such as purchase accounting effects and transaction related costs.
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 impacts of divestitures and other amounts that are unusual, non-recurring items or unrelated to our ongoing operations.
Attributable to the owners of the company.
Takeda raises its full-year outlook based on Velcade upside, Growth Driver momentum and OPEX discipline
Upward revisions to both Underlying Guidance and Reported Forecast.
FY2018 Underlying Guidance: Raising underlying profit guidance
Guidance assumes one additional therapeutically non-equivalent competitor to Velcade with intravenous and subcutaneous administration launching in the U.S. in March 2019, an upside of 35.5 billion yen from the previous guidance (Global revenue in FY2017: 129.6 billion yen, FY2018: 111.0 billion yen)*
Underlying Core Earnings margin expansion projected at the higher end of +100-200bps range.
This underlying guidance excludes the full fiscal year 2018 estimated financial impact related to the proposed acquisition of Shire plc by Takeda.
*(applying constant currency based on FY2018 plan rate)
The revised forecast in the table above includes the costs incurred in the first half of fiscal 2018 related to the proposed acquisition of Shire plc by Takeda (Profit before tax impact: 19.8 billion yen, Net profit for the year impact: 16.5 billion yen); however, it does not include any Shire-related costs anticipated to be incurred in the second half of the fiscal year. Furthermore, the forecast does not include any projected earnings from Shire should the closing of the acquisition occur within fiscal 2018.
Takeda estimates the portion of the Shire-related costs to be incurred in fiscal 2018 to be between 40.0 billion yen and 60.0 billion yen. This does not include integration costs, debt interest and other financial expenses as the magnitude of the FY2018 impact from these items will be dependent on the timing of deal closing.
(Reference)
A revised financial forecast that excludes the costs incurred in the first half of fiscal 2018 related to the proposed acquisition of Shire plc by Takeda is shown below. The previous forecast of May 14, 2018 also does not include any Shire-related expenses.
A full year forecast that does include the estimated financial impact of the proposed acquisition of Shire will be announced by Takeda once a reasonable assumption has been confirmed.
For more details on Takeda’s FY2018 first half results and other financial information, please visit View Source