Takeda Pharmaceutical Company Limited Q4 FY2026 earnings call

CEO Transition and Leadership

• Outgoing CEO Christophe Weber completed 12 years of leadership, during which Takeda transformed into a focused global R&D-driven biopharma with a strong portfolio and late-stage pipeline.
• Incoming CEO Julie Kim assumed full leadership in June 2026, after a planned transition. A new executive team was established in Q4 FY25, with organizational restructuring to reduce layers, centralize functions, and leverage data/AI for greater speed and efficiency.
• A planned refresh of the Board of Directors will add three new independent directors with expertise in global healthcare, Asian governance, and pharmaceutical R&D pending AGM approval.

Strategic Growth Framework

• The company adopted a two-horizon growth strategy: Horizon One (2-3 years) focuses on successful near-term launches, organizational transformation, protecting core operating margins, and deleveraging to return to revenue growth. Horizon Two (mid-to-long term) focuses on accelerating growth by scaling new blockbuster launches and expanding the pipeline, transitioning revenue away from the maturing legacy portfolio.

Pipeline and Operational Progress

• Takeda delivered positive Phase III results for three lead late-stage assets in FY25: oveporexton (narcolepsy type 1), rusfertide (polycythemia vera), and zasocitinib (psoriasis), all of which have received FDA priority review and are on track for upcoming launches. Positive pivotal data was also achieved for TAK-881 (subcutaneous immunoglobulin for primary immunodeficiency).
• Phase III studies were initiated for elritercept (anemia-associated MDS) and mezagitamab (IgA neuropathy), expanding the late-stage pipeline, which is the most robust in Takeda's history. A strategic oncology partnership with Innovent Biologics for TAK-928 and TAK-921 was completed, with a $1.2 billion upfront payment.
• An enterprise efficiency program delivered 300 billion yen in gross annualized savings over two years, offsetting VYVANSE LOE impacts and freeing capital for pipeline and launch investment. A new organizational transformation program will capture an additional 200 billion yen in annualized gross savings by FY2028, with 100 billion yen in savings expected in FY26, impacting approximately 4,500 roles with a 170 billion yen restructuring charge in FY26.

Overall: Core revenue totaled 4.5 trillion yen, a 2.6% decline at constant exchange rates (CER) driven by VYVANSE generic erosion (150 billion yen in lost revenue). Core operating profit was 1.17 trillion yen, a 0.9% decline at CER, with cost savings nearly offsetting the LOE impact. Adjusted free cash flow reached 684.5 billion yen.

Gastrointestinal (GI): ENTYVIO grew 4.2% at CER, maintains position as the #1 IBD brand in the U.S., but faced pricing pressure and increased competition, falling slightly short of the 6% growth forecast. ENTYVIO contributed 0% of core revenue growth net of LOE headwinds.

Rare Diseases & Plasma-Derived Therapies (PDT): PDT overall grew 1.9% at CER. TAKHZYRO was flat year-over-year, with strong international uptake offset by new U.S. competition. Immunoglobulin (IG) grew 4.1% at CER, with double-digit growth for subcutaneous IG products, but faced downward price pressure from increased global industry supply. Albumin declined 2.1% at CER due to Chinese government cost containment measures. PDT accounts for approximately 20-25% of total core revenue.

Oncology: FRUZAQLA grew 14.6% at CER, in line with forecast, driven by global expansion.

Vaccines: QDENGA grew 10.7% at CER, but missed forecasts due to a delayed Brazilian contract signing and lower dengue outbreak incidence than the prior year.

Growth & Launch Products: This segment represents over 50% of total revenue and grew 4.5% at CER overall in FY25.

• FY26 Revenue Guidance: Expects a low single-digit percentage decline at CER, reflecting continued modest LOE headwinds and early-stage contributions from late-year launches. On an actual FX basis (assumed 156 JPY/USD, 182 JPY/EUR), revenue is projected to increase 3% to 4.64 trillion yen.
• FY26 Core Operating Profit Guidance: Expects a 5% to 8% decline at CER, reflecting planned investment in new product launches and late-stage R&D, partially offset by 100 billion yen in transformation savings. On an actual FX basis, core operating profit is projected to be 1.16 trillion yen, a 1.1% decline.
• FY26 Core EPS Guidance: Expects a mid-teens percentage decline at CER, steeper than operating profit due to the favorable one-time tax impact that boosted FY25 EPS.
• FY26 Free Cash Flow Guidance: Projects free cash flow in the range of 650 billion yen to 750 billion yen. The annual dividend will be increased to 204 yen per share, consistent with the company's progressive dividend policy.
• Long-Term Financial Guidance: Confirms the target of a 2x adjusted net debt to adjusted EBITDA leverage ratio, and targets core operating profit margins of low to mid-30% in Horizon Two once new launches scale. Expects core operating profit to return to growth starting in 2027, and ROE to rise above 5% during Horizon One. Longer-term growth targets will be shared at the upcoming Capital Markets Day later in FY26.

• Generic erosion and loss of exclusivity (LOE): VYVANSE LOE created a 150 billion yen revenue headwind in FY25, and while LOE impacts are smaller in FY26, the maturing core portfolio still creates a drag on near-term revenue growth.
• Pricing and competitive pressure: Mature core brands such as ENTYVIO face growing pricing pressure and increased competition, particularly in later-line treatment settings. Biosimilar competition for ENTYVIO is emerging in Europe, with patent challenges ongoing.
• Plasma industry supply dynamics: Increased global immunoglobulin supply has created near-term price pressure, creating uncertainty around the timing of a return to more stable growth trajectories.
• Chinese market cost containment: Albumin demand has been suppressed by Chinese government utilization controls, with an uncertain timeline for demand recovery.
• Launch execution risk: The company's entire growth strategy depends on successful commercial execution of three key upcoming launches, with uptake dependent on physician and patient adoption that cannot be guaranteed.
• Pipeline risk: Late-stage programs may fail to meet clinical endpoints or receive regulatory approval, even after positive Phase III results, and competitor developments may erode market opportunity for Takeda's assets.

Q: Is core operating profit expected to grow after Horizon One (2-3 years), and what is the latest status of the TAK-360 Phase II study? / A: Management confirms core operating profit will return to growth starting in 2027, but the exact growth rate depends on new product uptake. TAK-360, a next-generation orexin agonist for narcolepsy type 2, is in adaptive Phase IIb studies to refine dosing, which balances efficacy and safety. Studies are progressing rapidly, and data will be shared publicly later in 2026, with a planned presentation at the World Sleep congress in September.

Q: What are the timelines for Horizon One/Two, what CAGR is targeted for Horizon Two top-line growth, and what are the downside risks for the plasma business? / A: Horizon One is a 2-3 year window, with completion depending on new launch trajectories, no fixed end year. Longer-term growth projections will be shared at Capital Markets Day later this year, but Horizon Two is expected to deliver a much higher growth rate to offset future LOE for core brands. For plasma, albumin demand in China is expected to rebound over time, and immunoglobulin market oversupply is a normal cyclical movement that will stabilize long-term; mid-single-digit Ig growth is already reflected in forecasts, with no material unaccounted downside.

Q: Will plasma-derived therapies contribute to Horizon Two growth, and how will zasocitinib's lack of fasting requirements impact its competitive positioning versus competitors that require fasting? / A: PDT is expected to remain a contributor to growth in Horizon Two, supported by new late-stage assets like TAK-881 (next-gen subcutaneous Ig). Management highlights that zasocitinib's profile includes rapid onset of efficacy by week 4, durable responses out to 60 weeks, and no fasting requirements, which eliminates a real-world adherence barrier that can impact competitor efficacy. This combination of benefits is expected to drive strong adoption.

Q: Are oveporexton and rusfertide revenues included in the FY26 forecast, and what is the outlook for deleveraging and capital flexibility once the 2x leverage target is hit? / A: Yes, first-year revenue for both assets is included in the FY26 forecast, but no individual product forecasts are provided. The company is on track to progress steadily toward the 2x net debt/EBITDA target, but exact timing is not specified. Once leverage reaches the target, the company will have more capital flexibility, but will maintain discipline to selectively invest in attractive growth opportunities that align with the company's strategy.