Takeda Pharmaceutical Company Limited Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Leadership Change: Christophe Weber announced retirement in June 2026, with Julie Kim selected as successor, set to take over in June 2026.
• Financial Update: Milano Furuta reported Q3 FY 2024 results: revenue up 9.8% on actual FX, core operating profit up 16.3% at CER. Raised full-year guidance, expecting revenue JPY 4.59 trillion, core operating profit JPY 1.15 trillion, core EPS JPY 507; core operating profit margin 25.1%. Planning share buyback up to JPY 100 billion.
• Pipeline: Completed licensing for elritercept, with 3 Phase III data readouts expected in 2025 (oveporexton, zasocitinib, etc.).

Segment Performance

• Growth & Launch products: Year-to-date revenue growth of 4.5% at constant exchange rate (CER), representing 47% of total revenue. Drove performance with 14.6% growth at CER.
• GI (ENTYVIO): 6.6% CER growth, impacted by shipment timing last year and a ~USD 50 million gross to net adjustment in Q3. Excluding these impacts, year-to-date growth was 9.4% CER.
• Rare disease: TAKHZYRO grew 16.4% at CER, ADZYNMA had strong launch momentum. Plasma-derived therapies: immunoglobulin +11.9%, albumin +2.2%.
• Oncology: Expanding well, with revenue from the U.S. and progress in Japan and Europe.
• Vaccines: Kudanga available in 27 countries, over 10 million doses sold since 2022.

Guidance

• Raised FY 2024 guidance: Revenue expected JPY 4.59 trillion, core operating profit JPY 1.15 trillion, core EPS JPY 507. Core operating profit margin 25.1%. Free cash flow forecast JPY 550-650 billion. Initiating share buyback up to JPY 100 billion due to positive cash flow from updated performance.

Risks

• Biosimilar Competition: Potential entry of biosimilars for ENTYVIO around 2030-2032.
• Geopolitical Impacts: Tariffs affecting pharmaceutical manufacturing due to changing geopolitical landscapes.
• U.S. Healthcare Changes: Shifts in U.S. healthcare environment, including IRA and PBM changes, impacting pricing and market access.

Question and Answer

• Q: Accounting issues related to inventory devaluation and R&D post-trial access cost A: Inventory devaluation is a one-off FX impact recognized in COGS; R&D post-trial access cost for specific programs is a one-time accrual in other operating expense.
• Q: Management change rationale and 2025 outlook A: Timing aligned with new product launches and Board changes; 2025 expected growth due to Growth & Launch products despite residual VYVANSE impact.
• Q: Zasocitinib Phase III trial timing and success criteria A: Trials blinded until long-term endpoints; success based on PASI-75 and PASI-100 efficacy.
• Q: ENTYVIO quarter-on-quarter growth and Julie Kim's leadership A: Growth impacted by shipment timing and adjustments; Julie's leadership focuses on U.S. business, already involved in strategy.
• Q: ENTYVIO gross to net adjustment impact and IRA effect on zasocitinib A: Adjustment slightly impacts 11% growth target; IRA reinforces need for efficacy differentiation for zasocitinib.
• Q: Next fiscal year margin improvement and dividend A: Margin improvement planned, dividend policy progressive but not specified yet.
• Q: ENTYVIO biosimilar entry timing and share buyback rationale A: Biosimilar entry expected 2030-2032; share buyback due to cash flow from positive performance.
• Q: IRA impact on pipeline and Julie Kim's location A: IRA reinforces focus on innovation; Julie committed to Tokyo-Boston location.