Thank you very much. Now we'd like to take questions from the participants. On the panel, we have participants from our side, Christophe, Andy Costa, and Masato Iwasaki, Japan General Affairs. Ramona Sequeira, President of Global Portfolio Division. Julie Kim, President, US Business Unit. Giles Platford, President, PDT Business Unit. Teresa Bitetti, President, Global Oncology Business Unit. If you have a question, please click Zoom's hand raise button, and we will guide you one by one. If you are participating and listening in Japanese, please ask a question in Japanese. If you are doing so in English, please speak in English. If you are listening to original voice, you may ask in either one of those languages.
Since many participants are online, we would like to limit the number of questions per person to two. Please give us two questions at one time in your question. If you have any questions, please raise your hand by clicking the button. First, Mr. Yamaguchi, Citigroup. Please go ahead. Mr. Yamaguchi, please start asking your questions. Let me go to the next person. Next is Jefferies, Steve Barker, please.
Yes. Hi, it's Stephen Barker from Jefferies here. Thanks for taking my questions. My first question, I think, is probably for Julie. It's about the plasma business. Do you have any comment about CSL's adoption of the Rika Plasma Donation System, which they developed with Terumo? There's some commentary that says that the collection times at CSL are currently about 66 minutes, but could come down to 50 minutes with the new system. Does that pose a competitive threat to Takeda? It's my first question. Second question is for Andy. You mentioned mezagitamab, TAK-079 for myasthenia gravis. According to ClinicalTrials.gov, there was a phase two trial that reached primary completion in March, and I was wondering if you had any comment on that, please. Thank you.
Perhaps I can take the first question. This is Giles Platford. I've taken over the Plasma-Derived Therapies Business Unit from Julie. Thank you very much for the question. Yes, we're aware that Fresenius Kabi, Haemonetics and Terumo all have new apheresis machines. You know, while we believe these are important improvements, not a fundamental shift in technology, we continue to evaluate the landscape and potential partnerships to identify opportunities to improve our operations, but have nothing to announce at present. Important to reinforce, we continue to explore and invest in ways to make the entire donor experience more efficient and effective for our donors through both incremental and disruptive approaches.
We firmly believe that, you know, beyond the apheresis machines and technology we're using, improving the entire end-to-end experience, both before donors come into the center and how quickly we move them through the experience of donation is really important. That's been demonstrated in our ability to maintain and even exceed pre-pandemic donation levels in fiscal 2021.
Thank you.
Hi, Steve. It's Andy. I can take the second question. You know, mezagitamab is our naked CD38 monoclonal antibody, and we've seen broadly across immunoglobulin subclasses reductions. We actually are now in three proof of concept studies. You mentioned myasthenia gravis, which will be the first to read out, ITP, both testing the hypothesis of whether reductions in IgG as elicited by this mechanism can result in disease benefit. Quite interestingly, the largest reductions that we see are in circulating IgA. We're in the process of starting up a proof of concept study in IgA nephropathy as well. Specifically to timing, we haven't seen data yet from the myasthenia gravis study. We expect to see data in the first half of this year.
Understood. Thanks so much.
Thank you very much. We'd like to move on to the next question from JP Morgan Securities, Mr. Wakao, please.
Thank you very much. This is Wakao from JP Morgan. My first question, in the fourth quarter, the COGS deteriorated. What were the reasons behind it? Maybe it was a shipment timing of Entyvio and of course, there was an increasing revenue and profit of PDT. Can you please give us details? Was it a transient factor that was mentioned in the presentation? What was background for that transient factor? And of course, for PDT this year, the margin is going to improve, it was mentioned. In the fourth quarter, the revenue did go up and the fee did go up, but is that fee going to continue to go up? The second question about the narcolepsy franchise. TAK-861 POC will be received, that was mentioned, this year.
On page 15 and page 16, looking at these two pages, you are in phase one. After the phase one study, phase two A will be done and POC will be gained. With that result, you are going to make a decision of go or no go. Is that the correct flow? Thank you very much.
Thank you very much for your questions. About the donation fee question, Giles, would you be able to answer that question, please?
Yes. Thank you. Thank you very much for the question. As Christophe and Costa rightly outlined, we saw very solid growth at and above guidance across all areas of our PDT portfolio in fiscal 2021, driven by continued expansion of our plasma sourcing footprint with the opening of 23 new centers in fiscal 2021, and continued operational improvements across our entire value chain. While we have seen some increase in donation fees during the course of the pandemic, we do feel very confident that as the pressures of the pandemic now ease, we will see some moderation of those fees.
We feel confident that the operational improvements that we have made over the past couple of years and with the continued expansion of capacity, and particularly with the uptake of the new donation centers and increased productivity of those new donation centers that we've opened in fiscal 21, we will be well-positioned to resume in improving our margins over time from fiscal 22.
Wakao-san, this is Andy. On the question regarding the clinical development strategy for TAK-861, let me say that one of the benefits that we have in working in this mechanism is the availability of proximal pharmacokinetic and pharmacodynamic, as well as clinical endpoints that we can measure even after a single dose. Our ability to understand whether a molecule it has efficacy and the level of that efficacy across a range of different populations, even in a single dose, is really immense. We also have huge experience here and databases that we can relate to, going back to our work with TAK-994, TAK-925.
Even in our phase I, the phase I, phase II , phase III nomenclature here also becomes a little bit blurred. Our goal with TAK-861 is to go as rapidly as possible and to bring this medicine as rapidly and safely as possible to patients. In our phase I program, again, nomenclature being a little funny. We actually are enrolling patients with type 1 narcolepsy currently right now with a dose for TAK-861 that we believe will have activity. We're also enrolling healthy volunteers who are sleep deprived. Through those two assessments, we should be able to generate a range of information, understanding effects in type 1 narcolepsy, understanding the potential for effects in diseases of sleep wake disorder that are characterized by normal orexin levels, and also, very importantly, understanding dose.
With that information, we'll be making a go decision later this year to a kind of a mid-stage study, whether that's a phase IIa study or a phase IIb dose ranging study that can accelerate us rapidly into late development. We haven't fully decided. Our intent is to make rapid decisions and to really accelerate this program.
Wakao-san, it's Costa here. I'll just answer the question on the gross margin and COGS for Q4. This is largely impacted by the Entyvio shipment timing. There we had, unfortunately, some logistical challenges in the last few days of Q4, which has now moved into Q1 of this fiscal. You've already seen the rebound happening for Entyvio in the month of April. You can also refer to some third-party data sources which also show strong in-market demand for Entyvio. Overall, it was just the timing of a logistical challenge, but we're seeing that rebounding already in Q1.
Thank you for your question.
Thank you very much. I'd like to ask a follow-up question, if I may. About the donor fee. During the pandemic, it went up, but now it's moderating. With inflation, is there a concern that it may go up? As for 861 phase I, in your explanation, you mentioned that, in the first half, you may see recovery. That data, I do not know if it's going to be phase II-A, phase II-B, but some kind of data, will it be disclosed to us before you go into that stage, please?
This is Giles. I can take the first part of that question. Absolutely, we did see increase in donor fees during the course of the pandemic. We're incredibly proud of the performance that Takeda has delivered across the value chain, as I said, through the expansion of our plasma sourcing footprint. Most importantly, the increase in operational efficiencies and how we've leveraged data and digital to improve the donor experience and to drive efficiency and productivity across the value chain that has enabled us to be in a position where in fiscal 2021, our overall donation volumes were actually 3% above pre-pandemic levels.
With the increased productivity from, you know, previously open centers increasing through fiscal 2022 and with the addition of a further 25+ new opening of centers in fiscal 2022, we're confident to be able to sustain the growth. You know, with those increased volumes of plasma available, we do expect donor fees to moderate during the course of 2022, and we don't expect any further increase in donor fees.
Wakao-san, with respect to our disclosure intents around TAK 861 data, you know, our intent would not be to disclose our phase I data before we move into our phase IIa, IIb program. You know, the exact timing of when and how we present and disclose data, both to the scientific and to the investor community forTAK- 994, for which we have a very extensive chronic data set and is something that we're still working through.
Wakao-san,
Thank you very much, Mr. Wakao. I'd like to take next questions. Stacy from Cowen, please.
Hi, Stacy Ku from Cowen. Can you guys hear me okay?
Yes, we can hear you. Go ahead.
Can you hear me?
Yes, we can hear you. Go ahead.
Okay, perfect. Stacy Ku from Cowen. Thanks for taking our questions, and congratulations on the progress. We have one follow-up and a second question. First, for Giles. Regarding PD guidance, beyond improving margins, what else is underpinning your expectations for growth? What segments are expected to drive some contribution? Should we be thinking about subcutaneous adoption? Which indications are you thinking might be driving growth more, immunodeficiencies or the autoimmune space? That's the first question as we think about the underlying contributors to PD guidance. The second question is another question on orexin, that go, no-go decision.
To just follow up on all the questions that have been asked, to the extent that you can, just given the changing competitive landscape for orexin-2 agonists in narcolepsy and other sleep disorders, could TAK-861 still be first mover in this space at this point? Any type of thoughts there would be appreciated. Thank you so much.
Thank you very much for the question. I will take the first part on PDT. As I said, and as Christophe and Costa outlined, we're in a strong position to maintain and accelerate our growth in fiscal 2022. We see overall growth for PDT business unit. Our outlook is high single digit, with between 10%-20% growth both on our immunoglobulin and albumin portfolio. In the immunoglobulin portfolio, we expect to see a strong rebound in primary immunodeficiency segment on the back of increased diagnosis rates as we come out of the pandemic, and that has been an area that has impacted PID over the past two years.
Continued strong performance also in SID, and of course, with a positive outlook in the future with our CIDP R&D program moving forward and expected launch in fiscal 2023 into CIDP.
Good morning, Stacy. It's Andy again. With regard to your question, we are very confident in TAK-861. As we continue to accrue more and more data and more and more information, our confidence level grows. You know, at this point, there are still some unknowns that we're sorting through, including you know, ultimately interactions with the regulatory agencies to understand what ultimately a pivotal program will look like. We knew what that looked like for TAK-994, but obviously with now the overhang of safety issues, we're gonna have to go back and have those conversations again. Our expectation is that TAK-861 will be the first in class molecule in this field.
We're very cognizant of the competitive landscape, which is one of the reasons that we're trying to go as fast as we are, and it's also another reason why we're being very careful in terms of our data disclosures.
Thank you. Next is Mr. Sakai, Credit Suisse, please.
Sorry. Sorry, can you hear me now?
Yes.
Okay. I speak in English because my questions are very simple. First question to Giles, this is more like a semi macro question for PDT. U.S. Court of Appeals reversed the decision on the Mexican border ban, actually, for the plasma donors. The migrant coming from Mexican border to U.S. for donation, that ban is gonna be lifted. Well, that's what I read from the article. Obviously your competitors are collecting more plasma alongside with the Mexican borders. Is that gonna benefit your competitors? What do you think about the landscape of the plasma collection going forward? That's the first question. Second question for Costa, why your cash flow forecast FY 2022 is shrinking from FY 2021?
Given that your confidence and outlook with efficiency, the cash flow must be improved. However, your cash flow is almost down by what? Yearly 20%-25%, if my math is right. What's causing this cash flow shrink for FY 2022? Thank you.
Thank you for the question. I can take the first part. Yes, we have indeed heard the news on a positive ruling regarding the Mexican border. I do believe there is one additional legislative step in there, but you know, we view this, of course, as very positive for patients and the ability to improve the level of donations, which may ultimately have a positive effect on overall dynamics for both volumes of donation and fees. We continue to focus on our transformation and growth, as I said, having opened 23 new centers in fiscal 2021. Over 25 centers expected to be opened in fiscal 2022. Continued operational improvements, leveraging data and digital to improve efficiency.
With the expected increase in plasma donation volumes between 10%-20%, as per the guidance we've given for fiscal 2022, we're very confident on our ability to deliver on our revenue growth guidance and to meet the demands of patients both in the U.S. and around the world. Thank you for the question.
Thanks, Sakai-san. It's Costa here. I just wanna highlight that the guidance for 2022 is very similar to the original guidance we had for fiscal year 2021, in the same range. In 2021, we did have some one-time benefits, in particular, the accounts receivable initiatives that we were able to unlock working capital improvements. We also had less CapEx. If you go to slide 60 in the appendix, you'll see that our CapEx cash flow base for fiscal year 2021 was JPY 186 billion. It's much less than what we expect in fiscal year 2022. Main reason for that is there was in fiscal year 2021 an underspend due to some R&D milestone payment delays, which we expect to incur in fiscal year 2022.
In fiscal year 2022, we have a bigger envelope for business development types of initiatives to enhance our pipeline. This is what's really driving the fluctuations. Nevertheless, anywhere between JPY 600-700 billion, it's a cash flow. When you have strong free cash flow in particular also allows us to manage the debt profile and maturity, our dividends and interest payments comfortably. Thanks for your question.
Costa, thanks for clarifying it, but I was asking for free cash flow. You're saying JPY 600 billion-700 billion doesn't make much difference from the JPY 943.7 billion from previous year. Is that what you're saying?
Yeah, because in 2021 we had some one-time benefits, like the accounts receivable initiatives that we unlocked the working capital. On top of that, you can see the CapEx in 2021. The CapEx was much less than what we're proposing in fiscal year 2022, mainly because of some R&D milestone payment delays from 2021 to 2022, and also the fact that we're increasing the envelope for certain BD development opportunities to enhance our pipeline.
Yeah. I'm talking about free cash flow. You unlocked cash flow, free cash flow, JPY 100 billion last year. That. Is that what you're saying? CapEx and the BD is not inclusive in cash flow, free cash flow.
In free cash flow, it's included.
Oh, okay. That's
Yeah.
the difference. Okay.
That's the difference. Yeah. Yeah.
Okay. All right. Thanks.
Thank you.
Thank you very much. Next question, Mr. Yamaguchi from Citi, please. We will unmute you, so please ask your question.
Can you hear me?
Yes, we can hear you.
This is Yamaguchi from Citi. 2 quick questions. The first one is page 9. You talk about core sales not only for fiscal year 2022 but also 2023. You're hinting 2023 gonna be flattish compared to 2022, which might be a little bit higher than the consensus. You also touch upon the earnings just a little bit. You're saying that I just confirm you are saying that your earnings for 2023 never going down below 2021. Compared to 2022, the sales is flattish, but because costs may go up, so earnings might be really weak, but you're saying that it's gonna. It shouldn't be lower than 2021. That's what I'm trying to confirm. That's the first question. The second question is regarding TAK-755.
It's gonna be a first phase III readout coming through, and this is one of the major, how to say, a wave one project with the potential market of, I think $1-$1.5 billion you talk about a few years ago. It is still exactly what you think about as far as the market size is concerned? How much this first indication may capture this potential of this, peak sales? Thank you.
Thank you, Yamaguchi-san. Hi, it's Christophe here. I'll take the first question. I guess Ramona will take the second one on TAK-755 . On the first question, you are right. What we are saying is that we expect to be flattish in 2023. In fact, you do the math. You see our growth on launched product just generate JPY 240 billion of incremental revenue in 2021. That's accelerating in 2022 because this group of product are growing faster and faster, so the absolute growth is growing faster. You have a product like Vyvanse, which is 3,000 oku yen, but will not lose everything in 2023 because the generic is expected to enter in August 2023. You know, you do. I mean, we do much more precise forecast.
You do the math, you see that we believe that we can be flattish. It's true also that we are seeing that we expect our core profit not to be lower than the 2021 level. So, just to indicate that while we are able to manage our revenue, we are also able to manage our bottom line.
Great. Thank you.
Thank you. It's Ramona here. I will take the second question on-
Thank you.
Sorry. I'll take the second question on TAK-755. First of all, when we had presented those R&D, I think it was on our R&D day a few years ago, we talked about the peak revenue potential for TAK-755. That was based on three indications, so congenital TTP, iTTP, and then sickle cell disease as well. We're still continuing to progress work across all three of those indications. The first indication that's coming is cTTP. That's the congenital portion. That's actually the smallest one. But incredibly important and incredibly high unmet need. There's really nothing available for these patients. We're very excited about this indication coming. It will be the first time we can get this ADAMTS13 replacement therapy into the market. Then we are continuing work on iTTP.
We're pleased with what we're seeing so far. That is a much larger indication, so we'll be reporting out on that in due course. Thank you.
Thank you.
Thank you very much. Due to the time constraint, I would like to have the last question from Daiwa Securities, Hashiguchi San, please. I think, Hashiguchi San has taken down his hand.
Muraoka-san, from Morgan Stanley, please.
Uh,
Muraoka from Morgan Stanley, thank you for this opportunity. First question, it's page 27. For this fiscal year, as the assumption for the guidance, COVID-19 vaccine JPY 500 oku yen in Moderna and Novavax put together. Novavax assumption is 150 million doses, and 20% of that will be supplied during this fiscal year. Is this a conservative number or upside potential being incorporated already? Or do you expect to see such a low demand for Novavax? So that's my first question. The second question is, for this fiscal year, core OP plus 15.2%, JPY 1.1 trillion. Your performance is great.
The next year, the situation is not going to go any worse, but you are going to maintain the dividend of JPY 180 and not increasing it. Why?
Muraoka-san, thank you very much for your question. Iwasaki would like to answer your question.
20% of the Novavax supply, we are looking at this number from many different angles. Whether the actual supply will be higher or lower, we're not in a position to make such a comment. In terms of the supply volume, this is to do with the government's allocation of vaccine doses to different municipalities, and that determines our supply. It's not as if it's up to us. That's something I would like you to understand. Thank you.
This is more or less a correct number?
Yes, that's what we think.
Thank you very much. Understood.
Hi, Muraoka-san, it's Costa here. I'll address your second question about the potential increase in dividend, is what I understood it to be. I do just want to highlight the importance of our capital allocation policy. It hasn't changed. The strategy hasn't changed. Firstly, continuing to invest in our growth drivers, in particular R&D, both in-house and partnerships, new product launches, investing in China and PDT. The de-leverage rapidly is a very important theme for us. You know, we've broken the 3x net debt to adjusted EBITDA ratio this year. In fiscal year 2021, we're down to 2.8x. We've committed to low 2x, and we wanna get there by fiscal year 2023. That's something that we are very much committed to.
We have the shareholder returns, where we maintain JPY 180 per share annually for dividend policy. We also have the potential, as we did in fiscal year 2021, to potentially do share buybacks when appropriate. At least for the short term, this doesn't change. This capital allocation, we're committed to being steadfast with our approach to capital. Thank you for your question.
Instead of increasing the dividend, your priority may be on the share buyback. Is that right?
You know, again, we will prioritize based on the capital allocation theme. Of course, we'll look at share buybacks when appropriate. Of course, we'll also make sure that we don't under-invest in the business for growth, such as R&D and partnerships, new product launches, et cetera. We'll see how we go throughout the course of the year. If there's opportunities, we may. If it's not in, you know, in fiscal year 2022, we can potentially do it in future years. It's part of our capital allocation policy. There is a potential we may be able to do a share buyback. We just will continue to see how we go throughout the course of the year.
Thank you very much.
Thank you. With this, we'd like to conclude the webinar today. If you have more questions, please contact IR team members and also our contact address. Our information is available on the screen at the end. Thank you very much for your participation. We'd like to ask for your continued support and cooperation. Thank you very much.