Okay. Thanks everybody for joining the session. My name is Steve Barker. I cover Japan pharma stocks for Jefferies from Tokyo, and it's my privilege today to introduce Takeda, Japan's largest pharma company by sales. Takeda is represented today by CEO-elect, Julie Kim, and CFO, Milano Furuta. Julie, Milano, thanks very much for joining us. We do want to get into the nitty-gritty of your business, but Julie, since you're about to take over as CEO, perhaps you could share a few biographical details with us.
Sure. Thank you everyone for joining us today. Happy to be here and to talk about Takeda, since you're making me talk about myself first. I've been in the life sciences space for just over 30 years. Started in healthcare consulting, but then worked in a number of companies, primarily in the rare disease space. Joined Takeda in 2019 through the acquisition of Shire.
Ran the plasma business, ran the U.S., managed part of our international business as part of the transition, and I've been acting CEO since January of this year, and on the June 24th, we have our Annual Shareholder Meeting where it'll become official.
Fantastic. Thank you. Let's jump right into the three big launches you have coming up. You've got oveporexton for Narcolepsy Type 1, rusfertide for polycythemia vera, both launching this fiscal year, and then in the first half of next fiscal year, you have zasocitinib for psoriasis. Regarding oveporexton and rusfertide, I believe there is some level of contribution included in your current year guidance. Can you quantify what launch timing you assume and what level of revenue is embedded in your guidance, please?
Yeah, sure. First let's talk about the timing for these two assets that should be first up for us. When you look at both rusfertide and oveporexton, their PDUFA dates are in August. For oveporexton, we do expect DEA scheduling, which is normal in this class, and the DEA can take up to 90 days. We hope that they are faster, they have up to 90 days.
You should take that into consideration in terms of timing for the oveporexton launch. In terms of quantification for this first fiscal year, again, given those timings and it's their first year of launch, we've not disclosed the exact amounts for those two assets. Let me give you a little bit of characterization of what we expect in terms of the difference of the launches between oveporexton, rusfertide, and if I can include zaso as well, Steve.
When you look at oveporexton, we do expect this medicine to fundamentally transform the standard of care for Narcolepsy Type 1 patients. There's a lot of anticipation, both from the clinician standpoint, but also more importantly, from the patient standpoint. Today, the variety of options that they have available to them really only treat symptoms and not the underlying disease. We do expect there to be a relatively fast uptake of oveporexton.
That will be the first source of growth. Beyond that, when you look at Narcolepsy Type 1, there's roughly 100 to 200,000 patients in the U.S. from a prevalence standpoint, but the diagnosis rate is roughly 50%. The second source of growth will be slower and steadier coming from improvement in diagnosis, where we expect oveporexton will be the first choice of treatm ent.
When it comes to rusfertide is one that I think you can expect more of a slow and steady uptake. This is an area where for polycythemia vera patients, they don't have a lot of good treatment options today, and rusfertide will be the first medicine that can provide durable hematocrit control for PV patients. The current standard of care is extremely cheap.
It's phlebotomy and it's HU. These are pennies on the dollar. We're not expecting to replace phlebotomy, but rusfertide will be a predictable, durable treatment for these patients. It's a matter of a lot of education and awareness to what rusfertide brings, and that's why we think more of a steady growth versus a rapid uptake that we'll see in oveporexton. When it comes to zaso, this is a very competitive space.
As many of you are aware, there are other treatment options that are available. There are three things that we like about our zaso profile. The first is that it has a rapid onset of action, that is something that is positive for both patients and for the HCPs. The second is that there's no food restriction, this is one where in a real-world setting, we'll have to wait and see the impact of ico's product and food restriction and what that means.
The third thing is the durability of the efficacy for zaso. This is something that we shared in April at the Academy of Dermatology meeting, and this is again, a benefit for patients. If you forget a dose, you don't have to worry. The efficacy will maintain.
Very clear. Thank you. Getting back to the current year, you are looking for a small single-digit reduction in decline in revenue this year because you've still got the negative impact from the Vyvanse LOE, though getting a lot smaller, and then the TRINTELLIX LOE as well. You've also guided for a return to revenue growth very quickly from next year onwards. You've talked about a Horizon One and a Horizon Two. Could you talk to that, please?
What we wanted to be clear with the investor community and the analyst community is to delineate the difference between what we need to go through over these next two to three years, what we're calling Horizon One, versus the accelerated growth we expect to see in Horizon Two. In Horizon One, there are four things that we are focused on.
First and foremost is strong execution of these three launches that we were just talking about. This is setting the stage for future growth for us. The second thing is that we have to make sure that the pipeline continues to deliver. Behind these three assets that we'll be launching in the next 12 or so months are five additional late-stage assets that will come in Horizon Two.
The third thing is we have to maintain the resiliency of our core inline brands, the two biggest ones being ENTYVIO and GAMMAGARD LIQUID, which is our immunoglobulin in the PDT portfolio. The fourth thing is we have to execute on our organization transformation. Some of this is driven by the new executive team that I've put in place that took effect April 1, the start of our fiscal year.
Some of it is our ongoing organization transformation to ready ourselves to be able to better take advantage of AI and other platform technologies. Those are the four things that we have to accomplish in Horizon one, and we expect that to be a two to three-year timeframe before we move on to Horizon two, where we will see the full impact of those first three launches.
We'll start seeing the wave of second launches from those five assets that I mentioned. We should have completed the bulk of our organization transformation, which will give us a much more efficient operating base. Of course, the R&D pipeline we expect to continue to deliver. From a business standpoint, that's what we're focusing on from Horizon One and Horizon Two. Maybe, Milano Furuta, you can share a little bit in terms of what we're trying to achieve from a financial metrics standpoint in those two Horizons.
No, thank you, Julie, and thanks, Steve. In Horizon one, as Julie mentioned, there's a big driver is, of course, in the new launches of these three assets. In the meantime, we will soon see the IP, the impact, and what's going to look like in 2028 for ENTYVIO. That's the moving factor. How we can drive the uptake of the launches and how the ENTYVIO's IP impact will be.
That's a kind of plus-minus effect. After 2026, we will see that bit dip in the revenue and in the corporate profit, but we expect it back to growth. That's the Horizon one. One of the initiatives in the big initiatives we're working on in the Transformation is the expanding the global capability center.
That's much beyond the traditional shared service center type of things. We're expanding the scope into the commercial analytics, now R&D work, and manufacturing that in the next two to three years, we're going to have a very solid corporate infrastructure. When I say corporate infrastructure, it's not the typical G&A, it's much beyond. That's going to give us a good operating leverage in the long run. In Horizon Two, as all the five more assets coming in, incremental revenue will have better trickle-down effect to the bottom line. That's how we see the corporate profit expansion in the long run.
Right. You mentioned the transformation plan, which I understand is going to deliver savings of around JPY 100 billion this year and growing to JPY 200 billion per year by a couple of years. That's going to, as you say, that combined with increasing revenues, you should have very great operational leverage.
At the same time, in Horizon One, there is an investment for the launches. It's, again, we are very excited to have these three new launches, and we don't want to compromise the investment for the growth. This will be the driver incoming in the two to three years, but in the long run, even more. Again, we have five more assets in the phase III. That also requires investment. Basically, we are offsetting those in an incremental investment by the short-term savings of the Transformation Program. This Transformation Program, again, will help us have the better operating leverage in the long run. Yeah.
This is why we've recommitted to achieving the low to mid 30% core operating profit margin in that Horizon Two. We're also maintaining our focus on deleveraging. We do want to get down to 2x. Today we're at about 2.6x, so we'll continue moving down to 2x. Those are in Horizon Two. In Horizon One, we also want to make sure that our return on equity hits 5% and above. That's a place where we've gotten some feedback from you all that that's a metric that we are now paying more attention to.
Right. That's ROE on the basis of IFRS EPS, right? Yeah. If you look at core, it's a lot higher already.
Correct.
Yeah. You mentioned leverage, 2.6 x net debt to EBITDA right now, heading for 2x. Milano, once you get to two, what sort of flexibility would that give you for a capital allocation, and what would be a priority? Would it be more shareholder returns, more business development?
It will give us more flexibility, but it's more. It's not perhaps the step change, the difference. In terms of the investment opportunities, we always continue to look at those and the additional opportunities and attractive opportunities. It has to be very super attractive. We are very selective and targeted on our targeted therapeutic areas.
We always look at, and then as our balance sheet and the leverage improves, yes, we will have more flexibility. In the meantime, also, we are quite busy now in a positive way, in the good sense. We are very busy to develop those 3 + 5 assets. There's also R&D operation, like a P&L capacity. We are not necessarily looking at a big staff to bolt on, but we always look at additional attractive opportunities, yeah.
Right. What I'm hearing is you don't have an appetite for doing large-scale transformational type deals like the Shire deal, for example, that brought you to Takeda. I guess you don't need that. You have global scale that you need already.
Exactly. While we're very excited about our existing pipeline and our ability to grow, in that second horizon, we do want to have top-tier top-line growth. While we believe that we've got great shots on goal with our late-stage pipeline, it's always nice to be able to supplement that. As Milano said, we would be looking for assets that fit into our existing therapeutic area focus to provide some additional growth potential.
Right. Understood. You mentioned the major revenue drivers right now, which include ENTYVIO, of course, and then also your plasma-derived products. Regarding ENTYVIO, I understand Alvotech has applied for approval for an ENTYVIO biosimilar in Europe, which I suppose you will oppose because it does run through patents which you have out to 2032. It's interesting that they've filed in Europe as opposed to the U.S. Do you have any insight into why they would do that?
Yeah. Fundamentally, the process for bringing biosimilars into the market in Europe is different than in the U.S. In Europe, as you mentioned, there's two markets where legal challenges have been filed in the U.K. and in the Netherlands.
You're absolutely right, we are going to vigorously defend our position in those two markets. In the U.S., the process is slightly different. There until the FDA accepts a filing, legal action cannot be started. Again, we feel very strongly about our patent position, and in the U.S., we would also defend. U.S., we have not changed our assumptions in regard to biosimilar entry. In Europe, we'll have to see how these two court cases pan out.
Okay. Putting all that aside, ENTYVIO, the growth rate has slowed, but do you think it can maintain I think you've guided for mid-single-digit growth this year. Can it retain that out to the end of patents?
ENTYVIO, I would say there are a couple of things that I would like to point out. First, from a U.S. market perspective, it is a very, very competitive market at this point, with lots of different mechanisms of action that are active. ENTYVIO is still the only gut-selective, and after being almost 14 years on the market, it's still the market share leader, particularly in UC for bio-naive.
We do believe that that is a position that we've been able to defend and we will continue to defend. We have seen, as you all have witnessed, the market share loss in second and third and in CD. We're holding strong in UC, which is why we have that guidance. Outside of the U.S., we are still growing quite strongly. That's the combination that creates that growth for ENTYVIO.
Understood. Regarding your PDT business, one of your competitors has created some concerns in the market. They've cut their guidance. You've given us guidance for high single-digit revenue growth for PDT in general.
It's mid.
Mid single-digit growth. You're confident. Do you have any concerns about that target?
Yeah. Concerns, we wouldn't have provided that guidance if we did. I think we need to separate the immune globulin growth from albumin. Immune globulin is still the primary driver for overall plasma, and this is an area where our underlying demand is still strong for our IG products.
Yes, there is some competitive behavior on the pricing side that is creating a bit of challenge on the revenue line, but our underlying demand is strong, and we're able to defend our key accounts in the U.S. We'll ride out the pricing variability with the strong underlying demand. Albumin is a very different story because the biggest market for albumin is China, and as you all are aware, in China, the government has put in place cost utilization measures that have impacted demand, and even caused demand to shrink this past year.
We were able to weather the bulk of the year without seeing that impact, but we saw it in our last quarter, whereas some of our peers saw it much earlier. Until China fully recovers, and we do expect that down the road, demand will start to grow again, that's going to be a tougher one for the whole industry. I think our position is slightly different in that we weren't as over-indexed on China as some others, and our ability to spread our demand across different geographies is helping us to temper the impact of the China demand shock.
Understood. We should talk about your pipeline. Very interested in your orexin strategy. We've talked about oveporexton coming to the market or getting approval in August. You have at least two follow-up compounds, TAK-360, which you have in phase II trials for NT2 and for IH. You also have an earlier stage candidate, TAK-495. Could you talk about the orexin strategy, please?
Sure, absolutely. We're very excited about our overall portfolio here with the orexin assets. As you mentioned, oveporexton is specifically for NT1 and NT1 only. This is a patient population where orexin is deficient, and with oveporexton, we are replacing the deficiency. For NT2 and IH, these are populations where the natural orexin is still present, and this is why differential dosing is needed in these populations.
TAK-360 is a different molecule than oveporexton, and we're very excited to see what our data looks like in the phase II studies that we'll read out later this year in both NT2 and IH. For TAK-495, again, a different molecule than TAK-360 and oveporexton. We believe that different molecules with different characteristics are needed to address populations beyond NT1, NT2, and IH.
We have not disclosed, for competitive reasons, exactly what our development plan is for TAK-495, but we're very excited about the, let's call it the profile that TAK-495 has, and its potential in indications beyond narcolepsy and IH.
Very exciting. Oncology, you have a couple of assets you've licensed in from Innovent. You've got TAK-928, alpha-biased IL-2/PD-1 bispecific, you have TAK-921, a Claudin 18.2 ADC. Could you talk about those, please?
Sure. Really excited about our partnership with Innovent on these two assets. For TAK-928, this is a co-development, 60/40, 60 us, 40 Innovent, but this has the potential to be a first-in-class, next-generation immuno-oncology asset. The key part of this is the alpha-biased IL-2. Many of you know that IL-2s have been available for quite some time, but those have been beta and gamma targeted, not alpha. We don't see the same, I'll call it baggage, that you see with the other IL-2s because of this alpha bias. The data that we've seen thus far, although it's all from Chinese patient, has been very strong and encouraging.
This is something that we currently have a number of trials ongoing, but we have a whole further development plan tied to TAK-928 that will have it be one of our key assets in our next cohort of blockbuster medicines for Takeda.
When you look at TAK-921, as you said, this is a Claudin 18.2 targeting asset in the very challenging populations of gastric and pancreatic cancer. Again, encouraging data in those two populations. Very excited. Not as big potential from a revenue standpoint as TAK-928, but from a patient impact standpoint, equally as strong.
Okay. Thank you. Julie, you mentioned a new management structure that you brought in ahead of actually becoming CEO. That's wonderful that you had that opportunity. Could you talk about that structure, please?
Sure. As I'm sure you would all expect, any incoming CEO would put in place their new executive team. Because I'm an internal candidate, I don't have to wait until I'm officially in role. If you think about it, those launches that I mentioned to you earlier with oveporexton and rusfertide, if I would have waited to the end of this month to be officially enrolled and then take the usual two to three months to assess before putting in a new leadership team, we would've been disrupting the organization at the exact point in time where we needed to be launching these new medicines. As an internal successor, and with the support of Christophe, the current CEO, I put in place my executive team ahead of being officially in role. They're all in place now.
We've made a number of changes to create better operating efficiency to some of the things that you heard Milano mention earlier, centralizing our corporate functions so that we can simplify and standardize to then fully be able to take advantage of AI and other technologies. We've also flattened the organization, bringing decision-making closer to the customers. We've brought in some talent, and I've moved some talent around on the executive team. Milano is still CFO. He's now taking on a new role. As you all know, I used to run the U.S., brought in Rhonda Pacheco.
Yeah, Rhonda Pacheco.
to run the U.S.
What an amazing CV. She launched the GLP-1s for Lilly, right?
Yes.
She knows how to run a blockbuster launch.
Exactly. We have a number of new talents that we've brought to the executive team. I think this is a good mix of fresh outside perspective, different experiences and capabilities, along with the experience that our existing team members have. Really happy about my new leadership team.
Terrific. You will be taking over as CEO before the end of this month. What are your top two to three priorities?
Well, as I'm sure you can imagine, launches and launches. Beyond the focus on these launches, very much aligned to what I shared with you in terms of our first horizon, our pipeline needs to continue delivering. We have laser focus on execution of those late-stage clinical trials. We also need to make sure that particularly ENTYVIO and GAMMAGARD, which are two of our large core in-line brands, show resiliency and strong performance. We have to execute on our transformation, because all of that is going to underpin our ability to continue delivering improvements from a financial perspective on the bottom line.
Great. We do have a couple of minutes if anybody has a question. No? Okay. Well, maybe I'll ask about the Board, because you're making some changes there as well. You're bringing in some new members. What do you expect these folks to bring to the Board?
Sure. Because of the term limits that we have for our Board, when the current CEO, Christophe, joined, shortly after he joined, he brought on a whole new cohort of Board Members. We actually have six longstanding board members stepping off in June. We didn't want to repeat the problem, we're not replacing all six at the same time.
This year, we're bringing on three new board members. First, Dr. Paul Stoffels, who most of you may know that he used to run R&D at J&J. Given the stage that we are at with our pipeline and the need for our pipeline to continue delivering, having someone with his background and experience is extremely helpful for us. Again, very excited to have him on board. Mr. Bruce Broussard is another Board Member that will be joining us.
He may be less familiar to this audience. His last CEO position was at Humana, so he ran Humana for about 14 years, I think it is. Again, that understanding of the payer landscape and the U.S. market in general, as you all know, is very, very important to the success of pharmaceutical products. Having his experience on the board is also something that will be very valuable.
The final individual is Mr. Koichi Kimura. One of our Board Members that's stepping off is the head of our audit and supervisory committee. Mr. Kimura has that same sort of accounting background to maintain the robustness of our financial focus.
Fantastic. Julie, Milano, thank you very much for your time today.