Takeda Pharmaceutical Company Limited

Thank you very much for your participation in the conference call for the financial results for Q1 fiscal year 2021. My name is Christopher O'Reilly, Global Head of Investor Relations. First, I'd like to explain the language setting. At the bottom of the Zoom webinar window, there is a language button. If you want to listen to Japanese, please select Japanese. If you want to listen to English, please select English.

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Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. Actual results may differ materially from those discussed today. The factors that could cause our actual results to differ materially are discussed in the most recent Form 20F and in our other SEC filings. Please also refer to the important notice on page 2 of the presentation. Now, please let me introduce today's presenters and panel. Christophe Weber, President and CEO, R&D President Andy Prump, Costa Sarucos, Chief Financial Officer, Masato Iwasaki, Japan General Affairs, Ramona Seguela, President, U.S. Business Unit and Global Portfolio Commercialization, Julie Kim, President, Plasma Derived Therapies Business Unit. First, I would like to start with a presentation by Christophe, followed by Andy and Costa. After that, we will have a question and answer session. Now we start the presentations.

Thank you, Chris. It's Christophe Weber here. Thank you very much for attending our Q1 results. If we can go to the first slide, please. In a nutshell, as you know, this year is an inflection year for Takeda, an inflection year in terms of revenue, dynamic, and momentum. Our growth will accelerate in 2021. It's also an inflection year with our pipeline. This is exactly what we are seeing during the Q1. which is a great start of the year. Our revenue grew 3.8% driven by our 14 global brands and we are really looking forward to continue to accelerate our growth in 2021. We also are very active to facilitate, to help with the vaccination against the COVID-19 vaccines in Japan. And you will have seen that we have extended our partnership with Moderna to bring 100 million doses of the Moderna vaccines in Japan. So good start of the year in terms of top-line momentum. In spite of some variability, product by product, overall, we are starting with an acceleration of our top-line growth. An infection year also with the pipeline. It's a very important year in term of submission and approval. You saw that in the last two weeks, two of our product got a breakthrough status designation in the US. It's a demonstration that we are also aiming for a very innovative pipeline. So the TAC994 got a breakthrough designation status as well as TAC999. We are also continuing with the development of the Novavax vaccines in Japan with a potential approval in the second part of the year. On the vaccines, we are focusing on dengue as well as the COVID-19 and Zika, but the dengue and COVID-19 is very much our focus. And you will have seen that we just did a partnership to continue the development of our norovirus vaccines, but with a partner instead of fully doing it by ourselves, with a capital investment which is required. So in a nutshell, very good momentum for the Q1, both on the top line and on the pipeline. And now Andy will explain further our situation regarding our pipeline. Thank you very much.

Great, thank you very much, Christoph. I'm trying to turn my video on and great, if someone essentially could turn my video on. Well, good morning, good evening, everybody. And thank you very much, Christoph. Three themes to my presentation this morning. The first is we have a very exciting and very dynamic pipeline and we are 100% focused on delivering and sharpening our ability to deliver on that pipeline predictably. Secondly, we follow the science. whether that's for our pipeline or for our global brands. And you'll see a great example of a success story for Intivio. And then thirdly, this is, as Christophe just said, a year of significant R&D pipeline inflection. We expect major milestones coming up over the rest of this year and into early next year. So if we can go to the next slide, please. Just showing you here a chronology of the major inflections and the momentum that we started late last year the beginning and throughout next fiscal year. And not to make this slide too complex, but it's broken into really three buckets. Above the timeline, you see a chronology of our submissions, expected submissions, and expected approvals of our global brands. These are all pipeline products that have been or will be submitted in the U.S. and or the EMA. In the middle bucket, you see the progress that we're making with our orexin franchise, which includes all three of our development candidates, all three with the potential to become medicines for patients in the marketed setting. In particular, the major events for our lead molecule, for which we're quite excited, TAC994. And then very importantly, you see on the bottom row across oncology, GI, and rare genetic hematology are other three therapeutic areas of focus. Very significant, very meaningful proof of concept inflections that we're expecting to see over the course of this year that will set us up for the future. If we can go to the next slide, please. I'm not going to dive into this slide in any detail. This is a list of the major milestones for our pipeline that we put out in front of you in May at our Q4 2020 earnings announcement. There's a similar visual for our market brands in the appendix. In a sense, it's our report card, how we judge ourselves for our success over the course of the year. And if we go to the next slide, what I will do, though, is dive into the accomplishments that and the major events that we've had up to date in this fiscal year. So let's just start with, you know, very significant regulatory interactions, and Christoph has already alluded to some of these, and I'll just do a deeper dive. Firstly, very excited about the approval of the Moderna mRNA COVID vaccine in Japan. In addition, as you know, we're very focused on expanding our global portfolio into Japan and China. And we had four approvals between Japan and China, two in Japan and two in China for our global brands. And then thirdly, a very significant submission in the EU for Intivio, which I'll mention in just a second. With respect to our wave one pipeline, both Meribavir and Mobocertinib have been filed globally, and the United States both have priority review, and we're looking forward, we're engaged in discussions with FDA. Currently, we're looking forward to potential approvals for both of these agents in the not too distant future. As you know, we've submitted our dengue vaccine. The dengue vaccine was initially accepted as an accelerated approval. That's actually been conferred. converted by the EMA to a standard assessment. This is a process that's quite common. About half of applications that are submitted will convert, and the vast majority of these are still accepted if they're initially designated as an accelerated assessment. We're still expecting a CHMP opinion in this fiscal year. And then lastly, with our wave one pipeline, we had, as Christophe mentioned, two big events just this week with TAC 994 and TAC 999, both designated with breakthrough designations. And we're also making decisions on our pipeline. We've made decisions. to prioritize our investments and to focus our attention and energy on those programs in our wave one and wave two pipeline and our research pipeline that are most aligned strategically and drive the greatest value for Takeda. And so we found partnerships for three of our very exciting programs. There's still very significant potential in these programs. And there are two points that I'd like to highlight. One is that by finding partners, we remove ourselves not just from financial obligations and costs for these programs, but from the operational burdens so we can redirect our attention on our priorities. And secondly, we maintain very significant economic upsides with these programs. If we go to the next slide, please. Let me just walk you through a new indication that we're pursuing in Europe for intibio. So this is a very interesting story. It's a condition known as antibiotic refractory pouchitis, a very high unmet medical need. And just the brief backstory is that in 2016, we initiated a randomized double-blind placebo-controlled multicenter trial. The trial was known as ERNEST. It was a Takeda-sponsored trial, and it was a trial that was conducted with the highest quality standards, but it was a phase four study in antibiotic refractory pouchitis. What is that? Well, 10 to 15% of ulcerative colitis patients will undergo colectomy, about 50% of patients Patients who have undergone colectomy with the formation of what's known as an anatomical pouch will develop an inflammatory condition known as pouchitis. And then a very high percentage, as much as 15% of these individuals become refractory to existing standards of care, which is predominantly antibiotics. So this can be quite worrisome for patients and even in some cases fatal. So we ran this study, it was a high quality study, and we saw striking results. In fact, you can see in the lower right, clinical remission of over 30% with intivio and under 10% with standard of care, highly significant. We're not presenting our multiple secondary endpoints, but suffice it to say, we will present these. Suffice it to say that all of our major secondary endpoints were consistent with our primary, including continued benefits well beyond week 14. Given the high medical need and the robustness of these data, we made the decision to submit this dossier to the EMA. That submission has been validated and accepted and is under review. We think that there's a good shot at getting a labeled indication. There are some risks. It was a phase four study, which means we didn't have agreement with the EMA on what those endpoints for registration would look like, and it's a single study. But that's now under review. So if we just go to the next slide, please, Chris, and the last slide. I'll just end before I hand it over to Costa, just emphasizing that it's a really exciting time for our pipeline. Our pipeline is dynamic, it's moving, and it's really starting to deliver value. With that, Costa, I will hand it over to you.

Okay, thank you, Andy. And hello, everyone. I'm just waiting for the video to come up. I think it's coming up now, so... Thank you so much, Andy. Great. As Christophe highlighted in his opening slide, from fiscal year 2021, we are pivoting towards acceleration of the top line growth. And I'm pleased to say that we started off quarter one in a solid format. And we're on track towards our full year guidance, our full year mid-single digit underlying revenue growth. Firstly, on the top line, Reported revenue growth in quarter one was 18.4%, benefiting from the business momentum, favorable foreign exchange, and the sale of our diabetes portfolio in Japan, offsetting the divestiture headwinds. Please note that this portfolio sale has been excluded from the core and the underlying revenue. Underlying revenue growth was positive at 3.8%, although there were some quarterly phasing headwinds for products such as TaxIro and our immunoglobulin products, which we would not expect to see going forward. And both are on track to delivering our full year guidance. We also saw strong contribution from China, where we had four new approvals last year. Moving on to margins and our focus on profitability. Reported operating profits grew at 48.6%, including the benefit from the sale of the Japanese diabetes portfolio, while cooperating profit declined 11.4% due to divestitures and our increase in R&D investment. Even so, we are still able to deliver a margin of 30.5%. With regards to cash flow, in quarter one, we delivered free cash flow of 129.9 billion yen or approximately 1.2 billion US dollars. And we're on track towards our full year target of 600 to 700 billion yen. Net debt to adjusted EBITDA is at 3.3 times, a slight increase from the end of March, reflecting the half-year dividend payment, as well as cash out for the acquisition of Maverick. In summary, we're very pleased with our performance in the first quarter as we delivered a solid start and we remain firmly on track towards delivering our full year 2021 guidance. Next slide, please, Chris. So slide 13 is a summary of our fiscal year 21 order one results. So reported revenue was 949.6 billion yen, up 18.4% versus the prior year, mainly due to 133 billion yen book as revenue from the sale of our Japan diabetes portfolio. Core revenue, which adjusts out its one-time impact, was 816.6 billion yen, with growth of 1.8%, as business momentum and favourable foreign exchange more than offset the impact of divestitures. Underlying revenue growth, which further adjusts out the foreign exchange and divestitures, grew at 3.8%. Reported operating profit was 248.6 billion yen, with a significant growth of 48.6% versus prior year. This was mainly due to the gain of the sale of the diabetes portfolio in Japan, as well as lower purchase price, accounting and integration costs. core operating profit was 248.9 billion yen. This was a decline of 11.4% versus prior year due to the increase in R&D investment and the impact of divestitures. If we adjust for the foreign exchange and divestitures, underlying cooperating profit decline was 2.1%, which is predominantly a reflection of the increased R&D investment. Despite the R&D investment, Our core and underlying core operating profit margins were both over 30%. Reported EPS was 128 yen. with growth of 141.9% as a result of quarterly phasing of tax, and core EPS was 113 yen. Underlying core EPS growth was 3.9%. Operating cash flow was 166.9 billion yen, up 14.4% versus prior year, and our free cash flow was 129.9 billion yen, down 11.2% with the operating cash flow increase offset by higher sales of marketable securities in quarter one of fiscal year 2020. Slide 14 gives more insight into our revenue growth dynamic. So moving from left to right, you can see quarter one in 2020, our reported and core revenue was 801.9 billion yen. You can see we had underlying momentum, underlying growth momentum of 3.8%, predominantly driven by our 14 global brands. Divestiture headwinds was minus 5.8 percentage point. But we also saw some favorability in foreign exchange. So net-net, our core revenue growth was 1.8%. Adding to that is the 133 billion yen of sale of the Japan diabetes portfolio gets us a revenue growth of 18.4%. Thank you. Next slide, please. This slide is moving to slide 15 is our portfolio. It talks about our five key business areas. It shows that we remain focused on our five key business areas, which now represents 87% of total revenue. This is increased from 82% for full year 2020 as a result of our execution of our non-core asset divestitures. GI, which represents approximately a quarter of the total revenue, delivered 8% growth, spearheaded by Intivio, which grew at 18%. Rare diseases is down slightly by 3%, impacted by continued decline of rare haematology as expected, and also impacted, as we mentioned, on some quarterly phasing of tax xyro, which impacted our HAE growth. PDT immunology was also impacted by some phasing. It was down 2% with immunoglobulin impacted by quarter-on-quarter fluctuations and higher revenue in Q1 of prior year. Oncology grew at 9%, neuroscience returned to growth of 3%, and Vyvanse rebounding strongly after being impacted last year by COVID-19 stay-at-home restrictions. Finally, I'd like to draw your attention to the right-hand side of the or other. Here you can see we saw some growth in quarter one by 9%. This is predominantly due to the fact that we divested many of the non-core assets here, which were declining assets. And at the same time, we did book some revenue for the Moderna vaccine in Japan in quarter one. Slide 16 shows the revenue of our main products within our key business areas. In particular, we are focused on maximizing our 14 global brands indicated here by the red globe symbol. In total, these products generated 335.6 billion yen or 3 billion US dollars in quarter one and grew at 6.8% on an underlying basis. As I mentioned on the previous slide, immunoglobulin was impacted by quarterly phasing, declining almost 7%. However, we remain confident that this will recover in coming quarters and we maintain our forecast of 5% to 10% growth for the full year. Quarterly phasing also impacted tax IRO, which grew 6%, mainly due to a strong quarter in the prior year. But again, we remain on our guidance for the full year growth of anywhere between 20% to 30%. Moving now to slide 17, which shows the bridge from reported to core operating profit. Here, what's really important to note is our reported operating profit reflects the gain on the sale of the diabetes portfolio and declining purchase price allocation or purchase price accounting and integration costs, which are then adjusted out of the core. So this quarter one, you can see the reported and core very similar, and our core is 248.9 billion yen. Next slide, please. This shows our impact, factors impacting our growth of our Q1 cooperating profit versus prior year. As you can see from the dark grey bars, our underlying business excluding the ramp up in R&D investment was positive. as was the impact of foreign exchange. However, as shown by the two red bars in the middle, Our year-on-year growth was impacted by a significant step up in R&D investment to support the innovative pipeline, as this is the inflection year, as well as the sizeable impact from the divestitures. Just to remind everyone, this impact of divestiture, we expect to see the impact easing off from quarter three this year, because last year, quarter three to March 2021, we divested seven products. These factors overall resulted in our 2021 quarter one cooperating profit of 248.9 billion yen, which puts us in a strong position towards achieving our full year forecast of 930 billion yen. Slide 19 demonstrates our commitment to our margins. Here, you can see we're on track to our full year target. In 2020, we closed the year with underlying cooperating profit margin of 30.2%. Quarter one was slightly ahead with 30.5%. And again, we're very much committed to delivering our full year guidance of approximately 30%. Next slide, please. Here now we want to switch towards the cash flow and slide 20 shows the evolution of our cash balance over the first quarter. Operating cash flow was 166.9 billion yen. This includes the cash from the Japan diabetes portfolio offset by cash for a litigation settlement and some phasing in working capital. Free cash flow was 129.9 billion yen, reflecting capex of 42.3 billion yen, and a lack of significant asset sales in quarter one this year. Our cash balance evolution reflects a significant 242.9 billion yen of debt prepayments made in quarter one. Slide 21 plots the net debt balance, also reflecting the half-year dividend paid in June, as well as other items, including the cash out for the Maverick acquisition. We ended the quarter with net debt to adjusted EBITDA at 3.3 times. It's a slight bump, but just to remind you, this bump is due to the half-year dividend payout in quarter one, coupled with the payout on Maverick. We expect the net debt to adjusted EBITDA to aggressively decline from quarter two onwards. Slide 22 is the latest snapshot of our debt maturity ladder. I'd like to draw your attention to fiscal year 2021, where you can see the full debt obligations have been paid off for 2021 already in quarter one. And on top of that, we made a prepayment of $2 billion that was due in fiscal year 2025. So already we've made $2 billion plus the $200 million that was due in fiscal year 2021. So what we see is in August, we're payment for 1.5 billion euro bonds, which we called in high. So in total, $1 billion of prepayments paid in actual fiscal year. As a result, what you'll see in fiscal year 22, our debt approximately 200 billion yen. So cash that we'll generate from quarter two all the way to the end of fiscal year 2022 will allow us to continue to accelerate and rapidly pay down future debt next slide please so now moving to slide 23 we are confirming that we're on track to our full year 2021 guidance um to the targets that we communicated during our May earnings. And finally, on slide 24, I'd like to emphasise our solid start to the year and that we're on track, as I mentioned, to deliver the full year guidance. Top line, we're seeing an acceleration. Last year, underlying revenue grew at 2.2%. We're accelerating already in quarter one at 3.8%, despite some of the phasing in some of the 14 global brands. But it's important to note that we are accelerating 3% to 3.8% in quarter one, and we expect to deliver mid-single digit, spurred by the acceleration of our 14 global brands, and also driven by continued rollout of the Moderna vaccine here in Japan. Our margins, we started off well at 30.5%. We see ourselves continuing to improve that in the midterm, anywhere between low 30s to mid 30s. And our guidance for 2021 for operating profit, we're confident to deliver the 930 billion yen. And finally, our free cash flow. We're on track to deliver our free cash flow target anywhere between the 600 to 700 billion yen and continue to focus heavily on our net debt to adjusted EBITDA ratios to low two times by fiscal year 21 to 2023. Thank you for your attention, and I'll open it up for Q&A.

Great. Thank you, Costa. Now I'd like to take questions.

Please click the raise hand feature over Zoom. If you are listening to Japanese, you may ask a question in Japanese. If you are on the English channel, then please speak in English. And if you are turning off those language selection buttons, you can speak either one of those languages. Now I'd like to take the first question. The first speaker is Yamaguchi-san of Citi. Please.

Can you hear me? Yes, we can hear you. Great, thank you. So, yeah, thank you very much, Yamaguchi from Citi. Two questions up front. The first question is regarding Hikari factories. I think that the FDA inspection should happen in July. Today is the last day of July. So can you give me, if you have any update on the Hikari factory inspection from the US FDA? That's the first question. And inspection and also the warning letter future prospect as well. That's the first question. Second question is a congratulation on the BTD for 994, which is exciting. But can you remind me, if you got the BTD, does it mean that FDA already saw some efficacy data, not phase one, but efficacy data, either phase two or phase two B, to see the efficacy potential of that drug? And also, can you, can Takada use this opportunity to shorten the or launching timing in the future through those BTT designations. Thank you.

Thank you, Yamaguchi-san. It's Christophe here. I'll take the first question and Andy will take the second question. So yes, we remember that we asked for this re-inspection because we felt that we met the requirement. And we progressed a lot to remediate the finding associated to the warning later. So we are very pleased that the FDA could do this inspection in July. It was complicated because, of course, of the quarantine and all the environment. But the inspection did happen. So we are very pleased with that. I cannot. Because, you know, it takes time to write the report. to conclude, but it has happened as we asked, and we are very pleased with that. And we will, as soon as we can, we will disclose the finding. But for us, it was a good event that it could happen. Great. Thank you.

Krista, maybe I take the 994 FDA question. So thank you very much for the question. So the answer to the first part of your question is absolutely FDA have seen data from the Pac-994-50-01 study part A. So we haven't shared that broadly externally because it's an ongoing study. But we have alluded to the significance and the robustness of the results that we've seen in that study. To be clear, the breakthrough designation by the FDA is typically allocated for a very particular indication. And in this case, it's excessive daytime sleepiness for type 1 narcolepsy. With regard to your second question, you asked about acceleration. So our base plan for this program is already hyper-accelerated. So the lead molecule, type 994, went into the clinic in November of 2019. And our expected base case, which we're still tracking in 2024, having a breakthrough designation only enables that and could potentially allow for further acceleration. The breakthrough designation is an incredible opportunity to have a very privileged and iterative dialogue with FDA. So when a key issue comes up, you're not waiting months to get in front of them. You have individuals who you're working very closely with. So it's an affirmation of the data that we've shared with you, and it gives us an opportunity to look to accelerate even further, yes. Thank you.

Great. Thank you, Yamaguchi-san. So next question is Stacy Koo from Cowan. We'll send an unmute request to you now.

Hi, Stacy Gu from Cowen. Thanks for taking our questions, and congratulations on all the progress in the quarter. A few questions. So first, any updated thoughts on Tuxyro? Any implications from Biochris' oral or lodeo launch now with nearly half a year of impact in the prophylaxis market? So that's the first question. Thank you. Can you talk about the commercial launch preparation ahead of the PDUFA date? And looking at Jane's earnings release, they didn't speak too much about their launch for Rybrandt. So what are you seeing? What are you seeing on your end? Thank you.

Ramona, could you take the first question?

Yeah, I'll jump right in then with TechSiro. Chris, I'm assuming that you can hear me okay, but please let me know if not. So thank you so much for your question, Stacey. You know, really, as we look through the year with TechSiro, The quarter one was largely due to phasing, but we're very confident in our full year growth projections for TaxIRO. We've said 10 to 20% and very confident in being able to achieve that goal. TaxIRO is going to be driven this year by geographic expansion, so we're continuing to launch in markets outside the US. In the US, we've penetrated pretty deeply into the market, but we do see continuing growth of the pro-fee market. And so we believe that over time that will help TaxIRO as well as we continue to grow in Prophe and the Prophe market continues to grow. And obviously the COVID recovery is only still happening in the US. So we think there's upside there too as the COVID recovery continues to happen and we're seeing some of that underlying business. Certainly Orladeo has made an impact in the US. I think it's good to have options for patients and certainly it's good to have competitors for us as a company. It keeps us on our toes and to make sure that we're ready to truly position ourselves in our strength, which is efficacy. And I think that's what we continue to hear from TaxIRO, even to patients that might have switched and then switched back to TaxIRO, is the efficacy allows people to live without the stress and the anxiety of having an that being a very strong feature for TaxIRO and something that people continue to rely on. We've just released data from our longer-term extension help trial, which shows that continued impact. So we're confident in our ability to grow both with the COVID recovery, with the Profi market growth, with our geographic expansion based on the strengths of the brand right now. Thank you.

Thank you, Stacey, for your question regarding MoboSatinib. One thing I want to stress out is that with the type of pipeline progression that we are aiming for and the type of inflation that we are looking for, one area we are focusing on very much is about new product launch and being ready. And on Teresa Bittetti, who is heading our global oncology business unit, is very much focusing on the oncology. And Ramona is leading the preparation of the launch for all of the products, working very closely with our R&D colleagues and our regional commercial businesses. So when a product will be approved, we'll be ready for launch, I can guarantee you, because that's very much our focus. And we know that it is a major challenge and a major opportunity to launch a new product, but you have to be ready. So we'll be very much ready with MoboSat and IBAN.

Thank you.

Thank you, Stacey. We'd like to move on to the next question.

Mr. Arai of BOD Securities.

Hello.

Can you hear me? Yes, we can hear you. Please go ahead. Thank you. I have a quick question about the first quarter results versus the full year guidance. Could you walk through briefly which business unit is stronger than expected or which business unit is weaker. That is my first question. And my second question is about the plasma therapy business. IG sales is declining year on year. Could you sort out the declining is like the higher or lower than compared with a market average? So my question is about declining IG business. year-on-year. That is the second question.

Gustavo, you take the first one. And Julie, second.

Sounds good. Thank you very much. Appreciate the rest for the question. So if you look at our five key business areas, we're on track. We're targeting our GI is doing well. We're seeing 8% growth. We still expect and acceleration there for the full year, as we have in the data book we've communicated. So we expect 10% for the full year. So we're getting there on the GI portfolio. Rare disease, rare metabolic is on track. Rare hematology is also on track on the basis of our expectations with the competitive landscape. there. HAE, that's the one that we, as Ramona mentioned, we have some phasing there. We expect that to drive upside in quarter two, particularly for TaxZyro. And then also Julie can talk to you about the plasma-derived therapies in particular, some of the phasing that we saw. So in quarter one of 2020 and also in 2021. Oncology doing well, overall strong growth here, 9%, predominantly driven by some variances or dynamics between Inlara and Velcade because of the switch between oral last year. We have some bumpiness quarter by quarter, particularly in quarter one of last year because of the pandemic. Many customers switched from Inlara IV to oral, and in quarter one, now that it's opened up, the market's opened up, in particular in the US, we're seeing the switch come back to the impact there of the variation between prior year. What's really important is the rebound in neuroscience, where you're seeing biobands particularly showing acceleration of growth as the markets in the US are opening up. And again, the other portfolio, we've divested numerous numbers of non-core assets in that area. And for the first time, you're seeing growth here at 9% here, in particular in the past, there was always double-digit decline in the last year or so. So this is an opportunity that we continue to see growth. And then on top of that, we're seeing an acceleration of the COVID-19 Moderna vaccine. We just started to record revenue here in quarter one. This will ramp up in quarter two as well. So overall, you know, the 14 global brands are growing at 6.8% in quarter one. We believe this growth will accelerate very similar to the levels of what we saw last year, where it was growing at 16%. So we have a good runway, good start to the quarter, but we see a positive runway, especially with the 14 global brands.

And Costello, I'll take it from here for the IG question. So thank you, Orison. In terms of the IG growth, when you look at quarter by quarter, it's very difficult to take a quarter performance and extrapolate for the final year. So last year in quarter one, we had very significant growth due to phasing. and a difficult comparison with the previous year in FY19. So if we take all of that into consideration, in FY19, we had a minus 2% growth in quarter one, and we ended the year with a 7% growth overall for IGs. In 2020, we had roughly 30% growth for IGs in quarter one. We ended the year with roughly 16% growth of IGs. And this quarter, again, it's a difficult comparison with the 30% growth from FY20 Q1, but we are on track to achieve the 5% to 10% growth for the year. To give you some confidence in that, if we look at our 12-month trailing growth, we are already in the mid-single digits. So, again, very much on track to achieve the year-end results.

Thank you. Thank you very much.

We'd like to move on to the next question. Hashiguchi-san from Daiwa Securities, please. This is Hashiguchi from Daiwa Securities. Thank you very much for the explanation. I have two questions. The first question, why did phasing occur? Why did phasing occur for Taxairo and for immunoglobulin? Not comparing it to last year, but just looking at the sales for the first quarter of this year, I think the value is low. Why did phasing occur to come to this number? Can you be more specific? Thank you. And the second question about TAC 999. Breakthrough therapy designation from FDA was achieved, and in the slides given, 2025 and after, as Wave 2 pipeline, that is the target for your approval. But in the first half of 2021, POC data will be available. That is what I read on the slides. And with this BDD, the POC data, would it be possible for you to apply for accelerated approval? Is that a possibility? That is my second question. Thank you.

Thank you, Ashikoshi-san. I mean, the phasing, year-on-year basis, the phasing, they are phasing dynamic because last year was a very exceptional year because of the pandemic. This year is still within the pandemic with a different situation. So you have different dynamic tech violence, for example. You didn't mention that. So you need to go product by product to get an explanation. So Let's take immunoglobulins. Perhaps Julie can give a bit more granularity on the situation, and then Ramona on the tax arrow.

Yes, thank you, Hashiguchi-san. So, again, I would emphasize where we are when you look at the 12-month trailing growth, which is mid-single digits, because there is, I'll just call it lumpiness, in terms of the sales of IGs. both in terms of tender sales as well as contracts in the U.S. So it's not something that on a quarter-by-quarter basis can be extrapolated for annual growth.

Yeah, and I can speak a little bit to TechSiro. And as Christoph mentioned, really every product because of COVID has had a bit of a unique circumstance. So for instance, last year with Vyvanse, all of the schools shut down. And so we saw the impact on the child market with Vyvanse. This year, we're growing on top of that. And at the same time, we're seeing the adult market really grow this year in the second quarter as an example. for Taxairo, a little bit of a different situation. So last year, as we were heading into the pandemic, there was a little bit of, I would say, hoarding. It was very, very strong adherence and a little bit of buy-in from the channel to make sure that they had product available for patients. Now this year, you know, we're more in a steady state with the pandemic. We don't see those shifts of buying in. And so we're more in a steady state with the pandemic. And so we're not seeing that that we saw last year. So that would be the textile example. It's all, you know, I would say that we had expected and planned for this. So as we looked through our forecast for the year, we had planned for kind of these different dynamics to happen in the quarters based on COVID recovery and based on last year. And I would say that looking at how we're tracking, we're tracking very much at or ahead of our plans that we had expected or forecasted. Thank you.

I can add Asaguchi-san on TAC999. So, of course, very excited about the breakthrough therapy designation. Just to step back, this is a partnership with Arrowhead Pharmaceuticals. Arrowhead runs the program through phase two, and then Takeda takes over the program for pivotal studies and forward. We actually, the breakthrough designation was allocated based on open label data from a series of patients that Arrowhead has already presented in the public domain where we've seen quite striking results. There is a more formal phase two study that will be unblinded later this year. So we'll see results from that study. The design of that study looked very similar to the design of the protocol that the patients that have already been disclosed have gone through. But we'll have much more robust data looking at reduction of what we think is the pathological factor in alpha-1 antitrypsin-induced liver disease, and that's this aggregate of pi Z alpha-1 antitrypsin, we'll also get a sense for liver inflammation, we'll get a sense for liver fibrosis. Whether Those data could be used as a source of accelerated filing. Well, now we have a breakthrough to therapy designation. We could certainly have that conversation in a more direct way with the agency. The agency up until now has been very clear for all liver disease programs, you know, starting with the very difficult, challenging NASH space, but also down to other spaces that you actually do need to show changes in fibrosis over time and then commit to showing, demonstrating clinical benefits. But I think we're still sticking to our base case in terms of timelines. We're gearing up at Decatur to start phase three studies next year. But certainly having a breakthrough designation gives us a window to have a dialogue. And the FDA has been unpredictable lately in terms of what they're willing to discuss for accelerated approval. So we'll certainly be in that conversation.

Thank you very much.

Next. Please.

Hello.

This is . Thank you very much. My first question is about for SG&A. I think it's YYY plus 7%, 218 billion yen. I think that this increase of SG&A is substantial. Are there any reasons behind? I think year on year, your forecast was to be flat. But if you consider this is not an issue, then could you also explain why do you think so? The second question is Eophilia and Malibu that you submitted. In page 6, looking at the timeline chart there, Eophilia approval, I think it seems to be delayed to Q4. So I'd like to know the reason of this delay. And Maribabyo, I think Piduva was May, but now it seems like it is expected to be in the third quarter. So could you also explain the background reason of this delay? Thank you.

Thank you, Murakasan. Kostas, the first question and Andy, the second one.

Thank you very much, Murakasan, for your questions. Firstly, let me highlight that the SG&A increase in quarter one, fiscal year 21 versus 2020, 50% of the SG&A increase is related to foreign exchange when you're looking at the core and the reported SG&A number. So 50% of that increase is FX headwinds. Secondly, when you compare quarter one of last year, when it was right in the middle of the beginning of the COVID pandemic, many of the markets and countries were locked down. So there wasn't much activity in that space in SG&A. 2021, we're seeing the markets reopening. We're launching a significant number of new products in particular in China. So we're seeing the China growth on the launching investment in the launching of new products. And that's reflected in the strong growth we're already seeing in top line revenue growth in China. So overall, SG&A increase is 50% of that is FX. Secondly, the quarter one of last year is not a real positive, you know, great baseline to choose from. And thirdly, we're seeing investments in our launch preparation, in particular markets like China, to help drive top line revenue growth. Thank you very much for your question.

And Muriel Casanes, Andy. very briefly on rivivir just to just to kind of make sure you understand the situation. So we submitted the dossier earlier this year and it was accepted in May with was received a priority review, which is a six month review cycle, which means our produce the date for rivivir is in November towards the end of November. So rivivir is tracking according to timeline. With Eohylia, we don't know what a target approval date looks like at this point. We had submitted that dossier at the end of last year. We had a PDUFA date earlier this year that FDA missed. FDA missed the PDUFA date, which is a quite significant event for FDA because they have an obligation through their PDUFA agreement to hit a certain very high percentage of their PDUFA date. So every time they miss one, it has consequences. We're in dialogue with FDA. There are what are called information requests where sponsors iterate with FDA on the material. We still feel very confident in the clinical profile, the overall profile of this drug, and we're still hopeful that it will be approved, but we don't have a sense for timelines right now. What you see on the timeline chart their chronology on slide 6 is just you know our best sense directionally of when that might occur, but that's not based on any feedback from FDA.

Thank you very much. Moving on to the next question from Credit Suisse Securities, Mr. Sakai.

Sakai-sama.

Sakai-san, are you there?

Sorry. Can you hear me now? Yes, we hear you. I'm sorry. I got stuck with the mute. Yes, two questions. Well, thanks for taking my questions first. Now, Pramson, your comment just brought me a high-level question. You said FDA recent is very unpredictable, especially when accelerated testing approval process. Now, are you referring to recent development of the Alzheimer's disease approval? Or can you specify what you mean by this unproductability? Because this may be related to narcolepsy drug. Now, phase one, sorry, looking at page seven of your slide, you have an important event coming, right, in this second half. especially this regulatory alignment for narcolepsy type 1 phase 3 development program. Now, what you're going to be discussing here, because we have already given break therapy status. Now, that is given if proof of concept is mechanically innovative. But clearly, you have to get the phase 2b outcome right. I just want to make sure I'm understanding this process is right. So these are, I don't know how many questions I have here, but that's all my question.

Thank you. Well, thank you. First of all, let me just ask a question. When we say we have an accelerated program, that's different than the regulatory designation of an accelerated approval. The regulatory designation of an accelerated approval means that you're having a product approved by the agency, not based on clinical endpoints, but based on biomarkers that the agency believes will predict clinical endpoints. So that's exactly what happened with the neuroscience example that you just mentioned in Alzheimer's disease. Our base case for for TAC-994 and narcolepsy type 1 is not an FDA quote-unquote accelerated approval. Our base case is approved based on accepted endpoints for registration. So the timeline that we're putting forward actually is highly accelerated, but it's not dependent on an accelerated approval by FDA. Now, with the breakthrough therapy designation, we'll have a chance to sit very closely with FDA and discuss what exactly will be required. What's the length of the study? What are the endpoints? Whether or not there are comparators? And this is a real privileged opportunity for us. Even with that opportunity, people think that the data are so profound that we can do this in an accelerated fashion. But having that designation will certainly enable that path.

Right. Okay. Thank you very much.

Next question. Mr. Akama, Nikkei newspaper, please. Can you hear me? This is Akama, Nikkei newspaper. Thank you very much. I have two questions. First question goes to Andy. Japanese MHLW actually had a discussion on Pervonilistat regarding its innovative drug dissemination. I believe that within the FY ending in March 2022, you are going to submit this. What is your status regarding the Japanese submission? And what is the indication that you are planning to obtain? So I'd like to understand the approval status, submission status in Japan. Second is to Christoph, Moderna vaccine, it is said that the vaccine supply has been delayed in terms of delivery to Japan. I believe that you will get 50 million doses by the end of September, but what is the current progress? Is it actually going to be achieved, or what is the commitment made?

First off, would you like me to start with the Pevo question? Yes, please. Yeah, so Akamasan, thank you very much for the question. So the first step for pevinitistat is the global phase three study, the PANTHER study in high risk myelodysplastic syndrome and low blast AML. We'll be receiving data from that study this fiscal year, and that will determine the next steps for pevinitistat on a global basis. I actually don't have the timelines for Japan registration in front of me. We can certainly get those to you. We will have to do bridging studies in Japan, and then what the registration package will look like fully will require further dialogue with MHLW, but we can certainly get you those dates.

Thank you, Kamasan, for the second question. I will ask Iwasaki-san to answer because he is working on a daily hour, minute, second basis on providing the vaccines to the Japanese. So, Masato, if you could take that.

Thank you very much.

I'd like to answer to your question. Thank you very much for your question. Today, from the Minister Kono, There was an announcement made, and I am repeating what's already announced. The Moderna's outside of U.S. partner in manufacturing, during its inspection process, some issues were found. Therefore, vaccine supply outside of U.S. has been delayed, and that's what we also heard.

at this point in time is that for Moderna, together with partners,

how we'll be able to minimize such a delay of any necessary supply. That's been under discussion. And also, already the manufacturing is put back on track. So for us, as soon as we get vaccine from Moderna, our importing process and delivery within Japan, we are ready and we will focus on achieving those as quick as possible on our side. Thank you very much.

Because of time constraints, we'd like to make the next question the last question for tonight. From JP Morgan, Mr. Wakao, please.

Thank you for taking my question. This is Wakao from JP Morgan. I have one question. about Novavax vaccine. When will we know the profit impact of Novavax vaccine? Is it after the approval is obtained or when the government purchase it? And will it be booked in the current fiscal year, March 22? That's it.

Well, I think we will include it in our guidance, in our forecast as soon as we have greater with a greater information about about the approval date and the possible launch in Japan, as well as the formalization of the supply delivery. So we are very, very committed, and we are working very hard to bring the Novavax vaccine as soon as possible in Japan. But we need a bit more time to precise information about when it could be introduced in Japan and what would be the type of supply delivery schedule that we could commit to. Okay, thank you.

Thank you very much.

With that, we'd like to conclude the webinar for today. Thank you very much for joining us despite your very busy schedule. Thank you, and please continue to support Takeda. Thank you.