Takeda Pharmaceutical Company Limited

Thank you very much for your participation in fiscal year 2021 earnings webinar of Takeda Pharmaceuticals. I am Ayako Uemura, IA of Takeda Pharmaceuticals. And for the language selections, I'd like to explain. If you want to listen to the discussion in Japanese, please select the Japanese button at the bottom of the Zoom window. If you want to listen in English, please select the English button. And if you want to listen to the original voice, please turn it off. Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Prime Security's Delegation Reform 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 our most recent Form 20-F and in our other SEC findings. Please also refer to the important notice on Phase 2 of the presentation. Now let us move on to the presentations of today's call. Christoph Weber, President and CEO, Andy Plump, R&D President, and Costa Sarucos, Chief Financial Officer, will give you a presentation. After that, we will take questions.

Now, let us begin.

Thank you very much Ayaka and thank you everyone on the phone for joining us today. This is a really incredibly exciting time at Takeda. We had a remarkable year as you will see in our fiscal year 2021 earning results. It is also clear that we are moving into a new phase of the pandemic and many of us are using our offices again with a renewed energy and optimism. At Takeda, we are embracing a flexible way of working, leveraging our offices, which will be transformed into a more collaborative workspace, enhanced by technology. At the same time, we are constantly reminded about the need to lead with our values in these very uncertain times. Since the start of the war and humanitarian crisis in Ukraine, we have been supporting with monetary and medicine donations. Recently, we made the decision to significantly reinforce the donation for humanitarian support and ensure that our life-saving medicines are still available in Ukraine. In regards to Russia, we made a decision aligned with our values to end all non-essential business activities in the country while still ensuring that Russian patients can benefit from our medicines. We stopped new product registration, new clinical trials, enrollment for existing trials and other activities. But we are continuing activities that are essential to maintain the supply of our medicines to patients in need. As the situation continues to evolve, we are committed to respond in line with our values brought to action through patient trust, reputation, business, in that order. Starting with slide four, I am really proud of where we are today and energized by our prospect for the future. Our purpose to create better health for people and a brighter future for the world is a core foundation of our global growth strategy and will help us create value for decades to come. Our growth strategies start with our balanced and diverse portfolio that includes oncology, rare genetics and hematology, neuroscience, gastroenterology, plasma-derived therapies, and vaccines. Within this portfolio, we have a category of growth drivers that we are calling our growth and launch products. We will expand on this more in a moment. And our new global portfolio division is already making significant progress in optimizing our commercial execution capabilities through focus on global product growth, launch excellence, elevating our strategic focus in China, and geographic expansion for many of our most important medicines. You can look at China as the best example of the potential that we have as we expand into new markets. We are leading with the most approval in China of any global biopharmaceutical company over the past two years. Our investment in the second largest pharmaceutical market in the world will effectively allow us to expect to double our revenue in China in the next three years. Next, we leverage our commercial momentum to nurture a pipeline with approximately 40 clinical stage medicines driven by our R&D engine. We have a holistic approach to R&D through our dynamic in-house research capability and a network of over 200 partnerships. We continue to invest in building a presence in cutting-edge cell and gene therapies that have the potential to redefine how we treat serious and life-threatening disease. We have multiple exciting opportunities with critical proof of concept and pivotal study data over the coming quarters. We are confident in the commercial potential of our pipeline to deliver in the medium term with 10 of our programs in late-stage development. Finally, all of this is possible thanks to our strong financial foundation. We continue to focus on growing our revenue and delivering a competitive, cooperating profit margin. Our strong margin drives important cash flow, which allows us to invest in our growth drivers while also paying down debt. It also allows us to return cash to shareholders in the form of our well-established dividend and share buybacks when appropriate. I credit our people around the world for our progress and growth. They come to work each day living our values and our commitment to patients. We are working to continuously deliver an exceptional people experience to all our colleagues wherever they work. We are redesigning our workspace and way of working to provide the flexibility that our people value, while reinforcing the power of human connection and creative collaboration. We are also ramping up our data on digital learning programs to make sure that we are creating a resilient, future-ready organization. And when we think about the future, we are also reminded of the importance of our mission to build more sustainable health systems and foster a better planet for future generations. We are on a continuous journey with our colleagues and others in the community to challenge our ambitious sustainability efforts. Our work is more important than ever before, particularly in the time of great uncertainty. As we look to the future, it is clear that we have unlimited possibilities to make an impact for patients, our people, and the planet. On slide five, as you will see today, our performance in fiscal year 2021 reinforced that our strategy is working. We remain well positioned for long-term business growth. Fiscal year 2021 was a year of significant top-line acceleration with underlying revenue growth of 7.4%. On a reported basis, revenue was 3,569 billion yen with a year-on-year increase of 11.6%. This top-line growth was driven by our growth and launch product, which delivered strong performance across our key business areas in spite of the COVID-19 challenge. We also continue to generate robust free cash flow reaching 943.7 billion yen, which allowed us to invest in our growth drivers while also paying down debt, ending the year with a net debt to adjusted EBITDA ratio of 2.8 times. This solid financial foundation on commercial momentum allow us to continue to develop a pipeline that shows significant potential. As a science-driven organization, We are committed to build for the future, and we are doing that. We are proving our ability to bring new therapies to patients, expand indication, and launch products in new geographies. Notable approvals, EXCIVITY and LISTENCITY, have exceeded launch expectation and have added even more momentum. Let's start with EXCIVITY. We launched within days of approval in the US and are off to a strong start. In fact, EXCIVITY is capturing approximately half of all new patient starts among the two branded EGFR Exon 20 treatment options. The broad prescribing use and high numbers of individual prescribers can be attributed to EXCIVITY durable response and oral administration. We are expanding EXCIVITY into new markets and are reaching new patients with a recent conditional approval in the UK. We are seeing similar success with our post-transplant antiviral infection treatment, LiftenCity, which launched in the US in December 2021. More than 500 patients have been treated with LiftenCity in the months following the launch, and demand is continuing to grow. To date, more than 30% of the approximately 300 transplant centers in the US have prescribed LiftenCity. This speaks to the unique value of lift-density. We also recently announced an exploratory data analysis of lift-density that showed meaningful reduction in hospitalization rate and length of hospital stay. Patient by patient, we are seeing the impact we are making. It is clear that both lift-density and extivity are addressing important and distinct patient needs. To help address the COVID-19 pandemic, we are continuing to gain traction in our effort to bring vaccines to the people of Japan. Last month, we received approval to license and manufacture Nuvavaxovid and will soon begin distribution in Japan. This past fiscal year has been remarkable. We have clearly demonstrated our ability to bring new therapies to patients. We received our highest number of global approvals during any fiscal year in our history, and we are particularly proud to be leading the industry in drug approval in Japan. I've talked in the past about how we complement our in-house R&D expertise with a robust network of some of the most innovative and respected partners. The acquisition of three innovative immuno-oncology companies, Gamma Delta Therapeutics, Maverick Therapeutics, and adapted biotherapeutics serve as a great example of our strategy in action. Another great example is a collaboration and license agreement with GCR Pharmaceuticals to develop a new way to treat Hunter syndromes and help maintain or improve cognitive function in patients living with this rare disease. We have also announced a collaboration with Frazier Healthcare Partners in fiscal year 21 to launch ILVAX, a biopharmaceutical company to develop and commercialize Takeda Neurovirus vaccines candidate. We follow the best science and collaborate to unlock innovation wherever it originates. These partnerships offer exciting new opportunities to advance our pipeline. On slide six, looking ahead to fiscal year 2022, we expect that our strong revenue growth will continue and will more than offset impact from loss of exclusivity. Going forward, we will use the concept of constant exchange rate or CER growth to give management guidance on our core financial. Previously, we had used a more complex underlying methodology which adjusted for divestiture as well as foreign exchange. But because our divestiture program is essentially completed, we will now only be adjusting for foreign exchange. On a constant exchange rate basis, we expect core revenue to grow low single digit at the high end of low single digit and we expect co-operating profit on core EPS to grow at high single digits. We expect to continue delivering robust cash flow and for the first time ever are forecasting a co-operating profit that exceeds 1 trillion yen, a first for Takeda, with a core EPS of 484 yen. We also expect a rebound on a reported earning basis with reported EPS to increase by 27.9%. With regards to shareholder returns, we remain committed to maintaining our well-established dividend policy of 180 yen per share annually alongside share buyback when appropriate. Developing our diverse pipeline continues to be a priority. We have many exciting opportunities in front of us. with 10 late-stage development programs with upcoming NME filing and expansion opportunities. I'd like to point to a few near-term highlights. Our dengue vaccine, TAG003, is currently under review with various dengue-endemic countries and with European authorities, and we anticipate a decision this year, in fiscal year 2022. We believe that we have the best-in-class vaccines for dengue, the fastest-spreading mosquito-borne disease, named by the WHO in 2019 as one of the top 10 threats to public health. Other late-stage milestones include data readout for label expansion opportunities for lift density in frontline cytomegalovirus infection, IQVIA in CIDP, chronic inflammatory demyelinating polyradiacal neuropathy, and TAX755 in CTTP, congenital thrombopoietic thrombopoietic cytopenic purpura. The late-stage data readouts should allow for global filing in this indication, with future label expansion opportunities to cover. Finally, there will be multiple proof-of-concept readouts across the pipeline over the next two years, which could lead to additional approval later this decade. In particular, we remain focused on continuing to develop the Oryxin franchise, and we expect to see data for our next oral program, TAX861, in the coming year. On slide seven, I'd like to turn now to an area of our business that is driving impressive growth and making a positive impact on patients with life-threatening conditions. Our PhD portfolio continues to grow faster than the market, driven by the strong performance of immunoglobulin and albumin. This is a remarkable achievement given the pressure of the pandemic that greatly challenged the industry. I'm proud to say that our total revenue growth in calendar year 2021 was the highest of the major industry players. As you can see here, immunoglobulin grew 9% and albumin grew at a rate of 42% year over year. Our remarkable growth can be attributed to our efforts to invest in, expand and transform our end-to-end plasma operation and capabilities. Throughout the pandemic, our primary objective has been to maintain continuity of patient supply, which require consistent donation volume growth as new patients are diagnosed and brought into therapy. We have met all our supply commitments to patients worldwide in the past fiscal year. Looking ahead, we see potential for growth in our PDT business and anticipate growth of both our immunoglobulin and albumin portfolio of between 10 and 20%. The past two years have demanded that we do more with less plasma, and we have. We expect also compensation of donors in the U.S. to start to moderate closer to pre-pandemic levels to enable year-over-year margin improvements. Indeed, we are well positioned to capture the full benefit of our digital and organizational transformation to improve PDT business margin over time. We have already done much to mitigate costs through operational efficiencies and advance in data and digital. We were also the first major plasma manufacturer to return to pre-pandemic plasma donation volumes and fully expect to deliver an additional 10 to 20% plasma donation volume growth in fiscal year 2022. Our strategy here is working. Strong top-line growth paired with bottom-line optimization has enabled PDT to successfully maintain our growth trajectory and meet our commitment. Next, on slide eight, I would like to share with you how we are classifying our commercial portfolio. Moving forward, we will look at our most important global products and future growth drivers under a category called growth and launch products. This category generated 240 billion yen or 2 billion US dollars in incremental revenue in last fiscal year. and delivered underlying growth of 19%. It includes Antivio, Taxaro, Alunbrick, and our immunoglobulin and albumin product. We will also look at our newest launches in this category, including Excivity and Intensity, as future source of revenue. This growth and launch product represents one-third of our global revenue and the vast majority of our growth. These products address important unmet needs, bring substantial value to patients, and are expanding rapidly to new markets, as illustrated by the recent approval of Alunbring in China and Taxaro in Japan. This is a slight adjustment from our previous focus on 14 global brands, but one that allows us to put strategic emphasizes on specific road drivers and new launches, That represents the main driver of our future revenue growth. In addition to this change and the shift from underlying to constant exchange rate, we are also slightly adjusting how we describe our pipeline to reflect our future forward business evolution. Looking ahead, we will place emphasis on our lifecycle management pipeline, on our late-stage pipeline, and our pipeline with expected key proof-of-concept readout. This will all be reflected in Andy's presentation shortly. These reporting adjustments are all intended to show with clarity and simplicity the direction of our business in the coming years. On slide nine, I would like to start on the next slide by reinforcing that we see Antivio, Taxaro, our immunoglobulin and albumin portfolio and new product continuing to generate substantial growth into the end of the decade. We are confident that these growth drivers will allow us to offset the impact coming from losses of exclusivity, which is especially significant in the next two years, as products like Velcade, Vivance, and Azilva will be impacted. As a consequence, we expect our revenue compound annual growth rate to be in the low single-digit range between fiscal year 2021 and 2023. Even in 2023, When we will likely face VIVANCE generic entry in August that year, we believe that there is enough momentum coming from the rest of the portfolio to hold revenue approximately flat. The headwinds we are facing are temporary. As we think about the long-term outlook, it is important to remember that after VIVANCE, we have significantly lower loss of exclusivity exposure in the second half of this decade. We can manage the loss of exclusivity at WIMS we face in 2022-2023, and we do not expect future loss of exclusivity exposure of this magnitude until the launch of Antivio biosimilars in the US. As previously communicated, we do not expect to see any biosimilar entry for Antivio at the time of data exclusivity expiration. We have patterns for Antivio that run out to 2032, and any biosimilar of anti-view that seeks to launch prior to then will need to address potential infringement or the validity of all relevant patterns. As it stands today, we also have yet to see any biosimilars enter clinical development. And as our infrastructure cost is competitive, our PDT margin improves and we leverage new investment in data on digital we aim to minimize the margin impact of Vyvanse generics and deliver a co-operating profit on adjusted EBITDA at or above the fiscal year 21 level. This will in turn allow us to continue to deliver towards our Lotus target while also investing in continued expansion of our growth and launch products and enriching our R&D pipeline, either organically or through targeted business development. Moving to slide 10, we never lose sight of the fact that our success can be connected to our relentless focus and patience on our enduring values. Our vision is to discover and deliver life-transforming treatments guided by our commitments to patients, our people, and the planet. This purpose-led and value-based approach drives all our action and decision. And as we look to the future, I see significant potential in data and digital. Technology will revolutionize, is already revolutionizing our business and create better experience and outcome for patients, accelerating the discovery, development, and delivery of life-transforming treatments. And we will transform the way we work. Our goal is to continue to grow Takeda into the most trusted, science-driven, digital biopharmaceutical company. In summary, I am really proud of our progress as well as our ability to lead with our values and continue to challenge our own ambition. This last fiscal year was a remarkable year. We brought new life-transforming medicines to patients and saw strong growth in our key business area. We focus on areas where we can make the greatest impact for patients, including scientific advancement in rare disease, where there is a desperate need for effective treatment options. Our diverse portfolio will position us to continue to generate steady, organic top-line performance, while also driving competitive margin and strong cash flow to fuel future innovations. With our recent approval, we are even more confident today that the strength of our commercial execution, combined with the potential of our pipeline, will help to fuel our long-term growth. We expect growth momentum to continue next fiscal year through market prioritization, new indication, and geographic expansion, particularly in markets such as China. We are confident that this growth outlook will signify societal and business value in the mid to long term. With that, I would like to provide Andy with an opportunity to discuss our exciting R&D pipeline. Thank you.