Takeda Pharmaceutical Company Limited

Thank you very much for taking time out of the very busy schedule to join us for this first quarter earnings call by Takeda or FY24.

I'm the master of the ceremony today.

My name is Sir O'Reilly from IR. I'm the head of IR. I would like to explain the language setting first. Please find the language button at the bottom of the Zoom window. If you wish to listen in Japanese, please select Japanese. If English, please select English. If you want to listen to the original, please turn them off. Before starting, I would like to remind everyone that we'll be discussing forward looking statements within the meaning of the Private Securities Litigation 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 the most recent Form 20F and in our other SEC findings. Please also refer to the important notice on page 2 of the presentation regarding forward-looking statements and non-IFRS financial measures, which will also be discussed during this call. Definitions of our non-IRFS measures and reconciliations with comparable IFRS financial measures are included in the appendix of the presentation. Now, without further ado, we would like to move on to the presentation of the day, which will be given by Christoph Weber, President-CEO, Milano Furuta, Chief Financial Officer, and Andy Plump, R&D President. Following the presentations, we have time for Q&A. Now, let us begin.

Christophe, over to you.

Thank you, Chris, and thank you, everyone, for joining us today. It's a pleasure to be with you all. Overall, we had a very positive start to fiscal year 2024. In the first three months, revenue grew 2.1% at constant exchange rate. Performance was driven by the continued strong momentum of our growth and launch product, which grew 17.8%. at constant exchange rate, and they now represent 46% of our total revenue. Antivio growth has started to accelerate since last quarter with the launch of Antivio Pen in the US. Still early days as we are getting full access coverage, but encouraging. We also saw robust growth of our Emilio Globulin portfolio, Taxaro, Cudenga, and Frisacla. We are also managing actively the lifecycle of our growth and launch portfolio. In Q1, we further expanded our main product geographic reach with approval of Lifton City in Japan and Frisacla in Europe. In the first quarter of the fiscal year, our core betting profit margin was at 31.6%, benefiting from phasing of R&D investment, reduction in other OPEX, and temporarily lowered and anticipated generic erosion of VIVANs in the US. Over the remainder of the fiscal year, we expect multiple pipeline programs to progress into phase three, and we are waiting our R&D investment towards future quarter accordingly. We also expect VIVANs generic erosion to come back in line with projection. We continue to be very focused on improving our cooperating profit margin through our multi-year efficiency program. This program is focused on three areas of opportunity, increasing organizational agility, improving procurement savings, and strengthening how we leverage data, digital, and technology across Takeda. Our progress on this program is on track. In Q1, we took concrete steps to improve organizational agility, for example, in R&D and in our U.S. commercial organization. We also identified and executed new procurement-led efficiencies. For example, we have been using data technology and AI to optimize our supplier selection process. We believe that our investment in data technology and AI will yield productivity and efficiency gain across our value chain. For example, in manufacturing and quality, our goal is to accelerate the release of drug batch, which will improve our working capital and our ability to supply. We also took steps to further enrich our pipeline. We signed two option agreements for mid- and late-stage programs. One with a percentage for Elveram-Batinib for chronic myeloid leukemia and other hematological cancers. The other with AC Immune for ACY2460, an active immunotherapy designed to delay or slow Alzheimer's disease progression. Agreements such as this complement our existing pipeline and portfolio and all promise for enriching our pipeline in the future. We also made notable advancement in our organic pipeline too, and Andy will discuss this in more depth in his presentation. In closing, we are very pleased with the progress we made in this first quarter, which reinforced our ability to deliver on our mission to transform the life of patients while driving long-term business growth and profitability. I will now hand over to Milano to discuss our financial results. Thank you.

Thank you, Christophe, and then hello, everyone. This is Milano, Frida speaking. And slide six summarizes our Q1 financial results. Revenue was just over 1.2 trillion yen, an increase of 14.1%, or 2.1% at constant exchange rate. We call it CER. Top-line performance of CER was driven by our growth and launch products, with some upside from milder than anticipated finance generic erosion. Cooperating profit, CoOP, was 382.3 billion yen, an all-year-on-year increase of 17.1% or 4.5% at CER. At this core, OP gross benefited from phasing of R&D investments, which we expect to be weighted more heavily in the remainder of the year. Reported operating profit was 166.3 billion yen, a decline of 1.3%, including the impact of restructuring expenses for the cost efficiency program and the impairment of particular stats after the phase 3 study readouts. Core EPS and reported EPS were 176 yen and 61 yen, respectively. Operating cash flow was 170.3 billion yen, primarily driven by Core OP improvements, and adjusted free cash flow was 23.7 billion yen, reflecting almost 100 billion yen of business development activity in Q1, and including the licensing of a referral tied from Propagonist and our option agreement with ACME. Please note that we have introduced the term adjusted free cash flow in fiscal year 24, but the calculation is exactly the same as we used for free cash flow in our presentations last year. Let's look at the New Year revenue dynamics on slide seven. Takeda's growth and launch products grew 17.8% at CER in Q1, more than offsetting the loss of exclusivity impacts such as Binance in the US and Zilliwa in Japan. Additionally, net positive growth in other brands contributed to 2.1% revenue growth at CER. The depreciation of the yen versus major currencies was an additional revenue tailwind of 127.2 billion yen, resulting in a 14.1% growth on the actual FX basis. Takeda has a balanced portfolio across six key business areas, which are all growing except neuroscience due to violence LOE. These are driven by gross and launch product, as Christoph said, which now represents 46% of total revenue and is now growing at 17.8% at CER. All of these products performed broadly in line with expectations in Q1. And TVR growth was 7.6% at CER. We have seen an uptick from the prior quarter. supported by the launch of NTVOPan in the U.S. As of July, two out of three patients have an access to NTVOPan based on U.S. health plan adoption. We expect growth to further accelerate this year with expansion of access. Taxira continues to have a strong momentum with growth of 19.8% of CR It is capitalizing its leading position in the expanding prophylaxis market in HAE. Within PDT, Albumin globally grew 21.9%, while Albumin declined 14.2% due to anticipated phasing of supply to China. We expect Albumin revenue to recover and reaffirm the full year forecast to single digit growth at CER. We are happy to see the first launch uptake of Fusacla and Kyudenga. For Fusacla, it is still early days, but the first quarter sales are slightly better than we expected, with revenue of 11.9 billion yen. We expect momentum to continue with EU approval in June and approval in Japan anticipated soon. Kyudenga, our dengue vaccine, is now available in 21 countries. We see strong demand in both endemic and non-endemic markets. Recently, the WHO added Qdenga to their list of pre-qualified vaccines, and Gavi, the vaccine alliance, approved support for dengue vaccine program. These acknowledgments should drive further awareness and access for Qdenga going forward. Slide 9 shows the year-on-year reach for cooperating profits. you can see how LOE has a proportionally larger impact on profit than revenue due to the high gross margin of products like Vyvanse and Azuliva. In Q1, this was offset by phasing of expenses, particularly in R&D. R&D investment in Q1 decreased by 7.7% at CER, but we still expect a modest increase for the full year as multiple programs move into phase three in the coming months. In adult banks, we saw a decline versus prior year benefiting from initiatives including the rationalization of real estate we executed last year. The cost efficiency program that we announced in May is also progressing on track. We expect savings from this program will ramp up in coming quarters. When it comes to reported operating profit, higher impairment of intangibles, mostly for static less stats, and higher restructuring costs associated with efficiency program more than offset the core B growth. Restructuring costs in Q1 totaled 40.9 billion Yen, tracking in line with our expectations for the full year. Also in Q1, we booked a legal provision in other expenses, according to our agreement in principle to resolve U.S. product liability litigation related to privacity and excellence. The full year FY20 for outlook is unchanged from what we provided in May. We will continue to monitor the violence and generic erosion alongside performance of the rest of our portfolio and FX rates. We will provide an update at Q2 earnings in October. A brief update on the financing activities. In June, we issued a new hybrid bonds of 460 billion yen. All the proceeds will go towards refinancing the 500 billion yen of hybrid bonds from 2019. We will call in October 2024. The balance of 40 billion yen will be refinanced with hybrid bank loans, which will come into effect on the core date. In July, we executed 3 billion US dollars debt financing. We use this to prepare 1.5 billion US dollars of bonds maturing in 2026, and to pay down another 1.5 billion US dollars of outstanding commercial paper. I just want to clarify, as all these are refinancing activities, they are leverage neutral. and they have smoothed out our debt maturity data, as you can see. We maintain 100% of our debt at a fixed interest rate, and the weighted average cost is now approximately at 2%. Thank you for your attention, and I'll now pass over to Andy.

Thank you very much, Milano. Hello to everybody on today's call. So if we go to the next slide, please, Chris, thank you. We start with ceticlostat, which recently completed phase three trials in two indications, Lennox-Gastaut and Dravet syndrome. As previously communicated, ceticlostat failed to demonstrate clinical benefit in Lennox-Gastaut. Ceticlostat also failed to meet its primary endpoint in the Dravet syndrome phase 3 trial, narrowly missing with a p-value of 0.06. However, the totality of data from this study, with meaningful effects on key secondary endpoints, combined with the highly significant results from the large phase 2 study, suggest clear clinical benefits for ceticlostat and Dravet patients with a differentiated safety profile. Given the large unmet medical need in Dravet, we are investigating a potential regulatory path forward. This quarter, we had important Phase IIb data presented for TAC861 and mezagidimab that we will describe later in the presentation. Bruzakla and Littencene had additional approvals that expand their geographic reach. Maralixibat was filed in Japan for algeal syndrome and progressive familial intrahepatic cholestasis. In addition, we continue to expand the depth and breadth of our pipeline by signing two option deals, as Christoph mentioned, for mid- and late-stage programs. From Ascentage Pharma, ovirumbatinib is a third-generation BCR-able tyrosine kinase inhibitor to treat CML and other hematological malignancies. from AC Immune, ACI-24060, is an active immunotherapy aimed at slowing Alzheimer's disease by targeting toxic amyloid beta. Building on the optionality we have gained with these two deals, let's now turn our attention to the overall momentum we are generating in our pipeline. Next slide, please. Our rich R&D pipeline continues to advance with two significant opportunities, zazocitinib, our selective TIK2 inhibitor, and TAC861, our orexin-2 receptor agonist, both poised to deliver near-term phase 3 readouts. Zazocitinib has the potential to be the leading oral treatment for patients with moderate to severe plaque psoriasis, addressing a significant unmet medical need for patients seeking clear skin. The Phase III trials are enrolling rapidly, and we expect to complete enrollment in fiscal year 2024. TAC 861 is also advancing rapidly as we have initiated global Phase III trials in narcolepsy type 1. We will provide updates on the Zazocitinib and TAC 861 pivotal trial designs, our overall program timelines, and market potential later this year at our R&D investor event. Beyond these two programs with significant revenue potential, we have significant depth and breadth in our Light Stage program pipeline that will further contribute to Decatur's long-term growth. Our partners at Protagonist have been making strong progress with Resveratide, which continues to enroll well with the target filing expected in fiscal year 2025. Fazir Saran continues to advance, and mezagidimab will begin phase 3 trials for immune thrombocytopenia, or ITP, in the second half of fiscal year 2024. Near-term phase 2 readouts that can expand our growing late-stage pipeline include adzinma in immune thrombotic thrombocytopenic purpura, or ITTP, and TAC227 in celiac disease. We have additional data inflections within our early-stage pipeline and intend to continue targeted business development activities to further enhance our maturing pipeline. Now, let's review some of the exciting data that was presented this past quarter. Next slide, please, Jeff. These transformative Phase IIb data presented at the SLEEP Conference demonstrate the potential to revolutionize the treatment of narcolepsy type 1, or NT1. Unlike existing treatments, by addressing the underlying pathophysiology of the disease, TAC861 has shown the ability to significantly improve patients' quality of life and, in many cases, normalize the entirety of their symptoms. Greater than 80% of the NT1 patients on the mid-to-high twice-daily doses were within the normal ranges for the upward sleepiness scale and the maintenance of wakefulness task. Weekly rates of cataplexy were driven to near zero. This efficacy was stained over an eight-week treatment period, and 95% of patients rolled over into a long-term extension study with no patients, no patients discontinuing due to treatment-related adverse events. We are observing sustained efficacy in our long-term extension study with no evidence of hepatotoxicity. Over 100 patients have now been treated for at least six months on active therapy and approximately 20 patients for greater than one year. We intend to present long-term efficacy and safety data at a medical conference this fall. It's worth noting that current NT1 therapies have shown maintenance of wakefulness times ranging from 3 to 10 minutes and F-worth sleepiness scores around 12 to 15, underscoring the unmet need for patients with narcolepsy. We are committed to bringing this exciting therapy to patients as quickly as possible. Let's now focus on the mezogidemab immune thrombocytopenia or ITP data. Next slide, please. Mezogidemab is an anti-CD38 antibody which depletes antibody-producing plasma cells as well as impacting a range of other cells involved in inflammatory processes. This leads to a rapid onset of response and a long-lasting immunomodulating effect. The unmet medical need in ITP is high, with relatively few approved therapies and as many as one-third of patients not well controlled on existing therapies. In this Phase IIb trial, we assessed the efficacy of mezogidemab in a deeply treatment-experienced population of patients with persistent or chronic ITP. The study demonstrated consistent dose response and high response rates at the high doses. There also appears to be the potential for durable and long-term remission after therapy is stopped. The treatment of emergent adverse effects were similar between treatment and placebo arms. We will be starting a phase three program in ITP in the second half of the fiscal year. Finally, I would like to take this opportunity to invite you to our R&D Day to be held December 12th in the evening Eastern Standard Time and the morning of December 13th in Japan. We will review data, development plans, timelines, and our assessment of the market opportunities for Zazocitinib, PAC-861, and other late-stage pipeline programs. Please save this date in your calendars. Thank you very much, and I will now turn it over to Chris to open the Q&A session.

This is my team-wide questions. In addition to Christophe, Milano, and Andy, Julie Kim, President of US Business Unit, will also join the Q&A. Please press the raise the hand button on Zoom if you wish to ask a question. If you're joining us via the Japanese line, please ask the question in Japanese. If you're on the English line, please ask the question in English. If you're listening to the original language, the language is fine. Please limit your question to the maximum of And please ask all of our questions right in the beginning. Thank you. A question? Matsubara-san from Nomura Security.

Yes, this is Matsubara from Nomura Securities. Can you hear me okay? Yes. I have two questions.

First question is about Vibance.

The generic supply will start again in August. So what is the current situation? And in the second quarter, do we see a decline in revenue or do we see that in the third quarter? What is your view? And the second question is about the immunoglobulin.

I understand that it's growing right now.

But the donor fee or other measures, maybe you can implement measures to improve OP margin. Are you doing that right now? And have those measures changed since the last quarterly call?

Thank you. for your question. So the first question on the latest status of Vyvanse in the US and the service of generic supply and when we expect that to accelerate, I'd like to ask Julie to comment on that question. And then the second question about any changes in our plasma business, particularly around donor fees, margin improvements, any commentary on that? I'd like to ask perhaps Christoph to take that question. Julie?

Thank you, Chris, and thank you for the question, Matsubara-san. In terms of Vyvanse, as you've noted, we have seen the supply from generics companies improve over the past quarter, and therefore our Vyvanse demand has declined, although it was above what we were expecting. Quarter over quarter, we do expect the supply situation for the generics to improve, but it is very difficult for us to accurately predict exactly what their supply might be. So we are monitoring this closely for Byvance. We do not have any supply challenges. And as I said, we do expect the overall supply for the generics to improve quarter over quarter. And so we saw from a Byvance perspective, a roughly just over 30% decline versus last year. And we expect our continued erosion of Byvance to proceed as planned. Thank you.

Thank you, Matsubara-san, for the question regarding PDT. A strong quarter indeed in terms of growth. We expect the growth to be slightly lower for the full year, but very strong demand. our margin has been improving now for a few quarters starting just after Covid in fact and this is due to the fact that we are optimizing our supply chain we are we are growing our revenue using our manufacturing capacity fully and the donor fee has been stable now for a couple of quarter so we And we expect them to remain stable, but we'll see how this is evolving. So overall, this is really how we are increasing our margin. We are actively managing donor fee. We are growing our revenue. Our sub-Q also is growing faster, which is helping our overall margin. And then we are optimizing the utilization of our manufacturing capacity. Thank you.

Arigatou gozaimashita.

Arigatou gozaimashita. Arigatou gozaimashita.

Yes, thank you for giving me this opportunity to ask two questions. Both are related to pipeline. Firstly, I was wondering if you could comment on your decision to end your partnership with Hunter Syndrome candidate, JR141. And then second question is regarding your deal with AC Immune for Alzheimer's. And given the regulatory challenges that Aziz Lakembi continues to suffer, I think there are questions in people's minds about the amyloid thesis in general. But this deal seems to indicate that people Takeda believes that this is a very legitimate target and I was wondering if you could comment on that topic generally and on this program more specifically. Thank you.

Thank you, Steve. Andy, would you like to take those two questions, please? Sure.

Hi, Steve. It's Andy Plump. So firstly, as you know, we've undergone a very significant prioritization of our pipeline over the last year to increase capacity to support our emerging late-stage pipeline. And the JCR 121 decision was really just a part of that prioritization. So we're quite enthusiastic about the program. We hope for patients and for JCR that that's a successful program. For the ACI 24-060 program, I actually have a different, slightly different take than the one that you just described. I think that the benefits that we've seen with the amyloid beta clearing passively administered antibodies are unequivocal. You know, there's clear clinical benefit. The benefits are modest. which many people believe reflects the timing of intervention. We think that with the active immunotherapy, the vaccine, firstly, we have the potential to generate a safer profile based on the kinetics of raising these antibodies. And secondly, if, you know, and of course, we need to wait to see the phase two data. We still haven't seen phase two data. This is a very early program. But if we're seeing the kind of amyloid beta clearing that the passively administered antibodies have seen, we think we have the potential to go in even earlier in these patients with a very convenient administration. And we and many believe that by going in earlier, you have the potential to significantly increase the level of efficacy. It's clear that the uptake of these antibodies has been slow, but we think that the vaccine has a very different profile that could really potentially transform the treatment of this disease.

Thanks, Andy. Just to follow up on the first topic, Takeda already has the best-selling treatment for Hunter's disease, Alipraze, and presumably you thought that the new asset you were developing with JCR had the potential to displace that. Is there something that you've seen in the market performance of ISCAGO in Japan, for example, made you rethink that view? Do you think that Alipraze can continue to be the most popular treatment for Hunter syndrome going forward?

I'm going to ask Julie to step in here, but maybe just to level set. So the JCR, the 141 asset actually was unique relative to L-aprasin, that it had a shuttle mechanism that allowed it to traverse the blood-brain barrier. And so our hope and our continued hope for JCR and for patients with this asset was the ability to expand the treatment potential of this replacement enzyme to treat you know, children that have neurological manifestations as well. But Julie, maybe you want to comment as well.

Sorry, just trying to get myself off mute. So, yes, in terms of Ellipraze, we continue to be pleased with the presence of Ellipraze on the market. And there are a couple of small competitors, as you are aware in some of our markets for the Hunter patients. And we also had, as you know, another program that we were studying in terms of Hunter that did not meet its endpoints in the phase three. So we continue to see that there's interest in developing further treatments for Hunter patients. But at least for now, Alipraise continues to serve the needs of those patients.

Thank you.

Thanks very much. Thank you. Moving on to the next question. Morgan Stanley, Mr. Muraoka.

Yes, hello. Good evening.

This is Muraoka from Morgan Stanley.

Thank you. My first question is about Entivio.

I think Entavier Penn is a wonderful story. And the CR for full year is 16%. That's the target. And if you think about the gap against the target, you have to really accelerate the growth from the second quarter. Otherwise, you cannot really achieve the full year target on a constant currency basis. Do you believe that you can catch up before the end of the year? And if so, do you have any evidence? Why do you think that?

Sorry, that was the first question.

And the second question is, at the time of the R&D day, 079, Meza Gita Map, IGRN, can we expect to see that on the R&D day? That's the second question.

Okay, thank you for your question. So the first question on NTVO and the confidence in the full year target of 16% growth. Considering the importance of the Penn launch in the US, I'd like to ask Julie to comment on our expectations for the rest of the year for NTVO and the Penn uptake. And then the second question on whether we will see TAC-079 mesagitamab IGAN data at the R&D day later in the year. I'd like to ask Andy to comment on that.

Yes, thank you for the question, Muralikha-san. And in terms of Antivio in the U.S., as you've noted, the pen launch has gone well thus far, and we are continuing to increase our access for patients. We've seen 6.5% increase growth in Q1 in the U.S., and we do expect, since the Crohn's indication was also just approved a couple of months ago, that we will see further acceleration as we continue to pull through not just the UC indication on Penn, but also the Crohn's indication on Penn. As Christoph mentioned in the presentation, and Milano as well, We are continuing to increase the access for patients in the U.S., and with a combination of the two indications plus improved access, we do expect to see an acceleration in the second half of the year for Penn in the U.S. I would also note that last year we had across the globe 12% growth in volume, and we do expect to see lower EU clawbacks so that will also contribute to our ability to achieve the 16% growth year-on-year for Antibio, which we acknowledge is ambitious, but we do have positive indications in terms of our ability to achieve that. And as I said, we continue to push in the U.S., and growth in Europe continues to be strong as well. Thank you.

Mario Casan, thank you. It's Andy. So, obviously, we'll take a deep dive into the mezagetamab program as one of the key areas of focus at the R&D Day in December. It's including ITP, IGAN, and other indications that we're considering. The mechanism of action for this molecule suggests the potential for benefits across a range of indications. We're clearly committed to ITP. We have very robust Phase 1b data in IGAN. IGAN is an extraordinarily competitive field. We think our profile is equal to or better than anything that's been reported, but we're being thoughtful in terms of how we proceed. Our intent right now is to disclose data at a medical conference in the fall and to have that data available to share with you at the R&D day. But we're also thoughtful of the competitive landscape. And so more to come. Thanks.

Okay. Thank you very much. I'd like to call on the next question. Mike Nadelkovich from Cowan. Please go ahead, Mike.

Thank you for the questions. I have two. My first is on TAC-279. So as I'm sure you're aware, another competitor TIC-2 inhibitor failed in a mid-stage IBD trial. Relative to Ducravacitinib, you have noted in the past that TAC-279 is being tested at higher equivalent doses, and that could make the difference in IBD. Should we apply the same logic when comparing to the Ventix molecule, or are there additional factors to consider? And my second question relates to guidance. Vyvanse, again, performed better than expected this quarter. And at least by our estimation, all of your key products beat as well. So I'm curious if your reiteration of full year guidance is meant to lean cautious or if there may be headwinds in the rest of the fiscal year that we're not considering.

Thanks, Mike. So I think the first question for Andy and then the second question on guidance, I'd like to ask Milano to comment on that, please.

Hi, Mike. Thanks for the question. So, of course, we've seen essentially what you've seen with respect to the Ventex disclosure, which is just a press release, so we don't have all the data in front of us. What we know from that press release is that it was a relatively small study that was running Crohn's disease. at doses that were equivalent to the doses that were used in their psoriasis phase two program. We know from the psoriasis program that the clinical data were suboptimal relative to our 30 milligram dose in 279, directionally slightly better than Ducravacitinib, slightly worse than 279. Those are the same doses that were used in IBD. The disclosure for the IBD trial was that they failed in their primary endpoint, which is a very subjective endpoint, very unusual to use this endpoint, which is called the CDAI in a phase two study. and that they showed dose-dependent positive effects in the much more robust objective endpoint, which is endoscopy. So, of course, we're going to have to wait to see these data, but, you know, our internal sense is it's actually encouraging for 279. You know, we continue to have, you know, a strong belief in the potential in IBD, and both the Crohn's and ulcerative colitis studies are enrolling, and we expect to see them read out in 2026.

Thank you, Mike. And then I'm going to answer to the second question about the guidance. So we don't change the guidance. It's not about the headwinds, but rather maybe two components for both the top line and the expand side as well. So the top line, you commented about the vibance, but yes, we did have some upside in vibance at the beginning of this quarter, but we do see now vibance generic erosion is coming back to our sort of expectation. And then we do expect that generic erosion is going to be accelerated coming quarters. And for expense side as well, the R&D investments are weighted toward the rest of the year. So the all in all, if you look at the full year, there's not much, you know, the big, big component at this moment. We think we should change the guidance as of now, but we will monitor the situation and we will come back at the Q2 announcement in October.

Great. Thanks so much. Thank you. Moving on to the next question. J.P.

Morgan, Mr. Wakao, please.

Please unmute yourself and ask your question. Yes, this is Wakao, J.P.

Morgan. I have two questions. My first question is about NTVO. UCC was approved for the indication of UC recently. And does it impact entire viewers' share or revenue in a negative way? That is my question. What is your view on this? And the second question is about the gross profit margin, gross margin. 65.5%, I think, is the target for the full year. And the first quarter was at 68%. So what are the factors that would lower this number from the second quarter and beyond? That's all. Thank you.

Thank you, Wakao-san, for the question. So the first question on Intivio, impact from the approval of Skyrizi in UC, any impact on market share? I'd like to call on Julie to comment on that. And then second question for Milano on gross margin, 68% in Q1 with an outlook for 65% for the full year. What are the reasons why it will decline in the coming quarters?

Thank you for the question, Orcao Santo. In terms of the UC indication, Antivio continues to hold our strong position as market cheerleader in first line. Where we do see a turn in terms of patients is in second line and beyond, and this is where SkyRizzy had their initial impact with CD, and that's where we are seeing their initial impact for UC as well. So, again, from a mechanism of action perspective, Antivio remains the only gut-selective therapy that's out there for IBD patients, both in UC and CD. And the new entrants seem to be impacting more within the other classes, the other MOAs. Thank you.

Thank you, Mr. Okawa. This is Furuta speaking.

In terms of outlook of gross margin, after the first quarter, for the remainder of the year, Vyvanse and Azilva high gross margin products will be shrinking, especially by a month. So that's the impact. And also, aluminum lower margin products will see recovery in terms of demand as well as revenue. And this is why we expect the gross margin to lower somewhat. Q1 gross margin is in line with

by expectation.

So currently we want to maintain the existing guidance. Thank you very much for the answer.

Thank you, Hakao-san. Okay, moving to the next question, I'd like to call upon Tony Ren from Macquarie. Tony, please unmute and ask your question.

Yeah, sure. Thank you for the opportunity to ask my questions. So I want to ask about your IVIG, your immunoglobulin in CIDP. So we saw some data, some results coming out of GenX. Their VivGuard was approved in CIDP, I believe, quite late in June. and they said the uptake in CIDP is exceptionally strong. I think that's their wording in their transcript. So I just want to see what type of we being. So we've had competition from them for about a month now. I just want to see what are you seeing in a market. And then I also want to go back to the market share for Intivio as my second question. If you look at the AVI's pronouncements and what they say during their earnings about IBD, they are obviously very aggressively targeting the frontline bio-naive IBD setting. And, you know, just want to see your view on that. And also, I believe you guys used to show a longitudinal market share graph of Intivio and its competitors in IBD. I don't believe I see it in this presentation for the first quarter. I just wanted to see if I'm missing anything here. So that's my second question. Yeah, thank you.

Thank you, Tony. I think we can call on Julie to answer both of these questions. Julie?

Yes, thank you, Tony, for the question. So let me start with your first one in regards to CIDP. So in terms of CIDP, our expectations have not changed in terms of the long-term position for IGIV or IGs in general, not just IV, both our GammaGard liquid and Hycuvia liquid. in the idp and so of course for patients it is always a positive positive situation when they have more choice especially with the disease area like cidp where the patients are heterogeneous and we know that not all patients respond to ig therapy but ig does remain the gold standard and we are pleased with our launch of CIDP in HyCuvia over the past several months. Moving to Antivio. So you had a couple of questions on Antivio. So let me see if I remember them correctly. So the first in terms of Antivio share in first line vis-a-vis AbbVie. So as I mentioned for first line BioNaive share, we are still the market share leader, both in overall. And then when we talk about the market share graph, which I think is your second question. So as you are aware, I'm sure everyone is aware, there was a cyber situation earlier this calendar year that impacted claims and claims processing. And because of that, at this point, we're not able to show the current Shared data, as soon as that has been sorted and worked through in terms of the claims data in the U.S., we will be able to revert and show the shared data again. But in terms of first-line bio-naive, Antivio is still the market share leader. I hope that addresses your questions. And if I missed something, please ask again.

That's very clear. Thank you very much, Judy. Thank you.

Thank you.

Moving on to the next question, UBS Securities. Haruta-san, please ask your question.

Yes, this is Haruta, UBS Securities.

My first question is about R&D organization. Margin improvement program is in place, and within FY24, in terms of headcount, organizational structure, I understand that you'll finish reorganizing, and you mentioned that. I think some of the functions will be centralized and the efficiency will be improved. But with a fewer headcount, how can you improve productivity? And how do you intend to run, operate the new organization? So that's my first question. My second question is about the Entivio biosimilar. I think some companies are advancing in the development, not necessarily in all the indications, but in 2025 or 2026, some of the Phase 3 studies will be completed, according to my estimation. Now, status of biosimilar development, considering this status, Do you think Entivio can protect itself against the biosimilar until 2030, 2032? Do you maintain this assertion or do you have any updates on how long you can protect yourself against biosimilar?

So the first question on R&D organization, the restructuring of the organization that's taking place this year, how can we make sure that we are improving productivity through this period of change? And then the second question was on NTVO biosimilar timing. So I think the first question for Andy, and then second question, I think perhaps Christoph, if you could comment on our latest biosimilar entry timing assumptions for NTVO.

Thanks, Christian. Thanks, Haruta-san. So we're continually looking at our pipeline. We're continually making data and strategic-driven decisions to prioritize our pipeline, and we're continually looking at how we operate to ensure that we're operating in the most effective and efficient way possible. Over the course of the last year, as I mentioned earlier, we went through quite a significant pipeline prioritization to ensure that we were concentrating our resources as much as necessary to support our growing late-stage pipeline, which, you know, now has six programs in it and the potential for more programs to come. You know, as Christoph has mentioned previously, we've also year on year been increasing our R&D budget to ensure that we can support that pipeline. So, the efficiency program that we've undertaken over the past year and that's in full swing right now is really designed to ensure that we have an organization that can drive fully that pipeline forward. You know, given the prioritization, we feel that we're right sized to deliver on that pipeline. we're also you know as we've mentioned in many in many different settings we're also looking to leverage more and more efficiencies and automation from data digital and technology and we're starting now to realize some of the benefits of that um that that uh that strategy thank you thank you for uh the question or regarding interview biosimilar slow look

Based on what we know, and we look at, of course, development stage of biosimilars, but also we look at the defense of our patent set, we don't see any reason to change. Our current assumption is that the earliest biosimilar could enter the market in the U.S. would be, you know, 2030 to 2032. So no change to our assumptions so far based on what we know. I will also mention, because we get the question very often, that the NTVO pain, which is very important right now, as Julie mentioned, it allows us to keep our leadership in bio-naive patients. We have not seen a market share decline because of the NTVO characteristic. But the MTV Open is not allowing us to have a longer protection. So this is why we have no chance to our assumptions when it comes to biosimilar entry. Thank you.

Thank you.

Thank you. Next question. From City, Yamaguchi-san.

The first question that might be in the presentation, but I may have missed it, but the Q1 looks very strong. And is there any kind of one-time factor why this is the kind of basic number for this quarter, which I can think of the four times more than this one? So that's the first question. The second question is a kind of repeated question, but the progress rate in the Q1 as far as the earnings is concerned, except currency, except vivas, is it in line or it still pretty looks good as far as the earnings progress is concerned, except currency and vivas? Thank you.

Thank you, Yamaguchi-san. So the first question on Kudenga performance, I'd like to ask Christophe to comment on that. And the second question on Q1 progress rate versus the full year excluding FX, I'd like to ask Milano to comment on that, please.

Thank you, Yamaguchi-san. Look, I think Kudenga is off for a strong start. We see a very significant demand where it is, I mean, in endemic countries as well as countries where there is a travel market. We are ramping up our manufacturing capacity. This is a limiting factor right now. The demand is way greater than our supply capacity. We are expanding this supply capacity. So, yeah, we are very pleased with the takeoff. I don't think there is any special phasing here. There will be in the future, by the way, because there is a private market that is quite predictable and linear, if you like, but more and more because we are going into public immunization programs, they are notoriously phased, if you like, depending on the order or the supply that we can provide to governments. But really, product is off to a fantastic start. And as we all know, dengue is a major issue in many countries. Thank you.

Thank you, Meguchi-san, for the question. So the overall, I think, the top line side, we think it's on track. It's according to our expectation. And buy-bends did have some upside at the beginning, especially beginning of the quarter. But we do expect it's coming back. That generic erosion will come back to our expectation level going forward. For the expense side, there was some phasing in R&D. So we spend less in R&D for the first quarter. And then those development costs are weighted toward the rest of the year. So it's going to ramping up. So yes, we did have less expense in Q1, but it will catch up. So all in all, according to our expectation, and then that's why we don't change the guidance at this moment.

Thank you.

Thank you. Thank you very much.

Thank you, Yamaguchi-san. I think we have time for just one final question. So I'd like to call on Miki Sogi from Bernstein. Miki, please unmute and ask your question.

Yes, thank you very much for giving me the opportunity. So first question is the Tuxero and Immunoglobulin. It seems that, you know, these two products had a really strong growth in the first quarter. Is there any market dynamics that can you explain, you know, the growth? And also, is this something, you know, you are expecting to sustain over the year?

Thank you, Miki. Julie?

On the second, okay, maybe I should ask a second question. Yes, exactly, yeah. And so for the second question is the Sotictu from the BMS. You know, we have been hearing that, you know, this product, you know, Tictu inhibitor, the first in class, has been, its launch has been quite awesome. And this is due to the fact that the payer coverage has been quite slow. I just wanted to see, is it the kind of fate that your TIK2 inhibitor would also have? Or if not, what would you do differently?

Great. Thank you, Miki. So Julie, would you like to comment on both of those questions?

Okay. So the first one, In terms of Taxairo and the immunoglobulin growth, I'll speak primarily to the growth in the U.S. versus rest of the world. I'll make a couple of comments on that. But in terms of the U.S., what we continue to see for Taxairo is very strong growth in terms of patients year over year. And so even though the product has been on the market for quite a number of years and we've had new entrants like orals, come on, we continue to see strong growth in patients. So, for example, in Q1 of this year, we had roughly 25% of our start forms come from prescribers who are writing texyro for the first time. So we're quite pleased with the continued growth of texyro in the U.S., and outside of the U.S., we continue to see further growth patient growth as well as launches in our markets outside of the U.S. So that's what's driving the strong growth for Texairo. In terms of the immunoglobulins in the U.S., we've had, as I mentioned in an earlier answer, the approval of our CIDP indication for Hycuvia and GammaGuard liquid. And we've had very strong growth overall for our IGs in general because of the continued ramp that there is in terms of diagnosis and optimization of treatment in primary immune deficiency. And now with the addition of the CIDP indication, strong growth in the U.S. Outside of the U.S., there continues to be more demand than supply, which is contributing to growth. outside of the U.S. And Chris, remind me of the second question. Apologies, I've slipped my mind.

Thoughts on the CITIC2 uptake in the U.S. and implications for TAC-279?

Sure, sure. On the CITIC2 uptake, so look, it's not our place to comment on our competitors' performance. But as you heard from Andy, in terms of TAC279, we believe in the differentiated profile that we've seen thus far for TAC279. And from a commercial perspective, if that data bears out in phase three, that will give us a very strong position from a commercial standpoint to launch successfully against the existing products in the space in psoriasis, as well as vis-a-vis the existing TIC2 product as well. Thank you.

Thank you. So, Gi-Sung, sorry, maybe let me add some comments around IG. So, yes, the IG's growth in Q1 was pretty strong comparing to the annual guidance but the the growth rate in a quarter by quarter growth rate of pdt can fluctuate a bit um so the we we we expect to stay you know the the full year growth would be within the guidance which is now five to fifteen percent thank you very much for your explanation that's great thank you

Great. Thank you, Sogi-san. With this, we've reached the end of the call. So thank you, everyone, for joining us today. And we wish you all the best. Thank you very much.