Takeda Pharmaceutical Company Limited

Thank you for taking time out of your very busy schedule to join the FY24 Q2 earnings announcement by Takeda. I'm the master of ceremony, a head of IR. My name is O'Reilly. Thank you for this opportunity. Allow me to explain the language setting first. Please find the language selection button at the bottom of the Zoom screen. And if you wish to listen in Japanese, please choose Japanese. If English, English, and if you want to listen to the original voice, please keep it off.

In the Zoom language select button.

Before starting, I'd 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 our other SEC filings. But it is also referred to the important notice on page 2 of the presentation regarding forward-looking statements over non-IFRS financial measures, which will also be discussed during this call. Definitions of non-IFRS measures and reconciliations with comparable IFRS financial measures are included in the appendix to the presentation. Now we would like to start the presentation. Today we have President-CEO Christophe Weber, Chief Financial Officer Milano Furuta, R&D President Andy Plump presenting to you. And the presentation will be followed by Q&A. Let's get us started.

Thank you, Chris, and thank you everyone for joining us today. Our fiscal year 2024 first half performance demonstrates a strong momentum of our growth and launch product portfolio, the potential of our pipeline, and our commitment to driving efficiencies to improve our margins. First half revenue grew 5% at constant exchange rate, driven by our growth and launch product, which grew 18.7% at constant exchange rate, and now accounts for 47% of total revenue. Divals declined 29% in the U.S. and 18% globally, a slower than expected erosion in the U.S., We, however, assume that Vivant's generic erosion will potentially accelerate in the second half as generic supply normalize, impacting our revenue and profit growth in the second half of the year. I will discuss our growth on launch product performance in more detail on the following slide. In the first half of the fiscal year, our core operating profit margin was 30.2%. benefiting from product mix, phasing of our investment, as well as the early impact of our efficiency programs. Our progress in the multi-year efficiency program announced in May 2024 is on track. We haven't taken tough but necessary decision to drive efficiencies and deliver cooperating profit margin improvement while rigorously prioritizing our pipeline. However, we are waiting our R&D investment towards the second half of the fiscal year to support our late-stage pipeline, where we have multiple programs now in Phase 3. This has been factored into our profit outlook for the full year. Our innovative late-stage pipeline is advancing, and we have multiple programs in Phase 3 development this year. In August, we initiated the Phase 3 clinical trial of TAC861 for narcolepsy type 1, a significant step towards reducing the overall burden and functional impact of this disease. Following this, in October, we presented proof-of-concept data for the treatment of immunoglobulin A nephropathy with mesagitamab at the American Society of Nephrology, highlighting its potential as a treatment for this disease. Turning again to our financials, we are raising our full year 24 management guidance and reported on core forecasts, reflecting first half performance and updated foreign exchange assumption for the year. In this presentation, Milano will speak in more detail about our updated guidance as well as progress in implementing our efficiency program. Turning to slide five, we achieve robust performance broadly across our growth and launch product portfolio. Together, this life transforming treatment now account for 47% of total revenue and achieved significant growth at 18.7% at constant exchange rate in the first half. The performance of our growth-on-launch product is underscored by Antivio's return to double-digit growth, accelerated by the launch of the Antivio pen in the United States. Mainstays such as Immunoglobulin and Taxaro continued robust growth, and newly-launched products through Zycla and Abzyma have a strong early uptake, exceeding revenue expectations. Approvals of Adima in the European Union and Frisacla in Japan support the geographical expansion of these new treatments and underscore their future potential. I will discuss this in more detail on the next slide. As I just noted, Frisacla launch has been flawless and has exceeded expectations since it launched in the United States in November 23, pointing an update to our forecast. We have seen a strong uptake in fourth line with new patient market share reaching 29% as of our latest data in July. We are also seeing continued momentum in the third line setting, reflecting the positive early reception on demand for this therapy. Significant need for new treatment options in metastatic colorectal cancer and positive feedback from oncologists have been key drivers of its initial uptake. Prusakla's inclusion in both National Comprehensive Cancer Network and European Society for Medical Oncology Guidelines further validates its importance in the treatment of metastatic colorectal cancer and underscores its position as a critical option for oncologists and patients. With eight regulatory approvals in less than a year since U.S. approval, we are positioned to begin commercialization more broadly this year, further supporting global growth. This includes our recent approval in Japan, where we will build on our heritage in colorectal cancer. As we continue to expand into additional market, we expect further regulatory decision on launch throughout fiscal year 24 and 25, which will provide more patients with access to Frusacla. Turning to the right side of the slide, Congenital thrombocytopenic purpura, or CTTP, is an ultra-rare, potentially fatal blood clotting disorder with limited treatment options. Adzyma launched in the United States in November 23 for the treatment of CTTP and has generated strong prescriber interest. Since then, Adzyma has also launched in Japan, Germany, and Austria. Further launch are planned in the European Union, where Azynma is the first and only enzyme replacement therapy specifically for the treatment of CTTP. Aeolia is currently the only oral therapy available for eosinophilic oesophagitis, a chronic immune-mediated inflammatory disease. Since its launch in the United States in February 24, we have seen growing patient demand due to increasing awareness and progressive yet slightly slower than expected coverage. Unaided awareness among healthcare professionals is approaching 80% and initial patient experience has been positive. Turning to the next slide, I would like to provide more details about Ontario performance. Since the launch of the Antivio Pen in the U.S., Antivio's growth rate in the U.S. has accelerated back to double digit at plus 10% in the first semester and plus 13% in the second quarter at constant exchange rate, compared to a 4.2% growth rate in fiscal year 23. This is a great performance, but slightly below our expectations. The issues have been a somewhat lower market growth than expected and slower than expected access pathway. However, as of July this year, antiviral pain coverage extends to more than two-thirds of the eligible patient population in the United States, and we will continue to work on the pull-through, supporting doctors and patients to get reimbursed while transferring from an IV under a Part B plan to a sub-Q under a Part D plan. Based on very positive satisfaction feedback from patients and doctors, we are optimistic of the demand for the sub-Q formulation and Ontario overall will accelerate in the future. Nevertheless, at this stage, based on first-half results, we have updated our global full-year growth forecast for Ontario to 11%. an acceleration from 6.6% in fiscal year 2023. Our updated forecasts assume a potential growth slowdown in Europe and a demand acceleration in the US, although the expected revenue acceleration is probably insufficient to propel our overall growth into the high teens. NTBO will continue to outperform the overall inflammatory boral disease advanced therapy market. We continue to see long-term growth potential for Antivio, powered by demand for the Antivio pen, and we are confident in our peak sales outlook of $7.5 to $9 billion, even when considering the potential impact of the Inflation Reduction Act in the United States. The continued strong performance of Antiviu, as well as our newer growth and launch product, such as Frusacla, Adzyma, and Aeolia, demonstrate the value of this portfolio and its ability to address patient needs. In closing, we are very pleased with what we have achieved in the first half of fiscal year 24. In a challenging environment, we continue to deliver on our financial commitment to progress our pipeline and to create long-term value for our stakeholders. We look forward to the opportunities at LiveAid. Thank you for your continued support and confidence in Takeda. I will now hand over to Milano to discuss our financial results and outlook.

Thank you, Christophe, and hello, everyone. This is Milano Furuta speaking. Slide 9 summarizes our financial results for the first half or each one of fiscal 2024. We had a very strong six months, a driven by momentum of our growth and launch products and continued by advanced demand. We also had some benefits from the phasing of investments, particularly in R&D. H1 revenue was almost 2.4 trillion yen, an increase of 13.4% versus prior year, or 5% growth at constant exchange rate or CER. Co-operating profit was ¥719.9 billion, a year-on-year increase of 22.3% or 12.9% at CER. Reported operating profit was ¥350.6 billion, growing almost 200%. We booked less impairments and other one-time costs compared to the last fiscal year, which contributed to this reported operating profit increase on top of the strong core OP performance. Core EPS and reported EPS was 310 yen and 119 yen respectively. Operating cash flow was 451.3 billion yen, up 54.9% year on year, reflecting our strong profit growth as well as improvements in working capital. Adjusted free cash flow was 247.5 billion yen. Let's look into the details, starting from revenue dynamics on slide 10. Our growth and launch products grew strongly, 18.7% at CER, more than offsetting the loss of exclusivity impact, such as Vyvanse in the US and Zilliwa in Japan. Additionally, net positive growth in other brands contributed to 5% revenue growth at CER. The depreciation of the yen versus major currencies was an additional tailwind of 176.5 billion yen, resulting in 13.4% growth on the actual FX basis. Slide 11 shows the year-on-year bridge for cooperating profit. In addition to the profit contribution from positive revenue dynamics, we benefited from phasing by investments, particularly in R&D. R&D investment in H1 decreased by 8.3% at CER. This is primarily due to the termination of CER programs during our pipeline prioritization at the end of FY23. However, it is worthwhile to note that with multiple programs moving into phase three, we expect an increase in R&D spend for the full fiscal year. We managed at OPEX lower than the last year with cost discipline. Co-OP grew at 12.9% at CR and with a positive FX impact, we landed with absolute growth of 22.3% for the first half year. Next, reported operating profit. This H1, the impairment of intangible assets became much smaller comparing to the last year, when we recognized impairments of alleficel and excivity. Although we have booked sizable restructuring expenses for the ongoing efficiency program this year, other operating expenses benefited from lower legal provisions and the reversal of a pre-launch inventory. These factors on top of our strong co-op growth helped almost triple our H1 reported operating profit to 350.6 billion yen. Next slide, 13. As announced in May, we have kicked off an enterprise-wide efficiency program. Our aim is to free up resources to invest for future growth while to improve cooperating profit margin by 100 to 250 basis points each year from 25, if not 25, towards our low to mid 30s percentage target. Please note that baseline of this margin improvement is our original forecast of 23% margin this year. Slide 14, starting with an organizational agility, we have made structural changes across several corporate and regional functions. For example, in R&D, we implemented changes to reflect the pipeline prioritization decisions made last fiscal year. We also exited our research site in San Diego, meaning we will focus our research activities in two sites going forward, which is Cambridge in the US and Shona in Japan. In addition, we have a project that has been announced and become effective in the second half of the year, such as a future career program in Japan. In procurement, our team continues to find opportunities to unlock savings across various cost categories, capturing 20 billion yen of savings to date. And as a company, we are focused on embedding data, digital technologies to drive efficiencies and enable savings. We are building capabilities in-house with our innovation capability centers now providing solutions to tasks where we previously relied upon external vendors. The impact of our DD&T initiatives can be seen across the value chain from accelerating patient recruitment in clinical trials to reducing inspection times in our manufacturing network and to optimizing our plasma collection processes. With regards to implementation costs associated with this efficiency program, in H1, we booked 61.6 billion yen of expenses. This is in line with plan and then on track towards a full year forecast of 140 billion yen. As you can see from the breakdown, the majority of expenses have been related to severance, but there are also project costs and write-off expenses included in the total. Next, let me give an update on our revised outlook for the full year. Starting with management guidance, we are upgrading each line item to reflect the strong H1 performance, driven by overall positive revenue momentum. Revenue is now expected to be flat to slightly increasing, cooperating profit amid single-digit percentage decline, and core EPS approximately 10% decline on a CR basis. Our updated forecast is now 4.48 trillion yen of revenue, 1.05 trillion yen of core operating profit, and 456 yen of core EPS. In terms of currency assumptions, we have revised the euro from 160 to 165 yen while keeping US dollar unchanged. This update has a positive impact on revenue, but negative impact on the corporate profit due to our large manufacturing cost base in Europe. On a reported basis, we forecast operating profit to be 265 billion yen and reported EPS to be 43 yen. We raised our free cash flow forecast range to reflect the uplift in corporate profit. Slide 16 shows the moving parts in our updated forecast. The biggest driver of incremental revenue is finance. While NTVO growth is accelerating, we made an adjustment to the forecast. In the meantime, there is a stronger than expected performance of other products such as Rezaclar, Adcetris, Qdanga, and Taxairo. This results in overall positive revision of revenue categorized as other products on this slide. FX is also positive to our revised revenue forecast. For cooperating profit, we expect the incremental profit contribution from Binance to be partially offset by a number of items. First, there is a slightly unfavorable product mix impact due to the relatively high profitability of NTBO. Also within the other products column, we anticipate incremental manufacturing expenses such as a preparation for future supply of Kudenga. Slight increase in OPEX includes additional investment in launching products such as Fusacla and higher personal costs based on timing of exits during the efficiency programs. Finally, FX, while positive to revenue, has a negative impact on Coop due to the depreciation of the yen versus euro. Slide 17. Let me explain some of the variance between H1 QoP results and implied H2 QoP. First, we expect a reduction in gross profit from product revenue. Roughly 50% of this is our ADHD portfolio, mainly violence due to acceleration of generic erosion. There are many different elements included in the other 50%, such as phasing of shipments like vaccines, tender timing for certain rare disease products, and the general competitive trend in some markets. The second biggest driver is R&D. Our forecast reflects plans to ramp up investment in late-stage programs, such as TAC 861, 279, and Mezagitimab, based on timing of phase three trials. For the COGS and SG&A, our forecast reflects expectation for expenses to be more weighted toward the second half. Although we usually have seasonality that results in higher costs in H2, that trend is even more pronounced this year. In part, this is because the spending slowed during the early stages of the efficiency program as organizational changes were being made. Finally, there's also MENA headwinds from FX built into the plan. So, This year, we are dealing with dynamic situations of the LOE of guidance, acceleration of the interior growth with a pen launch, the enterprise-wide efficiency program, and the progression of the late-stage pipeline. While there may be some viabilities, we are very confident that we can deliver this updated management guidance. Thank you for your attention, and now I will hand over to Andy.

Thank you very much, Milano, and hello to everyone on today's call. If you go to the next slide, please. This quarter, we have several significant updates to our late-stage pipeline. Last month, we presented important long-term extension data from the Phase IIb trial of our oral orexin agonist TAC861 in narcolepsy type 1, or NT1, at Sleep Europe 2024, which is one of the most impactful sleep conferences of the year. The results demonstrate that TAC861 continues to be highly efficacious and well-tolerated at six months and beyond. TAC 861 also shows improvement on cognitive domains like sustained attention, memory, and executive function after eight weeks on therapy, a first for the erection class. Following discussions with regulatory authorities, in August, we initiated the first light study, a global phase three development program for TAC 861 in NT1. Enthusiasm amongst investigators is high and enrollment is progressing well. I'm pleased to share that recruitment has been completed significantly ahead of timelines for two pivotal head-to-head phase three trials of our TIK2 inhibitor, zazocitinib versus apremilast in psoriasis. In addition, our partner protagonist, who is developing resveratide, an injectable hepcidin mimetic, has completed Phase III enrollment for the treatment of polycythemia vera, or PV. As you may recall, Takeda and Protagonist entered into a worldwide license and collaboration agreement for Resfertide earlier this year. Last week, Takeda presented positive interim results from a proof-of-concept trial evaluating mezogidemab in primary IgA nephropathy, or IGAN, at the American Society of Nephrology's Kidney Week. Mezogidimab, a potential best-in-class anti-CD38 antibody, demonstrates rapid and sustained reductions from baseline in serum IgA up to 70% and galactose-deficient IgA up to 62% as an add-on to the standard of care. At week 36, participants also achieved a 55% mean reduction from baseline in 24-hour proteinuria. And of course, with the caveats of small patient numbers, we see signs of clinical benefit with stable renal function up to 36 weeks. Mezogidimab demonstrated a favorable safety profile and was well tolerated with no discontinuations due to drug-related adverse events. We plan to engage with regulatory authorities this year as we are already preparing for phase three development. Looking beyond our late stage new molecular entities, as Christoph has already noted, We achieved regional expansions for our growth and launch brands, including at Zinma, Frasacqua, and IQBIA. Next slide, please. Very excited to extend an invitation for all of you to join our R&D Day on September 12th, starting at 6.30 in the evening Eastern Standard Time and 8.30 in the morning December 13th in Japan. The main focus of this event will be a deep dive into our high-value late-stage pipeline programs with a focus on Zazocitinib, our Erexin franchise, including TAC-861 and TAC-360, Resveratide, Vazir-Ceram, and Mezogidimab. During the session, we will review the unmet medical need for the multiple indications these programs are targeting, as well as phase three study designs, timelines, competitive positioning, and commercial potential of each asset. We will also provide updates on our evolving R&D strategy in our core therapeutic areas of gastrointestinal inflammation, neuroscience, and oncology, including disease areas of focus and business development strategy. We have made substantial strides in enhancing our clinical development capabilities with an emphasis on data, digital, and technology. Of note, we will review Takeda's future-looking development model and demonstrate how it has yielded positive results in accelerating these late-stage pipeline programs. The format will be a hybrid event featuring live presentations in Tokyo with a virtual option for any participant. Please save the date. Thank you very much. And at this point, I'll turn it back to Chris for the Q&A session.

I would like to take questions.

As respondents, in addition to Christophe, Milan, and Andy, we have Ramona Sekeira, President of Global Portfolio Division, and Julie Kim, President of U.S. Business Unit, Giles Platform, PDT Business Unit President, and Teresa Bittetti, President of Global Oncology Business Unit. If you have a question, please raise your hand in Zoom. And if you are on Japanese line, please ask a question in Japanese. And if you are on English line, please ask a question in English. And if you are listening to the live audio, you may be able to speak in either one of those languages. And please limit your number of questions up to two. And please ask all the questions you have. Thank you.

Okay, I'd like to take the first question from Steve Barker at Jefferies. Steve, if you'd like to unmute and ask your question, please.

Yes, Steve Barker from Jefferies. Thanks for taking my questions. My first one is about your plasma business. So on a half-year basis, the trend looks very healthy. Uh, however, looking at the quarter quarter trend, uh, looks like sales did decline in the second quarter compared to the first quarter. Uh, if you could please comment on the underlying dynamics and then if, um, yeah, so that's the first question. And, uh, second question, um, like to ask Andy about, um, um, there's a get demand, uh, and, uh, congratulations on the good data Sean at ASN. Um, but, uh, Just looking at the timelines, it looks like mesagitamab will come to the market behind other disease-modifying products, such as the April inhibitors. And so I was just wondering how you see anti-CD38s like mesagitamab fitting into the treatment algorithm for IGAN. Thank you.

Okay, thank you, Steve. So for the first question on PDT, I'd like to ask Giles to comment on that. And then for the second question on MISA GitHub, perhaps Andy can comment on the data. And then if Ramona has any comments on the positioning at this point, then that'd be great to have your comments as well. Thank you.

Thank you, Steve, for the question. This is Giles speaking. We did have strong first-half growth for our PDT business with 14% year-over-year growth. evolution. Our IG business continues to perform well with growth of 16% and with accretive growth from our innovative sub-Q portfolio and our albumin portfolio, particularly driven by strong demand in China, but also with some supply phasing delivered growth of 11%. We maintain our full year guidance of high single-digit growth for the PDT business overall, 5% to 15% for our IG portfolio and And single-digit growth for our albumen business, we have flagged that we will see slightly slower growth this year due to planned upgrades and associated shutdowns of our manufacturing facility for albumen. I would just call out that we continue our trend of positive margin expansion as well, driven by reducing donor compensation levels, investments in data, digital, and technology to drive donor experience, but also productivity of our collections network, improvements in yield in our fractionation process, and also positive product mix, as I alluded to, with accretive growth from our innovative subcutaneous IG portfolio. Thank you for the question.

Hi, Steve. It's Andy. Thank you for your question, and thank you very much for recognizing the strong data that we presented last week. And your question gives me the opportunity to, again, remind you and everyone that we will be having the R&D day in December, on December 12th and 13th in Japan and Eastern time. And our focus on that day will be addressing exactly the question that you're asking for mezzogidemab for all of our late stage programs, which is to help you better understand the programs, how we're designing the programs, the competitive positioning, and what we see of as the commercial opportunity. I'll say that The data that we presented, and again, the patient numbers are relatively small, but the consistency of the observations that we're seeing and the potency of the effect is quite remarkable and suggests the potential for a best-in-class across all of the potential disease-modifying agents. So there are a few features that I'll just highlight around the mezogatamab activity and IGAN and remind you that we saw similar similar robust effects in ITP. The first is the rapidity of the effect. The onset of the effect seems to be faster than what we're seeing with other potentially disease-modifying agents. The second is when we look at the reductions in IgA and galactose-deficient IgA, which many believe is the pathogenic form of iminoglobulin in IgA, we're seeing over 60 and close to 70 percent reduction, which is disproportionate to what we see for other immunoglobulins. We don't know exactly why, but it's clearly something unique about this particular mechanism and maybe even our molecule. We've seen stabilized renal function up to 36 weeks, of course, again, small patient numbers and a relatively short timeframe. But when we add all of this up, we're incredibly encouraged by the potential of the molecule. And then before I hand it over to Ramona, Ramona can make some comments about competitive positioning. I'll say that We are meeting with the FDA in the coming weeks, and we have a very aggressive and proactive phase three program. And our goal is to accelerate our study as much as possible. We have a number of different ways that we're going to be looking at doing that. Ramona, would you like to add?

Yeah, thank you, Andy. And Steve, I think Andy answered that so perfectly. I'll add just a couple of things. First of all, We know this is going to be a large and growing market in the coming years as you get more disease-modifying treatments available for patients, which is really important. But based on what we know and what we're seeing, we're very excited about the positioning of 079, kind of where it hits in the immune cascade, the efficacy, as Andy mentioned, very rapid, the dosing, the safety profile. We feel it's going to be very unique for patients and have an edge for sure in first-line utilization for a disease-modifying agent. Thank you.

Thanks very much.

Thank you, Steve. Okay, we'd like to take the next question. Mike Nedeljkovic from TD Cowan, please unmute and ask your question.

Thank you so much. I have two, if that's okay. The first relates to Intivio. We've gotten quite a bit of IBD data across mechanisms in the last few weeks. I know you have reiterated your long-term Intivio outlook, but have any of these updates caused you to change your thinking about the market one way or the other? And a related question on that topic, does your peak sales outlook contemplate a successful Intivio combination? And if not, could there be upside to your projection? And then my second question relates to Cudenga, which has been a bright spot. There may be competition on the horizon. However, as Merck pursues its own dengue vaccine, are you aware of any differentiation in the competitor's candidate?

Okay. Thank you, Mike. So I'd like to ask Ramona to take those. Ramona?

Sorry, my apologies. Hi, Mike. I will take the Antivio question before I move on to Qdenga. So first with your question on peak sales for Antivio, the answer is no. So when we did the peak sales estimate, which we still believe is absolutely achievable, we did not contemplate combination therapy. And certainly in this market now, we see more desire for physicians to use combination therapy in different types of patients, particularly in Crohn's. and are doing some evidence generation ourselves to look at how Antivio may be used in combination therapy. But certainly that is an open question, and we think Antivio is such a foundational therapy that that combination just makes sense clinically for physicians. So that remains to be seen, but our peak sales did not anticipate that. And certainly we did see the market continuing to evolve and change with new entrants coming in. You know, I think the reality is, you know, Antivio is the most frequently prescribed brand in the U.S., the only gut-selective advanced treatment option, the only product to have demonstrated head-to-head superiority against another advanced therapy in UC, and we're very confident in the efficacy and safety profile across all the patient populations where we're used. And so we, you know, we certainly see that franchise continuing to grow for us and doing very well. Then your question on Qdenga, could you just remind me again, maybe Mike or Chris, the question on Qdenga? It was Merck, I think, was it? The Butantan? That's right.

Yeah.

Yeah. So, you know, I think this is another one where truly Takeda has set the bar for what good looks like when looking at efficacy and safety in an endemic disease such as dengue. I haven't seen anything from any competitor that can even come close. In fact, I think there's still a lot of opacity in the actual data for some of the competitors coming out. The data that's been shared has been in very small data sets. And we haven't seen anything to indicate first that the efficacy is going to be similar to Kidinga. But also the amount of time that we spent in these trials doing the follow-up and showing the long-term results. durability of the asset, we think has set a new bar for other companies. And based on the, you know, the safety needs in this population, we feel other companies are going to have to demonstrate that level of efficacy and safety as well. And certainly haven't seen that yet. And I, you know, believe that's going to take some time to do if they're even able to do it. Thank you so much.

Thank you. Thank you. Thank you. Thank you. Thank you.

Thank you very much. Let's move on to the next question. City Yamaguchi-san, please ask your question. Can you hear me? Yes. Thank you.

This is Yamaguchi from City. Two questions, please. The first one is regarding the same interview, but I'm trying to ask about the company guidance changed. I used to have 16% now. It's around 11%, I think, in the U.S.? ? and you're doing better, but there seem to be some marketing situations and patient situations, which is more of a macro side. But can you give me what do you think about changing and what you did not think about changing and how the SC promotion has been going through? So that's the first NTBO corporate guidance changing assumption question. That's the first one. The second one is the total company guidance change. I understand the buy balance illusion is going to happen in the second half. But given what has been exceeding your expectation in the first half, first half already you are generating around 700 billion yen already. And the 50 billion yen upper revision sounds very conservative to me, even though NTB has been cut as well. But can you remind me, it looks pretty conservative to me, given you are doing the cost cutting as well. Is it the right way to observe or not really? You are really not that conservative as far as the company guidance? That's the second question. Thank you.

Thank you, Yamaguchi-san. So the first question on NTPO, perhaps I'll ask Julie to add some comments on that. And then the second question on the total company forecast, I'd like to ask Milano to take that one.

Thank you for the question, Yamaguchi-san. Thank you. In regards to the growth of Antivio, when you look at the U.S., yes, we are seeing accelerated growth for Antivio versus last year, and we expect to continue to have accelerated growth through the rest of the year. In regards to the dynamic as to why we lowered the overall guidance from 16% to 11% is because the acceleration is not as fast as we had anticipated at the beginning of And so part of that, as you heard from Christoph as he was going through the presentation, is in regards to the to improve our access pull-through for the patients as we have both Part B and Part D on intubio IV and PEN. So this is part of the reason why we've lowered the overall expectation from 16% to 11%. And also in Europe, for the second half of the year, we expect a lower growth due to competitive dynamics and increased pressure on pricing. So that's why the change from 16 to 11%. Milano, over to you for the second question.

Thank you for the question. The, so the, there is a lot of moving parts, actually, if you compare the H1 results and the H2. So the, maybe, no, the first one is the already addressed, like a biobance, you know, the, we expect, we still believe a biobance will, you know, the generic erosion will accelerate it in H2. That's the first one. And then there is like a division dynamics between H1, H2, like in terms of timing shift, like shipment of the vaccines or shift from H2 to H1, like tender or contract renewal. And then sometimes those timing change. That's also the impact like H1, H2, the profitability. At the same time, there is general like a competitive trend. in some hemophilia or multiple myeloma, those markets. So all in all, we expect some declining in terms of gross profit contribution when you compare H1 to H2. At the same time, the second biggest driver is actually R&D. In H1, we had some less spends in R&D, partly or mainly because we terminated some programs in the last fiscal year. But instead, we are kind of accelerating around the activities to ramp up the phase three activities, right? That's going to more weight toward an H2. That's why those kind of dynamics and combined, this H1, H2 profile is a little bit the kind of, you know, we see the contracts in the H1, H2. That's how I see it.

Right. So can I make a quick question for up on the interview, Chris?

Okay. Yes, please go ahead.

Thank you. Thank you very much. So you talk about access. Is this getting better now? It might be the timing issue. So now it is OK or not really? How about access?

Yes, Yamaguchi-san. So it is improving as time passes. We are working on a number of different tactics to improve the access. And so we are seeing the impact of that as we have the acceleration in our demand. So yes. While it was not as fast as we had wanted initially, it is improving and we are making progress.

Okay. Thank you. Thank you, Chris. Thank you.

That's it. Thank you.

I would like to move on to the next question. Next is Matsubara-san, Nomura Securities, please. Excuse me, Wakao-san, JP Morgan. Please unmute and ask a question. Thank you very much. I have two questions. One is about NTVO. I'd like to know more about the current market situation. Regarding PEN, access issues were answered. Now I understand. And concerning IV, why it's not growing so much? Because IV is a screechy and re-involved. I think they have been progressing very well. And Entivio IV and Skirigi, is it coming from the positioning differences of those products? And another question is about TIK2 inhibitor. Phase 3, we'll be finishing earlier. And I think the first phase three will be finishing within December. And the data readout, can we consider it's going to be at the beginning of the next year? And thanks to the acceleration of this development, do you think that the fighting for approval, that timing will be also accelerated or not?

TVO again. So on the overall market dynamics, not around just the PEN access, but also on the IV in particular positioning vis-a-vis Skyrizi and RINVOC. And then I'd like to ask Julie to take that question. And then the second question on the TIC-2, TIC-279 phase three timing, when we expect to get data and whether we can accelerate the filing timelines. I'd like to ask Andy to comment on that, please.

Thank you, Wakassan, for the question. In regards to the competitive dynamics for Antivio IV in the U.S., so Antivio overall is still the market leader when it's in regards to IBD and market leader in regards to bio-naive starts. So where we see Skyrizzy and other competitive entrants creating movement in the market is in second line and further lines of therapy. So in first line, as I said, We're quite proud of Antivio's performance. It's a product that's been on the market for over 10 years and still able to hold the first-line position due to its strong track record in terms of safety and efficacy. It's still the only gut-selective product that's available in IBD, and that's part of the reason why we believe Antivio continues to perform really well in first-line.

Good evening, Wilkhausen. This is Andy. So thank you for your question. So we're quite pleased with the execution of the Phase III psoriasis program. You know, we're six to seven months ahead of our schedule, our benchmarks. And actually, our benchmarks are not based on our own estimates. They're based on benchmarking across the industry for psoriasis studies. So it's a great example of the new capabilities that we've built into development. To be fair, we haven't disclosed a specific filing date yet for the program. As you can look in the backup slides, we have FY26-27 as our target filing date. So what we'll plan to do in December at the R&D day is, in a much more explicit way, go through the design of the program, what we're anticipating we would include in the filing and what that filing date will look like. I mean, as you can imagine, given the acceleration, we're looking at the front end of that 26 to 27 timeframe, but we'll get into that in more detail next month.

Okay. So can I assume the first trial data readout will be early next year?

We haven't disclosed when we read out the data. So just so you understand, we have multiple ongoing studies. There are two primary comparison studies to Apremilast. We've completed enrollment for each of those studies. We have a third phase three study that's a safety study that's ongoing. There are some requirements for safety that we'll have to meet with the FDA in particular. And then we have a fourth study. that will be important in terms of positioning, which will be a head-to-head study against Ducravacitinib. So how we then manage disclosure of data from all these, we still have to work through.

Okay, thank you. I'm looking forward to it on the day. Thank you.

Thank you. Thank you, Wakao-san. Okay, I'd like to take 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. Actually, just stay on TAC-279-zasocitinib. So this question is, again, for my first question is for Andy. So like you just alluded to, I noticed that the Latitude Psoriasis 3 study is recruiting, and it's looking to recruit a very large number of 1,300 patients, over four years of follow-up. And Andy also just mentioned the the FDA possibly requiring safety longer term safety observations and the study description says it's going to check the side effects of the agent and how well it is tolerated. So I just want to get a sense. You have already completed enrollment of your latitude one and two phase three. Right. So why? why start such a trial right now? I mean, would this affect your regulatory timeline? So that's my first question. The second question is on TechZero. So in HAE, so Intelia, announced its phase two data of their in vivo CRISPR gene editing therapy. So the data looks very good. So I just want to get a sense from you. How do you think that might affect Texas IRO's future prospects? What would be the clinical differentiation of the two? So these will be the two questions for me. Thank you.

Andy, would you like to begin with the zazacitinib question?

Sure. Thank you, Tony. So again, I'll just emphasize that all the details, and we'll go very deep into these details on December 12th and 13th of the R&D day. Dialing up for the psoriasis program, there are three core elements to the regulatory package, and there's a fourth element around commercial competitiveness and positioning. The first are the first two studies, the last head-to-head studies, by far and away the most important studies demonstrating the efficacy and safety profile. The third, which is why we started the Latitude 3 study, is to have an adequate patient safety database at one year. We don't expect that we'll need to wait for the completion of every patient in that study. That's to supplement the safety package from the first two studies. The third piece, of course, will be the CMC package. So those three elements, efficacy and safety from the two main Pramlabs head-to-head studies, extended safety from LADA 2.3, and then our CMC packages, those will be the key elements of our regulatory package. And then the head-to-head study against Ducravacitinib, that won't necessarily be part of the, that won't slow down our registration package, but our hope is to have that study completed and ready for launch of Zazacitinib.

So did the FDA come back to you and require and demanded the safety study after looking at the after the discussion with them? No.

OK. No, no. I mean, to be clear, there's there are general guidelines for the number of patients that are required to have been dosed on active drug for a year. So so. I mean, of course, every program has a unique conversation with FDA, but there's nothing particular about our safety profile. Our safety profile and overall therapeutic index is quite strong. Predominantly, we're following guidelines that exist. Okay. Very good.

And I can jump in here and answer the question on TexIRO then. So, you know, let me first say that TexIRO, after six years in the market, continues to be the number one prescribed advanced long-term prophy treatment. And we've got right now commercial presence for Taxairo in 55 countries. So we see continued growth, as you see in our results, being fueled by growth of the prophylactic market, as well as additional launches coming. So, you know, with respect to new therapies and certainly a gene therapy, there's Questions that we would want to see answered that will come over time, such as the durability, the efficacy, the safety, the access to the number of patients worldwide that need it. But right now, we've got very, very strong open-label extension data, real-world evidence data, strong improved quality of life, and over two and a half years on therapy showing very, very strong reduction in attacks and attack-free for many patients. So confident in our positioning, confident in what the product's been able to do for patients, truly transform their lives, and certainly on behalf of patients, you know, welcome new entrants in the future, but it's very early days.

Okay, very good. Yeah, thank you, Ramona. Thank you, Andy.

Thanks, Tony, for your questions. Okay, I'd like to take the next question, please. So up next, UBS Securities, Sakai-san or Haruta-san, please unmute and ask your question.

Hi, Chris. I haven't asked the question for some time, so this is my time. Just a couple of questions regarding your domestic operations. One, PDT. Now, the government is talking about improving the supply of the plasma in Japan. And I think Takeda's name has been mentioned about the expanding the infrastructure and also the facility of the PDT here in Japan. Are you doing anything or are you going to proactively dealing with this issue in Japan? That's my first question. And second question, again, regarding Japanese operation. Amazingly, your sales proportionate in Japan is now less than 10% of your total revenues. The question is how you manage your Japanese business going forward. Now, you are taking this new career development program, kind of redundancy program, right? And you have done this in the U.S. I think that's a part of the margin improving exercise. But where are you going to end up in Japan, really? I mean, it seems to be – you don't require that many reps in Japan considering your product portfolio right now. So I'm just wondering what you're thinking about. So these two questions, please.

Thank you, Sakai-san. So I think the first question is specific to PDT. I'd like to ask Giles to comment on that. And then the second question on our broader positioning in Japan. I'd like Christophe to comment on that one, please.

Thank you, Sakyo-san, for the question. This is Charles speaking. We have announced in 2023 an investment in an end-to-end manufacturing facility for plasma therapies in Japan. We remain on track to bring that facility online by the end of this decade. And we are also working very hard to improve standard of care for patients who depend on plasma-derived therapies with primary immunodeficiencies, secondary immunodeficiencies, and indications like CIDP and MMN. We have launched our first global subcutaneous Ig product, Kuvitru, already for patients with PID and SID. And we have recently, in quarter two of fiscal 24, filed with the Japan authorities IQVIA for treatment of CIDP and MMN, and we expect to file for Glovin and I 10% by the end of this fiscal year as well. So we are working closely with the authorities to support in addressing their concerns around sustainable supply and supply chain sovereignty around plasma-derived therapies for the patients who need them in Japan. Thank you for the question.

Yeah, just to just follow up, is that going to be business opportunity or is that going to be risk of margin deterioration? I know you don't disclose the margin from PDT, but can you just, well, qualitative comment? I would appreciate your qualitative comment if you could make.

Well, there is a high need for plasma drive therapies in Japan. This is a market that today is relatively underdeveloped. And I would say historically, perhaps not fully valued. That's why we're working with the authorities to invest in a manufacturing facility to meet the needs of patients in Japan, at the same time, ensuring that the authorities in Japan understand that the value that these treatments bring to patients, to their families, and to the health system at large, so that this investment does provide both supply for patients, but also sustainable business growth. And this is why we also announced that facility would not only be supplying patients in Japan, but would be a hub both for the Asia region and globally to support the needs of patients who depend on these therapies.

Understood. Thank you. Hi, Saika-san. This is Christophe. A couple of points here. First, the Japanese business is our second biggest business in the world after the U.S., Yes, Japanese revenue is less than 10% because the world is big, and Takeda is a big global company, but this is our second biggest business in the world. What we need in Japan is to grow, and we will grow by launching more innovative new medicine, and that's what we have. started to do for many years. So this is our intent. Japan is a very high priority. We have obviously a very strong presence in Japan and we'll continue to have a very strong presence and very strong reputation so we can really launch efficiently new products. So we are ambitious in Japan. We launch every single product global product in the world is launched in Japan. Plus, we always find opportunities to launch specifically some new innovative medicines in Japan. We did that very well, for example, in our oncology business. Today, we are one of the leaders in oncology in Japan because we launched our global product in Japan, but also we were able to license many products as well for the Japanese market. So we are ambitious in Japan. The reorganization that we are doing now is really to align an organization to a portfolio of product which has evolved a lot. We have more product treating rare disease, speciality disease. We used to be more a general medicine type of portfolio, but we are now much more innovative, but also we have more targeted therapy. We want to provide the best possible treatment and provide the best information to doctors. And this is why we are reorganizing our operation today to be able to provide.

All right. Okay. Thank you. Looking forward to your R&D day. Thank you.

Thank you, Sakai-san. I think I'd like to take one final question in today's call. So I'd like to call upon Miki Sogi from Bernstein. Miki, please unmute and ask your question.

Thank you very much for taking my questions. So two questions, please. So first of all, NTBO, I imagine that in NTBO growth and a 10%, congratulations, it's a great, you know, the recovery of growth. And it's coming from the price of Penn as well as patients expansion. Can you tell us, you know, what are the kind of rough division of the source of these two, the growth drivers? And the second one is for TIC2. So TIC2 in the US continues to make a kind of slow progress for its launch. And, you know, despite the fact that it has shown pretty clear the efficacy superiority vis-a-vis Tesla. And I'm wondering, you know, given that situation, that you continue to believe that, you know, the head-to-head, your TIK2 inhibitor against Sotik2 is important for your future positioning. Can you tell me that your thinking wouldn't change despite the situation of Sotik2? These are two questions. Thank you.

Thank you, Miki. So the first question was on the Antivio sources of growth. And so I'd like to ask Julie to take that question. And perhaps Julie can also take the second question on our thoughts of the TIC2 positioning in the market. Zaz Sidnep vis-à-vis the TIC2.

Yes, thank you for the questions. And in regards to Antivio, when you look at the U.S. in particular, I'm assuming that's what your question is focused on. When you look at the U.S. in particular, with the launch of the pen, we've had access to new patient populations, new HCPs that we did not have access to before. So that is part of the acceleration in our demand. But as we also shared previously to some of the other questions, Antivio overall still performs very well. It continues to be the benchmark in IBD, and that's why we are able to hold on to our first-line positions. In regards to the revenue, you were asking, I believe, the split between demand and revenue. So some of the revenue growth is coming from the mix between Penn and Ivy. And as I mentioned in the earlier part, for the second half of the year, while we do continue to expect demand acceleration, we do expect to see some of the channel dynamics increase. and mixed to have less acceleration on revenue than on demand overall, but still continuing to grow into the second half of the year. So hopefully that addresses your question on Intivio.

For your second question... Sorry, about Intivio, is it also right to understand that actually the pen price per patient is higher so that the just conversion from IV to PEN also contributes to your growth? Or as you were saying, that really access to, you know, more broader patients and broader in the physicians at the base, that's the kind of market driver?

It is both.

And roughly, is it doing a half and a half or?

Half and half in regards to?

So the contribution coming from the price difference versus the actual expansion of patient base.

So in regards to the split, roughly 7% is from demand and the rest is from price.

Oh, great. Thank you very much.

Does that answer your question?

Yes. Okay. Julie, Ms. Christophe, it's 7% out of 10, right? Correct. Yeah. So 70% is demand, 30% is price. So it's 7% of 10%, just to be clear.

Yeah, thank you. That's clear. Thanks.

Okay. Okay. I'm sorry, did you have another clarification?

No, I just wanted to also follow up on the TikTok questions as well.

Yes, so our TIC-2 versus the TIC-2. So first and foremost, we are waiting to see the data that comes out of our Phase 3, but we're very encouraged by the data that we have thus far. And if we are able to have that differentiated positioning and the stronger efficacy vis-à-vis Ducrasitinib, then that is going to help us with our positioning in the U.S. So that is a key component. And then the second part of what we will have to do with TAC 279 is in regards to how we address the access challenges. So here we will learn from what our competitor has had to deal with, but also what we are learning as we continue to pull through access with IntivioPEN.

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

Thank you, Miki. So with this, I'd like to bring today's conference call to a close. Thank you all very much for your participation. Thank you.