Takeda Reports FY2018 Full Year Results and Issues FY2019 Guidance

May 14, 2019 Off By BusinessWire
  • Excellent FY2018 results driven by key growth products and strict
    Opex discipline, with Legacy Takeda
    1 greatly
    exceeding original guidance and absorbing Shire acquisition-related
    costs
  • In FY2019, continued momentum of key growth products in Takeda’s
    five key business areas
    2 is expected to
    largely offset significant loss of exclusivity headwinds
  • Strong base for future growth with a balanced portfolio of 14
    global brands
    3, an innovative R&D engine to
    deliver a sustainable pipeline, and a commitment to margin expansion
    and deleveraging targets

OSAKA, Japan–(BUSINESS WIRE)–Takeda Pharmaceutical Company Limited (TOKYO:4502)(NYSE:TAK):


FY2018 Full Year Results

Legacy Takeda Underlying Revenue +5.3%; Consolidated reported revenue
+18.5%

  • Underlying Revenue growth for Legacy Takeda was solid at +5.3%, with
    significant contributions from key growth products such as ENTYVIO
    (+34.8%) and NINLARO (+36.1%).
  • Consolidated reported revenue increased +18.5% to 2,097.2 billion yen.
    This was mainly due to the inclusion of Legacy Shire’s results from
    January 8, 2019, which was offset by the one-time negative impact from
    applying Takeda’s distribution channel policies to Legacy Shire
    products.

Legacy Takeda Underlying Core Earnings margin expanded +540 basis
points

  • Legacy Takeda underlying Core Earnings grew +38.7%, with Opex
    discipline driving three fourths of the +540bps margin expansion.
    Legacy Takeda’s underlying Core Earnings margin has now expanded
    +960bps based on simple addition of gains in the last two years,
    driven by key growth products and execution of the Global Opex
    Initiative.
  • Legacy Takeda operating profit grew +70.3% mainly driven by business
    momentum. Large one-time gains in FY2017 from the divestiture of Wako
    Pure Chemical and the transfer of additional products to the Teva JV
    were matched by increased gains on sales of real estate and the
    divestitures of Multilab and Techpool in FY2018.
  • Consolidated reported operating profit decreased -15.2% to 205.0
    billion yen, and consolidated reported EPS declined -52.6% to 113 yen
    per share, mainly impacted by significant non-cash purchase accounting
    expenses. The strong performance in Legacy Takeda reported operating
    profit entirely absorbed Shire acquisition-related costs incurred in
    FY2018.

Innovative R&D engine delivered important pipeline milestones

  • ENTYVIO demonstrated superior efficacy versus adalimumab in ulcerative
    colitis head-to-head VARSITY study4. Regulatory
    applications for a subcutaneous formulation filed in the U.S. for
    ulcerative colitis and Europe for ulcerative colitis and Crohn’s
    disease.5
  • Approvals in FY2018 for TAKHZYRO in the U.S. and Europe as well as
    ALUNBRIG in Europe. Important label expansions for ADCETRIS to include
    previously untreated Hodgkin lymphoma approved in Japan and Europe, as
    well as TRINTELLIX in the U.S. to include data on speed of processing
    and Treatment Emergent Sexual Dysfunction.
  • Innovative pipeline has delivered 15 New Molecular Entity clinical
    stage-ups since April 2018.
  • 44 new collaborations with biotech and academia in FY2018, and
    announced 3 leading-edge cell-therapy partnerships.

Disposing non-core assets to generate cash and focus the business

  • Consolidated Free Cash Flow +4.6% to 378.1 billion yen, including
    200.9 billion yen from the sale of real estate, marketable securities,
    and non-core businesses Techpool and Multilab.
  • On May 8, 2019, Takeda announced agreements to divest XIIDRA to
    Novartis for $3.4 billion upfront in cash and up to an additional $1.9
    billion in potential milestones, and TACHOSIL to Ethicon for €358
    million upfront with a long-term Manufacturing Services Agreement.6
  • Takeda intends to use proceeds from the disposal of non-core assets to
    reduce debt and accelerate deleveraging toward its target of 2.0x net
    debt/adjusted EBITDA in 3 to 5 years.

Christophe Weber, President and Chief Executive Officer of Takeda,
commented:

“Fiscal 2018 was an important year in the history of Takeda as we
completed the acquisition of Shire to create a competitive,
values-based, R&D-driven global biopharmaceutical leader. I am delighted
to say that throughout the year, while we have focused on planning and
executing the integration, we have also maintained strong business
momentum, as demonstrated by our excellent financial results.
The
integration of Shire is progressing as planned, aligned with Takeda’s
values and culture. We have also identified opportunities to realize
greater cost synergies, and already have made progress on our divestment
strategy for non-core assets.
Looking ahead, I believe we have a
strong and resilient foundation for the future growth of the business.
We are focused on our five key business areas of GI, Rare Diseases,
Plasma-Derived Therapies, Oncology and Neuroscience, and our revenue
over the medium term will be driven by a balanced portfolio including 14
global brands. Our innovative pipeline is also delivering, as shown by
the 15 clinical stage-ups over the past year, and we are committed to
executing towards our margin expansion and deleveraging targets.
With
our business area focus, R&D engine, and financial strength, Takeda is
well positioned to deliver long-term value to patients and our
shareholders.”

1   References to “Legacy Takeda” exclude Legacy Shire financials (which
have been consolidated into Takeda’s results from January 8, 2019 to
March 31, 2019), costs incurred by Legacy Takeda and Legacy Shire
related to the acquisition, and financial impact from purchase
accounting. References to “Legacy Shire” are to the businesses
acquired in Takeda’s acquisition of Shire, which was completed on
January 8, 2019, and to the results of those businesses before or
after the completion of the acquisition, as the context requires
2 Gastroenterology (GI), Rare Diseases, Plasma-Derived Therapies,
Oncology, and Neuroscience
3 Entyvio, Gattex/Revestive, Alofisel, Vpriv, Elaprase,
Natpara/Natpar, Adynovate, Takhzyro, HyQvia, Cuvitru, Gammagard
Liquid/Kiovig, Albumin/Flexbumin, Ninlaro, Alunbrig
4 Schreiber S, et al. J Crohns Colitis 2019;13(Supplement_1):S612–3
(abst OP34). [Oral presentation]
5 Biologics Licensing Application in the U.S.; Marketing Authorization
Line Extension Application in the EU
6 Divestments of XIIDRA and TACHOSIL expected to close the second half
of calendar year 2019, subject to customary closing conditions,
including the satisfaction of legal, regulatory and, where
applicable, local works council requirements.
 

FY2018 Consolidated Reported Results (April – March)

  • Strong Legacy Takeda performance absorbed Shire acquisition-related
    costs. For more details on the breakdown of these expenses, please
    refer to the attached appendix.
 
(billion yen)   FY2017   FY2018   % Growth vs Prior Year
Revenue 1,770.5 2,097.2 +18.5%
Operating Profit 241.8 205.0 -15.2%
Net Profiti 186.9 109.1 -41.6%
EPS 239 yen 113 yen -52.6%
Core Earningsii   322.5   459.3   +42.4%
i   Attributable to the owners of the company.
ii Core Earnings, which is not a measure presented in accordance with
IFRS, represents net profit adjusted to exclude income tax expenses,
our share of profit or loss of investments accounted for using the
equity method, finance expenses and income, other operating expenses
and income, amortization and impairment losses on intangible assets
associated with products and other items that management believes
are unrelated to our core operations, such as purchase accounting
effects and transaction related costs.
 

FY2018 Legacy Takeda Reported Results (April – March)

(billion yen)   FY2017   FY2018iii   % Growth vs Prior Year
Revenue 1,770.5 1,788.0 +1.0%
Operating Profit 241.8 411.8 +70.3%
Net Profitiv 186.9 312.9 +67.4%
EPSv 239 yen 399 yen +66.6%
Core Earningsvi   322.5   393.3   +21.9%
iii   Excludes Legacy Shire financials (from January 8, 2019 to March 31,
2019), costs incurred by Legacy Takeda and Legacy Shire related to
the acquisition, and financial impact from purchase accounting.
iv Attributable to the owners of the company.
v Number of shares used for FY2018 EPS calculation: 784,477,109 shares
(as of January 7, 2019, the day before the completion of the Shire
acquisition)
vi Core Earnings is not a measure presented in accordance with IFRS and
represents net profit adjusted to exclude income tax expenses, our
share of profit or loss of investments accounted for using the
equity method, finance expenses and income, other operating expenses
and income, amortization and impairment losses on intangible assets
associated with products and other items that management believes
are unrelated to our core operations, such as purchase accounting
effects and transaction related costs.
 

FY2019 Full Year Guidance

FY2019 Management Guidance: Business momentum expected to largely
offset significant Loss of Exclusivity headwinds

  • Momentum of key growth products in our 5 Key Business Areas is
    expected to largely offset the significant Loss of Exclusivity of
    VELCADE, FIRAZYR, ULORIC & other products.
  • Full year consolidation of Legacy Shire results, cost synergies and
    OPEX discipline is expected to contribute to underlying Core EPS of
    350-370 yen.
 
    Guidance
Underlying Revenue Growthvii Flat to slightly declining
Underlying Core Earnings Margin Mid-twenties %
Underlying Core EPS 350-370 yen
Annual dividend per share   180 yen
  • Financial assumption for VELCADE in the U.S. is for one additional
    non-therapeutically equivalent competitor with intravenous and
    subcutaneous administration launching in July 2019. If no additional
    competitor launches, pro-forma underlying revenue growth would be
    “flat to slightly increasing”.

vii Constant Exchange Rate growth (applying FY2018 full
year average foreign exchange rate) compared to baseline of JPY
3,300 billion (pro-forma April 2018-March 2019 combined revenue of
Legacy Takeda and Legacy Shire, converted at April 2018-March 2019
average exchange rate of 111 JPY/USD)

Note: FY2019 Management Guidance does not take into consideration
the recently announced divestitures of XIIDRA and TACHOSIL. However,
Takeda does not expect these divestitures to have a meaningful
impact on its management guidance.

Costa Saroukos, Chief Financial Officer of Takeda, stated:

“Our guidance for fiscal year 2019 reflects a significant impact from
Loss of Exclusivity, without which the top-line would be growing by ~6-7
percentage points, driven by continued volume expansion of key products
such as ENTYVIO, TAKHZYRO, NINLARO, and our Immunoglobulin franchise. We
expect our Underlying Core Earnings margin to reach the mid-twenties in
fiscal 2019, and we are targeting Underlying Core Earnings margin in the
mid-thirties in the medium term, driven by continued Opex efficiencies
and relentless execution against our cost synergy targets. After closing
the Shire acquisition we conducted a deep-dive, bottoms-up review of the
synergy opportunities, and I am pleased to say we are raising our cost
synergy target from $1.4 billion to approximately $2 billion in annual
recurring savings by the end of fiscal 2021.
In addition to margin
improvement, we also are committed to rapid deleveraging towards our
target net debt / adjusted EBITDA ratio of 2.0x in 3 to 5 years. This
will be driven by strong cash flow, and accelerated deleverage from our
divestitures such as the recently announced agreements to sell XIIDRA
and TACHOSIL. In addition, we will continue to make focused investments
in the business to support our growth drivers, and intend to maintain
our well-established dividend policy of 180 yen per share annually.
Takeda
has delivered against its commitments in FY2018, as exemplified in our
superb margin improvement and cash generation, and we are committed to
delivering against our future targets to drive significant returns for
our shareholders.”

FY2019 Forecast: Expecting strong increase in core earnings of
+92.2%, with Net Profit excluding deal-related costs and the impact of
purchase accounting growing at +17.7%

  • Anticipate Revenue up +57.4% vs. prior year due to inclusion of Legacy
    Shire’s full year results for the full year.
  • Expect Operating Profit and EPS to be significantly impacted by Shire
    acquisition-related integration costs and costs related to purchase
    accounting. Excluding the impact of Shire acquisition-related costs
    and purchase accounting, Net Profit for the year would increase +17.7%
    (refer to the attached appendix for details).
  • Anticipate Core Earnings strongly increasing +92.2% from full year
    Legacy Shire contribution, cost synergies and continued OPEX
    discipline.
 
(billion yen)   FY2018 Results   FY2019 Forecast   % change
Revenue 2,097.2 3,300.0 +57.4%
Operating Profit 205.0 -193.0 N/A
Net Profit 109.1 -383.0 N/A
EPS 113 yen -246 yen N/A
Core Earnings 459.3 883.0 +92.2%
Exchange Rate
(annual average)
 

1 US$= 111 yen
1 euro= 129 yen

 

1 US$= 111 yen
1 euro= 124 yen

 

For more details on Takeda’s FY2018 results and other financial
information, please visit https://www.takeda.com/investors/reports/

About Takeda Pharmaceutical Company Limited

Takeda Pharmaceutical Company Limited (TOKYO:4502/NYSE:TAK)
is a global, values-based, R&D-driven biopharmaceutical leader
headquartered in Japan, committed to bringing Better Health and a
Brighter Future to patients by translating science into
highly-innovative medicines. Takeda focuses its R&D efforts on four
therapeutic areas: Oncology, Gastroenterology (GI), Rare Diseases and
Neuroscience. We also make targeted R&D investments in Plasma-Derived
Therapies and Vaccines. We are focusing on developing highly innovative
medicines that contribute to making a difference in people’s lives by
advancing the frontier of new treatment options and leveraging our
enhanced collaborative R&D engine and capabilities to create a robust,
modality-diverse pipeline. Our employees are committed to improving
quality of life for patients and to working with our partners in health
care in approximately 80 countries and regions.
For more
information, visit https://www.takeda.com

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or at www.sec.gov.
Neither Takeda nor its management gives any assurances that the
expectations expressed in these forward-looking statements will turn out
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Takeda undertakes no obligation to update any of the forward-looking
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Certain Non-IFRS Financial Measures

This press release and materials distributed in connection with this
press release include certain IFRS financial measures not presented in
accordance with International Financial Reporting Standards (“IFRS”),
such as Underlying Revenue, Core Earnings, Underlying Core Earnings,
Core Net Profit, Underlying Core Net Profit, Underlying Core EPS, Net
Debt, EBITDA, Adjusted EBITDA and Operating Free Cash Flow. Takeda’s
management evaluates results and makes operating and investment
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flow items which are included in, or are calculated differently from,
the most closely comparable measures presented in accordance with IFRS.
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measures prepared in accordance with IFRS (which we sometimes refer to
as “reported” measures). Investors are encouraged to review the
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Further information on certain of Takeda’s Non-IFRS measures is posted
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Medical information

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including the ones under development.

Financial information

Takeda’s financial statements are prepared in accordance with
International Financial Reporting Standards (“IFRS”). The financial
statements of Shire plc (“Shire”) are presented in accordance with
accounting principles generally accepted in the United States (“U.S.
GAAP”). Therefore, the respective financial information of Takeda and
Shire are not directly comparable.

The Shire acquisition closed on January 8, 2019, and our consolidated
results for the fiscal year ended March 31, 2019 include Shire’s results
from January 8, 2019 to March 31, 2019. References to “Legacy Takeda”
businesses are to our businesses held prior to our acquisition of Shire.
References to “Legacy Shire” businesses are to those businesses acquired
through the Shire acquisition.

Furthermore, this presentation refers to Takeda’s Adjusted EBITDA and
Shire’s Non-GAAP EBITDA. Takeda’s Adjusted EBITDA is not a measure
presented in accordance with IFRS, and Shire’s Non-GAAP EBITDA is not a
measure presented in accordance with U.S. GAAP. The most closely
comparable measure presented in accordance with IFRS (for Takeda) is net
profit for the year and in accordance with U.S. GAAP (for Shire) is net
income. Please see slides 58 and 74 for a further description of
Takeda’s Adjusted EBITDA and Shire’s Non-GAAP EBITDA and a
reconciliation to the respective most closely comparable measures
presented in accordance with IFRS and U.S. GAAP. Takeda’s Adjusted
EBITDA and Shire’s Non-GAAP EBITDA are not directly comparable, because
(1) Takeda’s results are based on IFRS and Shire’s results are based on
U.S. GAAP and (2) Takeda’s Adjusted EBITDA and Shire’s Non-GAAP EBITDA
are defined differently.

Contacts

Investor Relations
Takeda Pharmaceutical Company Limited
Takashi
Okubo, +81-(0)3-3278-2306
[email protected]

Media Relations
Takeda Pharmaceutical Company Limited
Kazumi
Kobayashi, +81 (0)3-3278-2095
[email protected]