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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 Takeda¹ greatly
exceeding original guidance and absorbing Shire acquisition-related
costs
In FY2019, continued momentum of key growth products in Takeda’s
five key business areas² is expected to
largely offset significant loss of exclusivity headwinds
Strong base for future growth with a balanced portfolio of 14
global brands³, 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 Profit^iv	186.9	312.9	+67.4%
EPS^v	239 yen	399 yen	+66.6%
Core Earnings^vi	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 Growth^vii		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”.

^viiConstant 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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Certain Non-IFRS Financial Measures

This press release and materials distributed in connection with this
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Further information on certain of Takeda’s Non-IFRS measures is posted
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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.