Takeda Looks Up As It ‘Hits Bottom’

Following the massive financial hit of the recent Actos settlement, Takeda appears set to return to profitable growth this fiscal year after a 12-month period during which its new CEO says the Japanese firm "hit bottom."

TOKYO - Japanese generic competition for its top product, along with the Actos (pioglitazone) settlement, took their toll on Takeda Pharmaceutical Co. Ltd. in the financial year ended Mar.31, but Japan's largest pharma company nevertheless posted 5% growth in its reported top-line revenues to JPY1,777.8 billion ($14.86 billion).

Underlying growth - at constant currencies and without divestments - was 3%, driven by new products, and multiple myeloma therapy Velcade (bortezomib) was Takeda's top product globally with JPY152.7 billion (+16%), as antihypertensive Blopress (candesartan) suffered from the launch of generics in Japan.

At a results briefing in Tokyo, president and CEO Christophe Weber described the 12 months as a period of change during which the firm has pursued a "big agenda of transformation" and restructuring. The fundamental changes are now mostly complete, and "I am very satisfied that we were able to implement these while continuing with our daily business," he said.

Much attention was on the recent offer to settle U.S. litigation brought over patient claims related to the bladder cancer risk of Actos, a drug for type 2 diabetes. Takeda has booked a $2.7 billion provision for the settlement, which knocked it into an operating loss of JPY129.3 billion and net loss of JPY145.8 billion for the year, in line with the firm's guidance at the time of the settlement (Also see "Takeda Offers $2.4bn No-Fault Settlement Of Actos Suits" - Scrip, 29 Apr, 2015.).

"This settlement allows us to reduce our financial uncertainty…and for our long term outlook it’s a better position, therefore we were keen to do this," Weber told the meeting. Product liability insurance is expected to cover around $400 million of the total cost.

While the no-fault settlement concept is maybe unique to the U.S. and is certainly new to Takeda and most of its employees, "Most mass tort litigation in the U.S. does in fact usually result in such settlements," the CEO observed.

Ringing In Change

Otherwise, Weber focused on recent launches and changes that he sees as positioning Takeda for long term growth, including highlighting again the novel gastrointestinal biologic Entyvio (vedolizumab) (Also see "Takeda Bigs Up Entyvio As Pillar Of GI Plans" - Scrip, 18 Mar, 2015.).

The drug saw sales of JPY27.8 billion in the fiscal year in its initial indications of ulcerative colitis and Crohn's disease, which the company sees as supporting its global peak target of $2 billion-plus.

Observing that "my [senior executive] team is now complete, and it's a very experienced, very diverse team," Weber noted that Ramona Sequeira will join as president of the U.S. business unit and Dr. Andy Plump, an ex-Sanofi executive, will succeed chief medical and scientific officer Dr. Tadataka Yamada, both in June.

Well over half of the 16-member group is now non-Japanese, and Sequeira – formerly vice-president of Lilly USA - will also become its first female member.

In Japan, the emphasis will be returning to growth, said Japan pharma business unit president Masato Iwasaki. Japanese sales of Blopress slumped by 25% to JPY94.6 billion in the 12 months, although it remained Takeda's top product in this market.

But along with pricing pressure and last year’s general price cut, this meant that new product growth could not outpace the negative factors, and Blopress dragged down the firm's overall Japanese pharma revenues by 4% to JPY561.3 billion.

The effort for domestic growth will center on new products such as the gastrointestinal drug Takecab (vonoprazan), Zafatek (trelagliptin) for diabetes and the antihypertensive Azilva (azilsartan), Iwasaki said.

Takeda is also looking to build on favorable doctor perceptions in Japan of the quality of its sales reps, and Weber added that the firm is "very confident" it can reverse the decline.

Emerging Markets

The company continues to see its value brands in emerging markets as an important mid-term growth driver, with its top product in this sector, the proton pump inhibitor pantoprazole, growing by 9% to JPY43.4 billion in the year.

Total emerging markets sales were up 8% on an underlying basis to JPY300.9 billion, with double-digit growth in China and Russia. Asia was the largest single region in the category, accounting for JPY100.3 billion (+18%).

As part of Takeda's ongoing Project Summit cost reduction initiative, the greater China and Asia-Pacific operations have been merged under the new emerging markets business unit, based in Singapore, chief financial officer François-Xavier Roger told the briefing (Also see "New Takeda Moves Signal Emerging Markets Intent" - Scrip, 25 Feb, 2015.).

There has also been a commercial reorganization in the Philippines and restructuring in Australia, and the closure of production sites in Belgium, Denmark and Norway, as part of the project, which generated savings of JPY28 billion last fiscal year and is running ahead of schedule.

Disappointing Guidance?

Takeda is expecting revenues of JPY1,820 billion this fiscal year (+2%) and a return to an operating profit, of JPY105 billion, with net profit guidance set at JPY68 billion. Excluding the impact of the Actos settlement, reported net profit is expected to more than double versus fiscal 2014.

While the topline guidance is actually above analysts' consensus estimate, Jefferies analyst Naomi Kumagai expressed surprise at the operating figure, which is well below her estimate of JPY185 billion and the consensus figure of JPY184.6 billion.

Costs for new product promotion and business reorganization appear partly to blame, she noted, observing that limited reasons were provided by Takeda.

R&D Losses

A pipeline update revealed several late-stage losses from the clinical pipeline in recent months, including sublingual ramelteon (TAK-375SL) at the Phase III stage in the U.S. for bipolar disorder.

Also discontinued were motesanib at Phase III in Japan for advanced non-squamous non-small cell lung cancer, alisertib (MLN8237) for relapsed/refractory peripheral T-cell lymphoma (Phase III in the U.S./EU) and ovarian cancer (Phase II), and MLN3126 at Phase I for Sjogren's syndrome.

As already disclosed, the focus of the alisertib program will now shift to small cell lung cancer.

'Committed To Contrave'

Weber noted that there has been "a lot of noise" about Contrave in recent days but said in a Q&A session with analysts that "we are doing our best to resolve the dispute" with partner Orexigen Therapeutics Inc. over the obesity product.

Sales of the drug were just $19 million in the fiscal year following its U.S. launch in October, and issues have arisen over the release of data from a U.S. cardiovascular safety trial and who will pay the costs of a second required study (Also see "Takeda To Ditch Orexigen In Another Deal Exit?" - Scrip, 13 May, 2015.).

Without going into details and despite suggestions that the Orexigen alliance may be dissolved, Weber declared that "We remain very much committed to Contrave."