Takeda Pharmaceutical Company Limited (4502) Earnings Call Transcript & Summary

Okay. Great. Thanks, everyone, for joining the Takeda fireside chat. We're really thrilled to have Andy and Ramona. Andy is President of R&D; and Ramona, President of the Global Portfolio Commercialization. So really fun discussion. I know offline, but always helping us is [ Novi, Elizabeth and Sumi ]. So we're really appreciative to them and all the help that they give us.

Where we thought we'd start, Ramona, is one of the most interesting components of Takeda, I shouldn't say interesting, I think one of the things when you first start looking at and analyzing as an outsider like we did was there are a few exclusivities that are out there, some that are just certain like VYVANSE. There's nothing we can do about it and it's understood. And we understood the hemophilia portfolio and kind of the pressures. But one of the bigger unknowns was ENTYVIO, ENTYVIO exclusivity. And it's clearly very important and it becomes a little bit scary for investors. But as time has gone on, we even have a growing appreciation that maybe we're taking way too conservative of a view of the durability of this asset and really the biosimilar may be risk. So we thought we'd start there and give you a chance to talk about what it is that you may know from an industry perspective that's hard for us to know. And some thoughts on how this might eventually play itself out.

Yes. Thank you, Ken. I'm happy to speak to that. And actually, you probably have to break this down into a couple of pieces. So first is the regulatory exclusivity. That's the data exclusivity we get with regulatory approval. In the U.S., as you know it, that's May 2026. In Europe, that was May 2024, it's now May 2025. So we just received the pouchitis indication in Europe. And part of what comes with the pouchitis indication is a 1-year extension of our exclusivity. So that's kind of the regulatory exclusivity, 2025 and 2026. But then you have to add on that, that in order to obviously bring to market a biosimilar for ENTYVIO, you need to do a clinical trial. ENTYVIO is a little bit different from some of the other molecules in this space where you've seen biosimilars appear, although they've been fairly late even in those cases. But the situation with ENTYVIO is because it's got selective, one of the things that makes it so desirable for physicians makes it harder to bring a biosimilar to market because you can't do a trial in an indication where you could maybe move a little bit more quickly and get more clear results such as psoriasis or rheumatoid arthritis. So with ENTYVIO, you have to do a trial in IBD because that's the only indication that you have. And so you have to look at the regulatory exclusivity. You have to look at the time to do a trial in IBD, which we would say conservatively, it's probably about 4 years to do a full trial in IBD. And even getting more difficult because of the number of competitors coming into this market at this time and the number of clinical trial patients in this market. So then you have to layer on top of that, the patents that we have. So we have a range of patents at Takeda that address everything from formulation, to dosing, to manufacturing process. We also, as you know, have the subcu, but the patents themselves expire through 2032 and beyond. And so you think that a company has to, first of all, be able to execute the trial and show results in IBD. Then they actually have to address infringement or validity of our patents. That itself could take a number of years after the submission. And so when you add those things together, and then you combine that with the fact that today, we're not aware of any public disclosures of companies that have trials ongoing for IBD, that gives us more confidence looking at our base case and changing it, and expecting that we now have a longer time for exclusivity with ENTYVIO. Now exactly when that is, is it going to be 2032 or a little beyond that or a little before that, there's still some uncertainty there. But I think certainly, 2028 to 2032, that time frame might be the earliest now that we could expect to see a biosimilar come in. I think what this means for us, as you think about Takeda and our R&D and our organic strategy, and Andy is here, Andy has been building a phenomenal pipeline of innovative medicines across all of our therapy areas. And what this means is that rather than trying to rely on that pipeline. And Andy, I've just been building that for the last few years since he's been at Takeda rather than rely on that to overcome ENTYVIO, that will actually now start to add to ENTYVIO as we go forward into the mid- to late 2020s and into 2030. And so that gives us an opportunity to have some organic growth, both through our existing portfolio, global brands as well as pipeline through to the end of the decade. The other thing I'll just mention is that we had disclosed previously a peak sales estimate for ENTYVIO between, I think we'd said $5.5 billion and $6.5 billion. So that we will be revisiting obviously, with this information. That was assuming regulatory exclusivity and biosimilars appearing at that time. We see that as highly unlikely now. So we will be revisiting that. And at an appropriate time in the future, we'll disclose a new number for peak sales for ENTYVIO. So I hope that helps to at least put the different pieces into context.

It did. I just want to revisit a couple of things that you mentioned and just see if we could flesh it out a little bit. I think at this point, obviously, you said there's no public knowledge of anyone working on it. There would seemingly be though a need to interact with clinical sites if someone was running a study, need to interact with thought leaders, or at least folks in the field. And we just simply -- we know those, at least your organization knows those. We just feel good that we're not aware of any active clinical sites, and we're really not aware of any thought leaders that are working with the companies. Is that fair and accurate?

Absolutely, Ken. We are aware there are a few companies doing preclinical work, but no clinical work. And we've been aware of that preclinical work, but absolutely no, at this point, not aware of any clinical work happening.

Okay. And you said 4 years to do one of these studies from start to finish. And I would assume it's a noninferiority study as well it would have to be kind of in comparison to. But I don't know if you're willing to prepare to talk in the nuance of what a study would have to look like that they'd have to run.

I think we'll stay away from talking about what the biosimilar companies need to do. But certainly, from our perspective, to be able to execute the kind of IBD trial that you would need to execute in order to get biosimilar approval, you'd certainly need to take those roughly 4 years.

Okay. Okay, well, that's really helpful and thoughtful, and it's a component of the story that as we looked at it, it was a little bit scary and certainly has implications to valuation. But if we have really good conviction in extending the duration, it's just quite a relief to the model. So why don't we talk about the franchise and you said maybe revisit the guidance. Can we talk about some of the push and pulls? There is going to be a little bit of change in the competitive landscape with the introduction of biosimilar like Humira, also competition from SKYRIZI. So can you talk about the puts and the takes that would make you want to even readdress the potential size of the opportunity?

Yes, absolutely. So I'll mention a couple of things, Biosimilars, the competitive environment and the subcu because that's also a nice growth driver for us. So from a biosimilar perspective, generally what we've seen, and this is globally, biosimilars tend to mostly impact the originator molecule. So we see that with infliximab biosimilars. We see that with Humira in Europe. But also have a dampening effect on price in the markets, particularly in areas like Europe when you get -- where you get some countries with very rapid biosimilar uptake. So I would say that in spite of biosimilars for Humira for instance being on the market in Europe, since I think it was 2018, we've got high double-digit growth, kind of 17% growth on ENTYVIO going forward. So we expect biosimilars to most impact the originator molecule. And ENTYVIO does have a different mechanism of action. So it's not like there's multiple integrin analogs and you're getting a biosimilar of one of them. These are all different mechanisms, different molecules completely and you're getting biosimilars of them. Now having said that, I also want to acknowledge that there are a lot of new molecules coming into the market in IBD, more in the ILs, more in the orals. And so we do expect that market to get more crowded. And certainly, ENTYVIO is more and more being used first line, that tends to be driving a lot of our growth. Certainly, our opportunity to grow is going to be impacted by new molecules coming into the market. I mean, there's a limited number of new patients. But we do believe, as we've modeled this out and looked at our ability to continue to grow, our growth being driven by growth of the market and the market is continuing to grow, we do believe we can grow through biosimilar entries and through these competitive launches similar to the way we've gone -- we've grown through biosimilars and competitive launches previously. But the growth wouldn't be exactly the same as you look at the growth today. It will start to moderate over time as we get through closer to the end of the decade, of course.

Okay. No, that's very helpful. I think a good time to pivot to Andy, and then we'll come back to you, Ramona. And ahead of Stacy, who is a lot more difficult in her questioning, I'm very easy when it comes to the pipeline. So I'm going to ask a question of you that's easy before we get to the hard stuff, which is, can you pick really, one of the programs that you'd want to highlight first? And I will go through many of them, but is there one amongst many here that you would think, hey, let's talk about this upfront, maybe set expectations, timing, where it is, and why you think so highly of it?

Maybe I can answer this question over the last 20 minutes of this fireside, so we never get to Stacy, Ken. Not that we don't like you, Stacy, but -- so -- and it's a very unfair question to ask just to pick out one. One of the -- I will do that, I'll answer your question, but one of the elements of our pipeline is the diversity of our pipeline. And we -- as you know, over the last 5 or 6 years, we've completely changed the complexion of our pipeline. And over 90% of what we have now in our clinical pipeline is new. And everything is scrubbed and really lives up to the high innovation bar that we put on our programs, high unmet medical need, and high-quality molecules. Right now, we have 10 programs. 10 programs that included recently launched EXKIVITY and LIVTENCITY and 8 new molecular entities that are in pivotal studies or will be in pivotal studies over the next 6 months. So we have a really exciting pipeline that's coming. And then we have, of course, a number of POCs that we can talk about that will be coming up over the next 1 to 2 years. But if you push me and you asked me this question in advance, right, so I had a chance to think about it, Ken. The one I'll pick out is modakafusp alfa, which was previously known as TAK-573, it still carries that name. So why do I choose this one? I choose this one because it's prototypical of what we're building in oncology, and it represents the leading edge of our oncology strategy. So it's a CD38 antibody. But unlike the approved CD38 antibodies, it actually doesn't deplete cells that express CD38. So it's not cytotoxic. Instead, it carries a payload and that payload is a modified form of interferon. And we know that interferon historically has had benefits across a number of cancers, including multiple myeloma. We've actually just over the last 6 months, read out data from our Phase I study that have gotten us quite excited where we've seen response rates of approximately 40% in patients who are highly refractory to existing therapies. And what's quite interesting is many of these patients have responded to modakafusp alfa actually had become refractory to a CD38 depleting agent like daratumumab, right? So it proves that it's working through a differential mechanism of action. Now we're about to start a noncomparator Phase II study in highly refractory myeloma. We're very excited about that. The regulatory landscape is getting more complex in myeloma as you all are aware of. We're still hopeful that, that can be a registration-enabling study, but that's something that we'll have a dialogue with the FDA around in the coming months. We're equally excited about the possibility to move up in lines of therapy because of the combination potential of this agent. So unlike all of the other agents, which are now approved for myeloma, this has an entirely unique mechanism of action that lends itself to combinations. And lastly, I'll mention that myeloma is a space with an aging population across the globe that -- well, the disease that's becoming more and more common, more and more frequent. And now with the number of therapies that we have and patients tend to go through remissions and then bounce back, with the number of therapies, the prevalence of this disease is really growing. So we see huge opportunities. And then the last comment and the reason I think, in many ways I'm so excited about it, is that it speaks to a biology, an innate immune biology, particularly around interferon that's represented in many other elements of our pipeline. So TAK-981, which we're really keen on, we're now expanding. We're in 8 different indications. Our hope is to get up to over 12 separate proof-of-concept indications over the next 6 months will be the next one that we'll be talking about in this space.

That's helpful. Okay. I'll turn it over to Stacy.

So Ramona, back to you. A question on TAKHZYRO. Actually, I don't know if you can hear me.

Yes, I can.

On TAKHZYRO growth, are you seeing an impact from the oral agent from BioCryst? And that's the first question. And we can move on to maybe your own growth for TAKHZYRO in Japan.

Okay. Absolutely. So first of all, let me just step back and say with TAKHZYRO, we -- as you know, we launched in the U.S., and the U.S. is a very highly diagnosed market. So what you saw in the U.S. was a pretty steep uptake curve in the U.S. And now as we've penetrated a lot of those patients in a lot of that market, you start to see the growth start to taper off a little bit. However, what's happening now is we're launching TAKHZYRO outside the U.S. So we've launched in about 20 countries outside the U.S. now and the launch in Japan is imminent. And those markets have a variety of archetypes. So some have a more highly diagnosed HAE population, but others do not or have maybe more on-demand treatment and less prophylaxis treatment. Japan would be an example of that where there's some prophylaxis treatment, but really a lot of education needs to be done to educate around prophy treatment. So as we look at TAKHZYRO now, we'll see some continued more stable growth, I would say, in the U.S., and that's being driven by new patient adds. And obviously, the tailwinds there or the headwinds there are new launches. So ORLADEYO, certainly. And we've seen some patients switch from TAKHZYRO to ORLADEYO, although we've also seen some patients switch back, from ORLADEYO back to TAKHZYRO. And so I think it remains to be seen where the sweet spot is going to be for ORLADEYO. Right now, they're trying to get doctors to try it everywhere, but I think it remains to be seen where the positioning and the sweet spot is. Right now, what we're hearing most is in a milder patient, ORLADEYO is a good option, particularly for first-line prophy in a milder patient, which doesn't tend to be where we end up focusing our efforts. So we have that impact. And then there's a little bit of impact with just titration. So with TAKHZYRO, you can be every 2 weeks or every 4 weeks. And so we have so many patients on it now that we start to see a few patients start to titrate down from 2 weeks to every 4 weeks, which is completely expected and well within our label. So I think you see those dynamics playing out in the U.S. That leads to continued growth, but not the kind of steep growth that you saw when we were still penetrating the market. Now the growth on TAKHZYRO is going to come from outside the U.S. where we're seeing some really, really nice uptake in Europe. We just launched in China, and we have a launch imminent in Japan coming as well.

Okay. When we talk to our clinicians in the U.S., at least for prophylaxis, they really indicate that they would want all of their patients to be on preventative therapy. So as you think about the Japan launch, how should we kind of set our expectations? Is that something that clinicians also believe there and it just takes some time? Or is it the patients that are more resistant?

Yes. So I would say, even in the U.S., all patients are not on prophy. I think prophy have grown from about 50% of the market to a little bit over 60% of the market right now in the U.S. So definitely, prophy is growing in the U.S., but it's still not 100% of the market. So in a sense, that's still an opportunity for prophy growth in the U.S. And I think largely what we see in the U.S., it's those milder patients that maybe haven't moved to prophy. So I think for us, it's really making sure that the right patients are on prophy. I think most people in the space agree that the best option for a patient is to be on prophylactic therapy. But that's truly when you consider a medicine like TAKHZYRO, where, I mean, we just released our latest open-label extension data, where you have the -- right now the longest real-world evidence in any -- in this space, which is 1 year attack-free for patients on TAKHZYRO. If you're taking a medicine that is still going to result in some attacks, then the benefit of prophy is not as great. And so that's where your risk benefit changes a little bit for prophy. So I don't think it's really simple to say every patient is going to be on prophy. But certainly, the patients that benefit from TAKHZYRO, we feel that we're getting access to and they are really benefiting from it to the point where even if some of them are tempted to switch they start to come back again after they experience their first attack. I think what you'll see in markets outside the U.S., Stacy, is a little bit slower growth -- slower, more steady growth over time because you're growing your penetration at the same time as you're growing your market knowledge, diagnosis of patients and growing use of prophylactic therapy.

Okay. That's very helpful. Moving to Andy. I think Ken is trying to set me up for failure here in my questioning. But as we think about the different ways to approach understanding the pipeline, one of the questions and large opportunities we have is for Orexin in narcolepsy. So can you provide some updates there? Remind us the different safety concerns, and what are the next steps and timing for all of that?

Certainly, Stacy. So we remain very enthusiastic and as excited as we were last year, we are today for the potential of this program. As you'll remember, in fall of 2021, we noticed some safety issues with the lead oral molecule, TAK-994, which is in a Phase IIb -- was completing a Phase IIb dose-ranging study in type 1 narcolepsy patients. We saw evidence of liver injury, drug-induced liver injury. And in fact, it was quite severe. We discontinued the trial. We filed these patients. All the patients that have had these liver injuries are now resolved, so they're doing well, which is, of course, good news. But it's very unlikely that TAK-994 will make it back. Not anticipating -- we've been asked this question a lot. There were not signals that led us to believe that 994 can add liver safety issues. And if you go back in the history of drug-induced liver injury, there are sometimes occasions where your preclinical toxicology work alerts you and you're concerned and you move cautiously, and there are other times where it's idiosyncratic, and this was clearly the latter case. With that said, we had so much enthusiasm around the mechanism that we have continued a backup strategy. So that allowed us to bring forward TAK-861. We differentiated TAK-861 against TAK-994 on the basis predominantly of potency. It's a much more potent molecule and on PK. It's a molecule that has an extended half-life relative to TAK-994. So we had already had TAK-861 in Phase I studies when the 994 event occurred. We did a number of things at the time of that event. One was we began to understand better what that risk profile will look like for TAK-861. And then secondly, understanding that we felt that, that risk was relatively low, we accelerated that program. So we're now in the process of generating efficacy data in sleep-deprived healthy volunteers and type 1 narcolepsy patients. And so with the -- with that aggregate data set, the overall TAK-994 data set and then the Phase I data from TAK-861, we'll be able to make a decision as to how and when to move forward. And our expectation is that we'll have a path forward for 861 and we'll spend time at Q4 in May talking about that in more detail.

Okay. That's helpful. And very quickly, before we move on, just remind us the potential development for some of the other Orexin assets. You previously mentioned the IV 925.

Yes. So we're in exploratory proof-of-concept studies. So 925 is a molecule that is difficult to deliver -- to routes other than IV at least at this point. We continue to always explore alternative routes of administration, but our experience with 925 is it's predominantly an IV administration. So we're looking at a number of settings where IV administration would be conducive to a mechanism like this. And an example of that would be in the postsurgical setting. There are categories of patients who are at significant risk of morbidity and prolonged ICU stays following anesthesia. So we're in the process of generating data right now. And I would say, over the next 6 to 12 to 18 months, we'll have a better understanding to whether it works in those populations and then what a development plan would look like.

Okay. So back to Ramona for a commercial question. So as we wait to kind of get more information for 2022, can you talk about your expectations for plasma supply? How we should approach blood shortages and potential pricing?

Yes, absolutely. So Stacy, let me remind you that actually when we -- we're looking at FY '21 and the challenges that we were facing, we made a very conscious decision, first of all, to improve all aspects of our value chain, not just increasing donations. And we did that in order to keep our margins in line as much as possible while we could continue to supply plasma. So I'm pleased to say that if you look at our plasma collections in the first 3 quarters of FY '21, we're actually surpassing prepandemic levels of plasma collection. And the reason for that is, unlike other companies, during this time, as COVID hit, Takeda was in the middle of an expansion and operations improvement for this plasma business. Remember, we've just done the acquisition and we were just really looking at all different aspects of this. So we've been opening up new centers even during the pandemic. And at the same time, we've been making process changes, manufacturing improvements, et cetera, throughout in order to really maximize the efficiency of our plasma collection. So that kind of tells you at least for the next 7 to 12 months because you've got that time frame, the donation to patient, what things look like for us. We feel that we're able to meet our growth targets with the way things are going today. Now I will say it also remains to be seen what's happening with the other companies, what's happening with them, what they're going to be doing with their allocations, et cetera. And just overall in the market, what that looks like as COVID ebbs and flows around the world. So we will disclose kind of more going forward as we deliver our guidance for FY '22.

Got it. And as we think about development in myasthenia gravis, you all are also developing some interesting proof-of-concept data for CD38. So I'm going to try to pronounce it, mezagitamab. Andy, do you want to give us your rationale in myasthenia gravis and ITP?

Sure. Sure, Stacy. I think you said it very nicely, actually. So autoimmune diseases are quite complex, and they typically have been. They are a result of immune dysfunction typically relating to a range of, I don't know, all humoral antibody B-cell driven to all cellular and T-cell driven to diseases that have mixtures of the 2. And actually, most auto-immune diseases fall somewhere in that middle bucket. Myasthenia gravis and ITP are 2 examples of autoimmune diseases that are predominantly driven by pathological -- predominantly pathological antibodies. So the TAK-079 or mezagitamab is a CD38 monoclonal antibody similar to daratumumab. It's -- Look, the active dose is a much lower dose administrated -- administered by subcutaneous route. And we see very significant reductions in target plasma cells, which are the cells that produce antibodies, including the pathological antibodies that you see in myasthenia gravis or ITP. So the mechanistic rationale is that by depleting these plasma cells, we deplete immunoglobulin. By depleting immunoglobulin, you're consequently depleting these pathological antibodies. And so we believe via that mechanism you could lead to benefits in these disorders. We actually have a third disorder, which we've already uploaded on to clinicaltrials.gov, a study that we hope to start in the near term, which is IgA nephropathy, which is a disease due by another class of immunoglobulin IgA. So we think that we have shots across these 3 disorders. The first proof-of-concept study that we'll be reading out, which will happen in FY '22 will be in myasthenia gravis followed by ITP and then IgA nephropathy.

Can you speak to the patients that are enrolled for IgA nephropathy? Is it going to be more severe? There seems to be a subset of different kinds of patients.

Well, you can look online actually at our -- at the criteria. Of course, in a proof-of-concept study, you tend to be a little bit more broad in the patient population that you look at.

Okay. Perfect. So moving to the collaboration with Arrowhead. I think we're expecting continued cadence of updates there. Andy, do you want to talk about the potential opportunity in alpha-1 antitrypsin-associated liver disease and maybe the competitive landscape?

I would have said that this is the molecule I wanted to focus on when Ken asked his question of one molecule, but I had a sense that you would ask a question already. So they got me too, Stacy. So -- and Ramona can add to this. But we're very excited about this program. It's a great partnership with Arrowhead. It's an incredible molecule with very robust pharmacodynamic effects. And we've seen tremendous knockdown of the target pathological protein, which is this alpha-1 antitrypsin PiS variant. So we've seen that knockdown over 90%. Peripherally, we've seen knockdown over 90% in the liver. And then what's really exciting is we've seen significant -- very significant reductions of what we think of as the causal agents of liver disease in these patients, which are these aggregates of this alpha-1 antitrypsin -- this mutant alpha-1 antitrypsin. We've also in relatively small numbers seen reductions in some of the pathological liver function tests that are elevating. So all this makes us feel very compelled in this fairly well-defined homogeneous patient population that we're going to see benefits on liver fibrosis and eventually on liver end-stage damage. The next data set to readout will be a controlled Phase II study that our partners, Arrowhead, have been running, that will come out in FY '22. And then the big next step for us will be starting our Phase III program. So we're in the process of having an active dialogue with FDA around what endpoints safety monitoring will look like. But we're hopeful that we'll be able to start that study in fiscal year '22 as well.

Okay. Great. I see that we're approaching the end of the program. And the truth be known, Stacy and Georgi done a ton of work in your pipeline, so we wanted them to lead the discussion, and I used an excuse to turn it over to her. And it's Stacy's birthday today, by the way. Just...

Happy birthday.

But this was really a wonderful discussion. Appreciate you taking the time on ENTYVIO and really sharing some of the details around it. And Andy, the pipeline, we know we're going to start getting more and more data readouts. And I think it will be more and more coming to life. And thank you for the review and picking some of the programs. I know there's much more to talk about. And we'll try to flush it out in another conversation. But thank you so much for participating. We really appreciate it and excited for Takeda's future and all the work you all are doing.

Thank you, Ken.

Thank you. Take care.

Happy birthday, Stacy.

Thank you.