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

Good morning, good evening, everyone. This is Elizabeth Borgeson. As part of the IR team at Takeda, I'd like to welcome you to our event, where we will be discussing our new dengue vaccine QDENGA. [Operator Instructions] Moving to Slide 2. I'd like to remind everyone that I'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 actual results to differ materially are discussed in our most recent Form 20-F and in our other SEC filings. Also refer to the important notice on Slide 2 of the presentation. We have a great presentation for you today. So without further ado, let me introduce Ramona Sequeira, President of Global Portfolio division. Ramona, I'll hand it over to you to introduce the rest of the team.

Thank you so much, Elizabeth, and I'd like to thank you all for joining us today to discuss QDENGA. We're very excited to share more information with you about dengue fever itself, about our dengue program and about our QDENGA launch strategy. I have a few guests joining me today. So from Takeda, we have an incredibly experienced team including Derek Wallace, who's the Head of our Global Dengue Program; and Gary Dubin, who's the Head of our Vaccines Business Unit. Both Derek and Gary bring years of experience working in clinical development in vaccines and on this program in particular. Also from Takeda, we're joined by Renata Campos. Renata is an experienced commercial leader and President of our Growth and Emerging Markets for Takeda. She's leading our launch plans in endemic markets. And to provide an external perspective, we're honored to have Prof. Eng Eong Ooi from Duke and National University of Singapore Medical School. Prof. Ooi is a clinician scientist and a renowned expert with deep experience researching and treating dengue virus. He's also graciously agreed to stay with us for the Q&A. I'd like to share why Takeda has been so focused on developing a vaccine for the dengue virus. Elizabeth, if I could move one more. Thank you. In 2019, dengue was listed by the World Health Organization as one of the top 10 threats to global health, along with HIV, antimicrobial resistance and noncommunicable diseases such as diabetes, cancer and heart disease. An estimated 40% of the world is at risk of dengue infection, and incidence rates have increased 30-fold over the past 50 years. In 1970, there were 9 countries that experienced severe dengue epidemics. Today, the disease is endemic in over 125 countries. When a dengue outbreak sweeps through a country, often during the rainy season, we see hospital system capacity being overwhelmed, in a similar way to what we saw with COVID, with a significant economic burden on the country as a whole as well as on individuals and families. In addition to the threat to endemic countries, dengue is also a leading cause of fever amongst travelers returning to the U.S. and Europe. We've seen cases of dengue in Florida, Texas, Portugal, France, among other areas. On the next slide, Takeda has 4 strategic imperatives to ensure a successful global launch of QDENGA and help protect public health for millions. Critical for us is making QDENGA available to as many people as possible who are at risk. Today, we'll share examples of work we're doing in partnership with other stakeholders to create awareness of the risks of dengue. Derek will walk you through the clinical program and the QDENGA clinical profile, which we're leveraging to build confidence with regulators, health care providers and consumers. We're keenly focused on establishing rapid and broad access. I'll walk you through how access will evolve in endemic markets such as Brazil. And finally, we'll lay out how we'll maximize the potential of QDENGA through our manufacturing capacity and our well-established global footprint. Our agenda today kicks off with Prof. Ooi, who will provide insights and background on Dengue. Derek Wallace will then walk us through the QDENGA program. I'll cover our commercial plans to fully capture this opportunity and deliver a transformative public health impact. Then we'll be joined by Gary and Renata for the Q&A. With that, I'm going to hand it over to Prof. Ooi.

Thank you very much, Ramona, and thank you for this opportunity to share idea about dengue and the global burden of this disease. Next slide please, Elizabeth. So this slide basically shows you the size of the problem globally. As you can see on the map, on the right-hand side, dengue is very prevalent in Central and South America and South and Southeast Asia, so it's all within the tropical belt. In Africa, you do not see many red dots, but that's because many of these are misdiagnosed as malaria and treated as such. So actually, the global burden is estimated to be about 390 million infections a year. About 4 billion people live within the areas of the world where dengue is actively transmitted all year round and especially, as you heard from Ramona, during the rainy season. And because of the plans in urbanization and global warming, the projected trend is that dengue is going to spread into the regions with subtropical climates. And because of that, by 2080, it's estimated that 6 billion people will live at risk of dengue each year. Next slide, please. So what is dengue? On the left-hand side, I mean if you read the textbooks and the literature, it's described as a mild flu-like illness. But those people who do have dengue would tell you that actually they wish you would die from it because it can be very painful. And so if you look at the map, the figure at the -- on the left-hand side, the muscle pain and the bone pain can be very debilitating. But people do recover from dengue if -- with simple supportive care. Except in about 5% of the cases, they go on to develop a very severe disease and potentially that's life-threatening. Now why that is so is probably multi-factorial as I'll walk you through in the next slide in a little bit. But those with very high levels of virus in the blood as well as some viral proteins and, in particular, the secreted NS1 protein, which is produced by the virus and it's thought at least an experimental model to trigger all the inflammation as well as directly affecting the integrity of the blood vessel, the lining of the black vessel, and that causes the liquid component of the blood or plasma to leak out from the blood vessels and therefore compromise our ability to maintain our blood pressure. So when that happens, then a patient goes into shock. The next slide will show you why this risk is affected by, amongst other things, our immune experience to other -- to previous dengue virus infection. So what I mean by that can be perhaps best illustrated in these 4 graphs. So the X-axis of these graphs are the amount of antibody in our blood. And the Y-axis is the probability from left to right, probability of infection, symptomatic infection, hospitalization and dengue hemorrhagic fever, which is the severe form of dengue. You can see in the panels A and B, the higher the antibody levels, the more likely we're going to be protected from infection and from developing disease if we're infected. And that -- and as you move from right to left on the X-axis, then as the antibody levels drop, then your risk of infection and symptomatic disease goes up. But the risk of hospitalized dengue and risk of severe dengue is not linear. That's actually a peak point in which the risk is actually the highest. And so that, in practical terms, means that once we have been infected with one dengue virus, then over time that level of antibody that developed from the first infection will drop. And when we encounter dengue virus a second time, then that risk is maximum at around about 2.5 to 3 years after the first infection. Then once you pass that window, the risk drops again. So this idea that is very often cited in the press and talks that the secondary dengue infection or the second infection is more likely to cause severe dengue is not -- is a very simplistic statement. It doesn't really capture the risk. The risk is actually maximum only within a time period of about 2.5 to 3 years, where after that the risk will drop. Next slide, please. And besides the prior immunity to one of the dengue viruses, it's also important to know that dengue viruses are actually quite different. By historical -- for historical reasons, they are all called dengue viruses and then named 1, 2, 3 and 4. Genetically, however, they're actually 4 different viruses. And so the behavior, the kind of diseases, the cause and all that are also different. And over the years, it's very clear that dengue-1 and dengue-2 viruses are the ones that cause the most disease. And amongst the 4, dengue-2 is the one that is most likely to cause severe disease, particularly during the second infection. So not all dengue viruses are the same, right? And so if we have to stop one virus, then dengue-2 is the one that we should try and tackle. Next slide, please. So because that there are 4 viruses and because of it's transmitted by mosquitoes that would breed especially during the rainy season, then we do get dengue outbreaks, especially during the rainy months. But also every -- once between every 3 to 7 years, many countries experience a big spike in dengue virus -- in dengue cases. And when that happens, dengue cases can very quickly overwhelm health care resources, and we've all lived through COVID. Same thing happens during dengue outbreaks. The hospitals get jammed with dengue patients, and many elective medical procedures will then have to be delayed. And so the cost to both the patient as well as the society is very high if we -- when dengue is not properly controlled. Next slide, please. So how do we control dengue? And why do we need a vaccine? I think of all the places that we have tried to control, Singapore provides the best illustration or experience in terms of why we need a vaccine. So there's the slide on the -- the figure on the right-hand side of the slide is that what happens with dengue between 1966 to 2022, right? So the red line is the -- represents the mosquito population density, right, as shown on the -- as indicated on the right-hand side of the -- the Y-axis on the right-hand side. So as you can see, in 1966, when Singapore first started surveillance on dengue, the mosquito population is extremely high. It's about 50% of all houses have Aedes mosquitoes breeding in them. And so during that period, dengue overtook malaria as the most common cause of death in children from a mosquito-transmitted disease. And when Ministry of Health started to control the mosquito population, as you can see, the red line then dropped. As the mosquito population dropped between 1974 to about late 1980s, Singapore experienced a period without any dengue outbreak. But from 1990 onwards, you can see that the blue bars now start to spike once every 5 to 7 years or so, right, starting from 1992 to '98, and all that. And despite the fact that the red line has stayed very low, and that illustrates the problem with dengue control if you just control the mosquito. And this applies to no matter what form of control we exert on trying to reduce the mosquito population that as we reduce mosquito population, we also reduce dengue virus transmission and therefore on the long-term immunity levels. And so because we cannot eradicate the mosquito, then even with very small numbers, we still get outbreaks periodically. And the only way we can prevent dengue, therefore, is to both control the mosquito as well as vaccinate the population so that we sustain the immunity levels as the mosquito population drop. I will leave the thought there, and I'm happy to take questions later, but I'll pass this time on to Derek to tell you more about the dengue vaccine.

Thanks very much, Eng Eong. It's a real pleasure to be here today. If we go to the first slide. Before I go into the design and the clinical profile of QDENGA, I'd like to reinforce 2 specificities of dengue that Eng Eong has mentioned and are really important to understand. Firstly, severe dengue, which is difficult to predict and extremely challenging for physicians to manage, is essentially a disease of vascular leakage. Fluid or plasma leaks from blood vessels into the lungs and abdomen, and this is managed by trying to find a sometimes impossible balance in fluid replacement, i.e., giving enough intravenous fluid to ensure adequate volume for the circulatory system while avoiding overloading the lungs with fluid. Getting this right can prevent death in some, but not all cases of severe dengue. One of dengue's nonstructural proteins, NS1, is implicated in this vascular leakage and is highly conserved between flaviviruses. The second element of dengue pathology that I'd like to reinforce is the potential for disease enhancement. In natural infection, a secondary infection is a risk factor for severe disease. Antibodies from the first dengue infection can make severe disease more likely in a phenomenon known as antibody-dependent enhancement. This characteristic of sequential dengue infections has been a major hurdle for the development of dengue vaccines. On the next slide and with these factors in mind, we have developed a vaccine that protects against all 4 dengue serotypes, protects against severe disease and has shown no evidence of disease enhancement. QDENGA is a tetravalent vaccine. It contains components of all 4 dengue viruses. The principal virus is an attenuated dengue-2 virus, and this forms the backbone for the other 3 serotypes in the vaccine. We have created chimeras for dengue-1, 3 and 4 by splicing the structural or pre-membrane and envelope genes into this dengue-2 backbone. The strength of this approach is that we get broad and persistent immune responses. First, QDENGA elicits neutralizing antibodies against structural proteins for all 4 serotypes. This reduces symptomatic dengue. Second, our vaccine induces antibodies against NS1. This directly reduces NS1-mediated vascular leakage. This mechanism could explain the excellent reduction in hospitalizations we see with QDENGA. Third, strong T and B cell responses are generated to numerous dengue antigens, and these could be contributing to the persistence of protection observed in our clinical program. On the next slide, to test the safety and efficacy of QDENGA, we designed and executed our pivotal Phase III trial following the WHO's recommendations for vaccine development of -- for development of a dengue vaccine. This trial enrolled more than 20,000 children across 8 endemic countries. Each participant received 2 doses of vaccine or placebo 3 months apart and was followed up for a total of 57 months or 4.5 years after the second dose. The primary endpoint included all cases of dengue observed during the first 12 months of follow-up. Secondary efficacy endpoints were observed during 18 months, and our key secondary endpoint was reduction in hospitalization. We then continued follow-up for an additional 3 years, making a total of 4.5 years to look at long-term safety and efficacy. And this duration is important because it refers back to the period at which a primary infection or, in this case, vaccination could potentially enhance exposure to a second infection, which, as Eng Eong explained, is typically in a period of around 2 to 3 years. So by following up for 4.5 years, we followed up beyond a period for which we might expect to see enhancements should it occur. So there are 2 important aspects of this trial that help us to identify potential disease enhancement. Firstly, the fact that we took baseline blood samples in all participants, and it allows us to identify who was naive to dengue and who had already been exposed and to stratify our data according to serostatus. And as mentioned, we followed participants for 4.5 years. If we look at the clinical data on the next slide, we can see that we have demonstrated strong efficacy across all endpoints, regardless of previous dengue exposure, and we did not identify any important safety risks. We showed an 80% reduction in symptomatic dengue at 12 months, the primary endpoint; a 90% reduction in hospitalizations at 18 months, the key secondary endpoint; and most impressively, we saw an 84% reduction in hospitalizations at 4.5 years, which shows the excellent durability of protection provided by QDENGA. We can see this on the curve on the right-hand side of this slide. The solid lines are the placebo recipients and the dotted lines, the vaccinees. The orange color is sero-positive participants and the blue is sero-negative. We can see very clearly the reduction in hospitalizations with similar and independent of serostatus. With respect to safety and tolerability, we did not see evidence of disease enhancement. And the vaccine was seemed to be well-tolerated with the reported reactions that are most frequent being those that are common to vaccines, such as injection site pain or headache. On the next slide, we can see the significant momentum that we are building. Our first approval was in Indonesia in August last year, followed by approval in Europe in December and Brazil earlier this month. All of these approvals have been for prevention of dengue regardless of serostatus. There is no requirement to test for prior infection before administering our vaccine. The vaccine is currently under priority review by the U.S. FDA and is also under review in a number of endemic countries that participated in the EU-M4all procedure with the EMA and WHO. So we're really excited now for continued momentum in 2023 and beyond, and I'm looking forward to handing back to Ramona to discuss the commercial opportunity for QDENGA.

Thank you so much, Derek. And on the next slide, we're going to talk a bit more about our 4 strategic imperatives to ensure a successful launch. First, we're partnering with stakeholders to educate decision-makers and consumers on the risks of dengue that you heard about today from Prof. Ooi. Second, and for the first time, there's a vaccine with a strong clinical profile and a recommendation for broad use, as you heard from Derek, and we want to build confidence and trust in our clinical data. Third, our goal is to make sure consumers, both living in and traveling to endemic markets, have access to this important vaccine. We have a tiered pricing strategy, and we're working with both private and public local stakeholders to provide rapid and broad access. And finally, it's critical we ensure launch preparedness through the work we're doing to expand our capacity and leverage our established supply networks and strong local presence across our broad global footprint. On Slide 23, we're already seeing the great interest and excitement around QDENGA. In the countries where we have approval, early signs are very positive. Demand from travelers in Germany has exceeded our expectations. Both in Indonesia and Brazil, the local media coverage and desire of stakeholders to partner with Takeda have been very strong. Let me share a few examples of what we're doing around the globe. In Thailand, we're partnering with the Ministry of Health and other organizations to raise awareness of the risks of dengue through interactive digital content. A young girl named Ing-Ma is our first artificial intelligence influencer and is a virtual representation of over 1 million dengue victims in Thailand. Our video campaign has gone viral, with over 35 million views so far. If you're interested in checking out the video, the link is in the deck. We've also partnered with top consumer brands like Kao Thailand. These campaigns are ongoing today prior to the approval of the vaccine in Thailand, showing the high unmet need that exists in dengue-endemic countries. We're building trust and confidence through our partnerships, building on our strong local presence across endemic countries. In Brazil, where QDENGA was most recently approved, we've launched a collaboration with UNICEF to educate roughly 90,000 people living in underserved communities on how to reduce the risk of transmission of mosquito-borne diseases. And finally, in travel markets such as the U.S. and the EU, we're looking at partnerships with leading travel immunization clinics to educate travelers destined for endemic countries who may not be aware of the risks of contracting dengue. Moving to Slide 24. Let me now walk you through how access will work in an endemic country such as Brazil, which has a very high burden of illness for dengue. Initially, and at the bottom, even in endemic markets, QDENGA will be available to consumers paying out of pocket. We refer to this as a private endemic market. This enables rapid access of the vaccine with further support -- we'll further support affordability and start to broaden private access as we explore opportunities with private payers and employers who want to keep their employees safe. We'll support initiatives with state and municipal-level governments looking at innovative financing options, value-based contracting and more. And ultimately, the goal is to be included in the national immunization programs, which are funded by the national government and result in broad access across specific cohorts of the population. Two important nuances to note here. First, the activities to support both private and public access happen in parallel, though private access comes first and the national immunization programs come later. And second, the time it takes to activate each program will vary from country to country. For instance, in Brazil, it has historically taken 12 to 18 months before inclusion in national immunization programs. Whereas in Indonesia, it's historically taken several years. Moving to Slide 25. To support our access strategy, we've developed and are implementing a tiered pricing approach based on factors such as GDP and the sophistication of the health care system to meet the needs of individual countries. As I mentioned, when we initially launched into a country, we'll start by making the vaccine available to consumers paying out of pocket in the private market segment. In the private endemic market segment, we plan to price below the historical average price for innovative vaccines. For instance, in Indonesia, we're launching with a USD 40 recommended retail price compared to an average price for innovative vaccines of about USD 73, allowing us to penetrate more deeply into the private market by being more affordable. For the public endemic market segment, so the large government-funded programs, we aim to price at below the average cost for innovative vaccines. Our goal is to ensure affordability for governments in endemic countries. In travel markets, which are much smaller in volume than the endemic markets, we plan to price on par with other innovative vaccines. In Germany, QDENGA is around $115 per dose, which is in line with the average price for other innovative vaccines. It's important to note that we believe implementing QDENGA public vaccination programs has the potential to create significant cost savings for individuals and at a government level. Takeda has done economic research on the burden of dengue, looking at factors such as health care costs, missed work, loss of tourism. We look forward to publishing this work in the coming months. Now on Slide 26. I'll summarize how we've prepared to deliver this innovative vaccine globally. We made early investments to establish in-house, end-to-end manufacturing capabilities. We're working to expand our capacity in-house and through strategic CMO partners with a target supply of 100 million doses annually. With respect to supply chain, we're leveraging the existing distribution network that Takeda has established. So the product will go from Singen in Germany to a distribution hub in Belgium. And from there, we'll shift to each of the launch countries. And we're able to leverage our local distribution networks and commercial infrastructure in our key launch markets, such as Brazil and Indonesia. I think it's important to emphasize that we have deep expertise in these markets. Our growth in Emerging Markets Business Unit has successfully launched over 150 medicines since 2019, and is growing at 14.5% in Q3 FY '22. We've hired key talent from the vaccine space, both locally and regionally in preparation for upcoming launches. Let's move to Slide 27, and I'll cover our launch time lines. As you can see here, we plan to have significant global expansion through the end of this decade and into the next. We're targeting launches in over 20 countries by the middle of the decade, which accounts for 55% of the eligible at-risk population. As you've heard, we've already received approvals in Indonesia, Brazil and the EU, and we have ongoing reviews in several other countries, including the U.S. We'll start to initiate launches in endemic countries, where approved, starting in Q1 FY '23. On Slide 28, today, we're excited to share that our -- that we are updating our peak sales estimate to $1.6 billion to $2 billion from our original estimate of $700 million to $1.6 billion. What gives us confidence in this peak estimate is, first, we have 4.5-year data, as you heard from Derek, which demonstrated a durable reduction in hospitalizations and importantly didn't show any important safety signals. Of note, we didn't see any signs of disease enhancement. Second, we have early positive momentum and feedback from regulators so far, including the CHMP [ M4all ] all opinion, recognizing QDENGA's strong clinical profile. And finally, where approved, QDENGA has received a broad label regardless of serostatus. Based on these factors, we've decided to expand our manufacturing capacity with an aim of delivering 100 million doses annually. We believe this positions QDENGA to deliver steady revenue growth through the end of the decade and durable sales beyond that. To close out the commercial section on Slide 29, in the near term, our goal is to drive early adoption. We have initial launches in key endemic and travel markets. In endemic markets, we'll establish rapid access through the private market segment and through local partnerships while we start to negotiate for national immunization programs. This will all be underpinned by our tiered pricing approach to ensure affordability for each country. In the midterm, we'll start to see acceleration of volume growth through the initiation of national immunization programs. As I mentioned earlier, the time to initiation of national immunization programs will vary from country to country. But as they start to come online, it will significantly drive up the volume, which will allow for us for economies of scale while enabling us to reduce SG&A spend and increase overall profitability. When you look long term, we expect to have durable sales beyond peak. We'll continue to expand globally into the next decade. Implementation of national immunization programs will ensure that new cohorts will continue to be vaccinated. And lastly, unlike traditional innovative pharmaceuticals, vaccines face more limited generic threats due to high barriers to entry, including in this space with WHO guidance specifying the need for at least 3 to 5 years of longitudinal data. To close, on Slide 30, there's an urgent need for a safe and effective dengue vaccine. There's a significant growing global burden of dengue, with over 3.9 billion people at risk and the prevalence continuing to grow every year. Not only does dengue pose an important public health risk, it also carries significant economic burden when endemic countries have outbreaks. You've seen QDENGA's differentiated clinical profile demonstrating safety and efficacy against all serotypes and regardless of previous exposure, and we saw durable results out to 4.5 years with no important safety risks identified. The high unmet need, QDENGA's strong clinical profile, our manufacturing capacity and global commercial capabilities provide us with the confidence that QDENGA will deliver steady revenue growth through the end of the decade, with peak sales of USD 1.6 billion to USD 2 billion and sustained durable revenue beyond the peak. Thank you for joining, and now we'll hand it over to Obi and Elizabeth to moderate the Q&A.

Thank you, Ramona. [Operator Instructions] First, our first question comes from Ms. Stacy Ku with TD Cowen.

Yes, Stacy Ku from TD Cowen. So the first question is for Dr. Ooi. I apologize about the pronunciation. So just understanding the level of dengue activity, it's going to be very important to understand long-term safety. What length of time in the real world are you looking for to gain conviction in the QDENGA safety profile as the drug launches? So that's the first question. I can wait or ask all my questions at once.

Yes, go ahead.

I'll let you go first.

Thank you. Thanks for the question, Stacy. That's a really good one. I think both Derek and Ramona have indicated that for the clinical trial, they have extended beyond what was required initially, which was 1 year after completion of vaccination to now having a 5-year follow-up data. And so from epidemiological studies in Thailand and in Nicaragua, we know that the risk maximizes at about 2.5 to 3 years. So we've gone beyond that time. So I think we are at least quite confident now that the period in which we should have seen severe dengue manifesting itself, it hadn't happened with QDENGA. I think moving forward, of course, the uncertainty is that what happens beyond 5 years, when do you need to boost if you do need to boost, I think those are certainly aspects that can be done in post-marketing studies. So I don't think we need that data to know that we can apply this vaccine and apply it effectively.

Okay. That's helpful. And then we have 2 more questions. The first is going to be potentially for Ramona. As we think about your long-term projections, can you just discuss the competitive landscape versus Merck's dengue vaccine that's being developed in collaboration with Instituto Butantan at hand? We understand that you're a few years ahead, that they're still in Phase II. So how big is this head start? And how should we be thinking about potential differentiation between QDENGA for expected efficacy or potentially a number of shots? And then last question we have is just about kind of the surveillance you have, 4.5 years of active surveillance. So can you talk about what remaining surveillance programs are in place for the launch and maybe the importance of tracking transmission?

Yes. Absolutely, Stacy. I'll give you a short answer, but actually ask Derek to expand a little bit on the kind of competitive environment as well as our post-marketing studies that we're doing. I will say I believe Takeda has set a bar for what regulators will expect for a vaccine in dengue. Given what we know about the disease, given the complexity of treating dengue, given the data that we generated and the time that we've watched this, we believe we set a high bar for any other vaccine to follow. And Derek, did you want to comment on the specific one with Merck-Butantan, if you can, and then the -- some of the post-marketing work, as Stacy mentioned, that we will continue to do.

Yes. Thanks, Ramona. And thanks, Stacy, for the question. So maybe I can start with what we have with QDENGA. So we've assessed this vaccine in 8 different countries across 4.5 years. And we've published our data, very granular data in peer-reviewed journals at the 1-year point, 18 months, 2 years, 3 years and 4.5 years now is soon to come out. So it's very hard to comment on what's happening with Butantan. There's no peer-reviewed data from their study. So we're not really in a position to comment on it. I can say that one of the challenges of dengue development is getting exposure to multiple serotypes. And one of the limitations of studying a vaccine in a single country is that you're dependent on the epidemiology in that country. That was the reason we went to 8 different countries across Latin America, Central America and Asia in our program. So it's a case of watching carefully what Butantan are doing and Merck. But at the moment, they have a long way to go. In terms of what we are planning from an ongoing data generation, the pivotal efficacy study has actually been extended by an additional 2 years. And we're looking at the impact of a booster on safety, immunology and efficacy during that additional 2-year period. We also plan a very large-scale Phase IV study, which will look at post marketing -- in a post-marketing setting at effectiveness. So sort of real-world impact on dengue, focusing on hospitalizations and also conducted in areas that have good distribution of some of the serotypes that we saw less of in our study. So we definitely need to continue to monitor safety and effectiveness longer term.

Thank you for your question. Our next question comes from Mr. Hidemaru Yamaguchi with Citigroup Securities.

This is Yamaguchi from Citigroup, based in Tokyo. The first question is for Dr. Ooi about the -- quickly 2 things. First of all, not Takeda, but in the past, there was one dengue vaccine which created the [ AD ] issues and there -- especially some issues in the Philippines, I heard. Do you think in the medical community, there is still the strong memory of what happened on the previous one in a sense that people tend to be relatively conservative to accept the new one? Or because of the data already shown, the good results in the medium term, you don't need to worry about any more. How do you think about from a medical community standpoint?

Thank you. That's a really great question. I think the data that Takeda has on QDENGA, it provides a lot of confidence because you've observed over that period where severe dengue should have manifested itself if that was going to be a risk. But you're absolutely right that the medical community will always have this scar that they bear, especially in those countries that implemented the vaccination with Dengvaxia before knowing about the risk. And I think that's why -- what Takeda has planned, what Ramona outlined, is really important that the outreach and education that needs to go along with the vaccine being accessible has to go hand in hand. And I think there are a lot of partners to around the world that are also trying to highlight the need that, actually, we have solutions now that we can use to prevent dengue. We don't have to wait for the perfect vaccine, but what we have is actually good enough for us to make a big impact to both lives as well as society.

Great. And also quickly on the serotype questions. I understand well that the serotype 2 is more important because of the severity of the diseases. But I understand Takeda -- on a relative sense because the number of the patients are small, I guess the serotype 4 was not really efficacious compared to other serotypes. From a medical -- from a professional standpoint, do you care about this one or it really doesn't matter?

I think if you look at the global data, serotype 4 -- of the 4 viruses, serotype 4 is probably the weakest of the 4 dengue viruses. Most of the infections are mild, very mild compared to the other 3. And of the 4 dengue viruses, the hardest to stop is actually dengue-2. Now we don't fully understand all the biology, but it looks like that's the evidence from both studying cases, looking at the data from Dengvaxia and including the data from Butantan. Dengue-2 is probably the hardest to stop, and I think that Takeda's data is really exciting in the sense that that's the one that it works best.

Great. So quickly, 1 or 2 more. Regarding CMO, you talk about you are going to use a CMO to create 100 million doses. Can you give me the time line? And also, how many of those 100 million you're going to create? I mean you're going to manufacture by yourself, so how much you use the contractors and how much you're going to do by yourself?

Yes. Let me just give a very high level. We want to make sure our supply chain is as derisked as possible. So we do want to create some redundancy in our supply chain. We -- it will be a combination of CMOs, our plant in Singen, and then we're looking for partnerships in other countries such as India. But Gary, could you comment a little bit about how we see that staging out across our supply chain?

Yes. Thanks for the question. When we think about our manufacturing capacity and supply strategy, there are a few important things to point out. So first, the launch supply is essentially established through our parent CMO, and we have been working with a CMO in Germany for the last few years that has ensured that we have sufficient capacity to meet the initial launch demands. In the near term, we will be bringing our in-house end-to-end manufacturing facility online. This is the facility that Ramona mentioned in Singen, Germany. And then in the mid- to long term, we'll be considering bringing online CMO partnerships in a number of countries to expand capacity. And for example, we're currently working to establish a manufacturing partner CMO in India. So this will play out sequentially. In the end, the majority of the supply will still come from the Takeda manufacturing facility, but we will have some overlap dual sourcing to ensure that we can maintain the supply continuity over time.

So sorry, just a very quick final question. You talk about a pricing strategy, which is very clear and understandable. Can you give me the guidance? You're talking about, I think, $40. Sort of I think Indonesia is more of a private market. If it's getting to the public market, then you're speaking the price much, much lower. It's not really. But can you give me a difference between the private market and the public market? Public market, meaning you're going to work with the government for the national program, so to say.

Yes. So absolutely right. In general, we will start with the private endemic markets, and then we will start immediately negotiating for public, but that will take a little bit longer. And in general, as you'll see, over time, as our volume grows and grows and grows, in some of these very large national programs, the cost will come down from what it was in the private market. I think the -- it's all very nicely tied together with what Gary mentioned. So as our capacity grows, our cost of goods comes down as well, and so it's kind of a nice scalable project that cause us to continue to build. Renata, did you want to comment on some of the early thoughts around Indonesia launch? And I know that you've already talked to some stakeholders around our private price and the feedback you've gotten there.

Thank you so much, Ramona. Absolutely. So we are very excited to have our true first launch across GEM. Indonesia expected to launch in Q1 2023. And in Brazil, we are expecting to launch in Q2 2023. The initial feedback from medical society, doctors and stakeholders are extremely positive, specifically in Indonesia, where we already have our price disclosure. So we understand that with this price strategy, starting with private, we are going to be able to [ differentiate ] from other innovative vaccines launched in the past, reach the middle-class population in Indonesia. So we received a positive feedback and we have a deep understanding about the potential of this market in Indonesia. In Brazil, we got a recent marketing authorization approval in the beginning of the month. It was an amazing acceptance across the society, Minister of Health, stakeholders and consumer in Brazil. We have a massive media coverage. To give you some numbers, more than 120 million people were impacted with the message of pending a launch in Brazil. So we understand that there is a huge unmet need. We have vaccine with a very strong profile in terms of efficacy and safety and really going to be addressing a major public health in the high populated endemic countries across GEM. Thank you.

Yamaguchi-san, thank you very much. Our next question comes from Ms. Naoko Saito with JPMorgan Securities. Saito-san, can you hear us? Okay. We might have some technical difficulties with Saito-san's line. We'll come back to Ms. Saito. Next, we will move on to...

[Interpreted] JPMorgan, Wakao. I have 2 questions. One is you had the commercial outlook for short to mid- to long term, and it was very clear in quantity manner. I want to -- peak sales is around 2032 to achieve USD 1.6 billion to USD 2 billion. Is that right understanding? And regarding the peak sales and the penetration into the market, can you show numbers 2025 or 2028 peak? And what's the percentage of penetration that you have in the market. Can you give that kind of information?

So what I can tell you is that you're right about the peak sales. It will be around the end of the decade. It's difficult to predict the exact year because it depends on how quickly some of the immunization programs move forward, but that's roughly in the right ballpark. Between now and the end of the decade, as I've mentioned, so by 2025, we expect to have launched in 20 countries, and that gets us to about 55% of the endemic population, and then we will continue to grow past that. What you can expect from a ramp, so the way this is launching, we're doing multiple things at the same time. One is we're launching into continuous new markets over time and over the coming years. The second is we're launching -- we're penetrating into those markets through the private and then regional public and then the national public immunization systems, and that's all happening in tandem. With all of that together, we expect a fairly steady ramp between now and the end of the decade. So it should be fairly steady growth between now and the end of the decade, given all of these things happening in tandem.

[Interpreted] So that means in the beginning, short term, it's kind of slow. But by '24 or '25 and beyond, you will accelerate significantly. Is that right?

Well, I would say it's more steady than slow in acceleration. So volume, yes. there will be less volume at the beginning. And then volume will accelerate towards the end of the decade, and that's when all of our extra capacity comes on board. However, revenue, you can expect a more steady ramp because the early revenue is coming from the private market, which is going to have a higher price and from the travel markets, which will have a higher price as well .

[Interpreted] Last question, my second question, gross margin of QDENGA. Can you give some ideas with your capacity building up and the cost can be lower? You mentioned that the pricing compared to other medicines, it may be lower. And live vaccine, that means the cost is a bit higher. Considering that compared to your in-house products, gross margin would be lower than your products in-house?

So with QDENGA, we expect to be accretive within a few years of launch. So accretive within a few years of launch to Takeda's overall margin, and then the margin of QDENGA will continue to increase as we move forward and the volume grows. And the other benefit of the national immunization programs, as we had mentioned earlier, is you also pull back a little bit towards the end of the decade on sales and marketing expenses. So we expect better yields, lower COGS, less sales and marketing towards the end when we have broader national programs, more volume.

[Interpreted] So at the top margin level, is the margin level comparable to your other products?

We're not -- yes. So we're not disclosing our peak margin right now other than to say that we will be accretive to Takeda within a few years of launch, and the margin will continue to grow after that.

Thank you, Mr. Seiji Wakao from JPMorgan Securities. Our next question will come from Mr. Shinichiro Muraoka from Morgan Stanley MUFG Securities.

[Interpreted] This is Muraoka from Morgan Stanley. I hope you can hear my voice. Yes, we can hear you. Please begin. 100 million doses of capacity, that was mentioned. So going beyond 100 million doses capacity enhancement, is that a possibility? And how likely is that possibility? And if there is a likelihood that you will further enhance the capacity, what will be the specific conditions or what is happening? Can you please maybe give me some idea?

Yes. Thank you, Muraoka-san. So with all of the work we've done and the assessment of how these programs will roll out, we believe 100 million is the right level of capacity to get to in a sustainable way. So we'll continue to produce 100 million. So the national immunization programs tend to work in cohorts. So you'll see groups of the population vaccinated at a time. And then as that goes on, you'll get newer people aging into some of the earlier cohorts. So we believe 100 million doses is actually a good strategy for us to access the global population and keep a sustainable durable revenue beyond the peak as well. We're not planning right now at going beyond 100 million doses.

[Interpreted] I understand. Next question. When you have contracts with national governments, what are the risks? For example, in Japan, a huge amount of COVID-19 vaccines were canceled. The orders were canceled in Japan. And with dengue fever, is there such a risk of a massive cancellation? Or is that not really likely?

I think to answer that, it might help to have perhaps Derek talk a little bit about the vaccine itself because I think knowing about the vaccine and the durability will answer the question about COVID. Derek, do you think that would be the best way to address this?

Yes. I think the situation with COVID was quite specific. That was an ongoing pandemic and a large number of vaccines with different profiles are available. I think the situation that we're looking at here with dengue is it's hard to see any competitor in the near or medium term. So dengue is a massive burden, and we expect that when countries implement public programs that they follow through on those public programs. It's a cost-effective intervention and intervention, which is important at an individual level, at a family level, at a community level and at a health care system level. So I think the risks are quite fundamentally different to COVID, and I don't anticipate canceled orders in the public programs.

Yes. And maybe just to build on that. As a reminder, with COVID, we had continuous variants. And so certainly, with the recent cancellation in Japan, it had to do with the vaccines that address certain variants, and other vaccines didn't address those variants. With dengue, we've got the 4 serotypes. We've got a vaccine that addresses all 4 serotypes. And the outbreaks might have different serotypes circulating at different time, but the vaccine will be the same vaccine that addresses that.

Yes, I think it's interesting to think about another flavivirus vaccine like Japanese encephalitis or yellow fever vaccine. Those -- the viruses that those vaccines prevent are very stable over time. You're going to see strain substitutions or changes in the confirmation of the virus that makes the vaccines less effective. And we expect the same thing with dengue, which is another form of flavivirus.

If I may add to what Ramona and Derek have replied, another major difference between COVID vaccines and this dengue vaccine is that the period of observation during the clinical trial was very, very short for a COVID vaccine. And so there's a great uncertainty as to whether you need boosters, how frequently you need boosters. And that's why countries stockpiled these vaccines without knowing the evidence. I think with QDENGA, we already have 4.5 years' worth of follow-up knowing that within that time that the protection is very well-sustained. So I think that's a major difference between the 2 vaccines, and that would influence how countries stockpile these vaccines.

[Interpreted] That was very clear. And just one last question. And earlier, Ramona, you mentioned that you don't disclose the margin information, but I want some kind of suggestion to help me. So by 2030, let's say, QDENGA operating profit margin and gross profit margin, compared to PDT, would you say it will be higher or lower?

So maybe I'll point out the differences between PDT and vaccines. And when you think about PDT, one of the things we do with plasma is we have a whole BioLife organization that's involved in actually collecting the plasma. Before we even get to the manufacturing, we have an infrastructure that collects the plasma, and we have to pay the donors for the plasma. That whole piece does not exist in vaccines. This is just more of a we manufacture the vaccine and we distribute the vaccine. Gary, I don't know if you want to comment on any kind of comparators -- market comparators with other companies. I don't know if we can, really. But in general, you'd see vaccines are very different from PDT.

I'm not sure I can add very much. I think that as you mentioned earlier, Ramona, we expect the margins to grow during the next decade as the cost of goods is reduced as we increase our manufacturing capacity and build and supply the high-volume public programs. So the margins will become accretive in a few years, continue to grow. I don't know that it's easy to make any comparisons with other vaccines in terms of margins, but I think that's probably what we can say at this point.

Gary, I can maybe add that one of the reasons that we will get increased capacity over time is the fact that we have additional facilities, but we're also improving the process. So there is inherent efficiencies in how we're making the vaccine over time as well, which also contributes to reduced cost of goods.

Thank you, Muraoka-san. [Operator Instructions] Our next question comes from [ Ms. Mickey Sogi ] from Sanford Bernstein.

I have a question regarding the commercial aspect of this program. So first of all, I'd like to understand the breakdown of peak sales that Ramona mentioned. So we believe that this dengue vaccine, the revenue streams are coming from the -- a few different revenue of the channels. So I'd like to understand the kind of -- what kind of breakdown are you guys are currently assuming? And also the -- and also when you talk about the public program. And is it that -- can you just give me a sense of what kind of public program are you guys envisioning? Such as, for example, is it kind of national, the program that the government can provide, the reimbursement, the full reimbursement, but still the -- actually, taking vaccination is actually up to the people's decision? Or is it more like a mandate type of the program?

Your first question, and then pass it on to either Gary or Derek, if you'd like to answer the second piece of it. So it's difficult to give a breakdown of all the different segments because they're going to be evolving in different markets at different times and over the course of the next decade. However, I will tell you that in general, about 15% to 20% of the revenue will be private, and the rest will be public. So that's kind of the breakdown that we would expect in a more steady state over time. Gary or Derek, did you want to comment on the other part of the question?

Yes. Maybe I'll start. So we expect that the -- when the vaccines are introduced into national immunization programs, this will essentially follow the model that is used typically to introduce new vaccines for programs that have a considerable public health impact. And the national immunization programs typically work through cohort-based vaccinations. So for example, a given country would likely recommend the vaccine to be given to all individuals, children or adults at a -- in a certain age range. Often, these programs have what we call catch-up vaccination. So at the beginning of the national immunization program, there's a broader range of ages that are included to try to get a certain level of population immunity. And then in the steady state, a more stable cohort is usually selected by the governments. These programs tend not to be mandated programs or programs in which the government procures vaccine and it's offered to individuals in the recommended age range and then it's typically up to the individuals to elect to be vaccinated.

And if I could just add, I do want to correct one thing, 15% to 20% roughly of the market with travel. I think I said private. But we expect, overall, about 15% to 20% of our revenue to come from the travel market versus the endemic markets. Sorry.

With that, I would like to bring today's call to a close. I would like to thank all of the panelists here and attendees for joining us today. I would also like to add a reminder that this Saturday, March 18, 7 p.m. Eastern Time, Sunday, March 19, 8 a.m. Japan time, we will have our TAK-279 investor call on our Phase IIb psoriasis data, and we look forward to seeing you then. Again, with this, we will close. Thank you, everybody, for your participation. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]