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

Thank you for joining us today. We are excited to share with you our impressive TAK-861 Phase II data that was presented earlier today at the Sleep Congress. This is [ Nobi ] from Investor Relations. I'd like to take a moment to remind everyone how to set their interpretation settings. You'll see a globe icon at the bottom of your screen. If you'd like to listen to the call in English, choose English. If you'd like to listen in Japanese, please choose Japanese. If you'd like to listen to the original language in either language, please choose off. Before starting, I'd like to remind everyone that we will 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 our actual results to differ materially are discussed in our most recent Form 20-F and in our other SEC filings. Please also refer to the important notice on Page 2 of the presentation. With that said, I'd like to hand it over to Andy Plump, President of R&D. Please go ahead.

Thank you very much, Nobi. I'm Andy Plump, the head of R&D here at Takeda. And I'm joined by Elena Koundourakis, who's the Head of our Orexin franchise; by Christian von Hehn, who is the Head of Development for our Orexin franchise; and by Erika Gill, who's the Head of Neuroscience Global Product and Launch Strategy. We are very excited to be here with you today. As we discussed a few weeks ago at our fourth quarter earnings report, we have very strong pipeline momentum right now. And as we move into fiscal year '24, we will have 6 new molecular entities in our late-stage portfolio. Several of these already have ongoing Phase III programs and several have multiple indications. One of these 6 is our oral orexin 2 receptor agonist, TAK-861, which we've previously shared with you, will begin Phase III this year. We are in Houston right now at the Sleep 2024 Conference. And as Nobi mentioned, earlier today, our principal investigator, [ Yves Duvalier ], presented results from our type 1 narcolepsy Phase IIb trial for TAK-861, and we're really looking forward to sharing those trial results along with some additional context with you today. And with that, Elena, I will hand it over to you.

Thank you, Andy, and hello to everyone on today's call. It is a great pleasure to welcome you to discuss TAK-861 Phase IIb data presented this morning as an oral session. First, let's remind ourselves how we got here. Takeda has been working in the orexin field for quite some time, looking to address the underlying pathophysiology in narcolepsy, which is caused by the profound loss of orexin neurons in the brain leading to orexin deficiency. Following the initial results with short-term therapy, TAK-925 IV in 2019, we were able to demonstrate the potential for an oral orexin receptor 2 agonist hereafter referred to as an orexin agonist to meaningfully improve sustained wakefulness and cataplexy with TAK-994 as published in New England Journal of Medicine in 2023. Unfortunately, we had to discontinue development due to some cases of severe liver toxicity. However, our deep understanding from this large data set and experiences in the orexin field led to the accelerated efforts to develop TAK-861. We believe, based on the data we have today, that TAK-861 has the potential to be the first treatment for patients with narcolepsy type 1, addressing the entire spectrum of disease symptoms. In addition to our efforts in NT1, we continue to address the needs in patients with sleep wake disorders with normal orexin levels such as narcolepsy type 2, otherwise referred to as NT2, and idiopathic hypersomnia, IH. From TAK-925 data, we know that it likely requires higher exposures of an orexin agonist to provide potent and sustained pharmacodynamic effects. Therefore, we designed new molecules like TAK-360 with unique chemistry and differentiated profiles initially focusing on the development in indications with normal orexin levels like NT2 and IH, leveraging our deep learnings from prior compounds. We're accelerating the development of TAK-360 now in Phase I. Finally, we are continuing our efforts in the orexin field with the discovery and development of additional assets and tailored profiles aiming to explore additional indications pertinent to orexin biology. Moving to Slide 5 and coming back to NT1. There is a substantial unmet need for patients living with severe debilitating disease. As you can see in the left panel of the slide, we know from published data and our own real-world insights that most patients experienced residual symptoms with the currently available therapies. The lack of adequate disease control has a substantial impact on school, work and social life. Moreover, the disease requires polypharmacy for many of these patients as it does not address the underlying pathophysiology of the disease. Finally, the cost of the disease and the societal impact are not adequately addressed today. With all of that in mind, patients with NT1 need more as their report having inadequate wakefulness control, many comorbidities, and they often cannot function normally, which meaningfully affects their quality of life. With TAK-861, we hope to deliver a treatment that helps patients to restore function to rediscover life. Moving on to Slide 6. From data we know that orexin agonists have the potential to address the unmet needs of NT1, which is mainly characterized by excessive daytime sleepiness, EDS, cataplexy, disrupted nighttime sleep, hallucination and sleep paralysis. We refer to these symptoms as dependent of NT1. Today's oral presentations and posters tomorrow demonstrate TAK-861 potential to address the entire [ disease ] symptoms in NT1. To date, no treatment has been able to address the full spectrum of the disease symptoms because existing therapies are not addressing the underlying cause of the disease. Based on the discovery of Yanagisawa and Mignot, who were recently awarded the Breakthrough Prize in Life Sciences, we know that the cause of NT1 is the profound loss of orexin neurons in the brain. We also know that while the neurons are lost, the orexin receptors remain intact, providing a unique opportunity for a pharmacological intervention. By stimulating the receptors with a selective orexin agonist, we have the ability to modulate downstream neurotransmitter activity and restore wakefulness. This unique pharmacological action can lead to restoration, patient function and improved quality of life, as we have shown today with TAK-861 data. In Slide 7, we would like to point out the complexity of the development of an orexin agonist to fulfill its great potential. Unlike our previous efforts with TAK-994, with TAK-861, we were able to now optimize the required profile for an oral orexin agonist to deliver on functional normalization and to restore the quality of life for patients with NT1, while minimizing the safety and tolerability events. Using highly sensitive methods developed by Takeda, we have been able to measure the natural fluctuation of orexin levels in cerebrospinal fluid in primates. We believe this primate model translates very well into humans. Orexin levels gradually increased during the day and fall overnight, about 1/3 to the daily levels. However they are not going to zero, suggesting that some level of Orexin tone is essential for normal function. With TAK-861 twice-daily, we think we were able to provide optimal coverage to ensure sustained wakefulness in the day but allow for levels to come back to baseline orexin levels at night to minimize on-target pharmacological side effects like insomnia. With its improved twice-daily regimen, we believe TAK-861 has achieved the optimal balance between potency, pharmacokinetics and safety, establishing the potential best-in-class profile. I will now turn over to Dr. von Hehn to walk you through today's data presentation. I will come back later to discuss the next steps for the Orexin franchise. Christian, over to you.

Thank you very much, Elena, and thank you very much for coming in and your interest in this exciting program. My name is Christian von Hehn, and I lead the clinical development of our orexin franchise. I'm looking forward to walking you through our latest Orexin clinical data, starting on Slide 9. Based on our extensive experience with other orexin receptor agonists and the TAK-861 Phase I program, this Phase IIb study was designed to assess the efficacy and safety of multiple doses and dosing regimens. Over an 8-week duration, we compared placebo to 4 active dose arms, where 3 were dosed twice daily and 1 was dosed once daily. This study included patients with confirmed narcolepsy type 1 diagnosis, who, in addition, were HLA genotype and had confirmed low orexin levels. Before enrolling, any stimulants and anti-cataplexy medication had to be stopped. After the 8-week period, patients had the option to continue TAK-861 treatment in the dose-blinded extension study. It was impressive to see that 95% of the patients who completed the Phase IIb study chose to roll over. And the majority of patients remain in the long-term extension study, with our first patients passing 1 year of treatment, and we're looking forward to presenting these data at future congress. On Slide 10, I would like to come back to our Phase II study and our key end points. To remind you, the unmet need in narcolepsy type 1 cannot be defined by a single symptom. There are multiple different symptoms during the day and nights that narcolepsy type 1 patients are living with. This study investigated the effect of TAK-861 on multiple symptoms using several different endpoints. We will start here with our primary endpoint, changes on the maintenance of wakefulness test or MWT as an assessment of objective wakefulness. And we will also show you our secondary endpoints, looking at one, the impact of TAK-861 on the Epworth Sleepiness Scale as a subject of measure of sleepiness; and two, changes on the weekly cataplexy rates. Of course, we also continuously collected safety and tolerability data to fully understand the benefit risk profile of TAK-861. In addition to the data we are showing you here, we encourage you to also to look at our very consistent exploratory endpoints here at Sleep as well as our future congresses. Slide 11 is showing that the study enrolled 112 narcolepsy type 1 patients evenly across the 5 arms, and only 3 patients discontinued the study, where 1 patient didn't meet the original inclusion criteria, the second tested positive for amphetamines during the study, and the third became pregnant during the study. No patient stopped prematurely due to adverse events or lack of efficacy. As mentioned previously, this apparent treatment satisfaction was also supported by the very high rollover rate into our long-term extension study. With this start, we had a very good foundation to assess the efficacy and safety profile of TAK-861. Let me start to show you our efficacy data with the MWT on Slide 12. The maintenance of wakefulness test lasts up to 40 minutes and is an objective measure of how long the subject can stay awake under quiet sleep-inducing conditions. It is not frequently used in clinical practice, but it is an important objective endpoint, commonly used for regulatory purposes. On the MWT, TAK-861 showed highly significant and clinically meaningful increases on sleep latency on all tested doses. The graph shows the mean sleep onset latency over the course of the study at baseline, at week 4 and at week 8. At baseline, participants fell asleep in 3 to 6 minutes, which is in line with past reports for our NT1 patients. At week 4 and 8, all those arms approached or were within the normative range of what has been described by healthy individuals, whereas placebo patients remained in the range typical for untreated narcolepsy type 1 patients, and on average, are falling asleep within 5 minutes or less. We would like to highlight that the treatment effects were maintained consistently with no loss of effect over time. In summary, the MWT is an important end point, and we see patients reverting back to normal levels of wakefulness sustained over time. Turning next to Slide 13 and to an endpoint more frequently used in clinical practice, the Epworth Sleepiness Scale or ESS. The ESS is a patient-reported symptom questionnaire asking about the likelihood of falling asleep or nodding off in certain situations. For 8 different settings like, for example, watching TV or sitting or reading, patients are recording a score from 0 to 3, where higher scores indicate a higher likelihood to fall asleep. The total score for healthy individuals for the scale is between 0 and 10. The baseline values show again balanced between the treatment arms and are aligned with previously reported scores for narcolepsy type 1 patients. Very consistent with our MWT data, the ESS showed highly significant and clinically meaningful decreases in sleepiness at all time points and on all tested doses. Over the course of the study, the average ESS score remained stable below a score of 10. And in the 2-milligram twice daily arm, up to 95% of patients reached a normative range. In addition to excessive daytime sleepiness, narcolepsy type 1 patients can experience a sudden involuntary loss of muscle tone called cataplexy. Study participants recorded the cataplexy episodes daily in a diary, which then was used to calculate the weekly cataplexy rates. On Slide 14, let me draw your attention first to the right. In today's presentation by [ Dr. Dover ], you have seen the actual cataplexy values for each arm, where especially twice daily dosing reduced cataplexy events close to a median weekly rate of 0. In addition, we also wanted to share how our primary analysis was conducted, shown in the table and [ photos ] plot on the left and how placebo -- how the placebo response contributed to their primary analysis. Here we have shown you the weekly cataplexy rate incidence rate ratio or IIR -- I'm sorry, IRR, relative to placebo at week 8. This rate ratio is the cataplexy incidence rate for the treatment arms divided by the placebo cataplexy incidence rate. So a lower IRR indicates a great improvement from placebo. As you can see, the twice daily arms had the strongest reduction in cataplexy with all 3 twice study dosing regimens showing statistically significant improvement compared to placebo. We have shown you what we think is very impressive efficacy data. I would like to turn now to the risk profile of TAK-861 on Slide 15. The collective reports of adverse events throughout the study are used to determine the safety and tolerability profile. Our 8-week Phase IIb study showed that TAK-861 was generally safe and well tolerated. The table provides a more detailed view for each treatment arm, highlighting the adverse event severity as well as the most common adverse events. Overall, more adverse events were reported by the participants treated with TAK-861. However, they were mostly expected on target events such as reports of insomnia and urinary events. Most adverse events were mild or moderate in severity. And importantly, throughout the trial, no participant discontinued due to adverse events. Furthermore, most AEs occurred in the beginning of the treatment and were transient and self-limiting resolving within 1 to 2 weeks. No safety concerns were noted across all laboratory parameters, including liver function tests. We would like to highlight here that we have had no signs of drug-induced liver injury or visual disturbances in this 8-week study or in our long-term extension study with the first patients, as mentioned previously, passing 1 year of TAK-861 treatment. Let us briefly look a little bit closer at the time course of insomnia events on Slide 16. We are illustrating here the number of patients over the duration of insomnia events for each patient. For most patients, these events started at the very beginning of the treatment that were mild to moderate in severity and were self-limiting lasting 5 days or less. For patients reporting insomnia for longer than 5 days, it is important to note here that none of them led to study discontinuation. Before we conclude the data presentation of our TAK-861 Phase IIb study in NT1, we would like to emphasize again that symptoms and disease burden of narcolepsy go beyond excessive daytime sleepiness and cataplexy. Slide 17 shows that we assessed multiple domains to really understand the impact TAK-861 can have on the full spectrum of narcolepsy type 1 symptoms and patients' lives. We have started today and will continue tomorrow morning and Wednesday morning during the poster sessions to show additional data that show the improvement of functioning and quality of life, as well as overall treatment satisfaction. In addition to the data presented here, induced sleep, we're looking forward to showing you additional measures and analyses, including data from our extension study at future congresses. Let me conclude the data presentation on Slide 18. Looking at the totality of our data, we are very encouraged with the consistent results of TAK-861 addressing different narcolepsy symptoms. TAK-861 demonstrated statistically significant and clinically meaningful improvements across multiple objectives and subject endpoints versus placebo over an 8-week treatment period. The majority of patients are within normal ranges for ESS and MWT, and the cataplexy rate is approaching 0 in most dose groups. The efficacy profile is consistent across multiple end points and were sustained over the treatment period of 8 weeks and beyond. TAK-861 was generally safe and well tolerated. No treatment-related serious adverse events and no discontinuations due to adverse events were observed. No cases of hepatotoxicity or visual disturbances were reported in the study or *** in the ongoing long-term extension study. In summary, TAK-861 has an optimized profile that balances efficacy and on-target/off-target adverse events. Based on the results, TAK-861 has the potential to provide transformative efficacy in addressing the overall disease burden in people living with narcolepsy type 1. We are committed to initiate our Phase III program rapidly in the first half of fiscal year 2024. With that, I'm turning back to Elena for closing remarks.

Thank you, Christian. To close today's presentation, I would like to talk about the next steps for our exciting journey in the development of the orexin franchise. Following the very accelerated Phase IIb development of TAK-861 and in consultation with health authorities, we will start Phase III shortly. We believe the Phase III trials will enroll quickly and hope to file in fiscal year '26-'27. As part of our regulatory package, we will include the safety data from our long-term extension study, which will be ongoing until approval. We're making great progress for our next-generation differentiated orexin agonist TAK-360, that is already dosing healthy volunteers with a goal to transition to start Phase II later this fiscal year. We are initially targeting sleep wake disorders with normal orexin levels, such as NT2 and IH that require much higher exposures than orexin-deficient population like narcolepsy type 1. Finally, we're continuing the discovery and development of tailored or accent profiles that have the potential to address diseases of high unmet need where orexin plays a key role. As we follow the science, we are leveraging both digital technologies to help improving treatment diagnosis and look to sustain Takeda's leadership in the orexin field for the years to come. With that, I would like to turn over to Nobi to open the Q&A. Thank you.

[Operator Instructions] We will now go to the first caller. Yamaguchi-san from Citi.

Congratulations for the great data. Quick 3 questions. First question is that how do you think about the dosage for the Phase III? It looks like a 0.5x twice daily and 2-milligram twice daily, both looks good. But how do you think about your Phase III dosage among those Phase II data? The second question is that it looks like there are insomnia cases you mentioned. In the future, are you going to -- just to wait for the people to go up -- insomnia to go away? Or do you think about using medications to treat insomnia if it's happening just the -- in the practical way in the future? And thirdly, on the competitive landscape, there are other kind of orexin companies -- orexin agonist companies which is kind of showing a better MWT. But how do you think about the competitive landscape? I think the totality might be important, but I think MWT itself sometimes there are higher MWT data has been important to date.

Maybe, Christian, we'll start with you. And just to, again, describe the nature of the insomnia events that we're seeing in the Phase IIb study. So there's a clear understanding of the severity of the finding. And then, Elena, if you could talk a bit about the Phase III program, the competitive landscape as well.

Thank you, Andy, and thank you very much for the question. So for the insomnia, yes, I would like to highlight again that there's some events that we observed here. The vast majority happened in the first 5 days, so very early in the treatment. They were mild to moderate, and none of them required any medical intervention. I think it's also important to point out here that the vast majority of patients enrolled and chose to enroll in the long-term treatment extension. There was an option that patient could decline. It was not mandatory, obviously, but 95% chose to do it because of the efficacy and safety profile. So we feel really that with this optimized efficacy and safety profile, we really have a very good balance for our long-term treatment that will keep patients on treatment.

So to take your question, Yamaguchi-san, on the dosing for Phase III, first of all, as I mentioned, we are in discussion with regulators at the moment on the Phase III design. So it's a little bit premature to comment the exact dosing regimen for Phase III. I would like though to highlight a few points about what you review today and maybe emphasize these data results to put them into the context with our own experiences with orexin and future compounds. First of all, when we try to balance the optimal profile, we look for several aspects in efficacy, objectives, objective measurements of wakefulness, cataplexy, safety, tolerability, and as we review today, a number of subjective measurements, exploratory endpoints that tailor the quality of life for patients, including the 5 symptoms of narcolepsy, the totality of the symptoms. So we learned a lot from TAK-994, and we know that this is difficult to provide the optimal profile. So we are very encouraged by the data that we review today, and we will continue reviewing its lead as well as future conferences that we have really many ways to optimize the profile and many doses in our disposal. So I'm very confident that we're going to pick the right dose. Well, it will be premature to comment on what would be the final dose in Phase III. I will say that based on the profile we were looking was -- we think that the BID dosing that provides, if you like, the coverage throughout the day and the night has done the best in our Phase III trial. So we are very confident that we have a very good profile to bring forward to Phase III and look forward to share the details. With regards to the competition, we are obviously very encouraged to see the class advancing. Many options for patients with sleep-wake disorders, that is definitely very promising. However, for many compounds, these are early days. I think day 1 data where -- what has been reported by competitors, unlike our large data set where we have been able to demonstrate MWT over 8 weeks of treatment and we continue monitoring efficacy in long-term study, which we will report in future conference. So we're quite encouraged about the fact that our efficacy reaches normal levels, both on MWT and ESS, and most importantly, that the effect consists up to 8 weeks and beyond. So we believe we have the most robust profile at the moment with the potential not only to be the first treatment for narcolepsy but also the best-in-class. Thank you for your question.

Our next question comes from Michael Nedelcovych of Cowen.

I have a couple. My first is, do you have a hypothesis as to why insomnia apparently is transient, whereas efficacy is persistent? One might assume that both are driven by on-target mechanisms, but maybe that's a bad assumption. So I'm curious your hypothesis there. And then I know that you have solid efficacy on cataplexy. I'm curious, do you have any data suggesting that cataplexy specifically triggered by emotionality is also affected by TAK-861? And then finally, one more question on the Phase III design. Do you have an established primary endpoint in buy-in from the FDA? Or is that more of an ongoing discussion for a pivotal trial?

Thanks, Michael. Christian, why don't you take the first 2 questions on speculating why some of the tolerability issues seem to be transient whereas the efficacy is persistent. And then the second one was around cataplexy. And then, Elena, if you could take the question on the Phase III discussions with regulators.

Thank you very much. Yes. So with insomnia, as I mentioned before, we have seen events in the very beginning of the trial, and the vast majority stopped after type data. So why exactly we see this pattern is something that I can speculate, but obviously, we don't really have any data. But I would like you to keep in mind that these patients have not seen any orexin receptor 2 stimulations for -- often for decades. So with that in mind, it is -- it could be a receptor adjustment. And then afterwards, it goes into normalization. And whatever I mean is that throughout the trial, we also looked at night time symptoms, something that we have not shared yet, but that we're looking at very, very carefully and have multiple endpoints in the trial where we are looking forward to publishing it in future days. So for example, at the NSSCT publication today, the presentation today for the Narcolepsy severity scale, there were questions about disturbed night time sleep and they are who contributed to the total score. And as you heard today from [ Dr. Barato ], that results are extremely encouraging. So far, they have not seen results like this with any other agent. And with that, I think we are very encouraged to treat the narcolepsy spectrum as a whole, and I'm looking forward again to share these results in the future. I just did for Cataplexy, the question, if I understood correctly, was whether or not that they Cataplexy events also were triggered by emotional events. So the patients we actually write that patients narcolepsy suffer from cataplexy that are often triggered by emotional events. In our study, patients have to rush out all medications prior. When they started the medication, the TAK-861 treatment, there may have been a short adjustment period. However, what we heard from treatment satisfaction questionnaire, it's again data that we will present tomorrow. We have throughout heard that they are highly satisfied with the treatment, how much it changes their lives, how much they can participate in society. It's something they could not before because the symptom exactly, as you said, like, for example, that they needed to control their emotions that they were sustaining from societal events. So again, I encourage you to look at the posters tomorrow and the future congresses, but it's very, very encouraging from our end.

So before you jump in, maybe, Christian, because I don't think you actually presented any data on the narcolepsy symptom score. Maybe you can just quickly describe what that is and summarize the data that was presented because it's quite meaningful.

Yes. Thank you, Andy. So at today's talk, on slides we did not include, but I think are in the end of the slide deck, there was a presentation about the narcolepsy severity scale, which is today the only scale that assesses the overall narcolepsy symptoms, the whole Cataplexy symptoms, which improves excessive daytime sleepiness, cataplexy, the data that I presented today to you as well. But it also includes questions about nighttime symptoms such as hallucinations, sleep paralysis and generally disrupted nighttime sleep. And the total score of all these five symptoms is then presenting as a total and it was presented today. So even when you parse out something that we have not shown yet and will present a future congresses, the data look encouraging and each symptom seems to contribute to the massive effect that we have seen on the scale. But it's -- again, it's very promising. We're very, very encouraged.

Yes. And with regard to the question on the endpoints for Phase III, just to go back to what Christian presented, we have been really very, very fortunate that we've shown consistent results across all the endpoints, both objective endpoints like the MWT as well as subjective endpoints like ESS, cataplexy, weekly cataplexy rates. And we have included a number of exploratory endpoints like the one that Christian just described that encompasses all the symptoms of NT1, and we have additional quality of life endpoints. So while the MWT is a regulatory accepted endpoint with certain authorities, all of these endpoints, we believe, capture the needs of patients with narcolepsy type 1, and based on the encouraging results of Phase II, we would like to proceed with many of these endpoints in our Phase III trials because our hope is to replicate the profile and provide an optimal treatment that cover all symptoms of NTI. So we plan to bring all of this forward. But again, we are in discussion with regulators. So we're happy to share the design when these discussions are complete. Thank you for your question.

Thank you. The next question comes from Matsubara-san at Nomura Securities.

[Interpreted ] I am Matsubara from Nomura Securities. Cann you hear me okay? Thank you for this opportunity. I would like to ask you how do you compare your services [indiscernible]. NWT baseline 34 minutes is shown by 8 milligram. And I understand that this competitor compound data is limited in numbers. However, looking at their MWT results, what is -- how do you comment on this, please?

Yes. This is a very important question as we see the class evolving. Remember, however, that we have made a lot of experiences with multiple orexin agonists starting with TAK-925, where we have also reported be very similar at day 1 like the [ Alchemis ] data. And as we progress over time with TAK-994, [indiscernible] we believe we see very similar results. However, I would like to remind you that narcolepsy type 1 is a chronic disease. In other words, patients need to be treated over a long period of time. So what we learned with TAK-994 with an orexin agonist that now we see with TAK-861 is that it requires really a sustained efficacy over 8 weeks to hopefully replicate what it would be needed for patients in real life. So we're very encouraged by the data that we have presented today, 8 weeks data with sustained improvements both in the objective measurements of MWT, which brings patients to normalized ranges as reported by Professor [indiscernible] at this morning's session as well as consistent results in the subjective ESS, WCR and additional exploratory endpoints. So the totality of the data suggests that this is a very suitable profile to be used for chronic administration to address the entire spectrum of patients with narcolepsy type 1. Thank you for the question.

Thank you. Next question is from Yamato. Is that you? Or perhaps it's Steve Barker on the line from Jefferies.

This is Steve Barker from Jefferies. I had a question about the dosing regime. Some other candidates being developed there working on once per day. Well, it appears that twice per day see to be a likely candidate for Phase III development. You prefaced the slides on the -- with some data, animal data, which seem to indicate that twice per day might actually provide more flexibility to optimize the dose. Could you perhaps comment on how twice per day might compare to once per day and why one of the other might be preferable?

Yes, Steve, thank you for the question. We have tested obviously also in our TAK-861 Phase II study, both BIP and QT regimen. We've done this on the, if you like, back on the experiences we have had with the class from the 9 and 4 days. We tend to believe that mimicking the natural fluctuation of orexin is the better way to treat the disease. And what I tried to show based on the monkey results, which we believe is applicable to humans, there is this increased sleep pressure throughout the day. And this is where you need a profile like the TAK-861, where basically you optimize the coverage needed throughout the day. But then you don't want this to be too high at the end of the day because you want these patients ideally to go back to sleep. So the levels of TAK-861 fall, if you like, in the later in the evening, and that allows patients to go to sleep. So we achieved this profile with the way we dose the trials with twice daily in the morning. You take the doses in such a way to avoid, if you like, high exposures in the night. We modeled this actually very carefully based on all our experiences. And I think the profile that you show with the clinical data show that we have really an optimal coverage in efficacy across objectives, subjective endpoints and safety and tolerability. So we remain obviously interested to continue exploring PK/PD profiles to optimize the diseases. But for narcolepsy type 1, I think we have a very clear dosing regimen, which we show to work very well, pending, of course, confirmation of these results in upcoming Phase III studies. Thank you.

Thank you. Our next caller is Miki-san from Bernstein.

I have two questions. So first of all, the TAK-861 efficacy does not appear to be dose dependent. So I'd like to understand your hypothesis of why this is the case. And secondly, your positioning of the new molecule TAK-360. So do you -- so we understand this is a very clinically structurally different product from 861. But do you consider it as a superior orexin, the receptor agonist in terms of the balance between the efficacy and the safety? And also if that the case, is it really only for narcolepsy type 2 and IH? Or is it also that you're considering the potential of the narcolepsy type 1 as well? Those are the two questions.

Maybe, Christian, you can take on the question around dose dependency of 861 in the Phase IIb trial. And then, Elena, you could talk a bit about how we look at 360 versus 861.

Thank you very much. So for the dose dependency, I mean, what we've seen here in the data is that the 0.5 twice daily doses did not perform as well as, for example, the 2-milligram twice daily or 2 and 5-milligram twice daily. So they are -- I would say there is a certain dose response. However, particularly for that report and we guage where we see the sustained effect. The higher two twice daily doses are approaching levels that are in the normal range. There is not much more we can improve in patients if they are in a normative range. They're going almost as high as they can. So there is a potential for a certain ceiling effect for the MWT. Similarly, with the ESS, I would make the same argument here where you can see that patients are probably a little over 10, but cannot go lower than the 5. There is a certain effect, again, a ceiling effect, however I can do, where 95% of the patients are approaching normalcy or 81% of patient approaching normalcy. I think in that regard, we are at a very good place where we have achieved that we are normalizing patients for wakefulness, for sleepiness. And again, many other endpoints that we are looking forward to sharing with you. But overall, we're very excited that how well particularly 2 BID doses, so the 3 BIDs or 2 higher doses really performed and are very excited about it.

Miki, with regard to your question about the TAK-360 and the positioning, so we know from -- as we reviewed earlier, we know from our TAK-925 data that four indications like NT2 and IH with normal orexin levels, we require a different profile, really to provide this optimal PK/PD, which is different than what we described TAK-861 with relation to NT1. So therefore, we have really designed, if you like, our next-generation molecules, TAK-360 being the front runner here, to provide that ideal profile. Particularly, we look to understand as to whether an orexin agonist works in NT2 and IH the same way as it does NT1. And we're very, very interested in understanding the sustainability of effect over a longer period of time. And this is -- with that in mind, we designed TAK-360, if you like, this flexibility in terms of chemical structure, PK/PD to be able to optimize the profile. So it is early days. So we just started healthy volunteer studies. We hope to progress into patients trials quickly based on the learnings from past compounds. It is premature to speculate which indications we're going to bring this forward. But obviously, we look to optimize as with every profiling the orexin franchise to find, if you like, the optimal indication with teller profile. And we are happy to report on this exciting compound in R&D meeting, hopefully, later in the year. Thank you.

If I may, maybe, Miki, I can add because I think that there's an undertone to your question of is TAK-360 a better model than TAK-861. And it's not. TAK-861 is a fantastic molecule, and it's played out in the data that you're seeing here. We designed TAK-360 based on a number of parameters that we think will be important in treating patients that have sleep weight disorders that are characterized by normal orexin levels like NT2 and idiopathic hypersomnia. TAK-861 is an outstanding molecule for type 1 narcolepsy. Just to dial up to everything that Christian said, it's not clear that you could have a better molecule for type 1 narcolepsy. When you look across all of the different symptoms of type 1 narcolepsy, we're coming -- either we're either normalizing or coming close to normalizing essentially every parameter. Today, there are presentations on the -- patient-reported outcomes known as the PGI or clinical -- clinician-reported outcomes known as the CGI. These are indicators for how a clinician thinks the patient is doing or how patient thinks they're doing. And you have to go back and look at these data, but the vast majority of patients are normalized in terms of their -- how they feel or how a clinician feels that they're doing. Now there is a question of whether a once-a-day dosing can hit the same efficacy and tolerability profile that 861 has. I think that's still the question. Based on everything we know of the biology of orexin, we think that that's going to be a tough needle to thread. And we'll, of course, see. Regardless, we don't think that there is much room for a better profile in type 1 narcolepsy than we have 861.

Our next question comes from [ Wangjing Lee of Springhill ]. Okay. The next question will be from Haruta-san at UBS.

[ Interpreted ] MWT regarding 861 compared to Q4, the legacy maybe shorter, but it works too much, then too much awake for is that is also a possibility. So optimal level is also very important in terms of MWT and 861 should good efficacy retreatment in Phase III narcolepsy treatment goals, what is endpoint should be within the normal range. Is that going to be the goal for treatment for 861? That is the first question. The second is Orexin franchise potential in the Wave 1, Wave 2 program in the past in NT1 potential, about $3 billion or higher and Orexin has a host $3 billion to $4 billion balance. What's your assessment on this point now?

Thank you so much Haruta-san. Maybe, Erika, you can talk a little bit about the target product profile and the expectations that we have in Phase III and then a bit about some of the market.

Great. Thank you so much for the question. So we designed the target product profile really based on the significant unmet need for people with narcolepsy. And as you heard today, we've actually demonstrated that across subjective and objective criteria. So it's very important for us that ultimately, at the end of the day, this is intended for a person, a person who's interested in being able to function at school and in their job and have productive relationships. And so our goal is really to return patients to normal. So that's what we're hoping to do with TAK-861. Maybe I can share a little bit more about the market and what we're thinking about. So as I talked about and as the team has shared today, that we've really learned so much more about the unmet needs for people with narcolepsy type 1. And globally, this disease is underdiagnosed, underappreciated, stigmatized and treated suboptimally. And these patient stories this year this week have been really profound. And as we think about the market, there's really three numbers I want you to consider. First, diagnosis rate; second, treatment rates; and those patients still experiencing digital symptoms despite standard of care. So let's walk through the prevalence and diagnosis rates. The population prevalence for narcolepsy type 1 in major global markets with 120,000 in the U.S. and diagnostic rates vary. But as I mentioned, this is significantly underdiagnosed. So in the U.S., it's about 50% and much lower outside the U.S. between 30% and 50%. From a treatment rate perspective, it's actually the highest in the U.S. and Japan at 75% and as low as 40% in Europe. And in the U.S., 60% of the patients are on polypharmacy with over 80% of patients still experiencing residual symptoms. So we're pretty excited about this opportunity to advance TAK-861 with the potential to impact the disease holistically and also make an improvement in diagnosis. And we believe these two together will grow the market. But I've shared with you these possibilities from a market perspective. And for the Takeda team, we're incredibly excited about the possibilities for people with narcolepsy. Thank you so much for the question.

Thank you. Next question is from Macquarie, either Frande or Tony.

This is Brenda from Macquarie. I am asking questions on behalf of Tony. We have one question. Could we have a better understanding of the pathological difference between type 1 and type 2 narcolepsy? As you mentioned, that type 1 patients select orexin, whereas type 2 patients generally have normal orexin levels. Yes, that's my question.

Would you like to talk to pathophysiology of the two disease?

Yes. Thank you for your question. So just to recap, the role of orexin is much better understood in narcolepsy type 1, which is characterized by the profound loss of orexin in the brain. And this has been reported by [ Yanagisawa and Mino ], as we discussed earlier in the presentation. The role of orexin in what we call population with normal orexin levels is not as well understood. The levels of orexin are a little bit more variable in these diseases, narcolepsy type 2 and idiopathic hypersomnia are somewhat overlapping. The orexin levels are also somewhat different between the two diseases. These are heterogeneous populations with -- which share some symptoms, but there are different in other ways. So the role of orexin agonist in those diseases is not as well characterized as it is for NT1. So for NT1, we have established the role of orexin agonist promoting wakefulness by restoring, if you like, the biological function of a loss of orexin. We showed this in TAK-994, and we now show it again with TAK-861 over a long period of time, 8 weeks, and we're continuing looking at the sustainability of that response in longer periods of time in long-term extension study. We have not shown, us or competitors, the effect of an orexin agonist over a longer period of time for an orexin agonist in narcolepsy type 2 or age. We have had reported previously effects of TAK-925 IV in NT2 and IH after single dose administration. The data were very encouraging, very comparable to what we have seen with TAK-925 in NT1. However, these are single-dose studies, and we cannot extrapolate the findings from these studies into long-term administration. Therefore, we would like to start with our next-generation compounds those longer-term Phase II studies in patients with narcolepsy type 2 and other normal orexin level indications to understand the profile that is needed to cover, if you like, these indications. I hope this answers your question.

Our next question comes from Steve Barker of Jefferies.

I wanted to talk about safety. And in particular, I wanted to talk about visual disturbance. I think I'm correct to say that you haven't observed visual disturbance with 861, but it is something that's shown up with other compounds. If you could comment on how serious that could be? And why haven't you seen it with 861? And do you think it's an on-target effect or an off-target effect?

Christian, do you want to talk a bit about visual disturbances?

Yes. So TAK-861 we have a very optimized benefit/risk profile. We have no reason to believe that there's a mechanistic connection with visual disturbances and direction to receptor. But to be honest, I'm not in a very good position to speculate here because we had no reports or complaints of visual disturbances. So neither in our Phase II study, where we had 112 patients or in the -- on the long-term extension study where we have patients now that are passing 1 year. So in our view, we don't think it's an on-target effect, and we have not seen it. I hope that answers it.

Yes. Thank you very much, Steve. Thank you very much. And we're coming up to time. I'd like to thank my colleagues, Christian, Erika and Elena, and I'd like to thank all of you for joining us. We look forward to getting our Phase III program started as soon as possible. And as we mentioned before, we're planning an R&D Day the end of the year where we can do a much deeper dive into the program, the time lines and some of the -- more on the market potential. Thank you very much.

Thank you. That concludes our call.