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

Good afternoon, everyone. Welcome to JPMorgan Healthcare Conference. I'm Seiji Wakao, Japan pharma analyst. And it's my pleasure to introduce Christophe Weber, CEO of Takeda, and welcome him to the conference. With that, let me hand it over to Christophe. Please go ahead.

Thank you. Great pleasure to be with you today. I won't talk about Venezuela. I will talk about Takeda's pipeline today mainly, and I hope it will be as exciting as the Venezuela situation. So at Takeda, we focus on discovering and delivering life-transforming medicines. That has been really our focus for many years. We used to be in the different businesses; generic, OTC. But a few years ago, we decided to really focus on becoming an R&D-driven company and innovation-driven company. So most of my presentation today will be about our late-stage pipeline. We have -- it took us a long time to deliver this late-stage pipeline. We did an R&D Day back in December, which lasted about 5 hours. So my task today is to summarize that in 20 minutes. So bear with me. So see this presentation, if you have not seen the R&D presentation, see this presentation as a teaser for you to go to see and to watch this R&D presentation that we did last December. So it's really about focusing on life-transforming medicines that we have been developing for many years. Takeda today has a scale to globally develop in clinical development, globally commercialize this pipeline. So this is something that we have been working on for also many years is to reach that scale where we can do clinical trials in many, many countries where we can recruit patients, and we all know that patient recruitment is a big challenge for the industries. We have also the ability to launch these new medicines in the countries where we operate, about 80 countries in a very competitive manner. So that's also very important part of our agenda to launch this new product by ourselves. Sometimes we'll seek a partner, but we have the scale and the presence to launch this new product by ourselves. We also, over the year, increased our R&D investment. It's about USD 5 billion per year. Today, this is growing. We are limiting the growth, but this is the type of commitment that we have for our R&D and our pipeline development. So our pipeline, we will focus -- I focus on 6 late-stage assets. And for every asset, I will explain what it is, how it is differentiated from the competition, again, very rapidly, and how we estimate today the revenue potential of these assets. Overall, this pipeline has a potential peak revenue between USD 10 billion and USD 20 billion. So between 1/3 and 2/3 of our current revenue at Takeda, which is about USD 30 billion. So it's very material. And all these assets will be launched before the end of the decade. And the top 3 actually will be launched in the next 3 years. So it's actually a very present moment for us even though we are waiting for the final readout for these assets, Phase III readout. But all of them are either in Phase III or about to enter Phase III. So let's start with oveporexton. So oveporexton is an orexin agonist that we are developing for the treatment of narcolepsy type 1. And the key with this type of treatment is to be able to mimic the natural orexin cycle. And you can see the cycle here is that you wake up in the morning, the orexin will increase -- will peak at around noon, midday. And then the orexin level will drop while we are about to start our sleeping pattern. So narcolepsy type 1 patients don't have orexin anymore. So here, we have an orexin agonist which will replace the natural orexin. But the key is to mimic this natural cycle. If you don't -- for example, if you keep a too high level of concentration later in the day, you might face side effects like insomnia. So this is what we believe we have achieved with oveporexton. It's a BD product, we are testing multiple dose in Phase III, but it's not a typical BD where you have morning and evening. Here, it's a morning, midday. So again, it's to mimic this cycle. And we believe that actually, it might be important in the future for patients to be able to adjust when they take the second dose and at what dosage as well in order to be closer to their natural orexin -- what should be their natural orexin level. We have assessed already in Phase II the efficacy of this molecule in narcolepsy using many different scales, whether it is cataplexy level, excessive daytime sleepiness, cognitive symptoms. And the efficacy has been really fantastic in Phase II. So our goal now is to replicate that in Phase III. So I will go very quickly here. But basically, what we are demonstrating against this criteria is a normalization. So it's almost a cure. In terms of efficacy, you are back to normal. So on this -- for example, maintenance of wakefulness test, this test is putting the patient in a situation in a dark room and to see how long it takes for them to fall asleep. And if you stay awake for more than 20 minutes, you are back to normal. And you can see here that normal narcolepsy patients, they fall asleep after 5, 6 minutes. And here, with our treatment, they are back to normal. So very high level of efficacy. And whether you look at other scale like the ESS scale, we are really seeing a normalization. If you are looking at the level of cataplexy, for example, which is a very traumatic event for this patient, we see a dramatic reduction with this product. Same with psychomotor vigilance test. So it has a benefit on the cognitive ability of the patient as well. And so you have an increased cognition for this patient. So there is absolutely no doubt that we have a very, very high level of efficacy with this treatment. It could be -- we think it would be first-in-class, for sure, potentially best-in-class orexin agonist. We are conducting 2 Phase III right now. It's -- we are recruiting as quickly as possible. So far, we have not seen serious side effect with this product. Obviously, the mimicking of this initial [indiscernible] I was explaining earlier is very important, and we think we have achieved that. So we are very excited about these programs. This is considered a rare disease, but it's not so rare. You have about 100,000 patients in the U.S. The challenge right now is that only half of these patients are diagnosed. Often, there is a misdiagnose. Patient might be diagnosed with obstructive sleep apnea, for example, or other type of disease. The treatment rate is about 75%. So we think that if you bring very innovative medicines like oveporexton, you can really change the diagnosis level and really help these patients who don't have very good solution right now to treat narcolepsy. Last thing I will mention is that we are looking at combining the molecule with a digital companion, monitoring sleep, for example, architecture, sleep quality, and we are also looking at AI-based algorithm to diagnose faster narcolepsy type 1 by analyzing the sleep pattern of this patient. So we think that we will be able to do that. And by recording sleep patterns, we will be able to diagnose better or to make the diagnosis of narcolepsy type 1 in the future. So it will be one example, and this is our goal for every molecule is to try to find a digital companion associated with these molecules. So that's the first product that I wanted to showcase today, potential for this product $2 billion to $3 billion. And again, very excited. It's in Phase III. We are recruiting to Phase III right now. Second product is zasocitinib. We are developing it for psoriasis and psoriatic arthritis. We will develop it in IBD in the future. This is a TYK2 inhibitor. There is already one TYK2 today on the market, and we get that question all the time. So I prefer to address it upfront. This is a very different TYK2 from the current available TYK2. It is much more selective. And that has allowed us to have a higher dose in order to aim for higher efficacy without inhibiting the JAK receptors. So you can see -- so if you compare the 2, you can see that we are able to increase the dose, be constantly within 24 hours inhibiting the TYK2 while being very far from the level of inhibition on the JAK receptors. So -- and we know that many side effects come with the JAK family. So that's why we have been able to develop a much higher dose with this product. It's very important. And we have seen that in our Phase II results, where if you look at the high dose at 30 milligram, we were able to have a fairly good efficacy or even a much better efficacy than any oral treatment today in psoriasis with PASI 100, for example, at 33% or PASI 90 at 46%. So this is also a very exciting product for us. We are in Phase III as well in psoriasis. In fact, we have fully recruited the trial. And we think that this product -- perhaps with other oral products which are in development, IL-23 oral, for example, could be the one really developing the oral segment in the psoriasis market. Today, the oral treatment are not -- don't have an efficacy, but very far from injectables. And that's why the oral segment is only 16% of the psoriasis market today in terms of patient volume. We think that with this new class of oral, the oral segment could really double in the next 10 years and be a treatment of choice for patients with moderate psoriasis, for example. You start with an oral, if it works, you stay with an oral. Of course, if it doesn't work or if the efficacy is not enough, you will always have the option for injectables. But I think this is a different type of efficacy for an oral treatment. That's what we have seen in the Phase II. That's what we want to demonstrate in the Phase III. Third asset is rusfertide. This is a product that we are developing for a disease called polycythemia vera. This is actually a blood cancer. This is a very serious disease. You have overproliferation of red blood cells. And the mechanism of action is extremely well described. So this is a product that we are very excited about it. We have seen very good data. The way you measure the efficacy in this disease is that you look at the hematocrit and you can see that we were able with this treatment to keep the hematocrit below the 45% level, which is what is considered necessary to have a good control of the disease. And you can see that as soon as we stop the treatment, this is what the dark bar is showing during the trial, at one stage, we stopped the treatment, and immediately the hematocrit went back up. But then we were able to restart the treatment and carry on. So we think that it is very promising for treating this disease. There are not many options today for patients. The main options which exist today is a phlebotomy, which is very annoying and actually a very old technology as well. If a phlebotomy is not enough, there are some treatment available. But this one could really transform the way this disease is treated. This is also a rare disease, but I mean, 155,000 patients in the U.S., not so rare neither. And we think that, that's really a treatment that could change the paradigm of treatment of this disease. I have 3 more to go. One is mezagitamab, also about to enter in Phase III. This is a product that we are developing for IgAN, IgA nephropathy and ITP. This is a CD38 which is depleting plasma cells. You can see on the right side that it has a very strong effect on IgA and it has a lasting effect as well. So we have seen that even during a dosing free period, we could see a maintaining of the depletion of the plasma cells. So potentially, this is a treatment that we could have some free dosing period, for example. And this is something that we will explore during the Phase III. We have seen a very clear efficacy whether you measure proteinuria or the renal function. And we have not seen major side effects with this treatment. This CD38 actually was in our pipeline a long time ago in oncology, and now we are developing it for IgAN and the ITP indication. So this is a competitive space. There is another CD38 in development. We think that our CD38 has different characteristic in terms of the impact it has on the different immunoglobulins as I showed earlier, it is a very potent CD38. There are also other class in development. But we think that the lasting effect and the efficacy we are seeing is quite compelling in this disease. So we are developing an IgAN and also we'll develop it in the ITP indication. So this is a molecule that could be developed in other indication as well that we will explore further. I won't talk about it today, but we are very excited about this molecule. Fazirsiran is a silence RNA that we are developing for a liver disease called AATD. This is -- the mechanism of action is degrading a molecule called Z antitrypsin. It is a very clear mechanism of action. We have seen in Phase II very strong evidence that it is depleting this protein which is accumulating in the liver and that eventually, this is a disease which end up with a liver transplant. It's a very serious disease. So we're very excited about the Phase III programs. It is not an easy recruitment because of the protocol design, but it could completely transform the way this disease is treated. Globally, there are about 250,000 patients in the world with this disease. It's actually a disease which is more prevalent in Asia -- in the Asian population compared to the Caucasian population. And again, here, the challenge is to be able to diagnose early the disease. Often, this disease is diagnosed very, very late in the process. So it might be too late. So once we have an efficacious treatment like that, we need to develop capabilities to diagnose earlier, start the treatment earlier before the liver is too much damaged by this accumulation of protein. So it will be transformative treatment compared to what is existing today, which is nothing until you do a liver transplant, if you can for this patient. And the last molecule that we just brought in through in-licensing, and we are very excited about that is a treatment for low-risk MDS. It is an inhibitor of activin A and B. One thing that we are very excited about and we just said is that it seems to be efficacious in RS-positive and RS-negative patients. And this is a clear differentiation of patient population. And so this is -- there is already a product similar in this class available, but with a very low efficacy in RS-negative. So our intent here is to develop this product in both population, RS-positive and RS-negative will start in third line and second line and hopefully move into first line for this low-risk MDS patient. And so we just did this in-licensing deal with Keros Therapeutics, and we are very excited about that. Takeda has a very strong presence in hematology. We have been in the onco-hematology for a very long time. So it is really a great addition to our portfolio and pipeline. So in a very rapid way, these are our 6 late-stage products. Again, if you need more information, you can find everything on our website. We have 5 hours presentation about 200 slides there if you need more details. And I would just finish my presentation by saying that for us, this is a very important moment because these 6 assets will be launched before 2030. In 2031, we will face biosimilars with our lead product, ENTYVIO, which will peak at around USD 7.5 billion to USD 9 billion of sales in 2031. So our goal is to have this pipeline launch and generating revenue to offset that decline from 2031 onwards. So this is what we believe we can do with this pipeline. Of course, we'll not sit idle. We will continue to do some business development targeted, some -- if we can find some in-licensing opportunity because you never know in R&D, you can face some setback. But we are fairly confident that we will be able to grow in spite this biosimilar threat that will exist on our lead product. Between now and 2031, we'll have -- we'll grow because we have a very limited generic exposure. Once VYVANSE is off, VYVANSE is -- for those who don't know very well Takeda, we have been facing generics of VYVANSE in the last 2 years. So we are about to see the end of that probably this year in 2025. And then from then onwards, until 2031, we have a very limited generic exposure and we have 10 growth and launch products, which would generate about 50% of our revenue. And in the first semester of this year, they have been growing at 18%. So we have a good growth outlook until 2031. And then we rely on this pipeline to continue to grow post 2031 once ENTYVIO will face these biosimilars. And so very exciting time to be able to share with you this pipeline. We know that many of you will wait for the readout, the Phase III readout. But at least you will pay more attention to this pipeline and perhaps you wait or you don't, but we are very excited about this Phase III readout. What I will mention is that for the first 3 assets, oveporexton, zasocitinib and rusfertide, we think that our probability of success is greater than 70% based on the Phase II data that I shared with you and the clear mechanism of action that we have seen. So again, very excited and very happy to answer your questions. Thank you very much.

Thank you, Christophe. Moving into Q&A session. So in addition to Christophe, I'm pleased to announce Milano Furuta, CFO; Andy Plump, President, R&D; Teresa Bitetti, President, Global Oncology Business Unit; Julie Kim, President, U.S. Business Unit; and Christopher O'Reilly, Global Head of Investor Relations will also be joining us.

So I'll kick off with my questions. Regarding zasocitinib. So we believe that based on the results from the Phase II trials so far, the probability of success for the Phase III trials and approval is high. On the other hand, considering the situation with the launch product, [indiscernible] we anticipate challenges in marketing. Could you share how you plan to achieve the target peak sales of USD 3 billion to USD 6 billion for zasocitinib? Additionally, I'd like to know where your confidence lies in your strategy.

So I'll start and then Julie can comment further. First, we think zasocitinib will have a much higher efficacy than the current TYK2 on the market. And that's very important because you need to have a much higher level of efficacy of current oral treatment and you need to be closer to the injectables efficacy in order to have a good argument to get reimbursed and get access. So there is a product profile dimension, and there is also a tactical way of launching it, and we'll make sure -- I mean, we have learned a lot from DMS experience, and we'll prepare very well the launch and how we can address the access. Julie, do you want to comment further?

The only thing that I would add is that when you look at the range of possibilities with zasocitinib as Christophe mentioned, first and foremost, we believe it's a better molecule. But second, the opportunity in the market to further grow the oral space with a more effective molecule is part of the growth story. So the ability to grow that and ability to grow advanced therapy as well.

[Operator Instructions]. Okay. So next about 27 also, zasocitinib, so potential for IBD. So how do you view the potential of zasocitinib in IBD? I'd love to understand the basis for your perspective regarding IBD?

IBD. Do you want to answer that, Andy?

Sure, sure. And then maybe, Julie, you can comment a bit on the market consideration. So I think the question was for zasocitinib, why we're enthusiastic about it for inflammatory bowel disease, ulcerative colitis and Crohn's disease. So there are 3 main reasons why we feel confident that TYK2 inhibitor with the kind of profile that zasocitinib has should be effective in IBD. The first is human genetic evidence. There are 1 in 25 if you are walking around with TYK2 allele that's essentially devoid of activity, which means that about 1 in 500 people in most populations are walking around with essentially no TYK2 activity. And human genetic studies have showed that those people are protected against both Crohn's disease and ulcerative colitis. The second reason is animal models. Colitis models respond to TYK2 inhibition. And the third is that everything we know about these signaling pathways, IL-23 and others, when you inhibit these pathways using established antibody therapeutics, you treat these diseases. And those -- all of those pathways signal at some level through TYK2. So we think there's a high chance of activity in IBD. And one of the benefits that we have with zasocitinib is the ability to dose substantially up. Christophe showed in his presentation, the concentration profiles, the 24-hour inhibition, we come close to 100% inhibition over a 24-hour period at our top doses. So we're really excited to see the Phase IIb data in 2026.

Any questions from audience. So regarding orexin franchise, you have 861 targeting NT1 and 360 targeting NT2. Could you provide a detailed explanation of your franchise strategy? Could you comment on why 360 is not targeting NT1?

So I'll start and Andy can jump in. So I have not talked about it, but we have another molecule, another orexin agonist called TAK-360. And oveporexton will be developed for narcolepsy type 1 only and the other one, TAK-360 will be developed for narcolepsy type 2 and other indications like idiopathic insomnia, for example. And we made that choice because 360 is a molecule where we can increase the dose. You need actually a higher dose for narcolepsy type 2 than narcolepsy type 1. And with 861, we dedicated this product for narcolepsy type 1. We don't want to increase the dose with this molecule. You might remember for those who are following Takeda for a long time that we had some safety issues with the previous molecules. We learned from that. And so that we made a decision to develop 2 different molecules for narcolepsy type 1 where you have no orexin level versus narcolepsy type 2 where you have orexin present, but you need to increase the dose.

Any questions? Also, could you comment on the competitive landscape for 861, so is there out of same mechanism, same price product regarding 861 orexin 2 antagonist? So what is the advantage of this product compared to your competitors?