Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)

Executives

Christopher Hohman – SVP, Corporate Communications Department

Iwaaki Taniguchi – SVP, Corporate Finance and Controlling Department

Tsudoi Miyoshi – SVP, Head of CMSO Office

Analysts

Hidemaru Yamaguchi – Citigroup

Ryoichi Urushihara – Nomura Securities

Atsushi Seki – Barclays Securities

Fumiyoshi Sakai – Credit Suisse Securities

Shinichiro Muraoka – Morgan Stanley MUFG Securities

Takeda Pharmaceutical Company Limited (OTCPK:TKPYY) F1Q13 Earnings Call July 31, 2013 3:15 AM ET

Operator

Please note that this telephone conference contains certain forward-looking statements and other projected results which involve known and unknown risks, delays, uncertainties and other factors not under the company’s control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions.

During the presentation from the company, all the telephone lines are placed for listening-mode only and the question-and-answer session will be held after the presentation. This conference call is being broadcasted through internet online, but only for listening-mode. Now we start the conference with the presentation.

Christopher Hohman

Thank you very much for joining the conference call of the First Quarter FY2013 Results for Takeda Pharmaceuticals. My name is Christopher Hohman, Senior Vice President of the Corporate Communications Department.

Now please let me introduce today’s presenters and panel. Mr. Iwaaki Taniguchi, Senior Vice President of Corporate Finance and Controlling Department; and Mr. Tsudoi Miyoshi, Senior Vice President, Head of CMSO Office.

First the Q1 results will be presented followed by the topics of R&D. After that, we will have a Q&A session. Please refer to the presentation materials as you listen. First, Taniguchi will start.

Iwaaki Taniguchi

I am Iwaaki Taniguchi, Senior Vice President in-charge of Corporate Finance and Controlling. I would like to report our consolidated financial results for the first quarter of fiscal 2013. This is the consolidated summary for the first quarter FY2013.

The net sales were up 12 billion yen or 3.0% from the same period last year to 410.3 billion yen. Operating income went down 14.9 billion yen or 23.8% to 47.7 billion yen. Net income went down 58.5 billion yen or 66.8% to 29.1 billion yen. Excluding extraordinary income or loss, such as intangible assets, goodwill amortization and special factors such as tax refund from the transfer price tax system agreed last year, net income was up 1.4 billion yen or 2.2% to 62.4 billion yen. Let me explain more in detail in the following slides.

This slide shows changes in net sales by business segment. For the domestic ethical drugs, contributions from new products such as Lotriga and Azilva could not offset the decline in existing products such as Actos and Blopress impact by the termination of distributorship agreement of some items also pushed down sales. As a result, sales went down 5.3 billion yen from the same period last year for overseas.

In spite of the Actos sales declined by generic erosion, sales contribution of 11.2 billion yen by URL Pharma and Multilab acquired last year, and the yen depreciation positively impacted sales by about 40 billion yen. Altogether overseas sales were up 16.7 billion yen from last year. Next slide please.

This slide shows changes in sales by products. Global sales of Actos were down by 45.2 billion yen from last year, but Velcade from Millennium and sales in emerging markets increased. The yen depreciation also helped to achieve an increase in other products by 32.8 billion yen. New products launched after 2009 also showed good progress, marking a sales increase of 23.8 billion yen. Next I will explain sales by regions.

In U.S. and Canada, the sales significantly declined which was partly offset by Colcrys from URL Pharma and other products such as Velcade, Dexilant and Ulonic to manage the decrease by 13.2% from last year. The sales of emerging markets which we consider as a growth driver, increased by 16.9 billion yen or 34.6%. In the next slide, I will explain more about emerging markets.

Emerging markets include Latin America, Russia/CIS, Asia, Middle East, Oceania and Africa. The sales of emerging markets increased 34.6% to 65.7 billion yen, about 18% of the total ethical drugs sales of 371.9 billion yen. Excluding the FX impact, sales of emerging market marked a steady progress up 10.4% from the same period last year. By region, Russia/CIS increased about 40%, Asia about 35%. China in particular was up 47%.

Operating income from the emerging markets are not shown here, but operating margin was about 30% on the management accounting basis, an improvement of few percentage points. Next slide please.

I will now explain changes in operating income. Although the sales went up by 12.0 billion yen from last year, because of the decrease of highly profitable Actos, the gross profit was up only by 200 million yen. For SG&A, although there was cost reduction affects by streamlining overseas activities due to the yen depreciation, the SG&A increased by 16.4 billion yen. As a result operating income was down 14.9 billion yen or 23.8% to 47.7 billion yen. Next slide please.

Net income was about 58.5 billion yen from the same period last year to 29.1 billion yen. Last year, we had tax refunds and interest on tax refunds which pushed up net income by 52.8 billion yen. This year we have no such special factors. And by comparison, net income is significantly low for this quarter. Excluding special factors and extraordinary income/loss, net income would be 62.4 billion yen or an increase of 1.4 billion yen. Please refer to the appendix for the breakdown of special factors. Next slide please.

This is the cash flow for the quarter. Operating cash flow was minus 89.5 billion yen, of which, income tax paid was minus 97.2 billion compared to the previous year when we had tax refund. The tax payment increased by 126.5 billion yen, which was a significantly negative factor. There are two factors associated with this. One, according to the Actos APA or Advanced Price Agreement, we paid about 85.0 billion yen in this quarter that was in Japan. Second, we received 42.0 billion yen more tax refund previously of last year as a part of transfer price tax refund compared to this year.

Regarding the first factor, based on the Actos APA between U.S. and Japan tax authorities, we received the same amount of refund from U.S. in the second half of last year. So there is no impact on the cash flow last year and this year combined. Next slide please.

Let me explain the forecast for the year. The FX assumption for the Q2 and beyond is now changed, so that we are more close to reality, 100 yen to the dollar and 130 yen to the euro. Sales forecast for the year is now 1.68 trillion yen, up 90 billion yen from the May announcement of which 80 billion yen is the positive change in FX assumption and 10 billion yen from expected sales upside in overseas including U.S. Velcade, Prevacid and Adcetris in Europe.

Our revised FX assumptions will push out sales forecast COGS, SG&A and R&D expenses in overseas subsidiaries will also increase. Furthermore goodwill, intangible asset amortization expenses denominated in the non-yen will increase significantly by the change in the FX assumption. As a result operating income for the year will be the same as was announced at around 140 billion yen. Excluding the special factors such as goodwill and intangible fixed asset amortization, operating income will be 295.0 billion yen, up 15 billion yen from the May announcement.

For the first half, operating income is expected to be up 10 billion yen or 14.3% from the May announcement to reach 80 billion yen because of possible shift in spending timing from the first half to the second half. In order to have a competitive operating model as a global company, we started Project Summit and we are driving this very strongly. This was already announced in May.

We are now discussing specific initiatives by cost category. The project is advancing very smoothly. The whole Group is working as a team. By the second quarter earnings report, we hope to be able to explain the whole picture of the project and specific measures. Next slide please.

Let me explain the Q1 results of sales and operating income against our forecast for the year. As of the end of the first quarter, sales achieved 25.8% of the plan for the year or 24.8% excluding the FX impact. Because of the change in the FX assumption, the sales forecast for the year was revised upwards by 90 billion yen to 1.68 trillion yen. Q1 achieved 24.4% of the revised plan.

Operating income as of now achieved about 34%. Further let me just remind you that more expenses tends to be spent later in the year. Last year our overseas compensation system linked to the stock price as a factor to increase overall expenses. We have introduced a management system to follow expense trends in much more timely and detailed manner. We are working to inform the compensation system, so that it is more linked with our business performance. Next page please.

Lastly, let me expand IFRS, which we will voluntarily apply at the end of this fiscal year. The slide shows the IFRS as actual Q1 performance for your information. It also shows forecast for the year announced in May and the revised numbers announced this time. The IFRS numbers are provisional obtained by incorporating IFRS factors into the numbers from the J-GAAP. This is just for your reference please.

For the first quarter, operating income on the IFRS provisional basis was up 8.5 billion yen to 56.2 billion yen compared with J-GAAP numbers. For the year, operating income will be up 20 billion yen to 160 billion yen. Further more details of the Q1 figures please refer to the appendix. Please note that the IFRS numbers shown here are provisional, which may be different from final numbers audited by auditors.

Along with the transition to IFRS, as one of our profit indicators, we introduced idea of Core Earnings. It is a profit based on IFRS GAAP operating profit which excludes temporary factors such as impacts from M&A. Q1 core earnings marked 90.5 billion yen, while 22.1% of net sales. For the FY2013, we expect core earnings of 295.0 billion yen or 17.6% of net sales. This is all from my presentation side.

Christopher Hohman

Now, Miyoshi would like to make presentation.

Tsudoi Miyoshi

My name is Miyoshi, Head of CMSO Office. I would like to talk about updates related to R&D activities. And today I’d like to cover recent stage-ups in the pipeline and MLN0002, vedolizumab and data from Phase 3 trials of TAK-875, fasiglifam and Lu AA21004, vortioxetine.

Before I introduce the latest stage-ups in the pipeline, I’d like to explain about the withdrawal of our marketing authorization application in Europe for the anemia treatment peginesatide. In February, Takeda voluntarily recalled all lots of peginesatide OMONTYS from the U.S. market, as a result of new post-marketing reports of serious to hypersensitivity reactions including anaphylaxis. Well Takeda has been working actively to investigate the root cause of these hypersensitivity reactions. The investigations and the root cause analysis and the determination of the risk mitigation plan is to be completed during the European MAA procedure timeframe. Therefore Takeda withdraw the European MAA and will determine at a later date the appropriate direction for the product.

As for TAK-700, MPC-5 trial for post-chemo metastatic castration resistant prostate cancer, the interim analysis by the Independent Data Monitoring Committee indicated that the TAK-700 would likely not meet the primary endpoint of improved overall survival when compared to the controlled placebo arm. So we decided to un-blind the trial based on the recommendation of the committee. And there are no safety points regarding the TAK-700 and the decision underlined the MPC-5 trial is not expected to impact other ongoing company-sponsored clinical trials with TAK-700.

Next, I would talk about the stage-ups, since the last FY2013 financial results announcement on May 9. As we just introduced you today in our announcement, in China, we received a CFDA’s IDL, Import Drug License for NESINA, alogliptin for the treatment of Type 2 diabetes. We think that this will expand our options of really good tracks to treat the Type 2 diabetes in Chinese market. Although it’s not shown in this slide regarding alogliptin, the Committee for Medical Products for Human Use of the European Medicine Agency expressed a positive opinion in July. The final decision will be made by the European Commission and we hope to launch in Europe after getting a formal approval.

Next into following on from the filing in Europe, we filed a Biologics License Application the U.S. for MLN0002, vedolizumab for the treatment for ulcerative colitis and Crohn’s disease. Also for REINSO, we filed for an additional indication to EMA in June this year which is iron deficiency anemia in patients with the history of unsatisfactory oral iron therapy or in whom oral iron cannot be used.

Regarding the MLN9708, we started the Phase 3 trials in patients with newly diagnosed multiple myeloma in the U.S. and Europe. Also listed here is SGN-35, treatment of malignant lymphoma, we have started the Phase 3 trials in Japan for front line mature T-cell lymphoma. Next slide please.

And we talk in a little more detail about MLN0002 for which we submitted Biologics License Applications in the U.S. in June. This product is a novel class of gut-selective monoclonal antibodies as targets α4β7 integrin on leukocytes involved in ulcerative colitis and Crohn’s disease. Finding from GEMINI I for ulcerative colitis showed that vedolizumab met primary endpoints of in clinical response at week six and clinical remission at week 52.

The six week clinical response in the vedolizumab arm was 47.1% compared to 25.5% in the placebo arm. Remission rates at 52 weeks was 44.8% of patients receiving vedolizumab every four weeks and 41.8% of vedolizumab every eight weeks, as compared to 15.9% of patients who received placebo. In GEMINI II for Crohn’s disease, vedolizumab demonstrated statistically significant improved in the primary endpoint of clinical remission at week six and week 52.

Clinical remission at week six was seen in 14.5% of vedolizumab patients versus 6.8% of placebo. Remission at week 52 was seen in 36.4% and 39% of patients on vedolizumab every four weeks and every eight weeks respectively, versus 21.6% of patients receiving placebo.

Next I’d like to talk about TAK-875, fasiglifam. This drug is the first in class GPR40 agonist for Type 2 diabetes. And in clinical trials, it has displayed its new mechanism action of stimulating insulin secretion dependent on glucose level. Because it is a glucose-independent, the risk of hypoglycemia is much lower than existing sulfonylureas drugs. And in Phase 2 clinical trials the incidence of hypoglycemia for TAK-875 was 2% but 19% for the sulfonylurea, glimepiride.

TAK-875 is currently in global Phase 3 trials. In addition to trials, in comparison to placebo and glimepiride shown in the slide, we are also conducting head to head trials and concomitant trials with DPP4 inhibitor sitagliptin.

In order to satisfy the US FDA’s requirements, we are also currently conducting a cardiovascular outcomes study. Projected timeline of approval in Japan is fiscal 2015, and in the U.S. and the Europe, fiscal 2016. In May of this year, we presented new Phase 3 study data at the Japanese Diabetes Society Annual Meeting which I will introduce you in the next slide.

This is under a stable-controlled double-blind comparative study evaluating the safety and efficacy of TAK-875 oral dosing of 25 milligram or 50 milligram once daily in 192 Japanese patients with Type 2 diabetes over the course of 24 weeks. Regarding the primary endpoint of the change from Baseline of HbA1c and week 24, as shown in the bottom left corner of the slide, TAK-875 25 milligrams and 50 milligrams had statistically significant reduction compared to placebo of 0.75 points and 1.01 points respectively.

In addition, both these doses showed continued glucose lowering effect up to 24 weeks. The second endpoint of the proportion of subjects with hemoglobin A1c was 6.9% after week 24, as shown in the bottom right corner of the slide was 54.8% for 50 milligram, 30.2% for 25 milligram of TAK-875 and 13.8% for placebo, showing statistical significance for both TAK-875 doses.

Regarding safety, incidences of advance events as far as hypoglycemia in TAK-875 and placebo groups was similar. In this trial, no weight gain was seen in the TAK-875 groups. Next slide please.

As we talk about Lu AA21004, vortioxetine in-licensed from Lundbeck of Denmark. This is a novel multimodal anti-depressant of two pharmacological actions, serotonin reuptake inhibition and serotonin receptor activity modulation. In October 2012, we submitted a new drug application in the U.S. for the treatment of the Major Depressive Disorder.

Right hand figure shows the results from Phase 3 clinical trials, we presented to the American Psychiatric Association in May this year. Of these four trials, three met the primary efficacy endpoint in the changes from baseline of MADRS. The PDUFA date in the U.S. is October – in the beginning of October 2013. Next slide please.

This slide shows our timeline for pipeline approvals. Within this fiscal 2013, we are expecting approval of SGN-35 for Hodgkin Lymphona, influenza vaccine in Japan, vortioxetine in the U.S. and the alogliptin family, dexlansoprazole and lurasidone in Europe. Next slide please.

As always, I would like to finish by reminding you of Takeda’s R&D value and mission. Moving forward in order to address unmet medical needs of patients, at Takeda we remain committed to the discovery and delivery of innovative solutions through R&D investment. We will also strive to improve R&D productivity and pursue improved cost effectiveness. Thank you very much.

Christopher Hohman

Now, we would like to have a Q&A session. We would like to entertain your questions.

Question-and-Answer Session

Operator

We have a question-and-answer session now. (Operator Instructions) The first question is from Citigroup Securities Company, Mr. Yamaguchi. Go ahead.

Hidemaru Yamaguchi – Citigroup

Hello, this is Yamaguchi from Citi. Do you hear me?

Iwaaki Taniguchi

Yes.

Hidemaru Yamaguchi – Citigroup

Regarding the progress of the first quarter, it’s a regular question because of those expenses, operating income is relatively higher in terms of the progress and by region Japan, U.S. and the emerging markets, there are some ups and downs, if you noted any particular situation. Can you comment?

Iwaaki Taniguchi

This is Taniguchi. Overall, regarding sales, there is a positive upside but when you breakdown overseas, upside was significant. On the other hand for Japan, compared to our expectations, it was slightly lower than our original forecast.

Hidemaru Yamaguchi – Citigroup

Thank you. And regarding NESINA and AZILVA in Japan. In case of AZILVA, it can be switching the NESINA. It looks like it’s not really achieving up to the expectation. You had mentioned particular definitive [ph] numbers, you think it’s going to be able to recover or do you think that’s going to be challenging?

Tsudoi Miyoshi

Well, let me first talk about NESINA. It is true. When you just look at the past three months, definitely there is a big slow against the plan, but prescription is on an increasing trend, and towards the end of the year in the second half, we expect good growth, three years past since launching. And efficacy is shown in the clinical data and based on our (inaudible) we are strengthening our marketing activities and I think we are seeing some good result out of that.

And for hypertension, AZILVA and Blopress between those two agents, and when you compare them together, it is within our expectation. It is to the pickup of AZILVA in terms of switch from Blopress, it’s behind

Hidemaru Yamaguchi – Citigroup

TAK-700 in your pipeline. I have a question on this. The basic idea here is regarding post-chemo patients, filing maybe a bit difficult but pre-chemotherapy if you had good data then you will have the findings?

Tsudoi Miyoshi

This is Miyoshi speaking. Regarding TAK-700 post-chemotherapy, it is un-blinded, but it does not mean that filing is difficult. But you look at the data regarding the PFS progression-free survival, we do have good data. And plus the pre-chemo data from blind will be the basis for our consideration in future. So regarding PFS post-chemotherapy, that strategy is still there. With regard to OS, we can’t really comment on that specifically, but we are analyzing the data in detail. While OS, overall survival was not significant by age, by region, by ethnic groups and sex, we will analyze furthermore, and together with pre-chemotherapy segmentation, our population we want to further analyze our strategy, thank you.

Hidemaru Yamaguchi – Citigroup

Regarding the FX sensitivity, you had made a revision for FX assumptions. So what’s the sensitivity level now?

Iwaaki Taniguchi

Are you talking about operating income level?

Hidemaru Yamaguchi – Citigroup

Yes.

Iwaaki Taniguchi

In the dollar basis, one yen 800 million and for the euro, that’s 200 million yen on the new FX assumption. Yes, that’s right. So that’s not a big change.

Hidemaru Yamaguchi – Citigroup

Thank you.

Christopher Hohman

We would like to entertain the next question please.

Operator

Next question is Mr. Urushihara from Nomura Securities.

Ryoichi Urushihara – Nomura Securities

Hello, may I ask you a question?

Iwaaki Taniguchi

Yes, please give us all the questions that you have.

Ryoichi Urushihara – Nomura Securities

I have four questions. The first question is about TAK-875. In order to look at the SCV [ph] event, you were trying to include 5,000 patients. And since the study started, I think already one you have passed, but could you really show the results of SCV [ph] with enough data with 5,000 subjects, that’s my first question? May I continue?

Iwaaki Taniguchi

Yes.

Ryoichi Urushihara – Nomura Securities

The second question is Contrave, the filing timing. In May, a financial announcement in our handout materials, it was said, it would be filed soon, but what is actually the timing, could you tell that? That’s my second question. Third question is the China risk in the case of GSK, whether or not, you have been receiving any investigation as much as you can, disclose it please? And number four is about the cost control. And here I have two questions. After sales has been down, but the gross margin is still 72%. It’s not worsened. So have you been making the efforts to cut the costs? And also in page six of the slide, SG&A, FX – because of FX impact, it increased, but actually the 9 billion yen cost cut seems to be achieved, is it really the right accurate interpretation?

Christopher Hohman

Miyoshi would like to answer to your question first.

Tsudoi Miyoshi

Regarding the TAK-875, 5,000 subjects. Whether or not, this number of subjects is enough? According to FDA guideline, of course we’d like to meet the FDA guideline requirements and statistically, we reviewed and we believe that this 5,000 sample size is good enough. We wouldn’t expect any problem with this.

Ryoichi Urushihara – Nomura Securities

And do you know actually what would be the rate of the events at the onset?

Tsudoi Miyoshi

No, we cannot disclose that at this moment of time. Your second question was regarding Contrave, the filing timing. Orexigen our alliance partner announced that in the beginning of this year, it will be in the second half of this year. That is the timing of NDA filing and we announced that – our partner announced and we haven’t changed the timing since then.

Iwaaki Taniguchi

Regarding China, and from the Chinese also update to us, we didn’t receive any notification of any investigation. And since last year, we have set the Group policy to prevent any – the briberies. Therefore, we wouldn’t accept or allow those to happen currently.

And your number four question regarding the cost, 72% roughly is this times figure and actually after the sales went down, and it went down by 3% at one time and compared with the two years ago, and FX actually impacted positively by 1%. So compared with same quarter of the last fiscal the – we were able to probably bridge from between 74.1% and 71.9% and of course we have been making every efforts to cut the costs, and part of them have been already producing the results.

Ryoichi Urushihara – Nomura Securities

With the accelerated for every quarter to come, do you think that cost cut results will be accelerated to be manifesting?

Iwaaki Taniguchi

No, I am not sure, but the cost rate will be improving and that’s one of the important thing of our Project Summit, therefore we would like to continue to make that efforts. And SG&A, you are right, that because of FX impact 25.3 billion yen minus was there. So as SG&A itself, we tried to cut the cost and now we see the part of the fruits.

Ryoichi Urushihara – Nomura Securities

Thank you very much.

Christopher Hohman

Next question please.

Operator

From Barclays Securities Mr. Seki.

Atsushi Seki – Barclays Securities

Hello, do you hear me?

Iwaaki Taniguchi

Yes.

Atsushi Seki – Barclays Securities

I have also four questions. First question, in Mr. Taniguchi’s presentation, emerging sales is growing very well and it is the growth driver for your page five, excluding FX impact 10.4% is the growth. Also it’s a double-digit. It’s a bit weak regarding the previous year that was 14% and the other global companies announcement showing weaker result in emerging market. So if the trend is changing in emerging markets? That’s the first question. And regarding the stock price, the incentive plan, 5,000 yen and above at the end of May and March and then it came down, so what’s the situation there? Regarding TAK-700, orteronel, you had shown PE values on these, but regarding OS and PFS comparing the active and placebo, what’s the difference? And also regarding page 25, orteronel U.S. approval expectation is FY2014. You haven’t changed, is that still all right? And in Boston, there was a change in leadership and after that, no confusion in the organization in the program regarding the talent retention? I have a long question list and help me answer to those.

Iwaaki Taniguchi

Regarding emerging market trend, these emerging markets are very important growth drivers. Because of macro economy, there could be some transient impact, but over the five years for the long-term horizon, the growth rate that we promised can be achieved in the emerging markets. It is excluding FX 10.4% as addressed [ph], and throughout the year, if you looked at the growth for the year, we think there is some room for growth furthermore. It’s not that the momentum in the emerging market in the mid to long-term is underlined, what maybe a tender impact versus significant factor? No, I don’t think so, not for this quarter.

Atsushi Seki – Barclays Securities

Thank you.

Iwaaki Taniguchi

And regarding stock price, the incentive plan, as you mentioned the accounting is based on the March end stock price level, based on that we have the calculation, then every quarter we have the numbers from each month. And at the end of June the stock price is down compared to March end. Therefore there is a decline compared to the March end.

Atsushi Seki – Barclays Securities

Do you disclose numbers?

Iwaaki Taniguchi

No, we don’t disclose, but for the quarter as a whole, for this long-term incentive plan cost for this three month is plus minus zero.

Atsushi Seki – Barclays Securities

Thank you.

Tsudoi Miyoshi

This is Miyoshi speaking. So TAK-700 data disclosure, overall survival details, as of now today, we do – we cannot disclose that data. And in future, at academic meetings, we will disclose the numbers and the data. And the second question was, what was that?

Atsushi Seki – Barclays Securities

Regarding the timing of filing.

Tsudoi Miyoshi

The discussing strategy for filing, and as of now we have made no changes, but going forward when the strategy is decided in the second quarter, opportunity we will show you the…

Unidentified Company Representative

Of course including the former CEO, Dr. Dunsire. During times of organizational change, it is inevitable that some people will make the personal decision to leave, and initially this can be somewhat disruptive. However, it also provides opportunities for others to lead and contribute in new and different ways.

Overall, we are engaging our employees with fairness, transparency and communication and appropriate compensation, so we can contribute to maintain a track and develop the best people possible for this important field of oncology. [Foreign Language]

Christopher Hohman

Thank you very much. The next question please.

Operator

Mr. Fumiyoshi Sakai of Credit Suisse Securities. Sakai sir, please.

Fumiyoshi Sakai – Credit Suisse Securities

Thank you. I have two questions. First is MLN0002 for ulcerative colitis and Crohn’s disease is the indication, and I believe that the remission rate is very high. Have you disclosed the data on remission rate somewhere? That’s my first question. And also in the U.S., the filing will be made in June, but PDUFA is it fixed? That’s my first question. Second question is TAK-700. Actually the same happened in the other companies that FDA, even without recognizing the OS improvement, would it be really approved? Including the post-chemo, there seems to be potentials in your view, but could you specific what is your ideas regarding this situation, and this is interim analysis, therefore the patients on placebo and TAK-700, I think that the data is at that time point, the close over hasn’t been performed yet, is that the right understanding?

Tsudoi Miyoshi

First regarding MLN0002 data. As I told you earlier – which data are you talking about, GEMINI I? In GEMINI I, the week six, the remission improvement, at week 52 excuse me, vedolizumab every four weeks to every eight weeks regimen, every four weeks 44.8% and every eight weeks 48.1%, and the placebo 15.9%. And at DDW we made announcement. And next was about TAK-700.

Fumiyoshi Sakai – Credit Suisse Securities

Yes. Yes, you couldn’t show the good results?

Tsudoi Miyoshi

Yes, we didn’t show the significant difference in terms of OS. It was the interim analysis, and we un-blinded the trial this time. So from now on, TAK-700 will be provided to the patients. And with existing data, how can we make filings? And well not only with this data, but pre-chemo data should be also reviewed, so that we’re able to come up with a good strategy. So we may need sometime to decide how to do. It’s only after short time, since it’s announced or disclosed.

Fumiyoshi Sakai – Credit Suisse Securities

Regarding 0002, filing timing. It says here in June, but PDUFA, has it been fixed?

Tsudoi Miyoshi

PDUFA hasn’t been fixed yet. So no notification from FDA, no, not yet, but the approval is expected to be in FY2014. We haven’t changed that timing.

Fumiyoshi Sakai – Credit Suisse Securities

Thank you.

Christopher Hohman

Next question please.

Operator

From Morgan Stanley MUFG Securities, Mr. Muraoka

Shinichiro Muraoka – Morgan Stanley MUFG Securities

Hello this is Muraoka speaking. I have three questions. Regarding the revision – upward revision and I want to ask about the background of that. The yen depreciation and in your case, operating profits in the dollar is negative factor, but for Non-GAAP base income expectation is higher. Is that you have changed some conservative to neutral? There are several positive factors in the three months ended tax income upside, can you clarify on that? That’s the first question. TAK-700 in Japan, FY2015 is the submission timing according to the cable, and Japan has a different clinical study from global. I think it was a different study, and so strategy in Japan? The (inaudible) is my next question. You did not mentioned today that sexual function – in terms of sexual function, it is considered better compared to the other agent. So you can you clarify that?

Iwaaki Taniguchi

Regarding the first question let me clarify. Regarding the revision upward, this is based on J-GAAP. And regarding the sales FX impacts, well on sales side our consolidation is in Japan, therefore the sales will be positively impacting. That is about 80 billion yen, by products and upside sales of 10 billion yen, therefore altogether 90 billion for the year for the operating profit. However, expenses tend to be shifted in the second half. And in operating income, the yen depreciation was negative in our company, but with cost reduction efforts, we hope to maintain as before so that for the Japan side at 140 billion yen.

For the first half, the sales is going to be increased compared to our original expectation, and also expenses to be shifted in the second half, especially in R&D. So for the first half on the operating income will be up by 10 billion yen, that is J-GAAP base. On IFRS base, it’s really amortization of goodwill and that is in the dollar basis, as it are all the dollar denominated. In the IFRS goodwill will come into the operating come and FX impact will be positive. So for the IFRS, there is upside of 150 to 150 [ph], that’s the different from the J-GAAP numbers. Is this clear now?

Shinichiro Muraoka – Morgan Stanley MUFG Securities

I understand that, but actually the cost in the second half is going to be heavy, and I think that may mean that you have some upside furthermore, but it’s too early to say that?

Iwaaki Taniguchi

But as of now regarding the operating income in ordinary income and net income level, we – I’ll just show you what we think is going to be now.

Tsudoi Miyoshi

Okay, regarding the second and third question. This is Miyoshi. Regarding TAK-700 for Japan, pre-chemo and post-chemo, we are conducting the same studies. Therefore, together we need to consider our strategy going forward. So it’s the same as in U.S. And vortioxetine, sexual dysfunction aspect, was the question and whether that can be reflected in the labeling? What we are going to discuss – we need to discuss this with FDA. As of now, we can’t answer clearly whether it’s going to be reflected in the label or not.

And advisory board, whether we are going to have that? Well we will have discussion with – we had discussions with FDA and in March, there is interim review meetings and FDA is saying that they are not planning advisory meeting.

Shinichiro Muraoka – Morgan Stanley MUFG Securities

Thank you very much.

Christopher Hohman

There aren’t any more questions. So therefore we’ll just – we’d like to conclude the questions and answer session. And with this, we’d like to finish the conference call today. Thank you very much for joining us in this conference call. We would like to ask for your continuous support. Thank you very much.

Operator

Thank you for your time. And that concludes today’s conference call. You may now disconnect your lines.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Takeda Pharmaceutical Company Management Discusses F1Q13 Results - Earnings Call Transcript

Check out Seeking Alpha’s new Earnings Center »

This Transcript
All Transcripts