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

Executives

Tsudoi Miyoshi – Senior Vice President and Head, Chief Medical & Scientific Officer, Office

François Roger – Chief Financial Officer

Analysts

Hidemaru Yamaguchi – Citigroup Securities

Atsushi Seki – Barclays Capital

Shinichiro Muraoka – Morgan Stanley MUFG Securities

Fumiyoshi Sakai – Credit Suisse

Tim Race – Deutsche Bank

Takeda Pharmaceutical Co., Ltd (OTCPK:TKPYY) Q2 2014 Earnings Call August 1, 2014 5:00 AM ET

Operator

Now we will start the presentation. Please have the presentation materials to hand. First of all, we'd like to start with the presentation from Mr. Miyoshi.

[Interpreted]

Tsudoi Miyoshi

Good evening. My name is Tsudoi Miyoshi, Head of Chief Medical & Scientific Officer, Office. Today I'd like to give you an update of recent events in Takeda's R&D. I'll cover the following topics; pipeline stage-ups since FY, 2013 financial announcement, efficacy data of VELCADE in patients with previously Untreated Mantle Cell Lymphoma. BRINTELLIX data presented at the International College of Neuropsychopharmacology World Congress and American Society of Clinical Psychopharmacology Annual Meeting and details of our strategic alliance with MarcoGenics autoimmune diseases. Next slide please.

As you can see from the stage perhaps since FY, 2013 financial announcement. We had some progress in our late stage pipeline. In May, we got approval of ENTYVIO for ulcerative colitis and Crohn's disease in the US and Europe.

We understand that this is the first biologic to have been approved for the two indications simultaneously. And we have already launched the product in the US and several countries in Europe including UK, Germany and France.

ENTYVIO is a groundbreaking new product that offers a new treatment option to patients with inflammatory bowel disease, who have failed to respond with existing products and we expect this product to become blockbuster global product for Takeda.

ENTYVIO's Phase III trial is running in Japan. We will continue activities for launching this product in other regions including Japan. As you can see, we have already initiated tryouts of subcutaneous formulation of ENTYVIO. We are pushing forward to develop this product into a blockbuster.

For VELCADE, we filed in the year – from by Mantle cell lymphoma and later I will introduce a beta that supported this filing which we presented at ASCO in Chicago in June.

For MLN9708/ixazomib trials are currently ongoing in the refractory multiple myeloma and newly diagnosed Mantle Cell Lymph. And in this quarter, we initiated an additional Phase III trial in Europe for maintenance therapy. In Japan, we started Phase III trial for our combination of Nesina and Metformin. As you know this combination is already available on the market in the US and Europe.

We are moving forward diligently to deliver this product also to patients in Japan as any option for Type II diabetes, who still need better good cost control. In the near stage, pipeline antibody drug progressed to Phase II for advance breast or intestinal malignancies.

We are accelerating the development of this company and we believe that it has potential to the efforts in class product.

As you can see in the early stage of development, we have studied clinical trials for two new compounds TAK-058 is the 5-HT3 antagonist that we obtained through the acquisition of [Indiscernible] for the treatment of schizophrenia especially associated with schizophrenia.

TAK-935 is another new compound in the CMS area. This is a small molecule that works by food and pretty easily turned crystal 24-hydroxylase.

Next Slide, here you can see the data presented at the American Society for Clinical Oncology meeting in June evaluating the efficacy of VELICADE in patients with previously Untreated Mantle Cell Lymphoma. In this study, we compared with rituximab, cyclophosphamide, doxorubicin and prednisone plus vincristine (R-CHOP) to regimen we've increased in is replaced by VELICADE or VR-CAP in patients with newly diagnosed mantle cell lymphoma.

The VELICADE showed statistically significant improvement in progression-free survival in the assessment by the Independent Radiology Review Committee. Based on this positive result, we filed a submission to the FDA for this indication.

Next, I'll introduce two sets of data about BRINTELLIX. Firstly, this slide introduces data from the international College of Neuropsychopharmacology World Congress showing the efficacy of BRINTELLIX on cognitive function in adult patients with Major Depressive Disorder. The primary endpoint of the study was to change DSTT from based on adult age.

The DSTT is an objective neuropsychological test associated with extremity [ph] function, processing speed and attention and is used as a scale to evaluate the effect on cognitive function. In this study, BRINTELLIX showed statistically significant improvement over placebo.

In contrast, Duloxetine did not show statistical significant over placebo in this endpoint. Also BRINTELLIX and Vortioxetine were both better than placebo, a statistical significance in reducing the MADRS total score from baseline to week 8, showing efficacy in treating depression and validating the clinical study.

Furthermore, path analysis indicated that BRINTELLIX benefit from cognitive function was direct treatment effect rather than general effect due to alleviation of mood and depressive symptoms.

Next Slide please, allow me to introduce data presented at the American Society of Clinical Psychopharmacology Annual Meeting comparing BRINTELLIX with Escitalopram in patients well treated for Major Depressive Disorder and experiencing treatment-emergent sexual dysfunction in the BRINTELLIX. There was a significantly superior change in the CSFQ-14 total score at week 8 compared to the Escitalopram CSFQ-14 is a clinical research instrument score assessment of sexual function.

We believe that the data from this trial showing BRINTELLIX superiority of Escitalopram in improving sexual function in patient well treated for Major Depressive Disorder and experiencing treatment-emergent sexual dysfunction will enable us to offer a new benefit to patients.

As we announced in May, we have entered into an auction agreement with MacroGenics for development in commercialization of a product candidate MGD010. MGD010 incorporates the Dual-Affinity Re-Targeting or the DART platform to simultaneously engage CD32B and CD79B, which boast B-cell surface proteins.

It is expected that the engagement of CD79B enables specific binding to the B-cell surface in the simultaneous action of CD32B inhibit excessive activation of B-cells. It is currently in pre-clinical development for the treatment of autoimmune diseases.

Finally I will introduce a Slide our approval scheduled. You can see, we have already obtained approval this year for ENTYVIO in the US and Europe. With regards in the MLN9708 or ixazomib projected approval timing in the US and Europe for the indication of relapse refractory multiple myeloma has been changed from FY, 2015 to FY, 2016.

Allow me to explain the background to this present patient enrollment has been completed and the trial is ongoing. It is an event driven study of the primary endpoint is progress free survival of PSS [ph] which makes it challenging to predict the precise timing of completion of the study as of now, pace of event is a bit slower than our original projection.

We expect data and submission in FY, 2015 and approval in FY, 2016. This does not mean that there is any problem or concerns with the trial stuff. We are very confident in

Ixazomib and we will diligently pursue our development in order to provide the product to patients with multiple myeloma as soon as possible.

Next, François Roger will be giving you the financial results.

François Roger

I'm François Roger, CFO. Thank you for joining this conference call today. Will discuss today, our financial results for the first quarter of fiscal 2014. We'd also touch on relevant information about our goals, innovation and efficiency initiatives and I will comment how our Q1 results fit into our full year guidance.

I would like to start with few quick notes on our disclosures for result this quarter and going forwards on Slide 1. As we have communicated previously, Takeda now transitions fully to IFRS from this reporting period onwards. Further, we are introducing core earnings as a key profit performance for easier comparability across global peers.

Core earnings use this operating profit and exclude items such as profit share accounting and optimization on impairments, loss of intangible assets, restructuring cost and litigation cost. Core earnings is also measured revenues for mid range guidance for some time and which is also used for short and mid-term management performance and reward.

In addition, we will be disclosing both sales and core earnings on the basis of reported and underlying growth. Underlying only makes two adjustments, one is constant foreign exchange and the second one is removing disposal acquisition and if any, exceptional items.

We believe this underlying growth will give a better and simpler view of our real performance. These concepts are provided in more details in the appendix section. Finally, after having carefully listen to both shareholder and analyst and in order to increase transparency from this quarter onwards, we are now disclosing core net profits, core EPS as well as information about normalized core tax rates.

Slide 2, the items that I will cover today. With that, let's move directly to the key highlights of the quarter on Slide 3. First of all, Q1 result show temporary slowdown in set goals. As a result of specific events this quarter including the Annual Japanese National Health Insurance downwards price revisions as well as reductions of inventories at wholesalers in emerging markets.

As a result, we don't see Q1 as an accurate proxy of our future goals. It is important to note, that this results are fully in line with our expectations and with this announcements, therefore we maintain our full year sale and earnings guidance.

Looking at product performance in Q1, Velcade, Colcrys, Dexilant grew steady while Brintellix started to contribute with sales level in line with our expectations. An example of our innovation includes our breakthrough product ENTYVIO. New biology therapy for UC and CD, which have now begun addressing and met medical needs of patients both in the US and in Europe.

Also projects meet continues to produce strong results including 5 billion yen additional savings generated in Q1 and I will touch on this, in a moment.

Next please look at Slide 5, for a closer look at the factors affecting our revenue specifically this quarter. Significant divestments totaling 6.2 billion yen impacted Q1, such as OTC products in Germany that we sold, as well as a conclusion of certain product license agreements such Edarbi in the US and [indiscernible] in Japan.

Underlying revenue growth stood at minus 0.2% leading to reported revenues of 411 billion yen in the quarter. Please move to Slide 6, looking more closely at underlying revenue growth in Q1. We are satisfied to see solid momentum in new products sales that contributed to revenue growth of 4.3%, while the best business was impacted by the factors that I mentioned and that I've shown on this Slide.

Slide 7, shows underlying revenue growth by region. Here again emerging markets and Japan were impacted by specific events this first quarter. In emerging markets, we had one-off impact for inventory reductions at wholesales.

However, keeping mind that we do confirm that the emerging market revenue growth for the full year is expected to be in double digits as it was last year. In Japan, our revenue growth will be positive if we exclude the impact of NHI price revision. At the same time, we are pleased with a growth of combined ARB family in Japan, Edarbi [indiscernible] combined.

Let's move to Slide 8, emerging market revenues in quarter showed wide range of performances. The temporary weaker growth rate in Q1 was mainly due to distributor inventory optimization. Mainly in CIS and LATAM and lower sales in Ukraine and Venezuela due to the political situation. We actively manage this reduction of inventory levels.

When looking at in-market or ex-distributor revenue in emerging markets. We see that Q1, growth was at high teens according to IMS data at the end of May, which is fully in line with our experience last year.

Furthermore as I mention, we forecast reaching double digit growth in emerging markets on a full year basis, as we did last year. On Slide 9, you'll find performance in Q1 of our top 10 products. The gain, revenues reflects goals of new products. While our best business was impacted by the NHI price revision and inventory reduction in emerging markets.

We are pleased to see the positive development of Lansoprazole plus 7.3%. Velcade plus 8.8% even after having been launched of our dedicated goal and Dexilant plus 8.8% among other else.

So switch from company started in-line Japan as I mentioned, is moving well as both products combined as showing positive growth of 7% year-on-year. Slide 10, looks at the growth of new products with examples of Adcetris and Brintellix.

Adcetris mainly in Europe, continues its strong performance some of the best 12 months and US. Brintellix has grown since launch in line with our expectations. Slide 12, shows the breakdown of expenses for your reference.

Our underlying core earnings were flat versus last year. Slightly better than our expectation due to some favorable timing of expenses. This happened despite, our promotional investment in new products. Looking closer at the individual expense item Page 13. You can see that favorable marketing investments for growth has increased, to support our new products in mainly Brintellix and Entyvio as we announced the beginning of the year.

While we have continued to reduce G&A expenses to bring more efficiencies as part of our project summit. And winter project summit Slide 14 and as I mentioned in the highlight, project summit continues to produce from results. For example in Q1, we included 5 billion yen of additional savings due to this project and we now expect to cumulatively save and estimate it 60 billion yen by the end of the year, fiscal year 2014.

Which means already half of the five-year targets in 2017, which we even increased in May from originally 100 billion yen to 120 billion yen. Slide 15 introduces the additional disclosure we are now providing for tax. We realize that in the past several exceptional items, that have made OpEx situation a little bit difficult to understand.

The reconciliation between reported tax rate and our normalized core tax rate helps to understand the underlying effective tax rates, which actually stood at 32.3% in Q1, 2014. This level of 32% is quite similar to what we have recorded over the last two years and which we show in the appendix.

In general, the normalized core tax rate, this quarter can be considered as a fair proxy for our tax rate excluding one-offs in the short to mid range, we therefore expect our underlying core effective tax rate to be in the low 30s.

Slide 17 gives additional new disclosures and providing transparency. Here you show core EPS, core effective tax rates, core net profits and core EPS. Our core EPS in Q1 have been impacted as we show in the previous Page by one-off tax impacts.

Slide 18, is called what we believe to a strong balance sheet. Moving to Slide 19, the company slight net debt position of total payment of our final 2013 dividends during the period. Overall is a profile of our debt illustrate the satisfactory level of liquidity that we benefit from.

Let's move to page 20, Takeda's CapEx is high in the first quarter, which is mainly related to some specific sizing of CapEx projects. Our operating free cash flow was impacted in Q1 by the unfavorable phasing of payments for operating expenses for CapEx and milestone payment for business development.

In Q1, for example as far as OpEx is concerned we have accumulated the payment of high cost that we book traditionally in Q4. This happens actually every year, so we usually have less cash flow generation in the first quarter of the year for the same reasons.

As a result of this factor, we expect our free cash flow to improve during the full year. Finally I will conclude with Slide 21, was rate reaching our full year guidance. As I said, we consider the full year, 2014 as a year of investment for growth and Q1 as the quarter that is impacted by some temporary headwinds. We don't see as a consequence, Q1 is a good indicator of the rest of the year, which we expect to be stronger.

Now let's open the call up for your questions. Thank you.

Question-and-Answer Session

[Interpreted]

Unidentified Company Representative

Now we would like to entertain questions for the audience. Those who are in the Japanese and English conference you can ask questions because of the time limitation, the number of the questions should be limited to two per person. Please address both of your questions upfront. Thank you for your cooperation.

Operator

We'll have our question-and-answer session now. (Operator Instructions)

[Interpreted]

Unidentified Company Representative

The first question is from Citigroup Securities. Mr. Yamaguchi. Please go ahead.

Hidemaru Yamaguchi – Citigroup Securities

Hi, this is Yama?

Unidentified Company Representative

Yes, go ahead.

[Interpreted]

Hidemaru Yamaguchi – Citigroup Securities

Yamaguchi from Citigroup. My first question is about Brintellix. Since disclosure is not available, but you mentioned seems in plan for $180 million yen for the year, it was the plan and according to the current pace, you're not going to reach that goal, but what's the reason, why you said that missing some of the according to the plan? That's the first question and the second question, is about the financial results.

And this one to Mr. François Roger. In the first quarter especially the revenue is weak, you indicated that, but when you look out the expenses and cost in comparison to the annual cost for the year, the expenses are less. So probably our profit is not so bad, that's the impression, but still you think the performance was not very strong, is because sales was a bit weak and for the cost, you're going to spend more cost, is that reason? Those are two questions that, I would like to address.

François Roger

Okay, regarding Brintellix as I said in, as of the end of June after or let's say roughly speaking about six months of, that was for Brintellix. We are basically nine ways, what we have built in the plan. Usually the amount that we had for 180 million yen for the full year is for 12 months and there is one popular [ph] in the year, it's too early to grow in conclusion. Anything that we could say is that we were close to what we expected in the first six months.

As you can see on Slide 10, the amount of salaries increasing months after months and so we will provide more disclosure, but once again after six months we were in line with our original plan, which the plan led to [Indiscernible] of sales in the full year.

Regarding Q1 as you said, we consider that, the quarter is on the weak side in terms of sales, but once again it is fully in line with what we had built in not only enough plan. So there is no specific concern at this stage. As I describe there were some specific events and one of them being the inventory adjustments in emerging market, that keep on selling this quarter.

As you rightly mentioned, the profit is not so bad linked to the fact that we have less expensive than expected, that being said. We have some exceptional items as well because as you may have seen, we have some write-off of tax 700, for example that we stopped during the quarter, but you're absolutely right, that we said on the weak side, but once again in line with our expectation and profit is slightly better than, what expected.

I would like to be careful there though, I don't want to draw any conclusion in terms of profit for the full year. We wait over the guidance, but we know that there is always might be different phasing during the year, but once again we are confident of reaching our guidance of 224 probably for sales and flat to slightly declining in core and in for the full year.

[Foreign Language]

Unidentified Company Representative

Next question, please? Next please.

Unidentified Company Representative

Mr. Seki from Barclays

[Interpreted]

Atsushi Seki – Barclays Capital

Thank you. I'm Seki from Barclays.

François Roger

He was saying, the line was actually very bad so, we could not hear properly the question, you asked. Could you ask the question again? And sorry about that.

[Interpreted]

Atsushi Seki – Barclays Capital

Are you talking about my first question, should I repeat my last question?

François Roger

Can you repeat both questions because we could not see, there was problem on the line?

[Interpreted]

Atsushi Seki – Barclays Capital

Excuse me, my first question was, can you hear me?

François Roger

Yes.

[Interpreted]

Atsushi Seki – Barclays Capital

Now GSK, has been trying to sell the product to the EPP and I would like to ask you a question regarding your M&A, how those some old product portfolio, do you have any interest in projecting those older product portfolio, that's my first question and then, this week according to the express, there seems to be some change on the full listings expected this week.

I would like to ask you that on your product position listed is it, some way is secured especially I'm interested in the current situation.

François Roger

Okay, regarding the question, regarding natural products from GSK. We don't comment usually on M&A, but I can tell you anyway that this not, an option that we are pursuing the acquisition of the specific product line that you're mentioning and the second question, I'm not aware of any changes that is affecting the product you mentioned in Japan, at this stage.

Unidentified Company Representative

The participants on Japanese line, please ask the questions in Japanese because of the technical conditions. Thank you.

[Interpreted]

Unidentified Company Representative

Next question is from Morgan Stanley MUFG Securities, Mr. Muraoka. Mr. Muraoka, please go ahead.

[Interpreted]

Shinichiro Muraoka – Morgan Stanley MUFG Securities

Good evening, this is Muraoka, speaking. Can you hear me?

[Interpreted]

Unidentified Company Representative

Yes, go ahead.

[Interpreted]

Shinichiro Muraoka – Morgan Stanley MUFG Securities

The delay of 9708, and for the initial and approval timing, the data availability is difficult to predict, is that going to be the first half or second half of FY, 2015. Is the current pattern, when in 2015, I don't think this is decided yet but the – in the interim analysis possibly, you can answer or the submission or approval, that's the first question, regarding 9708.

The second question is about Pantoprazole, according to your plan. It's going to decrease of 12% and it was very weak, but in the first quarter it was actually plus 12% with constant currency 7% to 8%. Is that because your initial estimate was about was consolidated, those are two questions?

[Interpreted]

Unidentified Company Representative

Mr. Muraoka, regarding the question 9708. When the disclosure is going to be available for the data or when the analysis of data is completed, which timing are you talking about?

[Interpreted]

Shinichiro Muraoka – Morgan Stanley MUFG Securities

Both, so when can we have announcements regarding the data, when would be the first announcement from your side to us?

[Interpreted]

Unidentified Company Representative

As I said before, Revinet [ph] plus take plus placebo and they submitted on, plus placebo and take Revinet [ph] plus 9708 those two answer compared as of now, the data is in advantage and the total event incidence is slower than our projection, the various reasons. It is blinded phase, so we don't really know the reason why, at the speed or the pace, where that's slow and in the or the company studies, we've been driven that is sometimes served as of now, we can't tell you exact n timing, when the data will be available.

In fact, at least up to 12 months time frame, we would like to make submission amongst meaning from the original grant, that they will not be beyond 12 months.

[Interpreted]

Shinichiro Muraoka – Morgan Stanley MUFG Securities

Okay, so submission within 12 months, so that means next calendar year in the first half, you will at least have the result.

[Interpreted]

Unidentified Company Representative

No, within FY, 2015. We will be able to file, we will be able submit, that's what I said.

[Interpreted]

Shinichiro Muraoka – Morgan Stanley MUFG Securities

Thank you very much and the second question.

François Roger

Regarding Pantoprazole the performance was good in Q1, we think that we had done better than in terms of trend that what we expect for the full year is largely link to the trend that Pantoprazole is reaching LOE status in some emerging markets. So sales could decline in the future.

It happened that Pantoprazole has been more resilient and what we expected initially. So I would say so far so good, but we can expect maybe more pressure going forward due to some LOE in selective emerging markets.

[Foreign Language]

[Interpreted]

Unidentified Company Representative

Next question, please?

Operator

Mr. [indiscernible] Management Investment. Yes, please.

[Interpreted]

Unidentified Analyst

My first question is regarding Brintellix. Cognitive function improvement seems to be due to more direct effect, not curing the depressive disease. Is this going through a very strong appealing point in medical practice? However, looking at the current data the current curve of the precision number increase, that seems to be too strong. Have you already completed your opening accounts activities in the US?

[Interpreted]

Unidentified Company Representative

I think that your question is actually two-fold. I think, you're talking about managed care, right? From myself, from R&D perspective I'd like to talk about some data, yes.

[Interpreted]

Unidentified Analyst

Wasn't it showing the remarkable differences?

[Interpreted]

Unidentified Company Representative

Not much, that you may be able to pursue indications that are down by the depression, is that what you said? About the data you mentioned, generally speaking in a company with a depression cognitive function, depends. Therefore is a data that, if depression improves then cognitive function also improves, however between Vortioxetine and BRINTELLIX.

As a result of the test, for antidepressant treatment both were effective. There is Brintellix, didn't show the differences in terms of cognitive function treatment. However Brintellix did, therefore Brintellix seems to be having some direct effect onto cognitive function.

However, in terms of promotion or indication, as the data it's not included, therefore in the US. The reps cannot promote it directly, so as of today what we can say is that, when the data is available, but today there it's not currently used in promotion.

[Interpreted]

Unidentified Analyst

I understand and in the future, don't you plan to promote the product using this data?

[Interpreted]

Unidentified Company Representative

We don't have a plan to include this in our indication. However because we could have this very good data, how can we use this data effectively we are going to have to consult with the authorities and with the next to review and decide it.

[Interpreted]

Unidentified Analyst

Thank you very much. May I ask the second question?

[Foreign Language]

[Interpreted]

Unidentified Company Representative

Yes, please.

[Interpreted]

Unidentified Analyst

Second question, is about your alliance with MacroGenics and I would like to ask this question to, Mr. Miyoshi. So it is autoimmune disease relating to B-cells I think a typical one is SRE [ph] it's already introduced looking at website of the MacroGenics, but from more expanded business view point, what kind of other autoimmune diseases that you can possibly consider?

[Interpreted]

Tsudoi Miyoshi

As of today, we'd like to pursue a wide range of diseases. Therefore, it's not specifically limited. As you rightfully said, coming to the we like to pursue all the possible areas. Thank you.

Operator

Next question is from Mizuho [ph] Securities. Mr. Tanaka. Please go ahead.

[Interpreted]

Unidentified Analyst

Tanaka from Mizuho [ph] Securities.

[Interpreted]

Unidentified Company Representative

Please go ahead.

[Interpreted]

Unidentified Analyst

I have only one question. 9708 is now in Phase III regarding the maintenance therapy trial, as long as I see the clinical trial February, 2018 is that right regarding the timing of clinical trial?

[Interpreted]

Unidentified Company Representative

My, micro phone was off, so probably you could not hear me. I said, it started July already during, it would take five years because the primary endpoint is, that we will have interim analysis and based on interim analysis, we can make some initial handouts for timing that you mentioned.

[Interpreted]

Unidentified Analyst

This is comparison against placebo, I suppose Vipdomet. Is often for maintenance therapy according to what I understand and head to head comparison with Vipdomet, is that in your plan?

[Interpreted]

Unidentified Company Representative

Vipdomet, does not have indication for maintenance therapy. For multiple myeloma, maintenance therapy is performed but the standard care is not quite established yet.

[Interpreted]

Unidentified Analyst

And in that sense, how 9708 can be used and be effective for maintenance therapy?

[Interpreted]

Unidentified Company Representative

And that is focused in our comparison data Placebo? Thank you.

Unidentified Company Representative

Next question please?

Operator

This is Mr. Sakai, Credit Suisse

[Interpreted]

Fumiyoshi Sakai – Credit Suisse

I would like to ask you two questions. One is, emerging market sales. In Russia and Mexico, you mentioned about inventory levels reductions affected. In these markets, in order to improve their profitability, do you have already some plan on going and when you say inventory level reductions, what are the reasons behind? Especially, I'm concerned with Russia. Could you give us more specifically, what's happening in those markets?

And looking at Slide 8, in quick note it says please refer to Page 27, but Page 27 shows core EPS. So I think, it's not the right page. If you modify, this later. Please update us. And my second is, regarding your disclosure of core earnings, that's the disclosed from two, you used this for a major performance indicator.

And regarding stock orders contribution. I think that previously the present that the dividend level will be maintained until FY' 2017 and then the payout ratio or how to use cash including all those aspects. Did you come up with the disclosure of core earnings? Just simply showing core earnings is not so meaningful and therefore, I would like to ask this question to someone, the financial expert, please.

François Roger

Okay, let me answer further question on the emerging market, inventory. They want just to reassure everybody the Russian situation has nothing to do with any, political situation in any country from a part what I mentioned in Venezuela or in Ukraine. In the Russia the situation is totally different, we had for some time for several years' rather high level of inventory with wholesalers in Russia and there are two reasons for it.

One of them is a fact that we have moved from exports to local manufacturing as we built a plant in Russia and the transfer required some higher level of inventory. The second one is that we had to change as when in Russia another countries, but in Russia, we did it as well to move the packaging of former Macronic [ph] products to Takeda brand and to do that, you cannot import for some time.

So we had to do, to get additional inventory for some time as well. Now this issues rebranding to Takeda and the establishment of our manufacturing unit behind us. So we can come back to a normal inventory level at wholesalers and we decided, this is something that we managed our sales to bring that level back to market levels.

There is kind of one off to take, which we took in Q1. Mexico is a different situation and there is nothing linked to a new political situation, whatsoever but in Mexico one wholesaler which has a significant market share is having some financial tensions and we decided to have more stringent policy in terms of credit, from a credit point of view and therefore to reduce inventory level globally in the country.

So it's very specific situation, which should come back to normal about time. So these are pure one off that happened in Q1 and they're not likely to happen again in the future. Regarding core earning, this is a performance indicator and indeed, that we have introduced some time.

We just mentioned now, that this is main indicator that we use to communicate externally as far as profit is concerned. This is an indicator that, we have provided as well in terms of medium-term guidance to 2017. We believe it is relevant KPI as well because it allows to benchmark of performance against our competitors and you have mentioning about shareholder contribution.

I want to correct something that you said, we have not provided guidance or any indication in terms of shareholder remuneration and more specifically dividend till 2017. We have only indicated that we would maintain the dividend as it is today in absolute value for the year 2014 and 2015 to be paid in 2016.

We have not provided any indication in terms of remuneration level, after 2015. I – raise the opportunity to mention that shareholder remuneration is something that we value, which is a reason why, we have decided on this dividend which we consider as testing only of the value that we put to shareholder remuneration, given that it is currently equivalent to a yield of about 3.8%, which we consider to be at the identity of the industry.

Unidentified Company Representative

You asked about the Slide number mentioned. It says, CFN express Slide number 27, in fact Slide number 27 and 28 are the only additional information we have about underlying growth. So this should say, please see Slide 27 and 28.

Unidentified Company Representative

Next question, please?

Operator

(Operator Instructions) and your next question is Mr. Tim Race, Deutsche Bank. Please go ahead.

Tim Race – Deutsche Bank

This is Tim Race, here from Deutsche Bank in London. Just I wanted to clarify what you said on Brintellix, it wasn't quite clear on the translation. Are you definitely not filing for a label claim, the sexual dysfunction and the cognition given the bag of dates [ph] that you've got and if you're not filing for that, could you explain why wouldn't be filing for that or do you have [indiscernible] plan and that's all. Thank you.

[Interpreted]

Unidentified Company Representative

It is not to be included in the label, that's our judgment, at present. This data alone is not sufficient to be included in the label. Going forward, how we can use this data in future, whether we would have additional study to support this, we will of course think about that, but this data alone is not strong enough to be included in the label, but this can be a differentiating data.

So including that, we will discuss with the regulators and we will discuss among ourselves, furthermore.

Tim Race – Deutsche Bank

Thank you.

Unidentified Company Representative

Next question, please?

Operator

(Operator Instructions)

Unidentified Company Representative

Thank you very much. It seems there are no more questions. We would like to close Q&A session. Thank you very much. This is end of the conference call today. Thank you very much for your participation.

Operator

Thank you for your check-in time and that concludes this 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 (TKPYY) Q2 2014 Results - Earnings Call Transcript
This Transcript
All Transcripts