Takeda Reports Solid Second Quarter FY2019 Results and Raises Profit Guidance for the Full Year

Takeda Pharmaceutical Company Limited (TOKYO:4502)(NYSE:TAK):

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Underlying Revenue declined -0.2% vs FY2018 H1 pro-forma revenue²

• Takeda’s 14 global brands with reported revenue of 547.0 billion yen in aggregate posted a strong year-over-year underlying growth of +21%, driven by ENTYVIO growing +33.9%, ALBUMIN/FLEXBUMIN growing +16.9%, and NINLARO growing +32.7%, offset by the negative impact of intensified competition and generic erosion.
• Underlying growth in key business areas for FY2019 H1: GI (+9%), Oncology (+11%), Neuroscience (+6%), and Plasma Derived Therapy (PDT) Immunology (+4%), offset by Rare Disease (-11%) due to decline as expected in Rare Hematology.
  • Within Rare Disease, Rare Hematology continues to be impacted by competition and price pressure, and growth in Hereditary Angioedema (HAE) was negatively affected by stocking in the prior year as well as generic entry for FIRAZYR.
  • Immunoglobulin returned to growth as expected in the 3 months of FY2019 Q2 at an underlying growth rate of +7.6% and +3% for H1, over the same period of last year.

Underlying Core Operating Profit Margin of 32.2% for FY2019 H1 with cost synergies and OPEX efficiencies driving margins

• Reported Operating Profit declined -70.7% to 50.3 billion yen, largely impacted by non-cash purchase accounting expenses including unwinding of inventory step-up, increased amortization of intangibles, as well as one-time integration costs.
• Core Operating Profit increased +155.5% to 541.6 billion yen primarily due to the acquisition of Shire, solid performance of 14 global growth brands and improved operating efficiency partially offset by the negative impact of intensified competition and generic erosion.
• Underlying Core Operating Profit Margin for FY2019 H1 was 32.2% reflecting continued OPEX discipline and cost synergies.
• Underlying Core EPS for H1 was 249 yen.
• Investing in future growth by adding 23 plasma collection centers since the closing of the Shire acquisition, acquiring license for first-in-class celiac disease therapy (TAK-101) from COUR Pharmaceuticals, and continued investment in our R&D engine.

Achieved Several Important Pipeline Milestones

• Data presented at World Sleep Congress demonstrated early evidence of efficacy for TAK-925 in Narcolepsy Type 1.
• ENTYVIO head-to-head study and TAK-620 (Maribavir) Ph-2 data published in The New England Journal of Medicine.
• TRINTELLIX approved in Japan for the treatment of depression and depressed state.
• Submitted a Marketing Authorization Application (MAA) in Japan for a subcutaneous formulation of ENTYVIO for patients with moderately to severely active ulcerative colitis.
• 8 potential best-in-class or first-in-class New Molecular Entities (NMEs) in pivotal studies.

Divesting non-core assets to accelerate deleveraging and focus the business

• Paid down 584.5 billion yen of debt and de-levered from 4.7x at end of FY2018 to 3.9x Net debt / adjusted EBITDA as of September 2019. This does not include the sale of OTC and prescription pharmaceutical assets in certain Near East, Middle East and Africa countries to Acino for more than $200 million.
• Negotiations ongoing for further potential divestments.

Christophe Weber, Chief Executive Officer, commented:

“We are pleased with our recent financial results, which reflect strong underlying performance across our 14 global brands and OPEX improvements that has allowed us to raise our guidance. I am particularly encouraged by the rapid de-leveraging year-to-date.
We are also satisfied with the progress of our integration efforts. Takeda employees are excited and engaged around our next phase of growth and our undeniable progress towards becoming one integrated company.
Our excitement around the future of Takeda is also derived from the strength and breadth of our pipeline. We look forward to providing some additional insight and commentary around our portfolio, pipeline, and growth strategy at our upcoming R&D Day in November.”

Reported Results for FY2019 H1 (April - June)

FY2019 Management Guidance: Upgrading guidance to reflect positive business momentum

FY2019 Reported Forecast: Revenue decreasing due to FX impact, but profit increasing

For more details on Takeda's FY2019 Q2 results and other financial information, please visit https://www.takeda.com/investors/reports/

Takeda to Host R&D Day on November 14 in New York, Plasma-Derived Therapies Day on November 15 in Covington, GA, and R&D and Plasma-Derived Therapies Day on November 21 in Tokyo;

At each event, Takeda executives are expected to discuss, among other things, the Company’s near-term and sustained growth strategies and next-generation platforms. Each event will be accessible via a live webcast on the Investors section of the Company’s website: https://www.takeda.com/investors/reports/quarterly-announcements/quarterly-announcements-2019/.
A replay of each webcast will be archived on the website along with the presentation slides associated with each event.

About Takeda Pharmaceutical Company Limited

Takeda Pharmaceutical Company Limited (TOKYO:4502/NYSE:TAK) is a global, values-based, R&D-driven biopharmaceutical leader headquartered in Japan, committed to bringing Better Health and a Brighter Future to patients by translating science into highly-innovative medicines. Takeda focuses its R&D efforts on four therapeutic areas: Oncology, Gastroenterology (GI), Neuroscience and Rare Diseases. We also make targeted R&D investments in Plasma-Derived Therapies and Vaccines. We are focusing on developing highly innovative medicines that contribute to making a difference in people's lives by advancing the frontier of new treatment options and leveraging our enhanced collaborative R&D engine and capabilities to create a robust, modality-diverse pipeline. Our employees are committed to improving quality of life for patients and to working with our partners in health care in approximately 80 countries and regions.
For more information, visit https://www.takeda.com

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Certain Non-IFRS Financial Measures

This press release and materials distributed in connection with this press release include certain IFRS financial measures not presented in accordance with International Financial Reporting Standards (“IFRS”), such as Underlying Revenue, Core Operating Profit, Underlying Core Operating Profit, Core Net Profit, Underlying Core EPS, Net Debt, EBITDA, Adjusted EBITDA and Free Cash Flow. Takeda’s management evaluates results and makes operating and investment decisions using both IFRS and non-IFRS measures included in this press release. These non-IFRS measures exclude certain income, cost and cash flow items which are included in, or are calculated differently from, the most closely comparable measures presented in accordance with IFRS. By including these non-IFRS measures, management intends to provide investors with additional information to further analyze Takeda’s performance, core results and underlying trends. Takeda’s non-IFRS measures are not prepared in accordance with IFRS and such non-IFRS measures should be considered a supplement to, and not a substitute for, measures prepared in accordance with IFRS (which we sometimes refer to as “reported” measures). Investors are encouraged to review the reconciliation of non-IFRS financial measures to their most directly comparable IFRS measures.

Further information on certain of Takeda’s Non-IFRS measures is posted on Takeda’s investor relations website at https://www.takeda.com/investors/reports/quarterly-announcements/quarterly-announcements-2019/

Reconciliation from reported revenue to underlying revenue growth presented in accordance with IFRS are included as an appendix to this document.

Medical information

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Financial information

Takeda’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). The revenue of Shire plc (“Shire”), which were presently, presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), have been conformed to IFRS, without material difference.

The Shire acquisition closed on January 8, 2019, and our consolidated results for the fiscal year ended March 31, 2019 include Shire’s results from January 8, 2019 to March 31, 2019. References to “Legacy Takeda” businesses are to our businesses held prior to our acquisition of Shire. References to “Legacy Shire” businesses are to those businesses acquired through the Shire acquisition.

This press release includes certain pro forma information giving effect to the Shire acquisition as if it had occurred on April 1, 2018. This pro forma information has not been prepared in accordance with Article 11 of Regulation S-X. This pro forma information is presented for illustrative purposes and is based on certain assumptions and judgments based on information available to us as of the date hereof, which may not necessarily have been applicable if the Shire acquisition had actually happened as of April 1, 2018. Moreover, this pro forma information gives effect to certain transactions and other events which are not directly attributable to the Shire acquisition and/or which happened subsequently to the Shire acquisition, such as divestitures and the effects of the purchase price allocation for the Shire acquisition, and therefore may not accurately reflect the effect on our financial condition and results of operations if the Shire acquisition had actually been completed on April 1, 2018. Therefore, undue reliance should not be placed on the pro forma information included herein.

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