Takeda Pharmaceutical Co Ltd (TAK) 2020 Q3 法說會逐字稿

Good day, everyone, and welcome to the conference call of Takeda Pharmaceutical Company Limited.

(Operator Instructions)

Now we start the conference.

Mr. Okubo, please go ahead.

Thank you.

Thank you very much for your participating in the conference call today.

Before starting, I would like to remind everyone that we will be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those discussed today.

The factors that could cause our actual results to differ materially are discussed in our most recent Form 20-F and in our other SEC filings.

Please also refer to the important notice on Page 2 of today's presentation.

Now let me introduce today's presenters and the panel.

Mr. Costa Saroukos, Chief Financial Officer; and Dr. Andrew Plump, President of R&D.

First, we would like to start with some opening remarks from Costa.

And after that, we will have a question-and-answer session.

Today, we also take questions via e-mail.

Please send your questions to Takeda's IR contact e-mail or your IR contact person during this session.

So Costa, please go ahead.

Thank you, Takashi.

Hello, everyone.

Thank you for joining this Q&A call with Takeda.

Before we open up for questions, let me briefly explain some highlights of our solid year-to-date financial performance.

Revenue was JPY 2.519 trillion, growing 82.6% versus prior year with the addition of revenue from Shire.

Compared to a pro forma baseline of Takeda plus Shire, underlying revenue growth was minus 1.2%.

We saw continued strong performance from our 14 global brands, which grew at 20% year-to-date.

In particular, ENTYVIO, TAKHZYRO, NINLARO, GATTEX and our subcutaneous IG products all performed very well.

Although revenue growth was negative for the first 9 months, this included the impact of stocking in the prior year.

And I want to remind you that Takeda conducted an extensive inventory harmonization in quarter 4 of fiscal year 2018.

This aligns Shire inventories with Takeda's lower days on hand policy.

Therefore, we expect revenue growth to recover in quarter 4 of fiscal year 2019.

And we remain committed to flat to slightly increasing revenue for the full year.

Core operating profit was JPY 792.2 billion, growing at 129.9% year-on-year, and the core operating profit margin increased by 6.5 percentage points to 31.4%.

This was driven by cost synergies and OpEx efficiencies.

The integration of Shire continues to be a great success with talent selection now complete for 98% of employees, and many large multifunction sites moves were completed at the end of 2019.

We also remain focused on our target of annual recurring cost synergies of USD 2 billion by the end of fiscal year 2021, and the current speed of synergy capture is moving ahead of initial plans.

Previously, we indicated that we would reach a run rate of 70% by the end of next fiscal year, but now we are tracking towards achieving 80%.

These synergies will contribute to further driving us towards top-tier margins in the medium term.

Year-to-date, reported EPS was JPY 27, impacted by large onetime and noncash items, including purchase accounting and integration costs.

And core EPS was JPY 360, an increase of JPY 24 versus the prior year.

Finally, free cash flow was JPY 745.7 billion or approximately USD 6.8 billion, with strong operating cash flow supplemented by divestiture income.

As of December, our net debt to adjusted EBITDA ratio is now 4.1x, which is slightly higher than the previous quarter, as expected.

And this is because we paid for the full year dividend and tax on proceeds from the divestment of Xiidra.

Moving forward, we may continue to see quarter-to-quarter fluctuations but we remain absolutely committed to achieving our target of 2x within the fiscal years ending March '22 to March 2024.

As a result of our strong business momentum as well as fast -- faster-than-expected realization of synergies, we confirm our full year underlying revenue guidance of flat to slightly increasing.

We raised our guidance for core operating profit from JPY 930 billion to JPY 950 billion, and we increased our guidance for underlying core EPS to JPY 385 to JPY 405.

Furthermore, we now expect positive reported operating profit for the year, having completed the purchase price allocation for Shire.

In closing, we are very pleased with the year-to-date results.

It reflects our strong performance across our 14 global brands as well as synergies and OpEx improvements, allowing us to raise guidance again for the full year.

Going forward, we remain committed to our financial targets, focusing on revenue growth, synergies and margins, divestitures, rapid deleveraging and shareholder returns.

That concludes my opening remarks, and we will now open the lines for Q&A.

Thank you, Costa.

We would like to move on to the question and answers.

(Operator Instructions) The first question is from Mr. James Gordon from JPMorgan

This is James Gordon from JPMorgan.

Three questions, please, and maybe it's easier if I ask them one by one.

So one question is on ENTYVIO and 2 are on immunoglobulins.

So the first question was just for the outlook for ENTYVIO and potential for more competition.

So I heard the call earlier, the plan for it to be $4 billion to $5 billion product.

But what does that assume about competition from Roche's etrolizumab?

I know that's another integrated targeting therapy, and we get Phase III data there pretty soon.

And maybe there are some differences because their product hits both integrated subunits and if both products are subcu, they're products maybe is more convenient because it could be monthly versus biweekly.

So what are you thinking about competition there, please, is the first question?

Thanks, James.

Do you mind just asking all 3 questions first?

If you don't mind, just for the process...

Sure.

Yes, the second question was immunoglobulins.

And so you guys commented about high single-digit growth for the franchise for the remainder of the year.

And it seems that the immunoglobulin market is growing very quickly, or at least for the other big players, it seems to be growing very quickly.

So it looks like for Grifols and CSL, it's probably low double-digit growth.

So the question would be, are there constraints to the newer growth?

Or could it actually be that once we go beyond the next quarter, and you've got 2 subcu products as well, could you actually accelerate to double digit?

Or would there still be some factors to bear in mind when we think about what the medium-term immunoglobulin growth rate would be?

And then the third and final question would be just -- we'd be interested in thoughts about the Momenta data.

So at the JPMorgan conference a couple of weeks ago, they had some -- it was early data, but interesting data for this product hypersialated immunoglobulin.

And that might mean that you can take immunoglobulin and make it much more active in terms of turning up peoples' immune systems.

So you might need a much small amount of immunoglobulin.

So is that something that you actually think is likely to come along?

Is that a big competitive threat?

And just can you remind us what you're thinking about sort of next-generation or recombinant products on immunoglobulin, how to think about them, please?

Thank you, James, for the question.

Maybe I'll answer the first 2, and then I'll pass it over to Andy for the third question.

So with ENTYVIO, we're very encouraged with the overall performance year-to-date.

It's our fifth year of launch.

We're growing every quarter.

Last quarter, quarter 2, year-to-date growth of 34%.

Quarter 3, year-to-date is 35%.

We're seeing significant growth in the U.S. and mainly in Europe.

We also have launches in Japan last year, and now we expect launches in China for ENTYVIO.

The market share continues to grow.

We're convinced that our peak sales will be JPY 4 billion to JPY 5 billion, so no changes to the peak sales of ENTYVIO.

In fact, when you look at even the total market share, we're still sitting at around 18% to 19%.

So there's still significant opportunity overall.

Regarding PDT, we did say that when -- your question was more around the high-digit single growth and any constraints in general.

I'm happy to present that we are -- in the first quarter of this fiscal year, we did have some challenges on supply, and our growth was negative 1.9%.

But each quarter that we go by, we're starting to ramp up the overall productivity and consumption.

So we're seeing that in quarter 2, our immunoglobulins were growing at 3%, and then overall in quarter 4, growing at 4%.

So we do expect the ramp-up of production in Covington plant, which gives us the confidence that by the end of the year, we expect to have a high single-digit growth for the remainder of the fiscal year.

Over to Andy for the question 3.

Yes.

Great.

Thanks, Costa.

Andy Plump, Head of R&D.

So the -- on your third question with regards to the hypersialation that Momenta is taking, I mean, firstly, it's early days, but the data look interesting and certainly builds off of the hypothesis that has emerged over the last 10 or 12 years regarding the mechanism of action for immunoglobulin's anti-inflammatory effect, which has been somewhat of a black box.

I'd say that -- a couple of points: One is that there's still a lot for us to understand with respect to the role that hypersialation plays in inflammatory diseases and whether this approach will stand across the spectrum of disease that IVIG currently works in.

The second is that the approach that requires plasma-fractionated immunoglobulin, of which we're one of the world's largest producers, and so if the approach has merit, has the potential to either increase efficacy of immunoglobulin or reduce dose, I think that would be something we would be very interested in looking at as something to -- simply to advance our own fraction.

So it's something that we're looking at really closely.

Scientifically, there's a lot of momentum and excitement around this, but I think there's still a lot that needs to be worked out.

We look at it less as a competitive threat, more as an opportunity to advance a field that, right now today is supply-limited.

Maybe Costa, if I can, just going back quickly to the ENTYVIO and adding to your comments on the competitive landscape.

So I'm quite excited actually about etrolizumab and to finally see, after all these years, what becomes of the dual inhibition of alpha 4 beta 7 and alpha-e beta 7. I think it's still an unknown as to whether the dual activity of etrolizumab will be negative, will be neutral or it will be positive.

And it's something that we'll have to look at very closely.

Of course, it will be very difficult in a field where the endpoints are quite crude in a cross-steady comparison to know if it's better or worse or the same.

The likelihood is that it will be in the ballpark.

I think we're very confident in what we've learned and what the world has learned about ENTYVIO over the past 6, 7 years since it was launched in 2014.

We have over 300,000 patient years of experience.

We have not just the study that Costa referred to, pivotal studies, but we also have an extensive data set of real world evidence, and it's a medicine that physicians and patients are becoming quite comfortable with as an emerging frontline therapy.

So I think overall, etrolizumab, hope it works and I think will be great for patients.

And I think it will overall help to propel the class even further.

So next question, please.

Next question is from Mr. Trevor Polischuk.

It's Trevor Polischuk from OrbiMed in New York.

Costa, 2019 so far has been a pretty impressive array of beaten races through the first 3 quarters so far.

I guess the question is, overall, would you say that it's been mostly due to a too conservative outlook in the guidance back in May?

Or would you ascribe it to better-than-expected operational execution in 2019?

I guess part of the reason for the question is to understand how 2020 may play out from a guidance perspective later this spring.

And as a follow-on to that question, can you talk about some of the pushes and pulls that we should be thinking about that may impact 2020 numbers?

Right.

Thanks, Trevor.

Great question.

So yes, 2019 was an extraordinary year.

We had pushes and pulls from, first and foremost, the inventory harmonization that we announced in quarter 4. So we had to harmonize the inventory to the levels of the Takeda, from legacy Shire to legacy Takeda.

At the same time, the impact of such a large acquisition, from an operational standpoint, we increased our guidance on the synergies from $1.4 billion to $2 billion.

But we've been -- we've basically impressed ourselves on how fast we've executed on, one, bringing the organization together where we've already announced 98% of the organization by December year-to-date.

The only 2% left is predominantly the global shared service organization in finance where we're consolidating.

So -- and that will be done by the end of March this fiscal year basically.

So we're very encouraged with the progress, the relentless execution on our integration.

And at the same time, overall, we -- I think with the 14 global brands that we've identified as key for our growth engine beyond the R&D pipeline to support the growth -- sustainable growth, we're seeing the 20% mark of growth each quarter and each quarter and year-to-date.

So we're quite impressed with the overall global brands' performance.

That being said, we also have some challenges.

The hemophilia, we knew about, but the competitive landscape is getting tougher.

But it's all been factored into our original assumptions, but -- and at the same time, we had the challenges of the NATPARA U.S. recall.

So we were putting it all together.

It's a tough year -- it's a challenging year, but we're very -- actually, we're very proud that we've been able to put the whole integration behind us now.

And we're performing as One Takeda and setting the foundation for 2020.

Now for 2020, what are the key puts and takes?

So one thing would be, we'll be clearer when we come out in 2020 on our position on VELCADE in the U.S. Now of course, you may know already that VELCADE in Europe has a generic competition, and as a result, you can see that the royalty income we've -- is declining significantly.

But at this stage, it's too premature to put a stake in the ground and determine what our position will be on VELCADE.

But nevertheless, what's important is we're very convinced on the overall business, the 14 global brands, the rich pipeline.

And one last comment around the 14 global brands, we have communicated in this earnings presentation that we do not expect any revenue for NATPARA in the U.S. for 2020.

So when you're doing your modeling, that is something you'll need to factor in.

Okay.

Next question, please.

The next question is from Mr. Umer Raffat of Evercore.

I wanted to focus on 2 topics, if I may, first, perhaps on your TAK-788 program.

And my question was, any protocol updates you've incorporated to improve the diarrhea findings of your earlier trial as well as -- I know there was a Cohort 4 in your ongoing Phase I/II, which had T790 mutant.

Can you speak to any early activity you're seeing there?

And I'll follow-up.

I can take that.

You can take than, Andy.

So 2 questions on 788.

So the -- so you may have seen at the R&D day in November, we presented some subset analyses from the Phase I/II experience with 788 where we looked at cohorts that had experienced higher degrees of GI-adverse events, including diarrhea versus those that didn't.

And almost as expected, given that when you experience significant GI effects, the likely path forward is to discontinue therapy.

And so as you'd expect, patients who had less GI toxicity had significantly greater -- clinically significantly greater endpoint progression-free survival.

The subset that had no GI tolerability issues had a progression-free survival of over 12 months.

So the answer to your question is yes, we did in our Phase II study and then also in the Phase III study, which has just started, have implemented measures to help patients reduce the burden of GI-adverse effects.

There's a number of supportive therapies and dosing with food that you can do to really mitigate that effect.

And so our expectation is that the effects that we saw in the overall population in the Phase I study will be significantly greater as we start to see results from these longer-term studies, the Phase II study and in the frontline Phase III study.

The next question was about the additional arms that we ran in the Phase I study, looking at populations beyond the Exon 20 populations.

And there are a couple of interesting populations that we're now looking at in more detail.

One are the resistance populations outside of Exon 20 and the other are looking at Exon 20 in a function mutations but not an EGF receptor in HER 2. So we haven't reported data from either of those populations yet.

That's something that we'll look to present at a conference perhaps later this year.

Got it.

And also if I may, I saw you guys recently initiated a trial of your vonoprazan regimen in H. pylori versus quad.

And I was kind of puzzled because I wouldn't normally expect vonoprazan to beat quad.

But I also noticed instead of a 7-day duration, which is typical for Japanese trials on H pylori, this one's 2 weeks, which sounds more similar to a western population.

So I just wanted to understand the thought process behind the trial initiation.

Was it a regulatory requirement?

And also we know that a bismuth-based quad is very strong in clarithromycin-resistant patients.

And my question was, I couldn't tell if clarithromycin-resistant patients are included in this trial or not.

Would really help.

I think, Umer, you're talking about the U.S. and EU trial that's now being run.

And that's actually -- it's not Takeda's trial.

That trial -- the IND for that trial belongs to a company called Phathom, which is now a publicly traded company, Takeda outlicensed rights to vonoprazan, the U.S. and EU rights, to Phathom.

And we have a very substantive equity stake and milestones and royalties coming back to us, but we're not responsible for that study.

That's something you have to go to Phathom with.

We would like to move on to the next question.

The next question is from Mr. Seamus Fernandez of Guggenheim Securities.

So Seamus Fernandez from Guggenheim Securities.

Just a couple of quick questions on the developments in the factor VIII market.

Could you guys just sort of give us a general sense of where you think the floor is developing or likely to develop for ADVATE in the ADYNOVATE market?

Obviously, the decline that we're seeing, I think, isn't too surprising in the context of the competitive landscape.

But just wanted to get a better sense of where your team sees that sort of developing out.

And then if you wouldn't mind just talking about your thoughts around the competitive landscape and your own efforts in gene therapy, specifically in the factor VIII and factor IX markets developing going forward?

Maybe I'll take the first one.

And Andy, you can talk about the gene therapy piece.

Overall, you can see, we -- when we made the acquisition, our modeling already assumed a significant impact on the ADVATE and ADYNOVATE.

And when we're rolling up the year-to-date numbers, they're pretty much aligned to our internal forecast.

So -- and that resonates also with the purchase price accounting as well that we completed in January from an intangible assets perspective overall in the scheme of the total size of the acquisition was a variance in intangible values of only less than 3%.

So if you look at quarter 2 year-to-date, ADVATE -- and quarter 3 year-to-date, ADVATE growth is pretty much -- it hasn't moved.

It's around 17%.

And then with ADYNOVATE, we're still seeing growth of low single digits, 4% to 5%, low to single and mid-digit.

And we're basically realizing that the growth and the impact from the competitors, it differs based on the region.

So we're seeing less impact on ADYNOVATE in Europe, whereas we're seeing more so in the U.S., broadly speaking, but overall, aligned to internal expectations.

Maybe I'll hand it over to Andy to talk about the gene therapy space.

Yes.

Great, Costa.

So Seamus, maybe I can clarify your question.

Are you asking our thoughts on the competitiveness of gene therapy to the overall factor VIII market?

Or are you asking specifically Takeda's competitiveness in factor VIII therapy?

It was actually both, frankly.

It was a little bit of a dynamic of how you see the market developing?

And then also your own internal developments moving forward.

Yes.

I suspected you were looking for both.

So obviously, we're all -- the whole ecosystem is incredibly enthusiastic about gene therapy and where -- we as well.

And in fact, in November, when Dan Curran is leading the R&D group for rare diseases, presented our rare disease strategy.

We talked about our long-term focus, which is almost exclusively in gene therapy.

We're quietly building a very deep infrastructure internally.

We have a manufacturing plant out in Austria that's as large and incredible as really any in the industry today for AAV and other viral asset-based gene therapy vectors.

And we've got an early pipeline, it's earlier than many that are out there, but an early pipeline that's really, really moving forward nicely.

But with respect to hemophilia in factor VIII specifically, we're behind.

We have a Phase I program that's probably at this point, at best, third or fourth in class, where we're realistic in terms of what the potential of that program is relative to the lead programs.

We haven't given up on it yet.

We're still dosing patients and trying to understand what the profile looks like.

There's still an immense amount that needs to be understood and learned in this space.

We're talking about still only tens of patients who've been treated through the development programs of some of our competitors.

So there's still an immense amount that needs to play out in terms of durability, safety, et cetera.

Our focus longer-term won't be to try to ram this into a competitive marketplace, but really to look for differentiation potential.

And as an example of that, we're looking at approaches to reduce baseline immunity to AAV.

So we're developing a number of different approaches that could be used together with a gene therapy vector like our lead program, TAK-754 to do 2 things: one is to dose patients at baseline who have neutralizing antibodies; and then secondly, to read those patients who've already received a first dose with an AAV vector.

So that's something that's in our line of sight.

I think dialing up to the broader question about the competitiveness of gene therapy, I think as you project out for some period of time, I'm a believer that this will be the best standard of care that will dominate the treatment paradigm.

I don't think, though, that, that's going to be in the next 2, 3 or 5 years.

I think that's a 10-plus year aspiration.

No, what you find with these patients is that there's an immense amount of "brand loyalty".

These patients who are doing well with infusion therapies don't like to switch from those infusion therapies.

So the idea of jumping immediately to the unknowns of gene therapy, you'll divide your patient population.

Some patients will be quite willing to do that, and I think a large percentage of patients will wait and see.

And that transition will likely occur over a longer period of time.

Thank you very much.

So we are waiting for the question from the audiences, but we got a couple of email questions.

The first one is about the NINLARO MM4 data.

Did you do file the NINLARO MM 4 to the FDA, or needed to wait for overall survival data?

That is question one.

And another question is, Costa mentioned faster-than-expected realization of synergies.

Can you give some examples of what is moving faster?

Could you -- could there be an increase from $2 billion?

These 2 are the questions sent by e-mail.

Okay.

Thank you for the questions.

Maybe the first one we'll get -- Andy, if you can follow-up on that one.

And then I'll do the synergy one.

Yes.

Takashi, would you mind repeating the first question?

I had difficulty hearing it.

Yes.

Sorry about that.

Will you file the NINLARO MM 4 data to the FDA?

Or we do need to wait for overall survival data?

That is the first question.

We're in the process of having a dialogue with the FDA to understand their expectations in terms of the package.

For MM 3, we were asked to wait to file on the data set until we had an overall survival trend, the data for MM4 were more robust than what we saw for MM 3, whether or not the FDA will require us the same mandate as an overall survival trend is something that we are going to have to discuss with them.

And we haven't come to a resolution yet.

Thanks, Andy.

And regarding the question two was the faster realization of synergies?

And will we increase the synergy target beyond $2 billion.

So in my communication today and in the IR deck, you'll see that we've highlighted the fact that based on faster integration and implementation, we were keeping the $2 billion.

But the synergy deliverable or synergy capture, the run rate moves from 70% in the first 2 years to 80% in the first 2 years.

And what gives us the confidence of delivering that?

Well, firstly, the org design and implementation of the final organization has been -- we're at 98%.

So we've delivered 98% talent selection, again with a balanced -- just with the shared service organization lift, which we will complete in March.

We're seeing all major site location decisions are being made.

In particular, the Zurich, the regional offices in Zurich, we're consolidating the shared service organization in Bannockburn, Exton and also [Warsaw], Poland and Ireland.

So from a location -- site location, that's the big locations have been already addressed.

And now we have 87% of decisions of the commercial locations across 67 countries have also been made.

So we're executing on that.

We also rolled out in June of last year a partner value summit, where we brought together 40 of our largest suppliers between legacy Takeda, legacy Shire, we negotiated within 1 week with all those 40.

And we were able to walk away with agreements with -- on updated contracts, which delivered synergy savings based on improved terms of $200 million.

On top of that, it was -- we also were able to improve our payment terms where we were able to unlock over $200 million of cash.

So yes, we are impressed with the speed.

At this stage, it's too premature to say will we increase the synergy.

What I can say, though, is the $2 billion -- what's important is that the $2 billion target, we're getting there faster, and it would be delivered on the bottom line to help improve margins and get us to mid-30s to being a top-tier -- in the top-tier pharmaceutical industry.

We are waiting for the next question, please.

The next question is from Mr. Umer Raffat of Evercore.

Andy is going to hate me by the end of this call.

My follow-up was actually on your CD38 engineering toxin body.

And my question really was, couple of things: One, where are you with dose escalation right now?

What type of dose level are you at?

And what would be the plans for data disclosure possibly this year?

And are you expecting, Andy, any activity in DARZALEX refractory patients?

No, Umer.

We love you.

We'll never hate you.

But actually, I'm glad you asked another question because I realized afterwards that your -- in your previous questions about vonoprazan, you're probably referring to a trial that we have, that Takeda owns the IND for in China.

So if that's the case, actually, our IR team can get back to you with the details on that response.

With respect to the 169 program, so that's a partner program with molecular templates, which as you know, it's a CD38 antibody, like DARZALEX with actually an idiotype that is distinct from DARZALEX.

So in other words, the antibody recognizes a different antigen on CD38, the different epitopes than DARZALEX.

So it's not actually competitive with DARZALEX.

In addition to the antibody, there's the Shiga-like toxin A, a conjugate that will do 2 things: One is it will drive receptor internalization; and then the second is that once that receptor is internalized, issues like toxin A has cytotoxic effects on the cell.

So now, in answer to your question, we're very early in the dose-escalation process.

There are some complexities around manufacturing.

It's not uncommon with ADCs.

We're in the process of working through.

And it's a program that's actually led up until proof-of-concept by molecular templates.

So we're involved in a joint development committee, but the primary decision-making is made by molecular templates.

And then as you can imagine, based on the explanation of the pharmacology of the antibody, we would absolutely expect to have the potential for activity in DARZALEX-resistant or refractory patients.

So the only -- the key would be to -- in those patients, to ensure that you have persistent CD50 expression of cell surface.

If we do, then, at least in our preclinical models, we've seen activity in DARZALEX in terms of savings.

So we are waiting for the next question.

The next question is from Mr. Ken Cacciatore of Cowen & Company.

Costa, just real quick, one question on housekeeping.

Just taking your guidance, looks like Q4, you have down pretty substantially quarter-over-quarter.

Just wanted to make sure that's just the U.S. high deductible resets.

I just want to make sure I understand some of the dynamics there.

And then strategically, you're really deleveraging very well.

And obviously, Shire is less of a growth acquisition and really more inexpensive company, a lot of cash flows.

As you're deleveraging so quickly, and I'm not looking to scare your investor base, but might you be in a position to get a little bit more offensive in terms of assets you would like to potentially add and buy?

I know you're still shedding some of your noncore assets, but we do -- as we look forward, there still are some duration issues with the combined organization.

So wondering if now is the time that you start thinking of kind of smaller, more offensive acquisitions to leverage off of your footprint.

And then lastly, for Andy, just an update on the dengue filing.

Thanks, Ken.

Just sorry, I need you to ask the first question.

We didn't quite hear you.

We heard the deleveraging one but we didn't...

Yes.

The first question was just the -- is there a seasonal weakness in Q4?

You have a really big down quarter-over-quarter implied off of your guidance given your year-to-date.

So just wanted you to talk through Q4 a little bit.

And then did you hear my deleveraging question?

Yes, yes, I heard that.

So let's talk about the -- maybe we will start first with the seasonal impact.

So typically, quarter 4 and second half of the year, firstly, there's -- we do invest more.

Typically, legacy Takeda spends about 10% more in the second half of the year than we do in the first half of the year.

So from an OpEx investment standpoint, we believe that will continue this fiscal year.

On the revenue side of things, there's a few things that are moving here.

Firstly, on the loss of exclusivity in the U.S., we have a number of products that are coming off -- that have already come off-patent in the U.S. But they mainly happen in July.

So ULORIC, for example.

And so we're seeing the ramp-up of the erosion picking up there.

Thirdly, we don't have any further sales expected from NATPARA for this fiscal year, again, also for 2020.

So when you combine those pieces, we do see that there is that sort of reduction in the run rate.

Regarding deleveraging, it's one of our key metrics.

If you wanted to summarize the financial metrics for Takeda, there are 3 things I want you all to remember that we're committed to.

Firstly is driving synergies.

So we said we're going to drive the synergies to $2 billion to help improve our margins to mid-30s.

We're relentlessly going after that.

The second financial commitment is deleveraging.

We said we're going to get to 2x net debt to adjusted EBITDA in 3 to 5 years, and we are relentlessly chasing that.

So we're at 4.7% in the beginning of the year.

Now we're at 4.1%, up slightly because of the Xiidra cash taxes and full year dividend payout.

But this is important.

So that's driving the synergies and margins and delevering to 2x net debt.

And the third one, the third financial metric is the divestiture of noncore to get to the $10 billion, of which we're already sitting at around 55% of that $10 billion mark.

Those 3 are critical.

We're prioritizing that, and we're not going to move away from that.

Now when it comes to small, opportunistic deals and especially when it comes to the R&D structure and strategy, we are continuing to buy assets.

And that will continue.

And that's already part of our financial criteria and metrics.

So there's no impact there.

So that will continue.

Recently, the MD Anderson one was an example of that.

And we'll continue to do that when it's first, potentially first-in-class and best-in-class assets.

Over to you, Andy, on the dengue.

Thanks, Costa.

Ken, so you're familiar with the current state of dengue in terms of what we've disclosed, I'm sure.

It's obviously complex given all of the considerations, both scientifically and geopolitically.

We're in the process of looking at 2-year data now from the TIDES trial.

We haven't seen those data yet, but those will be coming very soon.

And our plan is to continue to look at the overall efficacy profile, which has been quite strong, very strong in 0-types 1 and 2, reasonably strong for 0-type 3. And then we've had insufficient cases to really understand the efficacy for 0 type 4. We're also obviously very closely looking at safety issues, particularly in 0-negative patients, and particularly in patients who are 0-negative who go on to develop a type 3 infection.

To date, we haven't seen any increased incidents, any signal of any safety issue in the time period, but it's obviously something that extended the exposures that we're continuing to look at.

So our intent -- and this is very dynamic, and given all the different orthogonal complexities.

But our intent still is to file in FY 2020, probably more towards the end of FY 2020.

We have one more question.

Please go ahead.

The next question is from Mr. Seamus Fernandez of Guggenheim Securities.

So just 2 quick questions.

Just on ENTYVIO, can you update us on the subcu formulation?

You are submitting in Crohn's disease.

So obviously, that's advancing.

But I just wanted to get a sense, are you thinking about UC CRL from FDA as a 2-month resubmission or a 6-month resubmission?

It specifically states that there's no data requested here, and it sounds like it's more just a labeling discussion more than anything.

So just love to know how you're thinking about the time lines there for the resubmission.

And then just in terms of the development in Japan around the GSK PRIMA study.

Is there an opportunity to utilize the PRIMA study in Japan?

Or is that a study that -- or via bridging study?

What are the opportunities that you see with the PRIMA study opportunity in first-line maintenance ovarian cancer going forward?

And maybe you could just give us a couple of views on where testing is in that market for BRCA1/2 and if testing is any hindrance to the uptake of other products in that market like LYNPARZA.

Andy, do you want to take those two?

Sure, Costa.

So, Seamus, on ENTYVIO, the -- so the -- so we have completed both the UC and the Crohn's subcutaneous studies.

And both studies were positive and hit it on the primary endpoints.

We submitted the UC study.

We haven't yet submitted the Crohn's study.

For the UC submission, we've received, as we've discussed, the complete response letter.

We've made the decision to hold off on submission of the Crohn's file until we have a better understanding of what our path is to resolving the CRL for UC.

So Crohn's is on a holding pattern until we understand the issues and the path forward for UC.

With respect to then that path forward, the CRL, not to go into this in great detail, but there were issues both with the device and with the labeling of the device.

It's not just a simple labeling issue.

There are other concerns that the FDA had that we're in the process of understanding.

And until we have a better understanding of some of the root causes which, as Costa mentioned in the presentation, should be in the first half of this calendar year, it's hard for us to know what that time line to resolution will look like.

So we'll have more details and a better directional sense for timing by mid-calendar year 2020.

With respect to the niraparib question.

There's 2 parts.

One is with respect to BRCA testing in Japan.

And actually, I don't have a really deep sense for the standard of care for BRCA testing in Japan.

So that's something that either one of the guys in the IR team might be able to help you with or we can get to you in a sense offline.

But with respect to the -- our ability to leverage and harmonize global data sets for registration in Japan, the answer is absolutely.

So we've been very proactive and significantly ahead of schedule in terms of submitting both the maintenance and -- both for maintenance and induction for ovarian cancer with these parts in human patients that have homologous recombination deficiencies.

So absolutely, we've been very effective in leveraging the global data sets and the small studies that we've been running in Japan.

In fact, we've now submitted both for the maintenance and for the induction indications.

Thank you.

Thank you, everyone.

Now we would like to end this conference call.

We would like to express our sincere appreciation for your taking the time tonight.

And thank you very much for your continued interest in Takeda.

Have a good night, and have a nice rest of the day.

Thank you, everyone.

Thank you.

Thank you for -- your taking time, and that concludes today's conference call.

You may now disconnect your lines.

Thank you.