Takeda Pharmaceutical Co Ltd (TAK) 2020 Q4 法說會逐字稿

Thank you very much for your participating in the conference call of 2019 financial results of Takeda Pharmaceutical Company today. My name is Takashi Okubo, Global Head of Investor Relations.

Before starting, I'd 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.

Now let me introduce today's participants from Takeda: Mr. Christophe Weber, President and CEO; Dr. Andrew Plump, President of R&D; Mr. Costa Saroukos, Chief Financial Officer; Ms. Ramona Sequiera, President of U.S. BU and Global Portfolio Commercialization; and Ms. Julie Kim, President of Plasma-Derived Therapies Business Unit. First, we would like to start with some opening remarks from Christophe and the brief comments from Costa, then we will have a question-and-answer session. Christophe, please go ahead.

Thank you, Takashi, and good morning, everyone. Thank you for joining us. I would just say that we are very pleased and proud of what we have achieved in 2019 at the time of a huge integration. In our long history, we have been able to do this integration. We have been operating as One Takeda back in December. So in a way, we are very fortunate that we could do this integration at the speed that we did so that we were operating as One Takeda before the coronavirus crisis started in January. And we were able to do this integration and at the same time, keep our business momentum and deliver on our commitment, and Costa will elaborate more.

When it comes to the COVID-19 crisis, we have been acting on it very early on in January. We have been fortunate to have in-house infectious disease experts and epidemiologists and public health experts. So we have really looked at keeping our employees safe, at the same time, to maintain our business continuity, especially on the supply. And we have had no supply disruption, and we don't expect supply disruption.

And on the other hand, we are working very hard to develop potential therapies against the COVID-19, both within our pipeline as well as within our plasma-derived therapy. And we are developing a hyperimmune globulin, and we are progressing fast on that. And we have been part of the creation of an alliance in order to do it faster and at a bigger scale.

So for us, it's a -- it has been a huge year, and it puts us in a very strong position in 2020 and beyond because we are also benefiting from the R&D transformation that we initiated back in 2015. And we are starting to really see concretely the pipeline that we will benefit from with a Wave 1 product, first 12 product that we could launch between now and 2024, and then the Wave 2 product, which are -- and they are all products which are life-saving products. So very pleased with where we are.

Of course, we are dealing with a crisis never seen before. We are confident about our guidance. We think that our portfolio of product is quite resilient because it's -- most of our medicines are life-saving medicines, and they are not dependent on surgery or elective procedures. So I think even though the health care system has been paralyzed in many countries, we have not seen a huge impact on the prescription of our product because they are life-saving medicines.

So again, we're very proud on behalf of all the Takeda employees, more than 50,000 employees, I can say that it has been a year we can be proud of, and we are in a good position to move forward in 2020 and beyond. Costa, to you.

Thank you, Christophe, and hello, everyone. This is Costa Saroukos speaking. I'd like to take a few moments to emphasize that Takeda has delivered and will continue to deliver on its financial commitments.

First, I'm pleased to report that we delivered solid fiscal 2019 results driven by our 5 key business areas, accelerated synergies and OpEx efficiencies. Reported revenue was approximately JPY 3.3 trillion or USD 30.2 billion, with pro forma growth of 1.6%. This was driven by our 5 key business areas growing at 6% and 14 global brands growing at 22%.

Core operating profit was JPY 962.2 billion, benefiting from accelerated synergies and OpEx efficiencies, and core EPS was JPY 387. Fiscal 2019 free cash flow was robust at JPY 968 billion or approximately USD 8.9 billion, with strong operating cash flow supplemented by divestitures. As well as paying off all debt that matured in 2019, we also prepaid approximately USD 2.1 billion of higher interest debt that had longer maturities. As a result, we were able to reduce our net debt-to-adjusted-EBITDA ratio to 3.8x, a significant reduction from 4.7x in March 2019. We also finished the year with strong liquidity, with over USD 12 billion in cash and committed lines of credit.

With regards to cost synergies, I'm delighted to announce that in addition to the acceleration in 2019, we've also identified further cost synergy opportunities, and we're now increasing our target from $2 billion to $2.3 billion by the end of fiscal year 2021. We are excited by this additional opportunity and have decided to reinvest the $300 million upside into the business for future growth, specifically in China, plasma-derived therapies and R&D. The strong progress we have seen to date on synergies and OpEx efficiencies means we are very confident in our midterm target of reaching top-tier margins.

Noncore asset divestitures are another important part of our strategy. And during 2019, we made great progress towards our $10 billion target, with 5 divestitures announced to date worth up to USD 7.7 billion.

Now moving to fiscal 2020 guidance, where we expect the business momentum we saw last year to continue with an outlook for strong underlying earnings growth. Our reported revenue forecast is JPY 3.25 trillion, slightly less than prior year due to foreign exchange and divestiture impact. Underlying revenue, which adjust for both these items, is projected to show solid growth in the low single digits.

Our core operating profit forecast is JPY 984 billion, benefited from accelerated synergies and OpEx discipline. This will more than offset the negative impact of FX and divestitures. The divestiture impact includes the profit contribution of deals closed in fiscal year 2019 and also an assumption that the recently announced divestiture in Latin America closes in mid-2020. Without FX and the Latin America divestiture, our guidance would have exceeded JPY 1 trillion.

Adjusting for FX and divestitures, our underlying core operating profit guidance is very robust at high single-digit growth. Reported EPS is expected to be JPY 39, and core EPS is expected to be JPY 420, an increase of JPY 33 versus prior year.

Finally, our guidance is for significant underlying core EPS growth of low teens, also benefiting from an improved underlying tax rate.

In closing, I want to emphasize that we believe Takeda is a strong growth story. We delivered solid results in fiscal year 2019, and we are positive about our momentum in 2020 and our potential to accelerate growth in the midterm.

That concludes my opening remarks, and we'd now like to open it up for questions and answers. Thank you.

Thank you, Christophe. Thank you, Costa. Now we would like to take questions.

(Operator Instructions) The first question is from Mr. Ken Cacciatore from Cowen and Company.

Congratulations on all the great progress. Just had a couple of quick questions. First, on immunology, continue to do very well. Can you just talk about the underlying growth of that business? And then maybe discuss if you're having any impact on the collection centers due to COVID or how you're navigating around any potential issues there? And then second question is on business development. As I can see, Costa, you lay out very clearly the priorities. And it doesn't seem as if you're looking to do any larger acquisitions. But for a company of your size and such a great job you've done to deleverage, I was just wondering if you would be willing to look at multibillion-dollar kind of more tuck-in acquisitions, given all the nice development occurring even outside of Takeda. Just what's the appetite potentially more strategic, not necessarily large, too large, but more strategic acquisitions? And then just my final question is on VELCADE. Any new information about that, the potential market to give you confidence that we're not going to see much competition through the balance of this year from a generic?

Thank you, Ken. Christophe here. So Julie will answer your first question on the immunology. BD, will -- I guess, Costa can answer your BD question regarding large acquisition, and I will cover the third question on VELCADE. So perhaps, Julie, if you could start?

Sure. Thank you, Christophe, and thanks for the question, Ken. In terms of the underlying growth drivers for immunology, I think we continue to see very strong growth for our IG portfolio driven primarily by our subcutaneous brands, IQVIA and CUVITRU, but as well as from our albumin portfolio driven by growth in China.

In terms of the impact of COVID on our plasma collections, so we have seen a decline in our collections due to the stay-at-home policies that have been put in place, even though plasma collection centers are designated as critical infrastructure and have remained open. But we do expect to see, as the states are opening up, some of that to come back, and there are other levers that we can use to drive further growth in the coming months. So it's just too early to say that the decline that we have seen would have a permanent impact on our overall growth projections. Costa, to you for the BD?

Sure. Thanks, Ken, for the question. With respect to any larger acquisitions, I would just go back to our capital allocation policy. And the first area, focus area, is to deleverage rapidly. We're committed to deleveraging to net debt-to-adjusted-EBITDA at 2x. And that's really our top priority here.

Now having said that, of course, as part of our R&D model, we are always looking at opportunities in the R&D partnership model. But these are more smaller type, $100 million-type acquisitions, which are already factored into our current cash flow modeling. So hopefully, I answered your question there, Ken.

Thank you, Costa, and it's crystal clear. I think we also have to keep in mind that we need to continue to invest and to allocate capital on our R&D pipeline. We have a lot of programs now that we need to found. So that's also a huge priority for us to progress the Wave 1 and the Wave 2 pipeline.

On the VELCADE questions, look, I mean this is always based on competitive intelligence, and we always gave as much intelligence as possible. We assume this time that we won't have a subcutaneous formulation and another generic entry in fiscal year 2020. This is the best guess we can make at this time. And this is why we include it into our guidance.

Congratulations to the team on all the progress and good performance.

Thank you, Ken.

The next question is from Mr. Trevor from Polischuk.

It's Trevor Polischuk from OrbiMed. Okay. Four questions, please. The first -- and Christophe, I think you touched on it a little bit. But I'm just wondering if you can discuss more specifically or quantitatively the impact that the pandemic has had on the business in 4Q and articulate a little bit more the potential impact for the coming fiscal year. We've seen a very common phenomenon across large-cap pharma reporting period that the quarter that just ended was positively impacted in many ways from some prescription strength that might reverse in the following quarters. I was wondering if you could comment on that.

The second question, maybe for Costa. Last year, last May when you provided guidance for the fiscal year, it turned out to be conservative. But at the same time, there are many uncertainties that the company was facing 12 months ago. So I guess I'm wondering, how would you describe the guidance today? Is it also conservative? It seems like there are less uncertainties that are facing the company today compared to a year ago, but maybe you would disagree with that.

Question three is for Julie. I was wondering about time lines on any specifics you can give us for the development of a plasma-derived therapy for the COVID-19 treatment coming out of the coalition. I'm wondering, when might we see the proof-of-concept data? I'm curious about the manufacturing ramp. When do you think commercialization could begin? I'm also curious about the capacity that you have. And then a question just about how -- the proprietariness of that opportunity.

And then finally, if I may, a question for Andy. I'm just wondering what you think the key pipeline-related catalysts are to watch out for in the next 6 months?

Thank you, Trevor. I'll start with the first question by saying that we do see fluctuation. It's not that there is no fluctuation. We see some fluctuation. It's very country-dependent when the health care system and when the confinement has started. We have seen also a pattern sometimes of longer prescription, 3 months prescription in some countries.

Well, overall, we have not seen -- we have seen quite a good stability in our -- in the first quarter for calendar year, in our fourth quarter. And our portfolio of product is really treating chronic, very severe disease, life-saving medicine in many cases. So we think it will be quite resilient. But I will ask Ramona also perhaps to describe what she had seen on the U.S. market. Ramona, if you could.

Sure. Trevor, it's Ramona Sequiera here. So yes, I think if you look at the U.S., particularly on the small molecules, certainly, we've seen an increase in 90-day scripts. And we saw that starting in kind of the second half of March, as you indicated, and other companies have signaled that. We didn't -- we don't anticipate that there was a big impact between fiscal years for us of that impact. We obviously had been quite ahead of managing the situation with the pandemic across our business. And we're very careful with ensuring that ordering was appropriate so that we could make sure supply was maintained as well for patients. So we don't anticipate a big impact from that.

And in fact, across our portfolio, we're seeing better adherence. And so that is kind of helping as we are in entering the first part of fiscal '20.

Thank you, Ramona. Costa, the second question?

Thanks for the question, Trevor. So let's maybe start from the beginning. So your comment around the guidance of last year. There were some variances, mainly a couple of key areas was the VELCADE assumption. So we originally believed that we're going to have a competitor entry in the U.S., which didn't happen. And so we're very clear on that moving forward in fiscal year '20 that we don't expect an entry in the U.S.

There was also variability around the purchase price accounting. I mean there's a significant amount from that standpoint that we had up to 12 months to complete, and we did that in January of this year. So now that's behind us. And then we also gave greater granularity on our loss of exclusivity. So much more alignment there. And that helps the investors and analysts better align to the guidance and forecast.

Having said that, when we step back and look at our actual guidance, our underlying guidance, we said in the beginning that -- in May 14, 2019, we said that our underlying revenue growth would be flat to slightly increasing, and we delivered 1.6%. We said our underlying core operating profit margin would be mid-20s in the beginning, but then we increased it to high 20s, and we delivered 28.9%. That was just because we were able to execute more effectively in respect to the integration, faster synergy capture.

And then our underlying core EPS in our recent guidance was JPY 385 to JPY 405, and we delivered JPY 395, pretty much right in the middle of that. So yes, we had some moving parts in the beginning of the guidance. But I think some of those are behind us now, and it's all about focusing on how we executed in 2019 and starting off the right base for 2020.

Julie, the third question?

Thanks, Christophe. Hi, Trevor. So in terms of the COVID-19 program with the alliance, a couple of milestones for you I guess from a time line perspective. You had asked a number of questions about when certain things were starting. So last week, we did share that the alliance is going to be conducting their clinical study with NIAID under the NIH. This will be a global study that will take place in U.S., Europe and Japan. We shared earlier today that we started the first clinical manufacturing batch today, and that the clinical study, we hope to start in July. So those are some time lines for you to take note of.

And then in terms of when the product could be available, so we do intend to explore both expanded use, and there is a possibility that the FDA would also provide emergency use authorization if the data proves to be positive in terms of the effectiveness of a hyperimmune. So when the product would be available beyond the clinical study is still a little bit unclear. But we do expect that before the end of the year, we should see some information in terms of the broader use of the hyperimmune.

In terms of capacity, this is one of the reasons why we formed the alliance. One is that it does provide a broader collections footprint to capture the raw material, the convalescent plasma. But it also provides a broader manufacturing capacity capability towards the end. So the end intent of the alliance is to have all the alliance members be able to manufacture a hyperimmune.

And to your question about the proprietary nature of the manufacturing, each of the alliance members would leverage their existing IG manufacturing processes. And we are working on the comparability approach for the hyperimmune based on the neutralization assay so that the alliance members would be able to produce the hyperimmune without having to complete their own clinical studies as we would have completed the clinical studies as an alliance.

Thank you, Julie. I mean credit to Julie. I can share with you that she has been really the catalyst for this alliance. And I think it is a huge example of forgetting our competitiveness and moving forward in order to try to help to solve the crisis. Andy, the last question?

Great, Trevor. So lots of things, lots of stuff going on over the next 6 months. I'll just go through our Wave 1, briefly Wave 2 and then marketed products. So on Wave 1, we'll be filing our first Wave 1 program, TAK-721 for eosinophilic esophagitis. We'll see data from a completed Phase II study, which is a pivotal -- it's a registration-enabling study for TAK-788 in Exon 20 positive EGF receptor, nonsmall cell lung cancer. We'll later in the year file off of those data.

We will present our Phase II data next month for pevonedistat, a high-risk myelodysplastic syndrome. And then later in the year, we'll have our first readout from the PANTHER Phase III study in the same population that should serve as a pivotal data set.

So we'll have 3 data level filing and then 2 data sets that we'll drive a filing in the next 6 months. We'll have data readout from our first TAK-620 maribavir study. Right now, there are no drugs that are labeled to treat relapsed and refractory CMV. So this will be the first trial to demonstrate activity in that population. And we've got right Phase II data that was just published recently in the New England Journal of Medicine, which gives us immense confidence in that study. And that will be registration-enabling that single study with the second study in bone marrow transplant to follow.

You'll continue to see in the near future maturing data from the dengue vaccine, 2-year data. And each time we see the maturing data, we feel more and more confident about the robustness and the opportunities that this vaccine affords patients and Takeda. So those would be in the next 6 months, a lot of Wave 1 activity and very little risk around COVID because all of these activities, all these studies are fully enrolled. They're in essentially data generation or patient continuation phase.

In Wave 2, a little less certainty, but TAK-981 is emerging as a really interesting novel immune modulator. It's an only in class agent for Takeda as a simulation inhibitor. We presented at the earlier disclosure in Japan some of the data that we're starting to see in just the first couple of dozen patients. And we see very interesting diverse immunomodulatory effects, and we're starting to see a couple of responses. So we hope to see that play out further over the next 6 months.

And then finally, on the brands, we have a really interesting study that we haven't spoken a lot about with VONVENDI, which is an adult prophylaxis study in von Willebrand's disease that we'll read out shortly. Right now, firstly, it's the only recombinant factor that's available, and treatment is predominantly on demand. So this opens up a possibility for us to be thinking about von Willebrand's disease as one thinks about hemophilia in terms of prophylaxis.

We hope to refile ENTYVIO subcutaneous and address the issues that we received in the CRL in -- with the FDA over the next 6 months, and then we hope to have a plan for resupply of NATPARA. So despite everything that's going on that's keeping us at home, it's a really busy half year coming up for us in Takeda R&D.

(Operator Instructions) The next question is from Mr. Shinichiro Muraoka from Morgan Stanley.

It's Shinichiro Muraoka of Morgan Stanley Japan. The first question is about plasma business. In your guidance for this fiscal year, 10% to 20% growth of ID. And could you -- if you are okay, could you break down the sequential growth rate, i.e., so for example, in the first quarter or first half, 10% growth and the second half or third, fourth quarter, a 20% growth. So I'd like to know the growth rate acceleration or growth rate stay at a high-growth rate for all the 4 quarters? Certain guidance would be appreciated. The second one is the recent Japanese article of your asset disposal of Japanese OTC business. Certain report were distributed in the end of April. If you're okay, could you comment something on that? And finally, this fiscal year's guidance. In core, your core operating profit guidance is JPY 984 billion. But if you are okay, could you give us your gross margin assumption for -- at a core basis? I guess you are expecting the gross margin to deteriorate by up to 100 basis year-over-year. But if you guide us some quantitative information, that would be quite helpful. That's all.

Thank you, Muraoka-san. So Costa will cover your last questions. Regarding the 2 first questions, so we don't give guidance by quarter because -- especially this year, where we see on top of that the coronavirus situation. We will see some fluctuation quarter-by-quarter that we are not used to see normally. So I think we should be very careful on a quarterly guidance.

Having said that, and perhaps Julie will comment further after my comment. We have seen a huge turnaround of our plasma business in 2019, 9% growth in 2019. And we are not -- the result of focusing on this business, but also having created the plasma-derived therapy business unit, which is managing end-to-end this business now is very important. I don't think we will have been able to pull a business like that without this organization led by Julie. Julie, if you want to comment further?

Sure. I guess the only thing that I would add is that the growth that you are seeing now is due to the acceleration in our plasma collection that we started shortly after the close of the transaction last year. So we will continue to invest in that growth. We are continuing to open new plasma collection centers. So you should see continued growth from the overall plasma business with Takeda.

Regarding the second question on the Japan OTC business. So this report has not been -- it's not coming from Takeda. We don't comment on speculation like that. I would just say that OTC is not core for us anywhere in the world because we are -- we don't -- we are not focusing on OTC. So it's a noncore business.

In Japan, we have a unique position because we have a brand, a size, but also brand awareness, which is very strong with ALINAMIN. So our goal is to maximize the potential of this brand. And so I think the brand is very strong, the Omnaris is very strong. The business has not been growing in the last few years. So it's not an easy business to grow. The overall ATP market in Japan is not growing. So I think that's as far as I can comment. But we don't make comment on market speculation like that.

I think I'll take the last comment around the gross margin. And so thank you very much for the question. I think you can really -- you can -- I want to draw your attention to Slide 46 if you have the copy in front of you. But this is the evolution of our underlying core operating profit margin.

You saw how we went from 22% to 28.9% in fiscal year '19. And we expect to deliver low 30% underlying core operating profit margin, which is predominantly driven by the additional synergies that we expect to derive, and also some OpEx efficiencies. Having said that, you see a bar next to that column, and we have highlighted that we expect some gross margin erosion. And on top of that, we are investing, as I mentioned, in areas such as R&D plasma-derived therapy and China.

Now with respect to the core gross margin decline, we don't comment on the percentage of that. But what we -- what the main reason for the decline is a combination of product mix, including loss of exclusivity impact from products such as FIRAZYR, CINRYZE and also the NATPARA recall in the U.S. However, we do expect that this erosion will recover in fiscal year 2021. Thank you.

The next question is from Mr. Fumiyoshi Sakai from Crédit Suisse.

I have one question, well, specifically right here. I think this is a question for Weber-san from your expertise. Where do you stand with the COVID-19 vaccine development? Now some companies are very hopeful about commercializing the vaccine within a very short time -- period of time. But I really doubt a vaccine is going to be developed so easily. It takes time, and every company is now working in different standard. I know there's some experts saying we need the vaccine to be effectively defense -- defend the infection. But obviously, we are -- I'm stopping there -- where are we going to go? So I appreciate your input on this. Obviously, some input from Plump-san as well.

Thank you very much, Sakai-san. So I mean my view is that it's good to have multiple technology progressing in parallel because it would be too risky for the world to bet only on one technology. So to have 4 or 5 technologies is great. And you see what we have today with the RNA vaccines, adenovirus vaccines and more of the traditional type of technology.

There is -- we shouldn't have too many because you have -- you will waste resource if you have like 50 candidates. I think it's a waste of resource. But it's -- perhaps what we will get -- I think that we shouldn't forget that developing vaccines is very hard. Some vaccines will have no efficacy. Some vaccines will have an efficacy which will wane over time. And sometimes, we need a booster or -- and some vaccines will have 50-50 signals as well potentially. So the world think -- might think that it's a slamdunk, the vaccines will come. But it's far from sure.

I'm optimistic that a few will succeed. The question will be how much risk the world wants to take by shortening the development period of the vaccines, which normally take 5 to 10 years. I mean if you shorten to 1 to 2 years, you have less data. And therefore, we'll need to see how we assess that.

And then the last point I will make is that the big issue is the manufacturing scaling. And so scaling the production of vaccines is not easy. Usually, it takes time. And a bottleneck are not necessarily where you anticipate them. So one of the well-known bottleneck in the industry is actually the syringe and the filling of the syringe, which is more late-stage downstream manufacturing process, but that's a huge bottleneck.

Another bottleneck which is huge in the world today is the lyophilization process. For example, because there is a scarcity of big lyophilizators. So I think that we should be careful at managing expectations. Not all vaccines will succeed. There will be some bad news, some good news as well. I think a few will succeed. And then the scale-up will take time. The scale-up will take time.

And so if you are looking at successful vaccines and we vaccinate the majority of the population worldwide, you are talking about 5 to 10 years.

That's really long. But any program of Takeda for any specific project right now ongoing?

Yes. So in fact, when we see the coronavirus back in December, January, we assessed if we should have our own programs. But we didn't have the best technology to launch our own programs. So we didn't launch our own vaccines programs. But we are keen to partner, and we are in dialogue with a few vaccines manufacturers, 2 vaccines company and programs to be a partner so that we can help with the scaling up.

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

Thank you for all your efforts on hyperimmune globulin for COVID. I had a few questions, if I may. Perhaps, first, I was very intrigued when I saw that you're expecting an approval this fall, and second half '20, I think, is what you said on slides. And it almost sounded like FDA is possibly being more helpful and shrinking the time frame involved in making the hyperimmune product to perhaps 6 months or less. Am I understanding that right, first? Second, I know there's been confusion around what's the actual threshold for neutralizing antibody titers when you're collecting. And I'm curious if you have a certain threshold in mind as you're going out to patients? And on that same note, do you think you can make product for one patient with 5 or less persons' worth of product? And finally, if you could just give us a sense for how many patients' worth of supply you could possibly have by the time you launch this fall?

Thank you, Umer. Julie, I think it's all for you.

Yes. Thanks, Christophe. So I'll try to remember all of your questions. So first, in terms of the FDA, so they are obviously prioritizing potential therapeutics for COVID-19, and they are working not just with us, but with many companies to expedite approvals where appropriate. So part of the reason why we chose to do the clinical study with NIAID under the NIH is to help facilitate a potential accelerated approval. So we don't have any guarantee. No regulatory agency provides guarantees around early approvals. But there is the intent to accelerate as quickly as possible. And I think you've seen from some of the other treatments out there the use of the emergency use authorization to provide earlier access.

And so if -- again, if we have good data coming from our clinical study, we would expect that the hyperimmune would be a candidate for emergency use authorization as well.

In terms of the neutralization assay level, so we have developed a neutralization assay within the alliance to measure what the appropriate titer would be in the final product. But as we have not yet completed the manufacturing run, we haven't been able to validate it yet, so we will have that shortly.

In terms of the ratio of what we would expect, based on past experience, there's quite a wide range of the number of donations required to create a dose for an adult. And so again, until we finalize the first manufacturing run, we won't have the data to give a precise answer to that. But we hope to be better than the ratio that you just indicated.

In terms of supply, in the end, as I mentioned for the earlier question, we are trying to, through the alliance, maximize the potential supply available and allow all the alliance members to be able to create hyperimmune supply in the end. Now of course, all of that manufacturing capacity that is available is still dependent on the convalescent plasma collection. So this is really the key here. And I think you will see, not just from us but from the academic centers who are running convalescent plasma for direct transfusion studies, the overall efforts to increase the awareness around the need for convalescent plasma so that we can make as much product available to treat patients worldwide.

The next question is from Mr. Li from Tiger Pacific Capital.

Congratulations for the strong results. And I was positively surprised by the somewhat relieving guidance. And also I think the improvement in the disclosure has been very helpful. Thank you very much. I guess it's good to know that at this point, Takeda has not been materially impacted by the COVID-19. But to Christophe, I'm just wondering how COVID-19 has changed your priority? I know that probably at this point, you're focusing on the plasma therapy. But I'm curious to know which area you want to focus, but due to COVID-19, you decided to deprioritize as well?

Yes. Thank you very much, Li, for this question. So the COVID-19 treatment that we are discussing with Julie has not deprioritized other programs, and it's even not also destabilizing our manufacturing process of plasma-derived therapy, which are vital for patients. So far, the COVID-19 has not changed our overall strategy, which is an R&D-driven strategy. So of course, some clinical trial has not been able to start. So we need to assess that. But we want to progress our pipeline, and that's very important.

On the 5 business areas, we will continue to focus on those. So we have not seen the requirement to shift our strategy or to deprioritize some business based on the COVID-19.

(Operator Instructions)

Andy, would you like to add something there? I think you can.

Well, maybe just while we wait -- thank you, Costa, while waiting for another question. Just thinking about the -- it's a great question, and it's not so much a change in priority. It's just an opportunity to leverage the crisis to change the way we operate. I mean there's an immense amount of inefficiency on the R&D side, and particularly, in terms of how we run clinical trials, how we manage -- how we monitor patients and how we manage data. And I think we've started activities internally and externally to try to drive step-function change into elements of trial operations.

So examples will be use of digital technology, which are essentially, from a technical standpoint, all ready for implementation, but there are behavioral barriers. We're going to use this opportunity to overcome those behavioral barriers. There's -- the way we interface with the FDA and other regulatory agencies, as Julie was commenting, there is a level of engagement of the agency with the industry broadly that's incredibly productive around COVID. We should be able to leverage this and drive regulatory reform beyond today how we run trials. There's a great spirit. The CoVIg alliance is an example of this, but it extends well beyond that. There's a great spirit of how we can more effectively work together to enhance the efficiency of our business.

The idea of using a master protocol to test multiple different medicines against a single control arm, the use of real-world evidence to drive synthetic control arms, these are happening in real-time around COVID. I think we have a huge opportunity to transition these changes into the future and enhance our efficiency and speed.

That's great. Yes, that's -- it's actually right that you mentioned that, Andy, because we are seeing some shift in R&D, but we will see some shift across the entire company. We are working right now on the new phase of we -- it's not going back to where we were before. But in a country where there is a reopening of the economy, what do we do? And we will reuse, for example, our offices, but not in the way we are using it before. We'll have to alternate people. Many of our employees actually do like working from home. Habits are changing. The way we are interacting with doctors is changing as well. So our thinking is to actually use this opportunity to change the way we work and probably never go back where we were before.

Okay. Thank you very much. We have one shy investor who would like to ask a question, probably to Costa. And his question is as follows. While the slide presentation highlights the impact of divestiture on revenue, could you please quantify the impact of these divestitures for modeling purpose? Costa, please.

Takashi, thank you very much. The impact of divestitures for modeling purposes, is what they -- okay. Thanks for the question. So I think the best slide to really reinforce the movements there is Slide 48 of the presentation, where you can see that our actual reported revenue is JPY 3,291.2 billion and then forecast for 2020 is JPY 3,250 billion. You see, we have impact of divestitures closed in fiscal year 2019. And then another column where it says impact of divestitures expected to close in fiscal year 2020. Combined, that's approximately JPY 60 billion of impact due to the divestitures. Now again, reinforcing the point that strategically, these divestitures are our noncore portfolio. And having said that, it allows us to really focus on our 5 key business areas which you've seen in 2019 really driving the growth momentum.

On top of that, we see that the FX, we expect JPY 43.5 billion, we've actually called it out the impact of JPY 43.5 billion of FX impact. And that's largely impacted in recent months. You will have seen some several currencies have significantly depreciated. And our guidance assumes the midpoint of January to March 2020 FX rates for some of these markets such as Russian ruble, Brazilian real and Mexican peso.

Now on the flip side, there could be a positive outcome here if the rates returned to the December 2019 levels or further risk if April 2020 levels continue for the full year. Thank you for the question.

Thank you, Costa.

(Operator Instructions)

Okay, everyone. Now we would like to end the conference. And we really appreciate you spending your time with us. And thank you very much, and I wish that you will spend attention to Takeda continuously. Thank you, everyone. Have a good day. Good night.

Thank you.

Thank you, everyone.