Takeda Pharmaceutical Co Ltd (TAK) 2021 Q1 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 very much for your participation in the conference call of fiscal year 2020 first quarter financial results of Takeda Pharmaceutical Company.

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 the -- our most recent Form 20-F and in our other SEC filings.

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

Now please let me introduce today's presenters and panel: Mr. Christophe Weber, President and CEO; Dr. Andrew Plump, President of R&D; Mr. Costa Saroukos, Chief Financial Officer; Ms. Ramona Sequeira, President of USBU 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, followed by Andy's about R&D, then financial summary by Costa.

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

You can also e-mail questions to Takeda IR members or takeda4502.ir@takeda.com, takeda4502.ir@takeda.com so please feel free to do so.

Let's get it started.

Christophe, please go ahead.

Thank you, Takashi.

Hello, everyone.

Good morning.

Thank you very much for joining us.

I will start by saying that under the circumstances, COVID-19 circumstances, our first quarter has been a positive quarter.

I am on Slide 4. You look at our revenue growth -- on an underlying revenue growth of almost 1%.

Our 5 key business areas grew 6%.

Our PDT Immunology business grew 19%.

Our 14 global brands grew 20%.

So positive quarter, and it demonstrates the resilience of our portfolio.

We can say that only 1 product has been impacted during this Q1, during this pandemic, and it has been VYVANSE so -- on the negative side.

So a positive on the revenue.

On the bottom line, very good cost control, and that reflect on our core operating profit margin of almost 35% with, therefore, a very strong operating free cash flow.

And that allows us also to continue our deleveraging, and we are at 3.7 net debt to adjusted EBITDA ratio even after paying our half year dividend.

So very strong, positive Q1.

Andy will develop R&D.

We are keeping our momentum, and we are planning to file 7 NDA in the next 12 months.

So it's a very special next 12 months for us.

We continue to optimize the way we operate.

We have introduced an employee stock purchase plan, for example, in the United States, and we'll roll out this employee stock purchase plan globally.

And that's something that we had to do as an integration project, but it's also an opportunity to do something attractive for our employees to become shareholders of the company.

On the next slide, we -- Slide #5.

We continue to focus on 3 areas regarding the management of the COVID-19.

We keep our employees safe, and we have been very successful on that front.

We maintain our business continuity.

We didn't see any supply disruption linked to the COVID-19.

We are progressively regaining some activities depending on the country situation.

So for example, in China, it's almost back to normal.

In some states in United States, it's starting to open.

In some other states, it's not the case.

So we are adapting to the local situation.

And regarding clinical trial, Andy develop further, but we are starting to see a regain of activity as well.

Regarding our fight against COVID-19, we continue to focus on the hyperimmunoglobulin among the alliance that we have created.

The clinical trial should start very soon.

And we are also testing the potential activity of multiple molecules in our pipeline, and we believe that some of these molecules could have a promising impact against COVID-19.

On the next slide, I will give an update on the Hikari situation.

We have very well identified the path to resolve the issues that has been identified during the FDA inspection back in November.

And so we are now very much focusing on that to resolve this issue as quickly as possible.

We -- Takeda always took quality very seriously.

We have a very strong quality expertise.

So we are very confident that we will be able to resolve these issues.

At the same time, we have very much focusing our attention on maintaining as well as possible the leuprorelin supply.

We restarted the manufacturing of leuprorelin for Japan and some markets on July 20.

So that will allow us to resupply the Japanese market in September.

So we will not see a massive shortage, a sporadic shortage.

Of course, this is not the best situation for the patient, for the physician.

But I think we are really containing the impact.

And we will also continue to manufacture -- we are planning to resume the manufacturing as well for the U.S. market.

So we don't anticipate a significant shortage but more sporadic shortage.

And this is why on the financial side, we don't anticipate the shortfall of the leuprorelin to be material to the company.

But again, the most important for us is to remediate the issue that has been identified, and we are very confident that we have identified the way to do it.

We are working on it, and we submitted our response to FDA in due time.

So that's what I wanted to share with you as an introduction.

And I will now ask Andy to develop the R&D part.

Thank you.

Terrific.

Thank you very much, Christophe, and good morning, everybody.

Just a few brief comments on the R&D momentum in progress.

This year is a real -- we can go to the next slide, please.

This year is a really important year for us in R&D, and it's an exciting year.

Our R&D focus is in really 3 buckets, continued support for our global brands and our China ambitions and expansion.

You can see some of what we have coming in the lower half of this slide, what we call Wave 2, which is the sustained innovation, our platform technologies and our best network of innovative partnerships that will sustain us well into the future.

And then, of course, our Wave 1, which is our pipeline of 12 new molecular entities that will deliver over the next 4 years.

I'd just like to highlight, focusing on Wave 1, as Christophe mentioned, I mean, it's a really exciting opportunity for us.

We have 7 potential submissions over the next year, which is quite remarkable and unprecedented really.

Four of those programs, which we dove into some detail at the earlier presentation, now with the announcement of pevonedistat's Breakthrough Designation, 4 of those programs have Breakthrough Designations, which is a reflection of the significant unmet medical need that we are pursuing and the potential for these programs to address that unmet medical need.

You could see, starting with TAK-721, which also has a Breakthrough Designation for use in eosinophilic esophagitis, we're still on track to file that.

Starting -- it will be a rolling submission that will start in the next few weeks.

Important to note, while it's an orphan disease in the U.S. where we will be filing, there are over 150,000 patients with this disease and no marketed therapies, TAK-609, CoVIg-19, which I won't go into detail.

Julie is on the line and can share the progress we've made there.

Our dengue vaccine, we expect to file at the end of the year, and then mobocertinib, pevonedistat and maribavir.

It's going to be a really exciting few months of data readout.

We're very excited about the possibilities.

And based on the data that we've seen to date in our Phase II programs, we're quite excited about all of these.

Just 2 comments beyond that -- those 7. I'll just note that next month, we'll start to see Phase II data from soticlestat, which is TAK-935.

This is our partnership with Ovid.

It's a 50-50 partnership, and we're pursuing a number of different indications in rare epilepsy and complex regional pain syndrome.

And those data -- those Phase II data will read out next month.

And then just the last comment here, importantly, towards the end of the year, we expect to have a better feeling for the future of our Orexin franchise.

So you know we've been working intensively on our lead molecule, TAK-925, which is an intravenous-only molecule at this point, to understand the potential graft of opportunity with this program.

And we've seen really profound results, essentially functionally curing a variety of diseases in the settings where we've tested TAK-925.

Unfortunately, TAK -- there is isn't a place, an obvious place in most of those indications for an intravenous therapy.

We're working to try to reformulate TAK-925, but we now have a series of oral molecules.

The lead one of which, TAK-994, is on an accelerated path.

We started our dose-ranging study last month for that molecule, and we'll expect data over the course of the year.

If you just go -- just go to the next slide, please.

I'll just end on this slide, just an overview of our Wave 1 and Wave 2 pipeline and just a couple of comments.

Obviously, this is a dynamic representation of our pipeline, not moving away from using phases, but more trying to help you understand our intent of timing to bring these therapies to patients.

I'll just make 2 comments.

One is that in addition to the 7 that we have coming over the next year, there are 5 more in Wave 2. And there's one program in Wave 1 that I want to highlight, because in wave -- I'm sorry, in Wave 2 that I want to highlight, TAK-981, because there's the potential for acceleration.

And I'd like to put that in a bucket for you to consider.

TAK-981, our Orexin program, and then TAK-007 and our broader CAR-NK, natural killer, platform.

While each of these 3 have early data sets that look quite interesting, we're putting them on fast accelerated tracks because we believe that these 3 programs not only have very significant potential for patients, but over the next 1 to 2 years, we'll understand as to whether they could be potentially flagship and defining programs for Takeda in our future.

And then just the last comment I'll make is that we're constantly looking to prioritize our pipeline and to make the best decisions as to where we want to focus.

I mean I'll mention that over the past few months, we've established a really creative partnership with a great neuroscience company, Neurocrine.

So 7 Takeda programs, including 3 in our pipeline, TAK-041, TAK-653 and TAK-831, were partnered with Neurocrine.

For these 3 pipeline programs, we retain optionality to be 50-50 partners, depending on what happens in the early development program.

And we love that because we believe in these programs.

We just felt that given our strategy and our focus in more targeted and rare populations that we may not be the best company to bring these forward.

So we love the partnership that we've built with a very strong and committed group at Neurocrine.

So with that said, I'll hand it over to you, Costa.

Thanks, Andy.

Hi, everyone.

I just want to spend just a quick summary on the financials before we open it up to Q&A.

But I do want to reemphasize our excellent start to the year toward delivering on our financial commitments.

Firstly, on the underlying revenue growing at 0.9%, which was driven by our 5 key business areas, with underlying growth of 6%.

Now our 5 key business areas are now representing 83% of the total business.

From a synergies and margins, we're tracking very well to delivering our commitments.

As you can see, quarter 1, our underlying core operating profit margin was 34.7%.

Our core operating profit margin was 35%, and that's driven by synergies and OpEx efficiencies as we continue to drive towards the top-tier margins that we're committed to deliver in the medium term.

Also focusing relentlessly on our 5 key business areas and divesting in the noncore assets.

We've announced 6 noncore asset divestitures since April of 2019 worth up to USD 8 billion, and we're still embarking towards further nondivestitures to deliver $10 billion plus.

On the financial residence, you may have seen that in July 9, we issued USD and euro debt financing of approximately USD 11 billion with record low coupons.

And we've done that whilst extending the debt maturities and making sure that we remain on track to deleveraging targets.

And finally, as of quarter 1, our net debt to adjusted EBITDA ratio is 3.7x, down from 3.8x in March, and that's even after the half year dividend was paid.

So again, very much focused on delivering towards our commitment of 2x within fiscal year 2021 to 2023.

So with that being said, I'll open it up to Q&A.

Thank you very much.

We would like to take your questions now.

(Operator Instructions)

Okay.

Before we take a question from the floor.

We have some question to -- via e-mail.

And the first question is -- probably, this is for Andy.

In your first call, you highlighted TAK-981.

Do you mind elaborating a bit?

What drives your excitement?

What tumor types you are going to target?

And what clinical data do you have?

Andy, please.

Great.

Thank you, Takashi.

So I'm not sure who asked the question, but thank you very much for the question because it gives us a chance to spend some time on one of the most exciting molecules in our portfolio.

So TAK-981 is what's called a simulation inhibitor.

It inhibits a process in protein homeostasis.

It actually was a pharmacology and a biochemical program that came out of our legacy Millennium labs.

It's a cellular process that's involved in a number of different biological activities, including immune system regulation.

And we've learned over the years that simulation is involved in regulating, in particular, interferon responses.

And so we've noted with this molecule, the inhibition, both in preclinical settings and we have extensive clinical data right now, induces a host of immune responses in humans.

It seems to activate type 1 interferon responses.

It has beneficial effects on the adaptive immune system.

And then we're seeing very interesting effects, which is relevant to some of the combination programs that I'll tell you about in dendritic cell biology.

So it's a very interesting pan immune activating mechanism.

We're the only company that has this mechanism in development, which possibly makes it even more exciting.

And the data that we've seen in humans is really quite remarkable.

We had a chance at our 4Q to show you some of the early data sets that we've seen.

We've also started to see just in our very early dose escalation studies a handful of responders.

And what we're finding as we start to dose escalate is deepening of those responses.

And it looks like those responses are based on immune activation for a number of reasons that I won't go into.

It's still early.

We need to be careful not to overly interpret, but it's the combination of this biology linked to the clinical response that's getting us quite enthusiastic.

We made the decision a month ago.

We had started with 3 clinical studies, one is a broad range of solid tumors; a second, a combination study with rituximab; and a third, a combination study with PD-1 inhibitor.

Based on the data that we've seen, we've now made the decision to expand.

The challenge we face is we're not 100% sure how to translate these findings to the right targeted patient population.

That could be good or bad.

It could be that it's a very diverse mechanism, not unlike the PD-1s.

But it does challenge us right now in terms of trying to identify the best population to go after.

And so what we're doing is we're now looking at actually 18 different indications.

We have a very adaptive Bayesian type early design that will allow us to increase or reduce enrollment across those indications and pivot towards where we see the most activity.

Again, I mean, the caveat is this is still early.

But if you talk to individuals in the field externally, there's an immense amount of enthusiasm for what we've seen.

The next year will be critical to understanding really how significant these results are.

Thank you, Andy.

So let's move on to the next question.

We have a question from the floor.

The next question is from Mr. Ken Cacciatore from Cowen and Company.

Congratulations on all the great progress.

I'm sorry, I cut out a little bit, so I don't know if this question was asked.

And if it was, then you can skip it.

But just trying to understand the strength in immunology.

The competitors are doing a little bit worse.

You guys are doing fantastic.

So just trying to understand if it's -- we're taking share, if it's inventory stocking.

Can you just talk about that franchise?

And then maybe, Andy, on 721, an exciting opportunity coming up.

But maybe, could you help frame for us the potential -- you talk about the size of 150,000 patients.

Could you drill down a little bit about severe or less severe?

How many patients are on off-label treatment now?

And maybe someone could give a sense of pricing for a product like this so as we can try to understand eventually the size.

And then on 994, just wondering on the upcoming data that you were discussing once we get the program, the oral program going.

Are we going to be getting efficacy data in the near term?

Or is it going to be just more healthy volunteer PK data?

Can you give us a sense of what to expect?

And then lastly, and I promise this is the last question.

TAKHZYRO is doing just fantastic, a great growth.

But there is an oral competitor that could be launching early next year.

Can you talk about how the market dynamics could change with that competitor?

Thank you, Ken.

It's Christophe here.

So what I suggest is that, Ramona, perhaps you could cover 721 and TAKHZYRO.

And then Julie after will cover the question regarding PDT Immunology.

And then Andy could cover 994.

Yes.

Happy to do that.

So let me jump in, talking a little bit about 721 and TAKHZYRO.

Can you hear me okay?

Suddenly I hear a bit of an echo, I don't know.

Ken, you might need to go on mute.

It's a good here.

So 721, we're quite excited about.

We've done a lot of work with our GI community here in the U.S. and particularly with the community GIs here in the U.S. because this is a disease that they really struggle with how to manage.

There's nothing indicated today, and they end up hacking treatments to try to put different things together to best manage this.

And so I think there's a huge opportunity here for patients and for clinicians to be able to treat these patients.

I can't speak to the pricing strategy yet.

But I think our goal here is to price in a responsible way that allows us to treat as many patients as possible in the U.S. because we do see this disease growing in prevalence.

And so it is something that we think there's going to be a pretty strong volume demand for as we move forward.

And obviously, we'll share more about pricing and expectations as we get closer to the launch here in the U.S. But again, very positive feedback from the GI community in general.

TAKHZYRO, really pleased to see how the uptake is going with TAKHZYRO.

We have launched a number of countries outside the U.S. to -- now and that's helping to drive our increased patients, but obviously, the U.S. is performing very, very well.

So the oral that's coming in, what we see happening in the marketplace -- so first of all, let me say a couple of things about TAKHZYRO.

About half the patients that we have on TAKHZYRO or that we are getting on TAKHZYRO are new to Takeda.

So they are either coming from competitive products or they are coming from -- they're naïve patients who are entering treatment.

And so what we see is the prophylactic market, in particular, is starting to expand with TAKHZYRO.

Given the fact now that with a product like TAKHZYRO, you can have 8 out of 10 patients attack-free, more and more patients and more clinicians are starting to look to this.

So we're actually expanding the number of prescribers of TAKHZYRO as well, so more clinicians getting more comfortable being able to utilize this very safe and effective treatment.

Certainly, we see the oral coming in and probably taking some of those milder patients, but you can't compare the efficacy of the oral to TAKHZYRO.

So when you consider patients that are having attacks, they may be laryngeal attacks.

Those attacks could end up in the emergency room, which is not a great place right now to be, or it could be fatal in some cases.

Certainly, some of the milder patients might start on the oral or try the oral.

But we really see the momentum for TAKHZYRO continuing through this, both in the U.S. and globally as we start to launch as well.

This is Julie.

In terms of the question around the growth in immunology, I do want to point out that part of the exceptionally high growth that you see here in Q1 is due to the fact that in Q1 of 2019, we had a phasing issue that resulted in Q1 last year being quite low.

So part of the exceptional growth was driven by that comparison.

But we do have strong underlying demand for our overall IG portfolio, particularly the strength of our subcutaneous portfolio across the globe as well as strength in our IV GAMMAGARD LIQUID in the U.S.

So I don't know if, Ramona, you want to add any comments about the U.S.-specific situation.

No.

I think you covered it perfectly, Julie.

Ken, it's Andy here.

To answer the question on 994, the -- so we've completed Phase I, our -- all of our healthy volunteer work.

We have a good understanding for oral bioavailability, PK.

We've done CSF sampling.

So we understand quite a bit about the distribution of the molecule.

So we're now -- we also understand the tolerability, the AE profile.

And of course, at the higher doses, one of the more common AE is insomnia.

So we may even have an indicator for some of the activity of the molecule.

So we haven't been in type 1 narcoleptic patient.

So with TAK-925, we did that very early in our Phase I program.

I think based on what we understand of the pharmacology, we decided to wait and do that more formally in our Phase II study.

So the study that we started last month will have multiple parts to it.

The first part will be proof of concept in type 1 narcolepsy followed by proof of concept in type 2 narcolepsy.

But as soon as we have proof of concept, then we'll start to do parallel dose ranging so that we can try to identify a dose that gives us maximum efficacy and the best safety and tolerability profile.

And then in our hope so -- we've invested at risk is to leverage those data to start a pivotal study next year.

I'll mention that we have a second molecule, TAK-861, which will go into the clinic later this year.

And then we continue to work around our -- the chemistry space to try to diversify our chemical matter.

We really want to make sure that we have the best Orexin agonist to bring forward.

Great.

Congratulations to everyone during a difficult time.

Great progress.

Thank you, Ken.

The next question is from Mr. Muraoka from Morgan Stanley MUFG.

Shinichiro Muraoka from Morgan Stanley Japan.

Can you hear me?

Yes, we can.

But would you kindly speak up a bit?

Okay.

I got it.

Is it okay?

Slightly better.

Thank you.

Sorry.

Yes, I'll try to speak louder.

So first, about TAKHZYRO, so the 60% growth is quite strong.

So could you let me know whether there were any kind of inventory buildings or not, i.e., so is it a straightforward end demand growth or not?

Please elaborate on that.

The second question is income statement -- SG&A cost.

Why SG&A cost in this quarter is Y-o-Y minus 15%, 1-5 percent Y-o-Y, a pretty big sharp decline.

Could you let me know the breakdown of the minus 15%, for example, cost of phasing and COVID-19-related cost cutting and cost synergy of integration?

I'd like to know certain breakdown.

Thank you, Muraoka-san.

Ramona, can you comment on TAKHZYRO?

And then Costa will cover SG&A.

Yes.

Absolutely.

So no material inventory stocking up in -- on TAKHZYRO in Q1.

Certainly, in general, you'll see in the U.S., the payers are starting to -- or have started to through the worst of things, carry enough inventory that they don't get cut short.

So we see that in general in the U.S. But there's absolutely no material increase in TAKHZYRO, and it's well within our expectations of where we would want it to be on a long-term basis.

Thanks, Ramona.

And thank you, Muraoka-san.

It's Costa here.

So regarding the improvement in SG&A, it's really driven by the integration, the speed of integration and the synergy targets.

You may refer to Page 30 of our earnings presentation, we have 10 synergy cost packages we're tracking relentlessly to delivering towards our synergy execution.

And these are in compensation and benefits.

For example, we -- in December of 2019, 99.6% of the organization was already announced.

So we're seeing the execution deliverables of synergies there.

We're seeing improvements in other areas, such as contractors, consultants, technology.

Our facilities -- over 50 offices have been consolidated.

We have our hubs have already been -- our 3 major hubs.

And then at the same time, we've got enablers, such as the Partner Value Summit, where we negotiated last year, where we unlocked $200 million of savings with 40 of our largest suppliers.

And just this month, we did our Partner Value Summit 2.0 virtually with over 150 suppliers, and we've unlocked another $100 million.

So this is all helping towards a $2.3 billion synergy target.

Now another enabler is the Takeda Business Solutions, where we -- which is another -- it's a shared service organization where we've consolidated both Legacy Shire and Legacy Takeda shared service organization.

We're seeing significant improvements in robotics and automation.

That's having a significant improvement in productivity, in particular in the G&A function.

You mentioned around COVID-19.

So there has been an uptick of our margins.

So you see our underlying core operating profit margin at 30 -- just under 35%.

1.5% you can allocate that towards COVID-19, and that's mainly due to lower spend in travel, international and local travel and lower meetings and events in -- both external and internal meetings and events.

Thank you for the question.

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

This is Sakai speaking from Crédit Suisse.

Just a couple of questions.

First question for Julie Kim-san.

I know you answered this question already twice, but I'm kind of sticky guy, so I just want to make sure that I understand correctly.

The immunoglobulin growth is sustainable.

If it's so, what makes TAKHZYRO different from your competitors?

The correction center or some kind of -- just additional seasonality effect from previous past quarter and this quarter.

I just want to make sure that I understand you correctly.

So that's the first question.

And second question is ALUNBRIG.

What are you up to this product?

It seems it's still trying -- pretty low given that fast -- relatively high expectation given that.

And you need this product go up, obviously, given that VELCADE ROE and NINLARO is struggling.

So I appreciate that this update of this ALUNBRIG and -- during this first quarter and going forward.

Thank you, Sakai-san, Julie?

Yes.

Thank you, Sakai-san.

And I will answer again in a different way.

Hopefully, this will address your needs.

So in terms of the IG growth, we are on track to deliver double-digit growth for the year.

And we do believe that this is sustainable, and our commitment in 2020 is solid.

This is largely due in -- to the fact that as soon as the transaction closed, we began immediately investing in further infrastructure and capacity growth across the plasma value chain so that we could meet the needs, the increasing needs of patients who wanted to be on our portfolio of IG products.

And so we've seen continued growth particularly in our subcutaneous portfolio.

And in terms of the impact of COVID, I don't know if this is what you were also trying to ask about.

But in terms of our collections, we did see a decline in the early part of the year as the shutdowns and quarantines happened across Europe and the U.S.

But at this point, in Europe, our collections have almost fully recovered.

But in the U.S., we do see some sustained impact due to the ongoing dynamic nature of COVID in the U.S. So we continue to pull different levers to maintain and grow our overall capacity.

We opened new centers in Q1, 4 of them, and we continue to open new centers and intend to open just over 20 in the fiscal year.

So this is what we're doing to maintain and support the IG growth, and we do believe that it's sustainable.

Thanks, Julie.

It's Costa here.

Just to add to that.

Sakai-san, you may have noted that in our data book that we have available online, we've communicated for the fiscal year 2020 that our PDT Immunology growth is expected to be 10% to 20%.

So we started the year really well, and we're still committed to delivering double-digit growth there.

Thanks.

Sakai-san, it's Christophe.

On ALUNBRIG, we just got the approval in the United States for the first-line indication in -- last May.

So we are still -- of course, we are in a launch phase here, and this is critical.

So we got this indication later than what we had expected a few years ago, but we have it now.

And we believe that the product is very competitive.

In terms of efficacy, we have a very strong intracranial efficacy as well, which, in our mind, is a differentiating point.

So we are very enthusiastic about the product.

But of course, we need time to establish this product.

And -- but we are very committed, and we believe that this product is potentially a best-in-class product in that class.

You mentioned that NINLARO is struggling.

But in fact, NINLARO -- if you look at our overall portfolio, if there is one product which has been impacted negatively by the coronavirus situation, that's VYVANSE.

But if there is one product which has been impacted positively, it has been NINLARO.

And because it is a product which is efficacious -- it's not the most efficacious, but it is efficacious.

And of course, in the current context being overall, you have seen that the product has grown at 31% during the first quarter.

(Operator Instructions)

Okay.

Before we take a question from the floor, there's another question by e-mail.

And this is about dengue data.

And when will we see 24-month dengue data?

How are you thinking about commercial opportunity?

So we are planning to actually present the 24-month data at the congress, but this congress has been postponed because of the coronavirus situation.

So we will -- we are looking at the way of disclosing this data.

So we are very committed to file the dengue vaccines.

We believe that all the data we have generated so far has demonstrated a good level of efficacy.

As we explained in the past, it is a very different vaccine than the previous vaccines.

The overall efficacy is very strong, especially in dengue type 2, for example, and type 1.

Type 3 is perhaps where we have a weakness.

But in terms of the profile of the vaccine, it's a very, very different profile.

We don't see also a difference of efficacy between 0 positive and 0 negative.

So our intent is to file probably at the beginning of next year, in the first part of next year, and then to launch the product.

And dengue is a more and more serious issue, public health issue in endemic countries.

And therefore, we think that this vaccine is needed to -- we are planning to launch everywhere where dengue is a public health issue.

Thank you very much.

We have another question from an investor asking about the executive order.

Do you see significant risk in U.S. pricing dynamics?

What's your take on recent executive order?

Ramona, would you like to start on that?

Sure.

I think we are -- we've been pretty consistently giving the message on U.S. pricing for a while now that there's a number of factors at play.

There will, over time, be continued pressure on U.S. pricing.

We have taken fairly moderate price increases, as an example, over the past number of years in the U.S. So we're fairly derisked from not being able to take big price increases because we really don't do that.

If you look at our website, we publish our data and, we're fairly inflationary in our approach across our portfolio.

The executive orders, we're still waiting to actually see the full text of the one on international pricing.

I think if you look at them across the board, that's probably the one we need to dig into a little bit and understand what the situation is.

It's very difficult to use international pricing in the U.S. just because of the uniqueness of the health care system.

Different health care systems around the world are very different.

The patients flow through them differently.

Insurance is different.

For instance, in the U.S., there's this large middleman payer where a bulk of the profits go as well.

So I think our focus as a company is we want to continue to work with the administration.

We want to continue to find a way to be able to invest in the innovation that we invest in across the U.S., but then also continue to make our medicines as accessible to patients possible.

Certainly, passing rebates through the -- through to patients would be a big help in that.

Continuing to use our co-pays and coupons and free medicines programs continues to be a big help in that, and we'll just continue to move forward and see how the environment evolves.

I mean I can't make any predictions, so I'm not sure what else I can say.

And Christophe, if you have anything to add.

I would just add that their concept of international reference pricing is not a good concept because it means that -- in a way, it means that it's a downwards spiral.

And we should accept that less wealthy country should pay a lower price for a medicine than the more wealthier country.

If we don't accept this principle, we can call that tier pricing or -- if we don't accept such a principle, it means that it's a downward spiral.

It means that R&D will eventually suffer, and that would mean that there will be less innovation.

Or it means that there will be no access provider to the less wealthy country, patients in the less wealthy country.

So I think the concept of international reference pricing is a very different -- is a very dangerous concept.

And at Takeda, we advocate for tier pricing mechanism where the price is lower in a less wealthy country and the price is higher in the wealthier country.

The next question is from Mr. Ashida from Manulife.

I am very pleased to know that you made a great progress of deleveraging as well as successfully financing of existing debt.

In this respect, my question is that are you confident that you maintain investment-grade for the bond?

And also in the future, are you planning to issue bond in Japanese bond market?

This is my question.

Thank you very much for your question, Ashida-san.

So definitely very confident to maintain investment-grade credit rating.

We've been working relentlessly to pay down the debt.

In March of last year, our net debt to adjusted EBITDA was 4.7x.

We've already reduced that by 1 turn, and we're tracking very well towards the 2x net debt to adjusted EBITDA ratio.

We're working very closely also with the credit agencies, and that's been part of the communication we've had with them so far.

So they're very pleased with the progress to date.

Your question around refinancing or bond issuance in Japan, we don't expect to do any of those.

It's premature to communicate on that.

But at this stage, the refinancing that we've done manages the overall refinancing in a leverage-neutral debt perspective.

And you can see on Slide 35, how we've been able to really smooth the repayment ladder and maturities.

You'll also note that in 2024, the payments are very low.

But we have a hybrid loan -- a hybrid bond, sorry, that we can call in 2024, and that's in Japanese yen.

But at this stage, we're very comfortable with the way we structured this refinancing in a leverage-neutral perspective at very low interest rates.

In fact, one last comment on that is the -- it was the lowest coupon for any BBB-rated company for 20-year bonds and for 40-year bonds in history in any industry.

So we're very proud of that and just goes to show the confidence that the debt investors have with the Takeda strategy and debt profile.

(Operator Instructions)

Okay.

We have one more question from investor.

This is on CoVIg-19 program.

I wonder if the team could comment on the correlation of the protection with neutralizing antibody level.

And how does the sensitivity of assets across institutions affect interpretation of neutralization antibody levels?

Yes.

So this is Julie.

I will provide you my perspective on this, and Andy can add his comments as well.

So in terms of the hyperimmune development, part of the challenge is the development of a standardized neutralization assay.

So at this point, there isn't a standard that exists globally.

We have agreed with NIH on a standard for the hyperimmune, but that does not mean that neutralization assay is the same standard that would be used, for example, for monoclonal development.

So there is going to be variability between the assays, and I think this will be part of what will need to be addressed in future work so that it is clear for clinicians in terms of how to make decisions on various treatment alternatives.

So in terms of what we see with the assays that are being worked on for the hyperimmune, as I said, there are -- there is a single standard that will be used.

So amongst the hyperimmune, there will be more consistency in terms of that neutralization tighter.

Andy, I don't know if you want to add anything in general across the multiple therapeutic options.

I mean I'd just expand on what you're saying, Julie, and just mention that the immune system is just incredibly complex.

And we have to be careful moving beyond hyperimmune into the vaccine world and trying to understand how, as a community, we control this virus and not overly interpret some of the results that come out.

We've seen in the past many times being fooled by very compelling in vitro assays.

So I think the key, as Julie is saying, is that we've got a consistent assay.

We're very soon going to start to run a clinical trial.

We've seen -- for the hyperimmune program, we've seen compelling evidence from convalescent plasma.

So we have everything lined up, and it's really critical that we now run study and get an answer.

It's going to be the same with the vaccine.

I think we just need to be careful and not get too far out ahead of ourselves.

Okay.

Thank you very much.

I think the studies will be the last question.

I think this is for Costa.

And the -- probably there's nothing that you can say, but any comment on the rumors around the OTC business in Japan?

And another question is, how are you thinking about share buybacks?

Please?

I don't know if that's a question I can start, and then Christophe can add any comments on the OTC.

But in general, we don't comment on speculation.

That's the #1 comment -- we don't comment on speculation.

And the second question was -- what was it?

Share buyback.

Share buyback.

Look, our focus on our capital allocation policy is consistent.

Paying down the debt rapidly, paying down the debt, bringing it down to 2x net debt to adjusted EBITDA is a key priority.

Investing in R&D, very important.

We have 12 new molecular entities in Wave 1, approximately 30 new molecular entities, which are either first-in-class or best-in-class in Wave 2. So our capital allocation is to continue to fund R&D, growth drivers like also PDT, and China, where we're investing for growth of 15 new product launches in the next 5 years.

So that's where we are at this stage, but we'll continue to monitor.

As we pay down the debt, we'll start to have a few more options up our sleeves.

Thank you.

Thank you, Costa.

So I would like to wrap up this session.

So thank you very much.

Thank you, everyone.

We would like to express our appreciation for your taking the time with us tonight, today.

Thank you very much for your continued interest in Takeda.

Thank you.

Thank you, everyone.

Thank you.

Good night.

Good afternoon.

Have a good rest of the day.

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

You may now disconnect your lines.