Takeda Pharmaceutical Co Ltd (TAK) 2021 Q2 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. O'Reilly, please go ahead.

Hello. Good evening, everyone. Thank you very much for joining this conference call to discuss the fiscal 2020 second quarter financial results of Takeda Pharmaceutical Company. My name is Christopher O'Reilly, 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 our other SEC filings. Please also refer to the important notice on Page 1 of the earnings presentation.

Now please let me introduce to you today's presenters and panel: Christophe Weber, President and CEO; Costa Saroukos, Chief Financial Officer; Andy Plump, President of R&D; Ramona Sequeira, President of the U.S. Business Unit and Global Portfolio Commercialization; and Julie Kim, President of the Plasma-derived Therapies business unit.

After opening remarks from management, we will open the lines for Q&A. You can ask your questions through the call or you could also e-mail them to the IR team at takeda.ir.contact@takeda.com or to any member of the Takeda Investor Relations team.

Thank you. And let's get started. Christophe, over to you.

Thank you, Chris. Hello, everyone. A pleasure to have this interaction with you to this evening, Japan time. I will make a few remarks. We want to reduce the presentation.

First, about the COVID-19 crisis, I believe that we are managing the situation well within Takeda. We had kept down very safe. We moved to a remote way of working very early on for our office-based employees. It has led actually to some -- a clear strategy to move towards a hybrid model of working post-COVID. So Takeda will embrace a model of in-person and virtual way of working in the future, and we are actively working on that. At the same times, we kept our manufacturing operation going, and so we have not at least experienced any supply disruption because of COVID-19. Our R&D activities has been slowed down in some cases, but we do see a recovery of our chemical development at the present time.

We are very active on the fight against COVID-19. We are active in the vaccines area. We are developing a hyperimmune globulin product. And we are also testing some in-line product FIRAZYR and TAKHZYRO to assess whether they can have an activity against COVID-19. So that's the first point I wanted to highlight.

The second is our financial results, they are good, it will allow us to confirm our full year management guidance, which in the current context, we believe, is a great achievement. We are, in fact, raising our forecast for cash flow and reported EPS. Costa, just after me, will summarize rapidly this financial performance for the first semester and the outlook for the year.

And then we are preparing the future. We are developing our pipeline. We are more and more excited by our pipeline. We are planning to file 7 new molecular entities in the next 12 months. We have 12 new products in the next 5 years. The quality of this pipeline is more and more clear. And we are looking forward to a meeting in December with you to go further into the detail of this pipeline to really understand better the value of this pipeline, which is progressing and is very excited -- it's very exciting. And we did add 1 molecule to this pipeline recently with TAK-999, and we will be very happy to answer questions about this pipeline.

I will not dwell -- I will not go more into detail at this stage. And I will let Costa develop our financial results. Thank you.

Thank you, Christophe, and hello, everyone. This is Costa Saroukos speaking. I'd like to provide a quick summary on the key financial highlights for first half fiscal year 2020.

Firstly, as Christophe mentioned, the Takeda portfolio has been quite resilient in the first half of the year, and that's despite the challenges faced due to COVID-19. Our underlying revenue grew at 0.5%. It's driven by our growth in our 14 global brands, growing at just over 15%. Our underlying core operating profit margin was 31.6%. It benefited from continued synergy and OpEx efficiencies. And reported operating profit was up 98%, reflecting lower acquisition-related costs. Our operating cash flow grew by approximately 15% versus prior year, and the free cash flow was approximately USD 4 billion.

Based on this resilient performance, again, just confirming that we are delivering our full year -- we will deliver our full year management guidance for fiscal year 2020. And furthermore, we're increasing our reported operating profit and reported EPS forecast. In addition, we will also upgrade our free cash flow outlook to reflect the positive impact of additional noncore asset sales.

And finally, in the first half of the year, we continued to make great progress towards our midterm financial commitments, including exceeding our $10 billion noncore asset divestiture targets. We also remain solidly on track to reach our target of mid-30s margin and our 2x net debt-to-adjusted-EBITDA ratio within the fiscal year 2021 to 2023.

So with that said, I'd like to open it up to the floor for Q&A. Thank you.

Thank you. Operator, if you could open up the line for calls, please, for questions.

(Operator Instructions) The first question is from Mr. Stephen Barker from Jefferies.

It's Stephen Barker here from Jefferies. I have 2 questions. Firstly, I wanted to ask about your 3-month results. Compared to consensus figures that you've compiled from 9 brokers, the actual revenues and actual OP was a little bit lower than consensus estimates. Obviously, you can't control what brokers are forecasting and you may not know why the analysts as a group got it wrong. But if you do have a view on why the brokers as a group overestimated your second quarter sales in OP, I would appreciate any insights that you have.

Second question is related to Xiidra. On Slide 36, you said that the divestiture of Xiidra could generate cash of up to $5.3 billion. However, Novartis appears to have given up on the EU approval of Xiidra. And I'm therefore wondering if the $5.3 billion is still realistic.

Thank you, Stephen. Costa, can you take on the question?

Sure. Thanks for that. Thanks for the question, Stephen. So when we compared the results versus the consensus, the big gap was that the analysts did not capture -- some of the analysts did not capture the FX impact. And as you know, and you saw in the reports, we were impacted from a fiscal year -- first half of the year by 3.1 percentage points on just FX. So it's had -- it's been a heavy headwind towards our results on a reported basis.

The other point I do want to say from an underlying standpoint, however, we're growing at -- for the year -- first half of the year at 0.5%. We're confident we'll deliver the management guidance of low single-digit growth. And the reason behind that is, we had some softness in the actual quarter 2 because of predominantly some supply phasing. So there were shipment delays specifically in the hematology franchise. We had some shipment delays for fiber in the emerging markets area.

And also, we highlighted that in PDT, you see, our quarter 2 results were negative 0.4%. Our quarter 1 was plus 19%. And that's just a delay in the shipment for albumin towards -- for shipment for China. So we're not -- we're still very confident that our PDT franchise will be growing for the full year in double-digit, between 10% and 20%. It's just a phasing. So I'd like you to just really focus on the year-to-date because in our portfolio, there will be certainly some phasing challenges quarter-by-quarter.

Now with Xiidra, you mentioned -- in our divestiture slide, I think it's number, if you go to Slide #36, we say Xiidra up to USD 5.3 billion. The deal has been closed. $1.9 billion is milestones. $1.9 billion is milestones. Sure, we don't expect and we haven't expected that the full $1.9 billion in our internal modeling. We've been quite conservative. But nevertheless, even with that conservative approach -- conservatism on the upfront -- sorry, the milestones of $1.9 billion, we still exceed the $10 billion target. And we'll still drive towards our financial commitments, in particular, the net debt-to-adjusted-EBITDA ratio of 2x within fiscal year '21 to '23. Thank you, Stephen.

The next question is from Ms. Stacy Ku from Cowen and Company.

Stacy Ku from Cowen. And congratulations on the progress. Obviously, for the immunology franchise and a pipeline question. So first, given the potential COVID-19 impact on immunoglobulin collections, wondering if at this point, there is enough clarity in whether we would see the shortage sometime in next year 2021. Or if you still have enough collections or finished supply to still potentially smooth things over?

In addition, wondering if you could provide your updated thoughts on the competitive landscape for immunoglobulin therapies, with the potential approval of an FcRN in myasthenia gravis next year and a much smaller indication for IG use versus the potential hypersialylated IVIG seems to be now a much later date threat. So just wondering how you think this might all play out.

Finally for the SARS-CoV-2 hyperimmune program, could you speak more about the dosing of the single infusion? Do you believe the optimal dosing has been met? And when would you expect the next disclosed update?

And finally, on the pipeline question for the Orexin program. Will we still have a preliminary disclosure later this fiscal year in narcolepsy? And can we speak more to the potential additional CNS indications for TAK-994 and 861?

Thank you, Stacy. Julie and Andy?

Thanks, Christophe. And thanks for the question, Stacy. I think I've gotten them all here, but if I've forgotten something, please remind me.

So first, in terms of the plasma collections and the overall supply impact to immunoglobulins, let me give you a number of points. So first, we are in a much better inventory position now than we were 12 to 18 months ago. And so when you do take into consideration future impact on supply, as you indicated in your question, we are looking at plasma collections in addition to work in progress, inventory and finished goods inventory. So it's all components that we are looking at together.

At this point, in terms of collections, we did see a significant improvement in our Q2 collections over Q1. However, as I'm sure you're aware, and we are all watching very closely, the European cases have been increasing dramatically over the past month or so. The U.S. still has -- doesn't have cases under control. And so we are closely monitoring the progression of the pandemic, especially as we go into flu season in the U.S., where it is uncertain what impact that might also have on the progression of the pandemic.

So while I would say we had a strong Q2 versus Q1 in terms of collections, overall, the pandemic still remains a concern. We continue to pull all the levers that we have available to us in terms of efficiencies, whether that's in the collection process or on the manufacturing side or in our marketing, to maximize our ability to collect plasma to support the supply for outpatients. So for a more forward-looking outlook on IGs, we can't provide that at this point. But we are on track to deliver our FY 2020. And as you heard Costa mentioned for the IG portfolio, we are on track to deliver between 10% and 20% growth this year. And we will continue to manage as best we can to provide continued supply for our patients going into 2021.

Your second question, in terms of an update on the competitive landscape. There hasn't been any new data that has been released in regards to the anti-FcRns or hypersialylated other than the acquisition by J&J. And so at this point, we wouldn't have a revised outlook in terms of the impact of the potential disruptive technologies on our IG portfolio.

And then in terms of the dosing for the hyperimmune in the ITAC trial. So you all would have seen by now that the trial has finally started. First patients have been dosed. And in the trial, if you go to ClinicalTrials.gov, you will see the entire protocol, but we are using a 400-milligram per kilogram dose. It's a onetime dose. And this is what the trial is being done in conjunction with NIAID, the National Institute for Allergy and Infectious Disease, under the NIH. And this was the dose that they determined to be the appropriate dose for the clinical study.

So I think I got all 3 of them, but if I forgot something, Stacy, please ask again.

Yes. That was covered well.

Julie, perhaps could -- can you elaborate a little bit on the IG demand that we see and the dynamic between the demand and the competitive pressure with what -- and with the fact that with what we know today, we don't believe that -- we do believe that the IG demand will continue to grow the overall market?

Sure, Christophe. So when we look at IG demand going forward over the mid to long term, we still do see a significant runway for growth despite the entrance of the potential disruptive products. So as you pointed out, Stacy, the initial indication for the anti-FcRn products are in myasthenia gravis, which is a very small indication for IG utilization overall. The second indication that's being pursued is ITP. So those are the first 2 that will come to market and will likely help to establish a safety profile, et cetera. But again, relatively small in terms of overall IG usage.

The big one is CIDP. And here, the challenge is that, for CIDP, the patient population is very heterogeneous. And so unlike myasthenia gravis and ITP where there's a relatively clear mechanism of action and expected impact for patients, for CIDP, it's not as straightforward. And so there will likely be a continued use of multiple therapeutic options to maintain CIDP patients in their treatment. So we see a continued place for IG therapy as it relates to anti-FcRns in CIDP. And part of what we are doing at the moment is to help further the understanding behind why immunoglobulins work so well in CIDP as well as focusing on securing the indication for HYQVIA, which is our facilitated subcutaneous product, which is differentiated vis-á-vis other immunoglobulins on the market.

In addition, when you look at areas that cannot be impacted by the anti-FcRn, so primary and secondary immunodeficiencies, these are areas that have still relatively high growth, primary immunodeficiencies, being driven by the fact that there's still high levels of under-diagnosis, and optimal treatment is not achieved across all geographies. For secondary immunodeficiencies, it's primarily being driven by the growth in advancements of oncology care, which often has as a side effect, the need for immunoglobulin therapy to support those patients. So when you take all of that into consideration, this is why we still believe that there is a long runway for growth for the IG portfolio.

Stacy, it's Andy, Andy Plump. On your second question regarding Orexin, let me step back and update you more broadly on where that franchise stands. So we continue to generate more data with TAK-925. We presented earlier data that was released as a European Sleep Research conference last year. I would encourage you to get that poster -- the references on the slide -- our slide deck. We presented 7-day repeat dosing with the IG infusion. And we continue to see profound efficacy on the 40-minute maintenance await for this test, which you know is a pivotal endpoint.

We didn't present today. But at the meeting in September, we did that we -- at the 44-milligram dose, we see complete correction of the Epworth Sleepiness Scale index, not just bringing patients into what's a normal range, but no evidence of sleepiness, complete functional correction. And then for the first time, we've generated signals on cataplexy. In that 7-day study, we didn't see any cataplectic episodes in patients that were treated with 925.

We also continue to use it as a promolecule to expand proof of concept. We now have proof of concept in type 1 narcolepsy, which is the only condition that's due to a deficiency of Orexin. And then we're now accumulating evidence for efficacy in Orexin conditions, which are characterized by normal orexin levels or slightly depleted levels. Those include type 2 narcolepsy and sleep work disorder or sleep deprived to healthy individuals. In both cases, we see profound efficacy. We're running now a study in idiopathic hypersomnia. We'll have data soon. And we completed a study in obstructive sleep apnea, and we'll be presenting those data shortly. We also attended a path forward for TAK-925 in an indication where an IV infusion is appropriate to the population, and we'll be discussing that over the coming months and beginning a proof-of-concept study.

For TAK-994, we have 2 ongoing studies. The more critical of the 2 is the Phase II study in type 1 and type 2 narcolepsy patients. It's both a proof-of-concept study and a dose-ranging study. And so it's -- there are regulatory implications to the study. And so we're very careful in terms of how and when we will disclose data from this study, and we're still trying to figure out the best way to do that, but also maintain the integrity of the data for future submissions. I will say that given the profound efficacy that we see with these molecules, it's very hard to say blinded at a site level because these patients are essentially functionally cured for a disease where symptoms are quite dramatic. The second study is a study that will read out in the -- late in the early 4Q 2020 time point, and that's a help -- a sleep-deprived healthy volunteer study.

In terms of our focus, our focus is really hyper-like laser on type 1 narcolepsy because the dosing is likely to be different in type 1 narcolepsy versus some of these other conditions. That's our primary focus right now. It's also, of all the indications that we're immediately thinking about, by far the largest and with the greatest unmet medical need. We are in parallel working towards an indication expansion program that would include all of the rare diseases that I just mentioned and possibly some of the more common diseases.

In terms of disclosure, what I can say is that we're not going to be disclosing anything substantive at the December R&D. There, we're going to focus on other programs. But we are intending to come with an iteration on these R&D days and have another one sometime in the first half of the calendar year '21. And at that event, we do intend to provide an update -- or an extensive update on this overall program. We're still tracking, by the way, towards our filing date of and launch date of 2024, which means a pivotal start in the '21, '22 time frame.

The next question is from Mr. James Gordon from JPMorgan.

James Gordon, JPMorgan. A couple of rare disease and plasma questions, please. On the system, on plasma collections, following up on the previous question, are you able to quantify actually how much plasma collections were down during the quarter? And what were the exit rate was? And what was the trend you're seeing, or what trend are you seeing right now? That was the first question, please.

Second question was immunoglobulin performance, and I know you had a tougher year-on-year comparator. But sequentially, sales were down about 9% as well. Was that to do with demand? Or is it at all supply? Or is it just ex U.S. phasing? And if it's phasing, should we expect to have a rebound back up again in Q3, so Q3 gets an overshoot?

And then a third and final question to Arrowhead in the RNAi therapy, which looks interesting. So clearly, you've got economics on the Arrowhead product, which is promising. But presumably, part of this deal would be, you're trying to get people to use your plasma-derived product as well, so to treat both the liver and the lung symptoms. How are you go about doing that? I think -- could someone say they will just use the Arrowhead product to use it with the market-leading plasma-derived products? Or is there a way you can ensure that someone uses the Arrowhead product with your products -- with your plasma products?

Thank you, James. Julie, can you take the plasma questions? And then Andy, just the third questions?

Yes. Thanks, Christophe. Thanks for the question, James. In terms of the collections, while we're not providing specific data points, in Q1, we did see a decline as the entire industry. For Q2, as I mentioned earlier, we did see a very strong recovery in our collections in Q2. The difficult part is that the coming months are going to be very unpredictable. And it's difficult to say at this point whether the recovery would continue, whether it will flatten off, whether we'll see another dip. Because the trajectory of the pandemic is quite high, but yet deaths are lower. So it states thus far haven't put in place the same type of shelter-in-place orders. We've not seen shelter in place orders come into effect in Europe, although further restrictions are being put in place.

So it's very unpredictable. And so it's hard for me to give you an indication of what the coming months is going to look like in terms of plasma collection. I will reiterate that we are continuing to closely monitor and leverage all of the parameters that we have available to us to make sure that we have the -- we are maximizing our ability to collect plasma.

In terms of the IG quarter growth numbers, we do need to take a look back at FY 2019. We had a phasing issue to the U.S., our largest market, in '19. And so in Q1, we had an artificially low quarter. And Q2 of '19 was artificially high because of this phasing issue, which resulted in a very high Q1 for us this year and a low Q2. But if you look at the first half results, you'll see that for the IG portfolio, we have 14% growth. And I would encourage you to think about the 14% versus the individual Q1 and Q2 growth numbers. And we are still on track to deliver the full year of IG growth between 10% and 20%.

And James, on your question with respect to the Arrowhead program and our Aralast and GLASSIA PDT fractions, they're very complementary, and they treat different aspects of the disease. The common -- most common form of alpha-1 antitrypsin disease is a mutant protein called the Z protein, the PiZ, Z protein. That protein, when it's made, aggregates in the liver, and some of it gets secreted into the plasma. The aggregates in the liver are toxic and cause end-stage liver disease in the action of the alpha-1 antitrypsin patients. The secreted protein is active and prevents lung disease.

In our -- in the Arrowhead program, we're knocking that message down. And so we're knocking down that protein. So that does 2 things. One is it reduces the buildup of that toxic aggregate, so will protect the liver. But inadvertently, it also reduces the amount of circulating enzyme, and so it has the potential to exacerbate lung disease. So you can imagine the potential for additive effects between both the siRNA and the replacement protein. One, to treat liver disease, and one, to then subsequently treat the potential increased incidents of lung disease.

Okay. Just to clarify this. So my question was whether the 2 proteins will be complementary. So I think they clearly could be very complementary because one would work for the liver, one would work for the lung. But my question was, how do you ensure that a prescriber would use both approaches coming from Takeda rather than use the Arrowhead product with someone else is plasma-derived product?

Christophe, do you want to try to take that?

Yes, I can comment and Ramona can jump in as well. First, I mean, when you have complementary products like that, you can -- depending on where you operate, in which country you operate, you can sometimes contract with payers to optimize their health care cost. Sometimes, you cannot. You certainly can always composition the 2 products, so you have some synergies in terms of promotional expense synergies.

So I think that it's open a lot of opportunities to really try to synergize this type of product. But also, our philosophy is very innovation based. We are focusing by therapy area. This new product is completely played in the GI space, which we know perfectly because that's one of the 4 area that we are focusing on. Our philosophy is that, if we don't do this innovation, someone else will do it anyway. So we are better positioned to do it ourself. And so we are very excited about this new product. Perhaps, Ramona, do you want to add anything?

Christophe, I think you just answered it perfectly. Nothing to add.

The next question is from Mr. Yamaguchi from Citigroup.

So Yamaguchi of Citi. I have 2 questions. The first one, you mentioned a little bit on the Japan call about the Hikari factory's warning letter situations. But I wasn't quite sure about the timing, because you mentioned it take around 12 months from last, I think, October, November. So the timing was that they should be resolved pretty soon. So I understand it's very difficult to talk about the regulatory issue. But can you add some comments about your confidence which you showed 3 months ago about the resolution of those warning letter by the end of this year? That's the first question.

The second question is that the CoVIg-19, you started dosing, but then I think it's 500 cases of patients. And when you think about the filing by the end of this year or within this fiscal year anyway. So I found it very quick. Can you let me know that -- what kind of schedule you talk about? You have to finish 500 within the several months, or you can file without those finishing up the dosing? Or can you talk about the filing timing of CoVIg project?

Sure. Thank you very much, Yamaguchi-san. I'll answer the first question, and Julie, the second one. And Hikari, what I mentioned earlier is that we will be inspection-ready by the end of this year. It means that we'll have executed the remediation necessary. And inspection-ready means that if the inspection is positive and if we are ready, we expect that it is positive. We -- it could be -- it could change the status of the site, meaning that the status will not be under the current status which led to this warning letter. So we are on track. As we mentioned earlier, we are on track and we'll be inspection-ready by the end of this year.

And in terms of your question on CoVIg, Yamaguchi-san. So it is 500 patients that we need to enroll in the trial, 250 on placebo, 250 on treatment. So we would not be able to file before the end of the calendar year, but we do hope to be able to file before the end of the fiscal year. What Christophe was mentioning on the call earlier was that we hope to have top line data to share. So that will come before we file, and that's what he was referring to.

Okay. Okay. But you're confident about, yes, dosing 500 within 6 months or so?

Well, as I was mentioning earlier, given the significant increase in cases that we're seeing in the U.S. and Europe, it shouldn't be too challenging. But of course, we are not running the trial. It is being run by NIAID, so that is under their control. But 500 is a relatively small number given the caseloads that we see in U.S. and Europe. And the primary endpoint is at 7 days. Secondary endpoint are at 28 days.

Okay. Thank you, Yamaguchi-san. I just want to take a question from the e-mail now. So could Andy please comment a couple of questions on TAK-007, the CAR-NK program? So first of all, comments on responses and safety profile seen in DLBCL with current formulation for fresh, cold-blood derived NK cells. And when will we see a presentation at a medical conference?

And then the second question, how does the cryopreserved formulation differ from the current formulation? And can we infer efficacy for the cryopreserved formulation based on what we've seen with the current fresh, cold-blood formulation?

Thank you, Chris, and thanks for the question. As I mentioned at the earnings announcement, we've been continuing to dose patients only at the MD Anderson Cancer Center. We had expectations for enrolling an aggressive number of patients over the course of this year, as we were collaborating to generate a cryopreserve formulation and to initiate a multisite trial. We have continued to enroll some patients, but would fall well short of what our projections were, and that has a lot to do with the COVID pandemic disruptions.

We did, as you'll remember, present -- Katy Rezvani had a paper in the New England Journal of Medicine earlier in this calendar year that discussed extensively the safety and efficacy in the 11 patients that were first dosed. And in that cohort, it was a mixture of lymphoma patients, CD19-positive cancer patients. That included some DLBCL patients as well. When the remainder of those patients will be presented, I'm not -- I don't know what the answer to that question is we can try to get that date for you. We at Takeda don't have any plans. We'd have to check with our partners at MD Anderson.

In terms of the cryopreservation formula, it's something that we've been working very intensively on. It's a frozen and thawed cell, which is one that you can use for a supply chain that allows you to work off-the-shelf. It's quite different than having a fresh supply. And the NK cells are notoriously difficult to freeze and to thaw, which is why it's taken quite some time to develop that formulation and to establish the analytic class As that allow us to conclude to the best of our knowledge, that a frozen and thawed cell is equivalent to a fresh cell.

We think we have that. We're continuing to optimize, but we think we have a formulation and a drug substance that will allow us to now proceed. We're in the process. We've got a good conversation with the FDA, and we're in the process of putting our IND together. We hope to submit that in the next couple of months and start enrolling a Takeda-sponsored multisite study, a real true proof-of-concept study at the end of this fiscal year.

The answer to your question is, how well does what we've seen predict the future? And I think the answer is, we have high hopes and expectations that it will be predictive, but I think it's still an unknown that we have to test. The first unknown was, could we get the cryopreservation formula and come up with cells that were -- that seemed equivalent analytically? The answer to that is yes, unequivocally. So we now have a product that is -- that can be distributed off the shelf.

The next question is whether in humans with cancer, whether we see the same response characteristics and safety characteristics. And that's to be tested. And then there's still a third question that we'll be testing in that next study, which is the amount of mismatch. So is it one cell that can treat everybody, or do we have to do some HLA matching? And that's something that we'll figure out over the course of the next 12 to 18 months.

Thank you, Andy. I'm going to take another question that's coming through e-mail as well. So while not providing any formal guidance, could you discuss potential growth prospects for fiscal 2021? What are the early pushes and pulls for next fiscal year?

Costa, do you want to take that?

Yes, sure. Thank you. Thank you for the question. So the initial pushes would be the 14 global brand growth momentum. So as you saw already, we're growing our 14 global brands at 15%-plus. The annualized base of the 14 global brands is approximately $11 billion. So we expect that momentum to continue for fiscal year 2021. We also should start to see the impact of our first wave 1 pipeline launches, such as TAK-721. And then the investment in China will start to accelerate on the new product launches, in particular, products such as ENTYVIO and TAKHZYRO. So they're the summary of the pushes.

On the pulls, obviously, the COVID uncertainty, we need to see -- keep monitoring the impact of COVID, the potential LOE of VELCADE, and that's something that we'll -- hopefully, before earnings 2021 guidance, we will have much more clarity on, and the DEXILANT LOE in summer of 2021. I think they're the key pulls.

And then the one final comment, especially for the investors -- sorry, the analysts in Japan that are looking at reported -- significantly reported on revenue. Just to remember that the divestitures that we've already announced have -- will have approximately $1.3 billion revenue impact for fiscal year 2021. So on a divestiture standpoint, that's something you need to consider.

Thank you, Costa. I will just add that we see more push and pulls overall. The big uncertainty is really the COVID-19. And we are like everyone, every week is a new week.

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

Just one question. U.S. president election coming in 6 days, and well, it's everything up in here. But just assuming hypothetically, if Biden and Democrat win, he is talking about the [new version] of insurance coverage and even reducing the age coverage of the Medicare, how this change would impact, first, U.S. industry reimbursement pricing -- not reimburse, the pricing impact the U.S. pharma and also procure business to tuck it up? I know this is probably the question without answer, but as long as you could provide some color, I really appreciate.

Thank you, Sakai-san. Well, Ramona is very well positioned to answer that questions. She's not only in charge of our U.S. business, our global portfolio commercialization, but she is very active with the [pharma] association. Ramona?

Yes. Thank you, and you did acknowledge that you asked me a question that's also very difficult to answer at this time because there's so many different things up in the air right now. So assuming that in the election, the Biden administration win was your question, I think we still have to know what happens with the Senate. And so that is still an outstanding question that we need to have answered.

Generally, if you look at the Biden administration program, you're right. It is about providing care to more people through expanding Medicare to a lower age, et cetera, and kind of beefing up the Affordable Care Act. I would say that, in general, if you look at some of the policies you've seen, for instance, if there's something like inflation-based price increases in the U.S., very, very little impact on a company like Takeda because we tend to be pretty responsible with our price increase policy, so we don't see much impact. When you look at expansion of care, you tend to get a push and a pull between price and volume. So you'll get more accessible patients, but potentially some price dampening. And there are many different ways that could happen. It could happen through changing the way pharma pays for patients as they go through Medicare in the donut hole or in the catastrophic coverage stage.

So I think there's really too many unanswered questions right now. But I would say, all of these things are manageable for us to deal with and negotiate with the administration. Where we really want to focus our efforts is to avoid international price setting and international price referencing. That becomes difficult for us because it's just too difficult to compare the U.S. system, where you have a big private payer environment to other health care systems. So for instance, probably the worst policy that we've seen would be the most favored nation's policy is that this current administration has put forward.

But in general, that's where our focus will be: protect our ability to set our launch prices and work with any administration to continue to allow for increased coverage and increased care for patients and have some role for pharma to play in that, too. Really difficult to predict what the answers will be and what the actual impact will be at this time, but we're staying very close.

Christophe, is that -- anything to add there?

Great. Great. Thank you.

Okay. Thank you, Sakai-san. I've got a couple of e-mail questions, but maybe we'll see if there's any other phone questions to come. Anyone else who wants to ask a question on the call?

(Operator Instructions)

Okay. Whilst we're waiting for any additional callers, so next questions. Some product-specific questions that we've received. So firstly, NINLARO. So growth seems to have slowed down Q1 to Q2. What was the key driver of NINLARO slowdown? And do you expect a reacceleration in the second half of the year? So first one is NINLARO.

Second, on VYVANSE. It looks like there was a recovery in Q2. But with a resurgence of COVID impact the outlook for the second half? And then the third product question is on NATPARA. So what's the status there? And when might we expect to return to the U.S. market for NATPARA? So NINLARO, VYVANSE, NATPARA, if we could get some updates on those, please?

So I'll start with NINLARO and perhaps Ramona can cover the 2 others. I think first, I mean, I know it's hard, but don't look too much at quarterly result because there are a lot of movement between quarter. Overall, NINLARO has benefited from the COVID-19 situation. Will it last? We don't know. It depends how the COVID-19 situation will evolve. But it is a product which continues to grow. It's a product which is responding to a specific need from patients who are looking for efficacy, but with convenience. And I think that it will continue to be this product in the future. As you know, we have reset our aspiration with NINLARO because of the change in the market, but we still believe that this aspiration is a correct one.

So I can, Chris, jump in on VYVANSE and NATPARA. So VYVANSE, really, I think if you look at the first 2 quarters, we hit a little bit of the perfect storm with health care systems shutting down, patients not going in to see doctors and schools shutting down as well. What we see in our underlying trends now as we head into the fall and are heading into the fall season is that those trends are starting to improve.

So I think that the whole health care system has learned. As outbreaks increase, that's completely shutting down isn't viable. And so we do see patients going back to see their doctor now. We see prescriptions starting to be initiated. And even with schools, we see more of those hybrid models coming into play. And so we are seeing the underlying trends start to pick up now as we look at the fall for VYVANSE.

And really, the uncertainty is, how bad do hospitalization rates get? We see infection rates growing. But depending state by state, that doesn't necessarily correlate with any spikes in hospitalization rates or death rates. It's certainly in the immediate aftermath of rates growing. So we're just keeping a close eye on that. But as I mentioned, the underlying trends are looking better from F1, F Q1, F Q2, which was kind of the perfect storm of everything shutting down, and then going into the summer holidays on top of that. So to be determined on VYVANSE, keeping close on that.

On NATPARA, we are working very closely with the FDA. We did say we don't expect this in FQ '20. I would say we're not ready to update any guidance yet as to when we do expect it. But understand that you do want to know and are preparing for -- certainly before the end of this year, to be able to be more clear on when we would expect NATPARA back, but just no answers at this point. But continuing dialogue, very, very close continuing dialogue.

Great. Thank you, Ramona. I think we have another caller on the line.

The next question is from Mr. Stephen Barker from Jefferies.

I wanted to ask about the divestiture of your OTC business in Japan. You have yet to include the profit impact of that deal into your full year estimates because of presumably lingering uncertainty about the prospects of that -- for the closure of that deal in the current fiscal year. What are the potential hiccups? Why aren't you more confident that this deal will be completed on schedule by the end of March?

Costa?

Thanks, Stephen, for the question. When we announced the divestiture, we said that we expect to close the deal by March 31, 2021. So at this stage, we're still heading towards that target and we don't see any roadblocks. But having said that, if it slips 1 week or 2, that's a difference between $1.3 billion miss on our reported operating profit forecast, something that I don't want to put on the table right now. I'd rather wait until a few quarters. Maybe next quarter, we'll have greater visibility. But given the current situation with the COVID pandemic, that there are delays in many business activities no matter where you look.

And so right now, Steve, we felt that we would flag that we're not including this closure, the financial impact for fiscal year 2021, but we have flagged the potential upside should we close. And that's an upside both on the reported operating profit by approximately JPY 140 billion and gross proceeds on the cash flow, free cash flow of approximately $230 billion -- so JPY 230 billion, sorry. So that's something that we will continue to monitor. But right now, we don't see there as being a slip, but the magnitude of a 1 or 2-week delay causes a significant impact on the guidance. I hope you can -- you appreciate that challenge. Thanks.

Great. Thank you, Steve. So I believe there's no more callers on the line, but we did have one further e-mail question that links in a little bit to that previous question. So we'll ask this and then finish.

So around the divestitures, obviously, very, very good progress has been made over the course of this year. And we've exceeded the $10 billion target. What's next beyond this in terms of potential asset sales? Will there be further divestitures beyond the $10 billion?

Look, I think the divestiture, the main -- there are 2 main objectives with the divestiture programs. One is to be more aligned with our strategy to focus on our 5 core businesses. So we are divesting noncore businesses to reduce our complexity, to improve our margin, to improve our growth moving forward, because many businesses that we have divested are not growing or potentially declining businesses. So that's the main -- the first objective. And the second objective was, of course, to accelerate our deleveraging.

So we have done the majority of the divestment. We might have a few more to come, but it's clearly marginal compared to what we have achieved so far.

Great. Thank you, Christophe. With that, that brings the call to an end. Thanks, everyone, for joining us today, and we look forward to further communication going forward. Thank you, and have a great day.

Thank you, everyone. Bye for now.

Thank you, everyone.

Thank you for you taking time, and that concludes today's conference call. You may now disconnect your lines.