Takeda (TAK) Q2 FY25 earnings call: guidance and Q&A

How will Takeda manage the R&D costs for the Innovent solid tumor pipeline, given the need to balance operating margins? Can transactional FX impacts be avoided in the future?

Takeda is committed to oncology investment while supporting profitability, with the Innovent deal's financial implications already reflected in revised forecasts. They manage incremental R&D through cost-sharing (e.g., 60-40 split for IBI363, Blackstone partnership for mezagitamab) and continuous cost discipline. Transactional FX is hard to predict; long-term mitigation might involve rebalancing manufacturing footprint, but not based on short-term volatility.

“But in the long -- if we want to mitigate, then we have to -- maybe in the long run, somehow we have to rebalance the manufacturing footprint, but that's kind of, of course, a long-term strategic plan. It's not -- we've taken actions depending on a 1-year currency volatility. We have to take a bit to long-term stance on that.”

asked by Hidemaru Yamaguchi · answered by Milano Furuta

What actions is Takeda taking to enhance ENTYVIO Pen penetration and insurance coverage? How will the Nabla Bio partnership and AI utilization accelerate mid- to long-term pipeline enhancement?

ENTYVIO Pen is seeing 20% QoQ growth, and Takeda is working on improving access at multiple levels, including major PBM contracts and localized challenges. The Nabla Bio partnership is part of Takeda's broader strategy to integrate AI and in silico technology into drug discovery, aiming to improve success probabilities and accelerate molecule development, with over 90% of programs expected to be AI-enabled by next year.

“Today, 1 in 5 -- 1 in 4 of our research programs are enabled by in silico technology. By next year, we expect that over 90% of our programs will be enabled by in silico technology.”

asked by Matsubara · answered by Andrew Plump

Why has gross margin deteriorated from 66% to 64.7% in the revised guidance, and why is H2 expected to be lower? When is the next data update for IBI363 expected, and when will global Phase III trials start?

About half of the gross margin deterioration is due to transactional FX, and the other half is from product mix changes (reduced VYVANSE and ENTYVIO revenue). These dynamics, combined with updated H2 currency forecasts, explain the lower gross margin expectation for H2. Takeda is enthusiastically monitoring IBI363 data but is not yet releasing specific disclosure dates. The Phase III study in second-line squamous NSCLC is expected to begin in the coming months, with other studies to follow at speed.

“About half is coming from the transactional FX. And the other half is also coming from kind of product mix change. So we are reducing the VYVANSE, the revenue and the ENTYVIO revenue. And then these 2 revision has a negative impact on the gross margin.”

asked by Seiji Wakao · answered by Milano Furuta

What are the competitive pressures impacting ENTYVIO's growth rate reduction from 9% to 6%? How confident is Takeda that IBI363's impressive China data can be replicated in international trials?

ENTYVIO's growth is impacted by intensified competition, particularly in Crohn's disease, slower-than-anticipated pen conversion, and channel mix changes (340B, Medicare Part D). Takeda holds market share due to its gut-selective mechanism. For IBI363, Innovent has increased ex-China enrollment, and Takeda conducted significant due diligence, including internal radiologist evaluation of patient images, showing strong correlation with response criteria, which gives confidence in replicability.

“The second element is the fact that we actually endeavored on very significant due diligence during the evaluation for this collaboration. And that included bringing our own Takeda radiologists in order to evaluate the -- many of the images that we were seeing of the patients as well as determining the correlation with our response criteria, i.e., RECIST. And we saw a very strong correlation there.”

asked by Stephen Barker · answered by Phuong Morrow

Are there changes in the U.S. PDT business environment driving Takeda's focus on efficiency over center expansion? How confident is Takeda in continuing to increase dividends given the revised guidance and impairment losses?

Takeda has extensively invested in BioLife network efficiency and productivity, improving volume collection by 10-11% per donation, allowing it to meet demand without opening as many new centers. They continuously evaluate opportunities to open new countries for plasma supply. Regarding dividends, Takeda has a progressive policy (sustain or increase) based on core EPS, reported EPS, and mid- to long-term debt reduction. A definitive decision for next fiscal year will be announced around May.

“And in order for us to make a decision, we will look at core EPS and reported EPS and mid- and long-term reduction of interest-bearing liabilities or borrowings. And looking at these 3 parameters, we make a proposal what to do with the dividend in the next year and going forward.”

asked by Akinori Ueda · answered by Milano Furuta

Given CSL's profit warning and China albumin demand weakening, is Takeda's high single-digit growth guidance for albumin still achievable? What are the political consequences of the US Biosecure Act on the Innovent deal?

Takeda's albumin portfolio declined marginally by 2% in H1 due to China shipment phasing and cost controls, which were anticipated. They are building sustainable market opportunities outside China, securing tenders for H2 delivery, and remain confident in high single-digit growth guidance. For the Innovent deal, Takeda considered the geopolitical environment, will drive global development to meet regulatory criteria, and plans to manufacture these molecules in the U.S. to mitigate potential geopolitical risks.

“And the second point I will mention is that we will manufacture these molecules in the U.S. So we will do a full tech transfer and we manufacture -- we'll organize the manufacturing of this molecule in the U.S. And therefore, we think that this is also a way to mitigate the potential geopolitical risk.”

asked by Fumiyoshi Sakai · answered by Christophe Weber