Company Reports

Narrow-moat Takeda’s first-quarter earnings beat our expectations even after adjusting for significant currency tailwinds, driven by the outperformance of a handful of drugs, including dengue fever vaccine Qdenga. Sales grew 14% on a reported basis and 2% on a constant-currency basis. Gross profit margin declined 1.8 percentage points compared with the same period last year, which we think is a useful reference point as it reflects recent loss-of-exclusivity events. Takeda reiterated its full-year guidance of JPY 4.35 trillion in revenue and JPY 1 trillion in core operating profit. We maintain our fair value estimate of JPY 4,700 per share and view the current share price as slightly undervalued.

No-moat Takeda Pharmaceutical is Japan’s leading pharmaceutical company by revenue. While the firm historically focused on the Japan market, management is undertaking an ambitious overhaul to diversify away from its stagnant local market and overcome patent expiries with acquisitions. In January 2019, it closed its purchase of Shire Plc for approximately $57 billion. The mega-deal not only gave Takeda access to Shire’s rare-disease and plasma-derived therapies, it also granted Takeda much greater penetration into United States' markets and diversification away from Japan’s cost-cutting policies.

Takeda’s fourth-quarter earnings and fiscal 2024 guidance were in line with our expectations. Separately, we lower our moat rating to no-moat from narrow. Despite our downgraded rating, we maintain our fair value estimate of JPY 4,700, as our previous fair value reflected sufficiently conservative assumptions.

No-moat Takeda Pharmaceutical is Japan’s leading pharmaceutical company by revenue. While the firm historically focused on the Japan market, management is undertaking an ambitious overhaul to diversify away from its stagnant local market and overcome patent expiries with acquisitions. In January 2019, it closed its purchase of Shire Plc for approximately $57 billion. The mega-deal not only gave Takeda access to Shire’s rare-disease and plasma-derived therapies, it also granted Takeda much greater penetration into United States' markets and diversification away from Japan’s cost-cutting policies.

Narrow-moat Takeda’s third-quarter earnings were in line with expectations and the company’s full-year guidance. Revenue for the nine months has grown 4.6% compared with the same period last year, which is entirely due to foreign exchange. On a constant-currency basis, revenue growth is flat, as the growth from products like Entyvio and immunoglobulin were offset by declining sales from drugs facing the loss of exclusivity, or LOE, including Vyvanse, Azilva, Velcade, and Dexilant. Cost of sales for the quarter rose 3.4 percentage points compared with the same period last year, which we think is a useful reference point as it reflects the LOE events. Takeda maintained its full-year guidance of JPY 3.98 trillion revenue and JPY 1.015 trillion core operating profit.

Narrow-moat Takeda’s fiscal second-quarter earnings were in line with expectations on a constant currency basis. Revenue was JPY 1.04 trillion, which is 4% year-on-year growth and negative 0.8% on a constant currency basis. Core operating profit was JPY 262 million, or 25.2% of revenue, which is 5.3 percentage points worse than the same period last year. We think this is mostly attributable to loss of revenue from high-margin coronavirus products and also elevated research and development expense. The company revised its guidance for reported figures to account for JPY weakness and asset impairments but did not change its constant currency guidance for core figures.

Narrow-moat Takeda Pharmaceutical is Japan’s leading pharmaceutical company by revenue. While the firm historically focused on the Japan market, management is undertaking an ambitious overhaul to diversify away from its stagnant local market and overcome patent expiries with acquisitions. In January 2019, it closed its purchase of Shire Plc for approximately $57 billion. The mega-deal not only gave Takeda access to Shire’s rare-disease and plasma-derived therapies, it also granted Takeda much greater penetration into United States' markets and diversification away from Japan’s cost-cutting policies.

Narrow-moat Takeda’s first-quarter earnings were in line with our estimates on a constant-currency basis. Revenue was JPY 1,057 billion, which is 9% year-on-year growth but only 3.7% on a constant-currency basis. Core operating profit margin was 30.8% of revenue, or 2 percentage points worse than the same period last year. We think the company is on track to meet or perhaps exceed its full-year guidance of JPY 3.84 trillion in revenue and JPY 1 trillion in core operating profit. However, while earnings upside is possible, we think Takeda is fairly valued presently.

Narrow-moat Takeda Pharmaceutical is Japan’s leading pharmaceutical company by revenue. While the firm historically focused on the Japan market, management is undertaking an ambitious overhaul to diversify away from its stagnant local market and overcome patent expiries with acquisitions. In January 2019, it closed its purchase of Shire Plc for approximately $57 billion. The mega-deal not only gave Takeda access to Shire’s rare-disease and plasma-derived therapies, it also granted Takeda much greater penetration into United States' markets and diversification away from Japan’s cost-cutting policies.

Takeda Pharmaceutical is Japan’s leading pharmaceutical company by revenue. While the firm historically focused on the Japan market, management is undertaking an ambitious overhaul to diversify away from its stagnant local market and overcome patent expiries with acquisitions. In January 2019, it closed its purchase of Shire Plc for approximately $57 billion, an Ireland-based biotech firm that generated similar revenue as Takeda. The deal not only gave Takeda access to Shire’s rare-disease and plasma-derived therapies, it also granted Takeda much greater penetration into United States' markets and diversification away from Japan’s cost-cutting policies.

Narrow-moat Takeda’s fourth-quarter earnings met our expectations. Revenue was JPY 956 billion, which is 9.5% year-on-year growth, but a decline of 1.2% on a constant-currency basis. Full-year revenue was CNY 4 trillion, with core operating profit margin of 29.5%, both in line with the company’s guidance of JPY 3.7 trillion revenue and 29.8% core operating profit margin given last May, after adjusting for currency fluctuations. For fiscal 2023, the company is guiding for a low-single-digit decline in revenue at constant exchange rates and approximately 26.4% core operating profit margin. These are in line with our expectations due the loss of exclusivity for Vyvanse starting in August and also minimal revenue from COVID-19 vaccine sales. The company announced its dividend for fiscal 2023 will be increased to JPY 188 per share (from JPY 180), its first increase in 15 years.

Narrow-moat Takeda’s third-quarter fiscal result was in line with our expectations after adjusting for currency tailwinds due to a depreciating Japanese yen. Revenue was JPY 1,096.6 billion, which is 21.7% year-on-year growth, but only 2.6% growth after adjusting for currency. Core operating profit was JPY 330 billion, representing 30% core operating profit margin.

Takeda Pharmaceutical is Japan’s leading pharmaceutical company by revenue. While the firm historically focused on the Japan market, management is undertaking an ambitious overhaul to diversify away from its stagnant local market and overcome patent expiries with acquisitions. In January 2019, it closed its purchase of Shire Plc for approximately $57 billion, an Ireland-based biotech firm that generated similar revenue as Takeda. The deal not only gave Takeda access to Shire’s rare-disease and plasma-derived therapies, it also granted Takeda much greater penetration into United States' markets and diversification away from Japan’s cost-cutting policies.

Narrow-moat Takeda’s second fiscal quarter was in line with our expectations after adjusting for currency tailwinds due to the depreciating yen. Revenue was JPY 1,002 billion, which is 18.6% year-on-year growth and 2.8% growth after adjusting for currency. Core operating profit was JPY 306.1 billion, representing 30.5% core operating profit margin, which is also in line with our forecast.

Narrow-moat Takeda’s first-quarter results were in line with our expectations after adjusting for currency tailwinds due to the recent depreciation in the Japanese yen. Revenue was JPY 972.5 billion, which is nominally 2.4% year-on-year growth, 19.1% growth after adjusting for last year’s JPY 133 billion sale of its Japan diabetes business, and 8.3% growth after adjusting for this sale plus currency tailwinds. Core operating profit was JPY 304.5 billion, representing 30% core operating profit margin. After adjusting for the currency tailwinds, this is in line with our estimates.

Takeda Pharmaceutical is Japan’s leading pharmaceutical company by revenue. While the firm historically focused on the Japan market, management is undertaking an ambitious overhaul to diversify away from its stagnant local market and overcome patent expiries with acquisitions. In January 2019, it closed its purchase of Shire Plc for approximately $57 billion, an Ireland-based biotech firm that generated similar revenue as Takeda. The deal not only gave Takeda access to Shire’s rare-disease and plasma-derived therapies, it also granted Takeda much greater penetration into United States' markets and diversification away from Japan’s cost-cutting policies.

Narrow-moat Takeda’s full year results were in line with expectations. Revenue was JPY 873 million and JPY 3.6 billion for the fourth quarter and full year, respectively, representing year-on-year growth of 13.4% and 11.6%. Core operating profit was JPY 197 million and JPY 955 million for those periods, representing 23% and 27.9% core operating profit margin. These figures are in line with our expectations. Although there was gross profit margin deterioration in the fourth quarter, this was due to shipment timing of high margin Entyvio and we expect it to be temporary. Guidance for next year is low-single-digit revenue growth and high-single-digit operating profit growth, which are in line with our expectations.

Takeda Pharmaceutical is Japan’s leading pharmaceutical company by revenue. While the firm historically focused on the Japan market, management is undertaking an ambitious overhaul to diversify away from its stagnant local market and overcome patent expiries with acquisitions. In January 2019, it closed its purchase of Shire Plc for approximately $57 billion, an Ireland-based biotech firm that generated similar revenue as Takeda. The deal not only gave Takeda access to Shire’s rare-disease and plasma-derived therapies, it also granted Takeda much greater penetration into United States' markets and diversification away from Japan’s cost-cutting policies.

Narrow-moat Takeda’s third-quarter results were in line with expectations. Revenue for the quarter grew 8% year on year to JPY 901 billion, and core operating profit was flat at JPY 272 billion. Additionally, management raised full-year guidance for revenue and core operating profit by JPY 140 billion and JPY 40 billion, respectively. We think the upward revisions are due in part to the addition of 93 million booster doses of SpikeVax (50 micrograms) in its distribution agreement with Moderna and the Japanese government, of which 40%-50% might be completed in fiscal 2021 and the remainder after March 31 in fiscal 2022, as well as incremental upward revisions across business lines.

Takeda Pharmaceutical is Japan’s leading pharmaceutical company by revenue. While the firm historically focused on the Japan market, management is undertaking an ambitious overhaul to diversify away from its stagnant local market and overcome patent expiries with acquisitions. In January 2019, it closed its purchase of Shire Plc for approximately $57 billion, an Ireland-based biotech firm that generated similar revenue as Takeda. The deal not only gave Takeda access to Shire’s rare-disease and plasma-derived therapies, it also granted Takeda much greater penetration into United States' markets and diversification away from Japan’s cost-cutting policies. While the combined company still faces significant headwinds, including future novel competition and a sparse late-stage pipeline, the best assets of the combined portfolio are enough for us to assign the company a narrow-moat rating.