Q1 2024 Takeda Pharmaceutical Company Limited Earnings Call
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R&D President Andrew Plump, Chief Financial Officer, not cost us what it would cost you would eat president once I stated Rocky Mountain.
So on a auto sheets donaji kind of work with the Oems. So today, what type of ammonium us Christophe. Please go ahead.
Thank you Chris.
<unk> for joining us today, it's a pleasure to be with you all.
Our performance in the first quarter of this fiscal year again underscores the strength of our business and our ability to continue to deliver like transforming treatments to patients and communities over the long term.
Looking at our financial result.
The first three months of fiscal year 2023 revenue was one there were six trillion.
Growth at a constant exchange rate was plus three 7% driven by momentum in our girlfriend loons products, which represent 40% of total revenue and grew in this first quarter at 16, 2%.
At actual exchange rates, our top line growth was eight 9%.
Our top line performance contributed to core operating profit of $326 3 billion.
Year over year decline at constant exchange rates reflect the impact of loss of exclusivity and Louise Corona virus vaccines demand as well as our strategic investments in R&D and technology to ensure a ticket I don't jump competitiveness.
Core EPS for the period was 150 and flip divestitures priority Yeah. It's a constant exchange rate on a reported basis EPS declined due to the impact of one time financial income gains in the first quarter of last year.
Yeah.
Our result at constant exchange rates are tracking well against our full year management guidance for fiscal year 2003, and there is no change to our guidance at this time.
Moving to the right of this slide we are advancing our innovative pipeline to reach new patient population address unmet needs and provide new treatment options to improve patient outcome and quality of life.
I will then give vaccines to Dania was recently approved in Argentina, and Thailand, and we are pleased with the momentum we are seeing in both endemic and traveling market I will discuss <unk> further on the next slide.
In other regulatory developments, we have five major liquid in the U S for the treatment of chronic inflammatory demyelinating polyneuropathy or <unk>. This follows on from the submission of <unk> in Q4 of last year, representing net term indication expansion opportunities for two of the growth amongst pro.
In our PDT immunology portfolio.
We have also filed for continued in the U S and Europe for previously treated metastatic colorectal cancer, receiving priority review designation in the U S.
With the static colorectal cancer remain an area of high unmet needs with poor outcomes and limited treatment options and we are pleased to take a step further towards advancing treatment for patients.
Priority review in the U S. As also being granted for Tak 755 for congenital thrombotic from what it opening purpura or CGP and ultra rare bleeding disorder also with limited treatment options.
In neuroscience.
<unk> phase II study of oral Orexin agonist Tak 861 for both narcolepsy type one narcolepsy type two is progressing well on track.
We believe in the transformative efficacy potential of our <unk> programs and this is supported by data published today in the New England Journal of Medicine from our discontinued studio stagnated for.
Andy will explain the details in a few minutes.
We are proud of all of this progress which represent the potential of our portfolio to make a meaningful difference in the lives of patients and to serve communities around the world.
Turning to updates on our dengue vaccine skewed NGO.
We are very early in the launch phase for <unk>, but we are encouraged by the positive momentum we are seeing in markets, where it is now available and we are already seeing early signs of higher than expected demand.
We made significant progress in the last quarter with a pure entitled in Argentina on our first launches in the new countries, including Brazil and Indonesia.
The vaccine significant progress on the mid countries underscores strong clinical data and the urgent need for safe and effective vaccines to prevent thing if you will.
Which is why we remain laser focused on endemic market, which make up roughly 80% to 85% of our projected peak sales of $1 62 billion used at all.
At a global level two dengue prevalence has continued to grow.
World Health organization report that just last week that they have been close to 3 million cases of dengue reported so far this year.
Already surpassing the $2 8 million cases, which has stood for the entire year of 2022.
In travel markets, we have continued to see country level approval on launch across the EU. Following the EMEA broad approval late last year.
In the U S. We.
We made the difficult decision to voluntarily withdraw our biologics license application filing due to FDA request for additional data, including data that was not part of the previously agreed upon protocol.
Which could not be addressed within the Crohn's review cycle.
This decision will not affect our overall approach for taxes. There was there were three for contango, which we believe can be extremely effective to limit the public health impact of dengue endemic countries.
Looking ahead, we are continuing to work closely with <unk> and look forward to the release of the recommendation from Sage <unk> Advisory group, which is anticipated later this year.
We are also in active discussion with a number of supranational procurement bodies, such as the Pan American Health organization relating to large scale procurement following the <unk> recommendation.
To meet the vaccines anticipated global demand, we have been expanding our manufacturing capabilities.
We recently in fact last week celebrated the opening of our first state of the art building dedicated to drugs drug substance manufacturing for our dengue vaccines in <unk>, Germany.
This was an important step in achieving our goal of end to end in house production capability for Katanga by 2025, and achieving an annual supply capacity of around 100 million doors by the end of the decade.
While we ramped up our manufacturing capabilities, we are exploring partnerships with vaccines manufacturers, especially in endemic countries to secure additional capacity to meet current and future supply needs.
We look forward to continued momentum of these programs in 2023 and beyond.
Now I'd like to turn to our high level outlook for the near medium and long term based on our current assumption for fiscal year 'twenty. Three we expect to return to revenue profit and margin growth in the near term driven largely by the continued expansion of our growth on launch product.
We also see significant potential in our late stage pipeline assets and anticipate significant data and regulatory milestones this year.
Following the generic competition for Vyvanse, which will impact revenue and profit growth in fiscal year 'twenty. Three we will have limited loss of exclusivity exposure until the launch of <unk> biosimilar loss, which could occur as late as 2032.
The momentum for our growth in most product combined with our continued investment in R&D will drive progress in the medium and long term.
Looking ahead, we remain committed to returning to core operating profit margin in the low to mid thirties supported by value creation enabled by data and technology, including AI.
We will also continue to evaluate the asset specific business development opportunities to further enhance our pipeline on reinforce our growth profile.
Finally, our progressive dividend policy of increasing or maintaining that dividend each year will allow us to continue to return value to shareholders.
Including this quarter demonstrate that our growth strategy remains on track, we continue to deliver on our financial commitment to progress our pipeline and to create long term value for our stakeholders, while we fulfill our purpose of bringing better health for people and a brighter future for the award with that I will turn the corner.
Over to Andy to update you on our pipeline. Thank you.
Thank you very much Christophe and Hello to everyone on today's call will go to the next slide please.
Our pipeline continues to advance including considerable progress with the CAD 379, and a raccoon franchises, which we will describe later in this presentation.
This quarter the rest of our pipeline featured a number of incremental but important program milestones and a few small headwinds at.
As Christophe just mentioned important regulatory milestones include filing for Clinton Ed in both the U S and EU for metastatic colorectal cancer.
Finally passed 755 and again the U S and EU for congenital thrombotic, thrombocytopenic, purpura or TTP and filing Gamma guard liquid in the U S for chronic inflammatory demyelinating polyneuropathy or <unk>.
<unk> been <unk> 70, <unk> five are granted priority reviews by the FDA, reflecting their potential for increased effectiveness and our better safety in areas of high unmet medical need if approved Tak 755 would be the first available therapy for routine prophylaxis and congenital TTP.
<unk>.
Supporting these and other programs, where a number of key publications and presentations. These include <unk> <unk> phase III advanced one study results demonstrating an approximate 10% relapse rate with IQ. Yet. This is the lowest relapse rate observed in CIB P maintenance studies.
Ross mechanisms.
<unk> <unk> data from Prescott Q was published in the lancet and showed a greater than 30% increase in overall survival versus the control arm in patients with metastatic colorectal cancer.
In June at 755 data were presented these data demonstrate a reduction in the incidence of thrombocytopenia by 60% versus the standard of care and no acute TTP events were observed in.
And also in June updated data from the Phase two Sequoia study a physician ran was presented at the European Association for the study of liver Congress, where aesop.
<unk> continued to demonstrate a dose dependent reduction in the pathological alpha one anti trypsin GAA protein in both CRM and liver leading to directional decreases in liver inflammation and fibrosis.
We started our phase III Redwood study earlier this year.
Now headwinds this quarter include <unk> 611 for Metachromatic, <unk> dystrophy, or MLD, which missed its primary and secondary endpoints in our phase II study.
We are disappointed and wish to express our gratitude to the MLP children parents and caregivers were currently evaluating options, but given these outcomes. The program. Unfortunately is likely to be discontinued.
Following a planned interim analysis the phase III Exclaim, two trial was stopped for futility the trial comparing <unk> monotherapy chemotherapy in first line non small cell lung cancer with exon 20 insertion mutations.
We will be engaging with regulators required regarding these data and determining next steps for the program. As a reminder, excuse me demonstrated a median duration of response of $17 five months and a median overall survival of 24 months in patients being treated in the second line.
Progressed after chemotherapy.
And lastly, as Christophe discussed we had some positive or negative developments for <unk>. This quarter its very important to recognize that the unmet need for a dengue vaccine is not equally distributed around the world.
We remain confident in the overall benefits of Katanga, However, timing of approval may vary depending on local needs and experience.
Finally yesterday as Christoph again mentioned phase <unk> data from the first ever oral Orexin receptor agonist Tak 994 was published in the New England Journal of Medicine next slide please.
We conducted a phase <unk> dose ranging trial that tested three doses attack 90 94 in an eight week study with the option for patients to continue in 2008 week extension. The trial was stopped early due to liver toxicity. He.
Even with a truncated study the impressive efficacy data indicate orexin receptor <unk> is a promising novel biologic target for patients with narcolepsy type one.
<unk> Wakefulness test scores range from 26% to 35 minutes on a placebo adjusted basis for.
For benchmarking currently marketed agents have shown a placebo adjusted benefit of eight minutes or less.
Similar effects were observed with the Epworth sleepiness scale, a subjective test used to measure daytime sleepiness in which patients.
When normalized to equivalent levels as those seen in healthy subjects at all doses.
And we can cataplexy rates were reduced or abolished again at all dose doses tested we believe orexin two receptor agonist may be the first agents to address the underlying cause of narcolepsy type one offering the potential for functional cures.
We are applying our learnings from past 90, 94, and our deep understanding of Orexin biology, as we advance the research and development for multiple Orexin assets. For example, <unk>. One has been enrolling ahead of schedule in two phase III trials that started in January of this year one for narcolepsy.
Type one and a second for narcolepsy type two.
<unk> one is a more potent agent then Tak 994, and thus provides efficacy at a much lower dose, therefore significantly reducing the potential for adverse effects, including liver toxicity.
We're very pleased to report that our recently conducted external review by the data safety monitoring Committee confirmed no liver toxicity signals to date.
In addition, nearly all of the patients that completed the trial to date have enrolled in the long term extension study and will be followed for up to 102 weeks. We are expecting a go no go decision to advance to phase III in the next fiscal year.
<unk> 95, or IV Orexin receptor two agonist showed exciting data earlier this year in two data in healthy volunteers Tak 905, reverse opioid induced respiratory depression, and sedation without impacting pain control.
Phase II trial has started and is on track to have proof of concept in fiscal year, 2024, which will inform the registrational studies.
Later this year, we plan to file an IND for our next generation oral orexin receptor agonist. Our goal is to expand into additional indications I developing orexin agonist that are tailored to meet unmet patient needs and ultimately make a meaningful impact on patients' lives next slide please.
Depicted here are exciting late stage development programs that $2 79, our highest priority is on track to start a phase three program in psoriasis. Later this fiscal year. We continue to believe we have a best in class oral therapy for psoriasis.
We will have a phase <unk> readout for Psoriatic arthritis. This fall and are preparing at risk to start a pivotal development program for these patients in fiscal year 2024.
We are accelerating development of tap two 709. Additionally, in crohn's disease, ulcerative colitis, and systemic lupus erythematosus as well as exploring a range of other indications.
These expansion opportunities are being developed in parallel with psoriasis.
Finally, we want to remind everyone that we have important lifecycle management approvals and data Readouts later this year.
These include potential approval of Entyvio subcutaneous in the U S for ulcerative colitis, and a loss of <unk> phase III data for Perry Fistulas lifestyle.
Lifecycle probe lifecycle management program milestones can be found in the appendix and now at this point. Thank you very much I'll turn it over to Costa.
Thank you Andy and Hello, everyone. This is costa <unk> speaking.
Now I'll walk you through the financial highlights of our fiscal 2023 Q1 results.
Starting with the topline.
Revenue was 1.06 trillion yen or seven 3 billion U S dollars delivering strong growth of three 7% versus prior year at constant exchange rate.
Eight 9% on an actual basis, reflecting foreign exchange upside from the depreciation of the yen.
Our topline performance was driven by our growth and launch products, which represents approximately 40% of total revenue and grew at 16, 2% at constant exchange rate.
Core operating profit was $326 3 billion yen or $2 3 billion U S dollars with core operating profit margin of 13, 8%.
<unk> operating profit was 168 6 billion yen.
We continue to see stable cash generation from the business with operating cash flow up nine 7% to $92 4 billion yen.
Free cash flow was negative at minus 275 billion yen.
Reflecting 223 billion cash out for acquisitions and in licensing, including TAC 279, and for <unk>, which occurred in Q1 as expected.
Importantly, I want to note that there is no change to our full year free cash flow forecast of 400 to 500 billion yen. As these deals were already included in the forecast, which we gave in may.
I'm also happy to announce that Moody's recently upgraded our credit rating from B double H two positive should be double a one stable.
This is an important this is important to highlight because it is a reflection on the strong financial foundation of the business with our robust cash flow outlook and manageable debt profile with 100% of debt at.
At approximately 2% fixed rates.
With regards to the outlook for full year 2023, there is no change from the guidance we presented in May.
As we flagged since the start of the year starting from Q2, we expect to see most significant loss of exclusivity impact.
With generic versions of Zumba, having launched in Japan in June .
And more importantly, generics for vyvanse in the U S expected to launch in August .
Finally, while we are not changing our reported and core forecast at this time, we do see potential some potential upside if the current FX rates continue.
We will provide an update on this at our Q2 earnings in October .
Slide 13 shows our Q1 results in more detail.
On the left hand side, you can see our reported results with reported operating profit up 12%, reflecting revenue growth.
Completion of inventory step up related to the Shire acquisition, and lower impairment charges compared to the prior year.
Meanwhile, reported net profit and reported EPS declined as a result of substantial one time financial income booked in Q1 of last year.
Our core results on the right hand side and as mentioned we saw strong revenue growth of eight 9% or three 7% at constant exchange rates driven by our growth and launch products.
Cooperating profit grew at two 3% on an actual foreign exchange basis.
With a slight decline of minus 2% at constant exchange rate.
This decline reflects product mix due to generic entry and lower COVID-19 vaccine revenues.
And also continued investment in R&D and data and technology to secure long term success of the business.
Even with this incremental investment margins for Q1 remained above three.
2%.
Core net profit and core EPS benefited from a lower core tax rate with core EPS for the quarter of 150 yen up plus 0.3% versus prior year at constant exchange rate.
And as mentioned on the prior slide free cash flow reflected the expected cash payments for tattoos seven non and Procrit.
And there is no change to our full year forecast of 400 to 500 billion yen.
Slide 14.
On slide 14, we highlight our portfolio of growth and launch products.
Which are the key drivers of top line growth.
These products generated $424 1 billion yen or 40% of total revenue in Q1 with 16, 2% growth at constant exchange rate.
Within our five key business areas Gi grew at 3% on a constant exchange rate.
A slight slowdown versus last year, mainly due to generic entry of the excellent in January of this year.
Our largest product entyvio continues to perform well with growth of 7%.
This is a little behind our expectations for the full year.
<unk> single digit market growth.
Timing of U S inventory shipments in the prior year and pricing headwinds in Europe .
And to be able to maintain the lead in U S market share both in overall IBD prescriptions and in IBD by now <unk> patient starts.
And with an approval decision in the U S.
On the subcutaneous device expected in the coming months.
We remain fully confident in the continued growth outlook for the product.
In rare diseases <unk> Zara continues its strong momentum with growth of 15% having successfully launched now in 56 countries and we sustained demand in the U S.
We also recently launched in the pediatric indication in the U S, making it the first H AE product indicated for use in children over two years old.
We also see continued launch successful intensity up 71% with strong market penetration in the U S and rapid geographic expansion within Europe .
PDT immunology continues to deliver outstanding growth of 24%, including 23% growth of immune globulin and 36% growth of albumin.
Both our <unk> and albumin products continued to see strong demand with album and also benefiting in Q1 from recovery in China. Following the Lockdowns in prior year.
We have continued to expand our plasma donation center network, adding three more centers in Q1 with the intent to increase by more than 20, new centers by the end of the fiscal year.
And we have seen donor compensation continuing on a downward trend since fiscal year 2022 after significant increases during the pandemic.
Next is oncology, which continues to decline as a result of brocade generics.
However, the timing of loss of exclusivity in May 2022, does mean that the impact should wash out in the coming quarters.
Excluding brocade the rest of the portfolio grew 5% driven by products such as <unk> <unk>.
<unk> ADCETRIS and inclusive.
Finally, neuroscience had a very strong performance in Q1 with growth of 17% with vyvanse benefiting from the expanding ADHD adult population as well as lower supply of other ADHD medicines in the U S.
However, as a reminder, we are expecting multiple bench generics entered the U S market in August this year.
Finally, the other segment is declining in Q1, mainly due to the lower revenue from COVID-19 vaccines injured.
However, this other segment now includes our dengue vaccine <unk>, our newest growth and launch a product which is seeing strong initial demand in both endemic and travel markets.
On Slide 15, you can see you can see that versus prior year with.
So it's a multi products was the main driver of the three 7% growth at constant exchange rate more than offsetting the headwind from loss of exclusivity.
And lower Corona virus vaccine revenue.
On top of this we.
We had on top of the solid growth we had.
Exchange rate upside on the foreign exchange Foreign exchange tower due to the depreciation of the yen, taking our top line growth on an actual FX basis to eight 9%.
Moving to the year on year cooperating profit bridge on slide 16.
You can see how loss of exclusivity in coronavirus vaccines or having a larger impact on profit compared to revenue due to the higher margins impacting our product mix.
On the investment side, we continue to allocate resources to R&D to support high potential programs, such as <unk> III benign and our Orexin franchise, while also making substantial investments in data and technology, including AI across the value chain.
We believe these investments will have a transformational impact on ticket as long term competitiveness and therefore, we continue to allocate capital in these areas as they will play a major role in our return to growth in the near and long term.
At the same time, we are applying strict cost discipline to hold other opex flat year on year.
All of these factors combined result in our Q1 core operating profit decline of minus 2% on a constant exchange rate basis, but when including foreign exchange benefit we realized growth of three 3%.
Finally, moving to slide 17.
Our outlook for full year fiscal 2023.
Based on the Q1 results, we do not see any need to make changes to our management guidance or a reported and core forecast at this time.
We are still expecting a significant loss of exclusivity impact in the remainder of the EG to vyvanse and the silver and therefore, we are keeping our management guidance unchanged.
Low single digit percentage decline in revenue.
Low teens percentage decline in core operating profit and low twenties percentage decline in core EPS on a constant exchange rate basis.
With regards to the reported and core forecast on an actual FX basis. There is some potential upside if current FX rates continue.
We will continue to monitor foreign exchange as well as the underlying business and we will revisit our full year outlook at the Q2 earnings announcements.
In October Thank you for your attention and I would like to now open it up for Q&A.
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Hi, crush going away from us.
Okay.
Pascal Hi, Guaymas. Thank you so let's see how much for safety. So I have two questions.
The first question regarding your comments on Entyvio.
Talk about the market is slow and there is a price pressure in Europe as well I'd also theres, some kind of a yelling I effects of <unk> in there.
The trip using up.
Can you elaborate a little bit, especially in the United States, which is our core market of this product is really is weak or is the case is it coming from the.
Humira will either biosimilars coming to the market or just needs related to the COVID-19. So that's the first question on N type your market.
Chris I'm sorry.
And type of weakness comments.
The second one around 90 94 on the New England Journal Medicine. It is really if the cases, which is really unfortunate situations.
Because it does show the results, but at the same time you have.
But more asics upon I'd also talk about some next generation product can you give me the sense that you are kind of like a efficacy level of it to you Oh.
Getting a sofa as far as six five is concerned it's the same range of 94 is a better than 94.
About the efficacy level.
And also the second generation product as well thank you.
Thank you Yamaguchi San for your question. So the first question on Entyvio and the market performance. So first I'd like to ask Julie to comment on the situation in the U S. And then apps if Ramona has anything to add on the situation in Europe or other regions and then on 99 four.
The New England Journal posting.
What implications does this have on on 861, more particularly what the efficacy levels that we've seen so far 4861, and what our expectations for the next generation.
It's an agonist I'd like to ask Andy to comment on that one.
Hi, This is Julie so thank you for the question Yamaguchi, San <unk> 17 Yep.
I'm sorry can you hear me, yes, sorry.
Okay.
Okay, sorry about that.
In terms of Ontario, and the U S.
Few comments in regards to your question is you had multiple.
Components in your question there first in terms of the impact of Biosimilars.
It's a little bit too early to say the impact of those biosimilars, we are monitoring that closely but so far.
As anticipated.
Similar are really within class versus having an effect of costs.
Different products with them.
Within IPD when we look at <unk> performance in particular.
We're pleased with the very strong.
<unk> market share.
And we continue to be the leader when it comes to diabetes share and particularly in terms of bio naive share.
For the market growth as you mentioned there market is still in the single digits. So it hasn't returned to double digit growth as <unk> seen in the past. So those are the different parameters of the impact.
The impact on <unk> in the U S.
Remind me do you want to add anything for Europe .
Thank you Julie Yeah, I can comment a little bit outside the U S. So in general the market is growing double digits and actually volume is for growing double digits and O U S.
Really the impact of <unk> assets due to rebates and price cuts in Europe , specifically the underlying fundamentals, though are looking good so shares increasing the market is growing we do continue to lead in new starts and globally. Both in the U S and outside the U S.
And you know as you know we've got the subdued expecting to launch in the US Later this year and we're continuing our evidence generation phase four trials at looking at Entyvio in different lines of therapy. So we feel the fundamentals are looking good and.
Continue to keep an eye on Entyvio, let's take out through the year.
Okay.
Yes.
Thank you Chris Yamaguchi, San Thank you very much. So we're just so excited to have now the 9900, where data out there in the new England Journal publication of both us and the principal investigators with whom we've been working for for many years and it's.
Terrific that you now have a chance to see these data and understand why we are so so enthusiastic about this mechanism. The question with respect to apex 1861 has every possibility to be as as strong as 99 four in terms of its efficacy profile, we don't have enough data.
Now to know whether it will be equivalent to 904 across the multiple different parameters and as you saw with 904, we're essentially able to take type one narcolepsy patients and make them look like.
Healthy individual the issue with apex, one is going to be dose. So we're very thoughtful in terms of what our dose selection will be and as we've said because because we want to be careful around the potential for liver toxicity, we will cap our daily dose at somewhere around 10 milligrams and so the question that we'll be asking with.
Phase III study is with a dose cap what is that efficacy profile looks like and those are data that.
We'll have in house at some point over the course of this year and we will share next year and will be the basis of a go no go decision to phase III with respect to our backup programs. Our first next generation molecule will be coming into the clinic. Later this year and there are really two intense behind the backup program. The first if <unk>.
One doesn't have and what I would say is a maximally efficacious profile in type. One narcolepsy. Then there is the potential for a next in class best in class. If 861 is the ultimate molecule for type one narcolepsy with maximal benefits then our intent would be to develop these molecules and across a range.
Of other indications and then just I'll just add that we've only presented in this Newland journal paper a subset of the overall data that we have from our oral orexin and there is data that point us in many different directions for this particular pathway and so that's one of the reasons, we've been so really proactive in bringing a suite.
Molecules forward.
Thank you.
Thank you very much.
Moving to the next question please.
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Thank you for your question. So the first question was on reasons for the lower gross margin in Q1 versus prior year.
Also related to that the margins in the PTT business, how are they improving so I'd like to ask Costa to take that question.
And then the next question was on 99 for an 861 and the reactive metabolites being the cause of liver injury for Tech 99 for what's our thinking on that around the 861 program I'd like to ask Andy to comment on that.
Thank you very much <unk> for your question.
Regarding the.
All gross profit margin.
As you rightfully highlighted there is a softening versus Q1 of last year and the main drivers for that are three the first one being the impact of loss of exclusivity.
Products, such as brocade loss of exclusively happened in May of 2022. So we're seeing the bulk of the impact of all of our Q1 this year versus last year, so that brocade loss of exclusivity headwinds as well as our silver, which which we experienced loss of exclusivity.
Japan in June and Furthermore, the excellent in the U S loss of exclusivity in Q1. So those three products alone have very high margins. So having that loss of exclusivity had an impact on the overall product mix of debt. The second one is the.
The European Pullbacks that we experienced in Q1 versus last year. There was the impact on claw backs in Europe was not impactful in Q1 of last year versus this year. So that's another key contributor to the.
Erosion of the gross profit.
And then the third component is really the the.
Strengthening of the euro versus the yen given that we had.
More of our manufacturing plants and a lot of the Opex is in euros for cost of goods. We are experiencing some of those headwinds that have been.
To your second part of the question on PDT, we are seeing in Q1, an improvement overall in PDT business not only on the top line, but also on the on the.
Gross profit margin as well given that the.
Reduction in diner fees from last year, we did start to see a reduction in diner fees of anywhere between 10% to 15% that's helping the improvement in the in the gross profit.
Overall <unk> start to filter through the P&L this fiscal year, but not enough to offset the other components that I mentioned.
Mainly being the loss of exclusivity and the pullbacks.
But I'll go very pleased with the PDP performance you saw in the it's a key driver for growth and launched growing at 24% on a constant exchange rate and we're seeing really positive momentum on the gross profit and cooperating profit launch. Thank you.
What kind of tonnage Christoph.
We are pleased with the start Joe you asked whether it was a.
How do we see this first quarter for us it's a good start of the year.
So the line or above our.
Our expectation so let's see how things evolve for the remaining of the year, but a good start for sure.
<unk> it's.
It's Andy with respect to your question on the similarities and differences of 86, 1% and 99 for the 86, one and 99 four distinct molecules. They have they have overlapping metabolic pathways and so it's hard for us to know exactly whether <unk> one at at a high enough dose with <unk>.
<unk> would have the same liver toxicity liabilities as 99, four and so that's one of the reasons why we're proceeding with caution and limiting our dose to an empirical level were below which it across the industry. We just don't see liver toxicity.
We all know toxicity is always a function of dose and this is particularly true for liver toxicity.
Just to put this in context, the liver toxicity for 90 94 were seen at the 90 milligram dose to 180 milligrams per day of exposure at the 30 milligram dose 60 milligrams per day of exposure, we didn't see the liver toxicity and if we were to make simplistic assumptions that theirs.
One to one equivalents, which which I don't think its fair.
We're targeting a less than 10 milligram per day dose for phase six one so we're looking at it at a six to 18 fold margin too to where that potential toxicity is with 99 four.
With respect to the backup programs. Our next generation programs. We've we've developed a very distinct.
The pharmacy for a very distinct chemistries to the series looks quite differently there entirely novel metabolic pathways.
Fixed <unk> and pathways for elimination. So so the issues. So we've dialed out fully any potential issues I would say with the next generation programs and Thats why why we spend so much time trying to to rework some of the some of the novelty in this space.
Yeah.
I would have thought that lawsuit brought by myself.
Thank you. Thank you for your question.
I'd like to take the next question from Hershey Gucci sung from Daiwa. Please on mute and ask your question.
Oh, that's okay hospital.
So it's a question is thermo and law and order.
Shanghai awareness program not a quote ups type of why you guys no.
So got it.
Although a decade of economy.
Uh huh.
Conquering the Grand Bazaar that over medicine thereof.
Our experience has also evolved.
Coursera consider youre doing its thing.
Now the Calypso type of Ronda Rousey, Connecticut at the mall.
So Dave I don't know that there are so there are quality oil.
But it's certainly not a condensate out another one I've got there if you don't want them how to do it at the mining method.
The.
Sorry are you at all from our Narcolepsy type Hawaii, Idaho.
So are there any thoughts there are.
Bonds into neat.
Sending out another one I've got two who have not got them all and oxides had stayed at the lane that's it.
But what I can say it there.
That got US there are on a go there on your Oklahoma, Iowa, Oklahoma.
So on one or another quite opposite type of run tore so they got it all right. So that's sort of gone their own estimate the acres and economical I can say at the moment they thought about it.
Yeah.
Okay. So Andy if you've got that if you'd like to provide the answer on that one please it's.
Sure Chris Thank you as a gucci sense. So we're actively developing package six one in both narcolepsy type one narcolepsy type two we will be looking at the data from those studies later this year and making a decision as to whether we move forward in type one narcolepsy type one type two plus additional indications or whether we limit.
Our future development in type one narcolepsy, so were interested in a range of disorders and the data that emerged from the phase <unk> study on the apex, one will inform on how broadly we intend to bring that molecule and again and again, we're bringing additional molecules.
We attack 95 for postoperative indications and then we have our next generation molecules, which we will intend to develop more broadly as well.
Okay.
Okay.
I thought that last call.
Thank you very much for the question.
So next question, we'd like to invite Mike NATO Natal Kovich from Cowen. Please on mute and ask your question.
Thank you for the question. So my first question is from is on track 904 I was curious.
Urinary urgency and urinary frequency AE was relatively prevalent are you seeing something similar with <unk>.
The next generation agents and as the dose reduction that's intended to address the active metabolite that also addressing to some extent the urinary urgency.
That's my first question and then my second question is on Entyvio do you anticipate a return to double digit growth in the U S and if so do you have a general timeframe over which you expect that to happen and to what extent might the subcutaneous formulation contributed to that growth.
Got it.
Thank you Mike So the first question on nine nine for the urinary urgency and whether we're seeing that with 861 I'd like to ask Andy to answer and then a question on Entyvio potential return to double digit growth I'd like to ask Judy to comment on that.
Good morning, Mike the urinary urgency appears to be an on target.
Tolerability issue with the Orexin two receptor agonist not not related we think too to the to the any of the metabolites.
The even though it's prevalent in a large percentage of patients it seems to be fairly fairly mild and one of the indicators that makes us feel quite confident that this is going to be something that won't be a problem for these patients is that we see we see almost no dropouts in our studies both for nine nine for it.
And for the ongoing 861 study and we see almost 100% conversion from the main trial to our open label extensions.
Hi, Mike and in terms of and kidney aircrafts I would say there are key factors that were.
Looking at to have double digit growth for MTI here first as you heard from minus what we are anticipating approval and launch of <unk> in the U S and we can expect that.
To bring a lift to our growth and then there are two other factors that we are working on one is in terms of further evidence generation to support on <unk>, we have three.
Great plan studies in the U S R.
One of which has already.
He can.
Almost <unk> in terms of work with our HCP and clinical sites and the second is in terms of leveraging data digital and technology to further enhance our marketing capabilities.
Excuse me.
Excuse me to have more targeted and precise.
Segments and on marketing for Entyvio. So those all three aspects that we are looking at to help drive mtvs teen type of growth this year.
Thank you.
Okay. Thank you Mike. So the next question I would like to call upon Muraoka from Morgan Stanley Muraoka, San Please go ahead.
And Morgan Stanley and without <unk>.
And as Vishal.
Hi Tech write them off.
Got it.
Moreover on Sunday.
Yes.
I call it the most.
A quick Scotty Oh my gosh.
Ross.
It talks.
Can you go higher you know this got like key nor can I cut anonymous.
Conkey Khakamada, Jim Jong none of the.
Can't give more squishy, what would that alter your continental honestly that authority case stainmaster <unk>.
So step at AQR by von Cigar now cannot do so stay entyvio, but most cuts that archive goodness to come.
Tornado tore.
A key.
For us to say on our core operating profit.
Put us towards the one that.
You'll go by MS call minus Union and look minus the minimal risk to you in the World Congress there you'll see this year.
Okay, So thoughts on 2024.
Turning on Vyvanse Entyvio, how they play out.
Is it potential that 2024 could be a year of decline so I'd like to ask Christophe perhaps to come.
Comment on this question.
Thank you Marcos.
While it's way too early to give a guidance for the next fiscal year I think the one key factor here will be the violence.
Generic impact.
We today, we plan for a generic entry in August , but you can imagine that if it will be delayed for example, if the number of generic would be lower or higher than what we have in our plan that will.
We'll have an impact on the erosion curve at the present time, our assumption is that we will rebounds.
In 'twenty four 'twenty five because we think that it will be.
A much more limited impact of.
The generic in 'twenty four 'twenty five, but it's really important that we look at what happened this fiscal year in order to predict better I will re bounce.
If it rebounds is planted.
Barry bonds on both the <unk>.
Corporate and appropriate on the on the revenues, but let's see during the fiscal year 'twenty three how things are evolving with more violent that azure virtually in order to predict better how we can we can see 'twenty four 'twenty five or eight months. Thank you.
Great. Thank you very much.
Next question I'd like to call upon Steve Barker of Jefferies. Please on mute and ask a question.
Yes, Steve Barker from Jefferies. Thanks, very much.
Two questions one about 861.
Like to ask Andy about the choice of the 10 milligram dose I understand the logic regarding wanting to reduce the risk of side effects that are.
Given if you could explain.
What you're seeing in terms of the potency and therefore, what you might theoretically I expect to see intensely efficacy some comments around that would be let's see I. Appreciate it and then my second question is.
Perhaps for.
Christoph maybe costa.
Christa.
You mentioned in your comments that you would expect to see the core OPM.
Get back up to a low.
Low thirties, a low to mid thirties, and you mentioned that the application of AI.
I might be able to help efficiency.
It'd actually be very interested to see to hear what how you think AI can be applied to the pharmaceutical business. Thank you.
Okay. Thank you, Steve So I guess.
First question, Andy and then maybe Christophe to start on that second question.
Yeah.
Steve Thank you very much so so foresee.
801 is a significantly more potent molecule when we look at the in vitro pharmacology relative to 99 four it's also a molecule that has a more <unk>.
Extended exposure and a longer half life. So it is very different properties and tech 99 for us. So it's going to be important for us to look at the data to come out of our phase <unk> study to understand whether with our dose limit our dose cap. We can achieve the same level of efficacy is tak 904, but in principally the molecule has the potential to do that.
Even at lower doses and I'll add that we plan to begin sharing data from the <unk> one program in type one narcolepsy patients. Later later this year. So some of the healthy volunteers, who comprise data some of the PK PD modeling that we've used those data will start to be out there in the coming months.
Thank you Steve for the question.
We see a very high potential for utilization of AI in our in our business, but I will emphasize that these data technology and the audience without the does how you cannot trade.
Results from technology like image recognition you don't have you don't generate that tie in many parts of our business. So we have been focusing on.
I think that'll Aiken that'll domain will structure in order to train the algorithms and we are seeing we are seeing application across our value chain. For example in manufacturing we are using image recognition on our manufacturing line up in order to improve the.
The efficiency of their line for example, we are using AI as well to do some visual recognition that we are doing manually in the past so in the manufacturing side, we see a lot of productivity implication on the research side, we are using AI for molecule design or four toxicity more deterioration for example.
We will use them.
The AI.
To accelerate clinical trials test protocol.
Are you a patient activation on the commercial side, we are you know.
Looking at optimizing our interaction with doctors in.
In.
Digital way and we are using AI algorithm as we speak already.
The Doctor on the PTT side for example, we are using some algorithm.
I have a better relationship with our owners and so it's really across the board and I didn't talk about back office, but we are also using this type of technology in our geographies. In fact, we think that all of our employees and Julie will have some application of.
Of AI for their jobs. So this is really a very high priority for us. Thank you.
Thanks very much.
Thank you, Steve and without question that brings us to the end of our time today. So thank you everybody for joining us on this conference call and we look forward to talking with you again later date, Thank you and good night.