Takeda Pharmaceutical Company Limited American Depositary Shares (each representing 1/2 of a share of Common Stock) Q1 2027 Earnings Call

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Before starting, I would like to remind everyone that we'll 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 in our other SEC filings. Please also refer to the important notice on page two of the presentation regarding forward looking statements and our non financial measures, which will be also discussed during this call. Definitions of non as measures and reconciliations with comparable financial are introduced in the appendix of the presentation. Now we would like to start the presentation. We have present CEO Julie Kim. Chief Financial Officer. Milano Furuta. And. President R&D Andy Plump. They will do the presentation which will be followed by the Q&A session. We will get started.

Julie. Please go ahead.

Thank you Chris. Thank you for joining us for today's earnings call. Focused on the first quarter of fiscal year 2026. We delivered a solid start to the fiscal year and our performance this quarter demonstrates steady progress against our strategic priorities. Keeping us firmly on track to achieve our full year guidance. These. Achievements reflect our continued execution against the two Horizon Strategic roadmap we shared last quarter, which will position us for accelerated growth in the years ahead to expand impact for patients and set the stage for sustained value creation Today, I will outline this quarter's progress against our priorities. Financially, we delivered a solid quarter and made steady progress against our fiscal year 26 priorities. In the first quarter. Core revenue declined slightly at 0.5% at constant exchange rate or C e in line with our expectations. As momentum across our core inline brands and existing new launch brands largely offset anticipated headwinds in our mature portfolio core. Operating profit declined 0.5% year over year at Sir, reflecting the continued investment behind our upcoming launches and exciting late stage pipeline, which we are partially offsetting by savings generated through our transformation program. And core EPS was ¥154, a decrease of 11.8% at CER, mainly due to a favorable tax position in the prior year.

Milano will walk you through the financial dynamics in more detail shortly, but the key takeaway is that we are well on track towards our full year guidance. This quarter, we had strong execution across all Horizon One priorities. We are ensuring the resilience of our existing portfolio with our core inline brands growing by 2.3% at CER. We also continue to execute against our transformation program As an example, we have largely completed the implementation of our international business unit, which is bringing leadership and teams closer to patients and customers and supports more simplicity, speed and efficiency. We'll do all of this without sacrificing quality to help us move at pace, to bring life transforming medicines to patients. Takeda is consistent and effective execution of our enterprise. Transformation is enabling us to fund our launches and advance our pipeline. It also represents a fundamental change in how we work today and how we will grow as a company in the future. We also made excellent progress across the pipeline this quarter. We are pleased to have received our first approval for Ovarex in narcolepsy type one under the brand name or Zaful in China, and approvals in US and Japan are key milestones expected in Q2.

I will speak. More about the important milestones and progress towards launch for Zaful. And Dasatinib. On the next slide. In oncology, we presented Tak 928 data at Asco in first and second line non-small cell lung cancer. And we initiated a phase three study of L in first line anemia associated MDS. Taken. Together, our three priorities for FY 26 remain firmly on track. Continue advancing preparations for the successful launch of our Zaful tide and associated progress. The next wave of our pipeline and continued execution of our transformation program to unlock new capabilities and efficiencies. We continue to build the foundation for our future growth by preparing to bring new medicines to patients. With the first or full approval obtained in China. We eagerly look forward to bringing our first in class orexin agonists for narcolepsy type one to patients in the US and Japan, as well, with launches expected in the second half of 2026. Austevoll has. Delivered transformative efficacy across a broad range of nt1 symptoms at the Sleep 2026 meeting, we presented additional Oars phase three data, reinforcing the potential of this medicine to establish a new standard of care by improving measures of daily function.

Cognition and nighttime sleep in patients with narcolepsy. Type one. Our. First, in class Hepcidin mimetic for polycythemia Vera has demonstrated rapid, stable and durable hematocrit control while reducing patients reliance on phlebotomy. Rutherford Tide has obtained US FDA priority review and we expect a US launch also in the second half of 2026, following. Protagonists opt out from us. Co commercialization. We are excited to have soul responsibility for commercializing respiratory globally, and we are committed to maximizing its growth potential and impact on patients. Turning to the third of these transformative medicines. Dasatinib is our potential best in class oral treatment for psoriasis, delivering rapid and durable skin clearance in a convenient once daily pill with no fasting restrictions. We are on. Track towards launching in the US in the first half of 2027. Our confidence in its profile is stronger than ever in our recent head to head phase three psoriasis study versus Deucravacitinib, Dasatinib demonstrated statistical superiority for all primary and key secondary endpoints, with more than 35% of patients achieving Pasi 100 or complete skin clearance at week 16. We also shared new data this month from the pivotal phase three. Psoriasis studies, demonstrating that Dasatinib achieved consistent high rates of skin clearance across the body, including hard to treat and high impact sites.

Andy. We'll talk more about this in a few minutes in. Importantly, we are not just generating compelling data. We are continuing to lay the groundwork for successful launches for our. We have had medical science liaisons in the field for more than a year. We've engaged payers and kols, and we've set up specialty pharmacy and patient support programs to facilitate an exceptional patient experience for tide. We are building HCP awareness of the importance of sustained hematocrit control and leveraging our established hematology commercial infrastructure to ensure we're ready for successful launch. For. Payer discussions and broader pre-launch preparations are already underway. Supporting our ambition not only to gain market share, but also to expand the oral treatment segment. Our efforts are Planful. We believe they will enable us to ensure these transformative medicines will reach patients as quickly as possible, delivering on our commitments in horizon one and positioning Takeda for accelerated long term growth. These milestones reinforce the depth of our late stage pipeline and reflect the sustained, disciplined commitment we have to faster AI enabled discovery and development, strong market access and best in class scientific, medical manufacturing, technology and commercial capabilities today. We are in Horizon one and fundamentally transforming Takeda from within.

This includes optimizing our operations, strengthening our competitiveness, and successfully launching new medicines that will become our future growth drivers, as I. Just shared, this phase is progressing well through our launch preparation pipeline progress core inline brand resilience and execution of our transformation to provide. An additional example, we recently announced a landmark collaboration with the Indonesian government to build plasma operations in the country. Starting with establishing plasma donation centers and assessing the feasibility of potential future manufacturing capabilities. Partnerships like this support the growth of our PDT business and the competitive resilience of our core in brands. While reinforcing our commitment to a sustainable global plasma ecosystem. Throughout this period, we are committed to a clear set of performance measures. Returning to top line growth, protecting our core operating profit margins while making substantial growth investments and improving our return on equity to above 5%. The entire Takeda team is working diligently to execute on our priorities and establish a strong foundation in horizon one. Every. Milestone, we accomplish reinforces our path of progress towards horizon two growth, acceleration. Our. Employees. Relentless dedication and discipline will continue to set the stage for sustained value creation for patients and shareholders.

With that, I will hand the call over to Milano to walk through our first quarter financial results in more detail.

Thank you Julie. And hello everyone. Let me walk through our financial highlights for Q1 of fiscal year 2026. Overall, our Q1 results are on track towards full year guidance. Revenue was ¥1.22 trillion, an increase of 10.2% on actual FX basis or a decline of 0.5% at constant exchange rates or KR. Cooperating profit was ¥358.9 billion up. 11.5% at actual FX or. 0.5% at KRW while. Reported operating profit was ¥201.4 billion. Core EPS. Was ¥154. With. An 11.8% decline at KRW. As expected, mainly. Reflecting tax Favourability in the prior year. Reported EPS was ¥72. Operating cash flow was lower than prior year, reflecting changes in working capital related to our trade receivables. Factoring program. Adjusted free cash flow. Also reflects a payment of 200 million US dollar. To protagonist. Following the decision in April to opt out of a Co-promotion agreement for respiratory. As Julie highlighted, this means that Takeda now holds exclusive developments and commercialization rights for respiratory. Globally. Overall, we are on track to deliver 650 to ¥750 billion free cash flow for the full year. Slide ten shows the revenue bridge versus prior year. At KRW. Core, revenue declined 0.5% as growth from core in brands and new launches largely offset the decline from low and mature products, which includes the continued generic erosion of vyvanse in the US.

Core inline brands represented 58% of total revenue and grew 2.3% at KRW, which is on. On track with our expectations for Q1. Our largest products and TiVo remains resilient with 4% growth at KRW. While immunoglobulin and albumin were both impacted by phasing in the US, which was within our expectation. Our new launches category is still small today. Only 4% of total revenue, but it. Is growing strongly at 22.6% at KRW supported. By LA Libertad Citi. Azima. And Qdenga. We are excited at the prospect of introducing new products to this category. With a potential. Launches of. Or the full and respiratory. Later this year Finally, FX was a big positive to our top line, adding ¥118.2 billion to deliver 10.2% growth at actual exchange rates. Slide 11 shows a bridge for core operating profit consistent with our priorities in horizon one. We have. Positioned fiscal year 2026 as a year of growth investments funded by savings from our transformation program. The transformation program is firmly on track as Julie commented earlier. However, many. Of the initiatives were implemented at the end of the quarter, meaning the savings amount captured in Q1 results is still relatively limited. All the high priority growth investments are on track, including.

Launch readiness for a full respiratory and associated live, as well as progress of late stage development programs such as tack 928 and tack 921. We continue to demonstrate cost discipline alongside targeted investments. Finally, you can see in the chart that gross profit was positive in Q1, primarily driven by favorable effects. Variance in cost of goods, as well as a one time divestiture related milestone. Next, reported operating profit on slide 12. As you can see in this chart. The two main factors impacting year on year performance were lower amortization of intangible assets. Mainly due to the completion of five and sanitization in January 2026. And. Higher restructuring expenses related to the transformation program. FX also provided a tailwind, resulting in 9.1% growth versus prior year at actual exchange rates. Slide 13. Shows our full year fiscal 2026 outlook, which is. Unchanged from May. And our Q1 performance was fully on track towards our targets for this year. I will close my. Section of the presentation by Re-emphasizing. Our commitment to strict financial discipline. Through our two growth horizons in. Particular, during this rise on one. Our focus is on returning to revenue growth, protecting. Cooperating profit, improving.

Reported profits and. Roe and maintaining strong adjusted free cash flow. I look forward to sharing our ongoing progress towards these goals. Thank you. And I'll now pass to Andy for updates on the pipeline.

Thank you. Milano. And hello to everyone on today's call. I want to frame this quarter. Simply Takeda. R&D is ready to convert pipeline progress into commercial performance. That supports our two horizon growth strategy over the coming months, we are poised to launch three transformative medicines, or Xefo tide and Azasite each. With the potential to redefine the standard of care in its field and together setting Takeda on a new growth trajectory. Let me begin with our xefo, which I. Believe is one of the most exciting stories in neuroscience today. Narcolepsy type one is a lifelong disorder caused by the loss of orexin signaling, leading to disabling daytime and nighttime symptoms. At the 2025 World Sleep Congress, we presented groundbreaking results from two phase three studies that met all 14 primary and secondary endpoints, demonstrating statistically significant and clinically meaningful improvements, or xyzal delivered transformative efficacy across the broad disease spectrum, including daytime symptoms like excessive daytime sleepiness and cataplexy, as well as nighttime symptoms, cognitive symptoms, functional improvements, and quality of life or. Doesn't just manage symptoms, it addresses the underlying orexin deficiency and. Nt1 offering patients a single well-tolerated oral therapy that could restore how a majority of Nt1 patients feel and function.

We are on track to bring the first and only erection agonist to patients living with Nt1. As Julie mentioned, we have received our first approval in China and we eagerly await decisions in the US and Japan. This quarter. At Sleep 2026, we presented additional phase three data that I would describe as remarkable, with improvements spanning daily function, cognition, and nighttime sleep. Let me share a few of the highlights. Using the. Functional impacts of narcolepsy instrument or fin for short, we saw significant improvement across all functional domains with p values below 0.0001. Including benefits to cognitive functioning, social activities, everyday activities, and daily responsibilities. These important benefits led to significant gains in work productivity, activity impairment, and quality of life. On cognition, we saw improvement versus placebo in attention, memory, and executive function. Each with a very significant p value on. Nighttime sleep. I want to dwell for a moment on the striking REM latency. Finding. REM. Latency is the time it takes to enter the first REM sleep stage after falling asleep. REM sleep disturbances can manifest as sleep paralysis. Sleep related hallucinations and sleep disruptions at baseline. Our Nt1 patients had a mean REM latency of about 50 minutes.

Against a healthy control value of roughly 130 minutes or. Shifted mean REM latency into the normative range across all treatment groups in both. The first light or 3001 study and the radiant light or 3002 study. This objective ship in sleep is unprecedented. To keep it simple, we are showing data from the Radiant Light study. Both trials produced similar results. As you can see, the objective REM shift is corroborated by the subjective assessments. We measured the subjective effects on REM sleep using the NSE, CT, or narcolepsy Severity scale for clinical trials. A validated instrument used in narcolepsy or. Significantly reduced hallucinations and sleep paralysis in all treatment groups. And it did so with no clinically meaningful disruption to sleep architecture. In practical terms, we are significantly improving, often normalizing a patient's day and night. Now let me turn to our. Next generation, highly selective and potent oral tyk2 inhibitor. Here to the. Data speak for themselves in our phase three head to head psoriasis study Zazo significantly outperformed Deucravacitinib at week 16. More than 35% of Zazo treated patients achieved complete skin clearance as measured by Pasi 100. We have two key takeaway messages from these top line results.

One. This was a real well run trial with Deucravacitinib having data consistent with past phase three trials. Two. This is the best 16 week. Efficacy in psoriasis that we have seen from a pill Zazo. Is poised to be a leading oral option with a fantastic efficacy and safety profile. Full details will be shared at a medical meeting. This fall. What gives us additional confidence is the performance in the hard to treat, high impact areas like psoriasis of the scalp. Palms and soles, as demonstrated here by the high rates of skin clearance in the phase three latitude programs, as well as statistically significant benefits to nails. These are the places where psoriasis can have greatest day to day impact for patients who are among the hardest to treat the. New psoriasis data continues to add to our library of outstanding phase three results I'd like to take a moment to remind you that Zazo is. A far more than just a psoriasis story. As you can see here at the top, Zazo has studies underway across a broad range of immune mediated diseases like psoriatic arthritis, Crohn's disease, ulcerative colitis. Vitiligo, and hydradenitis suppurativa. Doxazosin is a molecule we believe could redefine what is possible with the convenient once daily oral therapy.

We anticipate a phase two data. Readout for Crohn's disease and ulcerative colitis. At the end of our fiscal year 2026. Our orexin franchise continues to advance or has initiated the important 3003 phase three study, which will support filing in Europe. This potentially label enabling trial will, for the first time, generate clinical data on direct switches from polypharmacy to our xefo. In addition, for the small number of patients who may benefit from dose escalation, the trial will include a higher dose option beyond our. Xefo, we are advancing Tak 360 in narcolepsy type two and idiopathic hypersomnia and anticipate phase two data. Later this calendar year. The. Third of our imminent launches is Rutherford Tide, a. First, in class Hepcidin mimetic for Polycythaemia Vera Rutherford. Tide delivers rapid, stable and durable hematocrit control. Addressing a major unmet medical need in PV. It is filed in the US with an EU filing targeted later this fiscal year. We have an August date and anticipate launch immediately thereafter. Now, I want to be clear that our story does not end with these three assets. They are the starting acts of the most robust late stage pipeline in Takeda's history.

And as we continue through horizon one, we will advance the next wave of pipeline progress with key readouts and milestones. As Julie shared earlier in oncology, a ridderschap has started two phase three trials in first and second line myelodysplastic syndrome and will soon start a pivotal trial in myelofibrosis. We presented important updates at Asco in June for Tak 928. Our PD one IL two alpha biased bispecific fusion protein. First, in patients with second line plus I o resistant non-squamous non-small cell lung cancer, an area of great unmet need. We showed a 42% overall survival rate at two years. We are planning for a pivotal phase three in this refractory population. Later this fiscal year. In first line non-small cell lung cancer patients with less than 50% Pd-l1 expression, we were excited to see outstanding early data for Tak 928 in combination with chemotherapy, with favorable safety data. We are looking forward to additional data cuts in the coming months as the trial matures. Tak 921, also known as Arko Vatican, is an oncology program that has received less attention but remains highly promising. Strong progression free survival data was announced from our partners at Innovent in June from a regional phase three trial in third line gastric cancer.

We plan on filing in Japan in fiscal year 2027 using mature overall survival data from this trial in. PDT Tak 881. Our 20% next generation. Facilitated sub QIG. Is advancing towards a US filing in primary immunodeficiency and filings in multiple indications in Europe and Japan. Let me close where I began. What you're seeing from Takeda R&D is the result of our sustained focus on pursuing science, but we have the depth to lead. And commitment to disciplined choices that allow us to advance programs with the most meaningful patient potential, or Zaful frustrated and Zazas are. The leading edge of that strategy, and behind them is a pipeline with the depth. To sustain this momentum. Well into the future. If we take a step back, we anticipate U.S. launch of our Xefo in the second half of 2026. Rutherford tied launch in the second half of 2026, and Citi launch in the first half of 2027. Three potential new standards of care launching in close succession, two of which carry breakthrough and Fast Track designations. This is the launch cadence that underpins our confidence in Takeda's growth trajectory. I have never been more confident in the science and the team behind it, and in our ability to improve patients lives and build a healthier, healthier world for generations.

I look forward to sharing our continued progress with you. Thank you. And with that, I'll turn it back to Julie. To wrap up the presentation Julie.

Thank you. Andy. As you have heard, the momentum across our R&D organization is translating directly into tangible milestones with the goal of bridging us from transformation to growth, acceleration. We are also dedicated to operational discipline and our enterprise transformation is already starting to unlock capital to reinvest in our pipeline and launches in some. Summary. We are delivering on our priorities in horizon one towards a clear set of operational and financial goals. These milestones will enable us to secure a strong foundation that will advance us to horizon two, an era that will be defined by accelerated revenue growth, structural margin expansion, and sustained value creation. We know our. Shareholders are eager to discuss more details of this path forward, and I am pleased to announce that we will host a Capital Markets Day in Tokyo on December 11th, 2026.