Takeda Pharmaceutical Company Limited (TAK) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents mixed signals. While there are positive developments like product launches and strategic partnerships, concerns arise from declining revenue, margin pressures, and competitive challenges. The management's reluctance to provide specific guidance and the potential impact of U.S. policy changes add uncertainty. The Q&A section highlights cautious optimism but also underscores risks, leading to a neutral sentiment.
Key Financial Performance
Revenue Revenue for the 9 months period was just over JPY 3.4 trillion, a decrease of 3.3% or minus 2.8% at constant exchange rate (CER). The decrease was attributed to the significant impact of VYVANSE generic erosion.
Core Operating Profit (Core OP) Core operating profit was JPY 971.6 billion, a year-on-year decrease of 3.4% at both actual FX and CER. The decline was primarily due to the loss of exclusivity of high-margin VYVANSE, but operational efficiencies in R&D and SG&A expenses helped limit the impact.
Reported Operating Profit Reported operating profit was JPY 422.4 billion, an increase of 1.2%. The increase was due to lower restructuring expenses, which more than offset an increase in impairment of intangible assets.
Core EPS Core EPS was JPY 428, reflecting the financial performance and cost management efforts.
Reported EPS Reported EPS was JPY 137, reflecting the overall financial performance.
Adjusted Free Cash Flow Adjusted free cash flow was JPY 625.9 billion, even after the upfront payment of USD 1.2 billion to Innovent Biologics in December. This indicates strong cash flow performance.
Growth and Launch Products Revenue Growth and launch products, representing over 50% of total revenue, grew 6.7% at constant exchange rate. This was an improvement from the 5% growth rate in Q1 and Q2.
ENTYVIO Revenue ENTYVIO grew 7.4% at CER, with strong growth in Q3 partially due to a one-time gross-to-net true-up in the prior year. ENTYVIO Pen was the main driver, maintaining leadership in the IBD market.
TAKHZYRO Revenue TAKHZYRO grew 2.4% at CER. Strong uptake in international markets was offset by the impact of new competing products in the U.S.
Plasma-Derived Therapies (PDT) Revenue PDT revenue growth improved in Q3, with IG growth at 4.3% year-to-date driven by subcutaneous IG products. However, albumin growth was slower at 1.3% due to softening demand in China.
QDENGA Revenue QDENGA growth accelerated to 22.1%, driven primarily by Brazil.
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Operating Highlights
Oveporexton: First orexin agonist submitted to the FDA with significant Phase III results. Expected to transform treatment for narcolepsy type 1.
Rusfertide: Hepcidin mimetic for polycythemia vera with durable hematocrit control. NDA submitted to FDA.
Zasocitinib: Highly selective TYK2 inhibitor for psoriasis. Positive Phase III data; regulatory filing underway. Launch expected in 2027.
ENTYVIO: Maintained leadership in the IBD market with 7.4% growth at CER. ENTYVIO Pen now on formulary with major pharmacy benefit managers.
QDENGA: Accelerated growth of 22.1%, driven by Brazil.
Cost Management: Disciplined cost management offset VYVANSE generic erosion impact. R&D and SG&A expenses reduced.
Adjusted Free Cash Flow: Strong cash flow of JPY 625.9 billion despite USD 1.2 billion upfront payment to Innovent Biologics.
Pipeline Expansion: Added two oncology drugs through partnership with Innovent Biologics. Focused on TAK-928 and TAK-921 for solid tumors and gastric cancers.
Leadership Transition: CEO Christophe Weber transitioning to Julie Kim, with structural changes to enhance competitiveness and growth.
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Risk or Challenges
VYVANSE generic erosion: The company is managing the significant impact of VYVANSE generic erosion, which has caused a decline in revenue and profit. This erosion is expected to continue impacting financial performance, although the headwind is tapering off.
ENTYVIO biosimilar entry: The anticipated entry of ENTYVIO biosimilars in the early 2030s is expected to impact revenue, requiring the company to offset this through new product launches.
TAKHZYRO competition: Growth of TAKHZYRO has slowed due to the impact of new competing products in the U.S., which is affecting its market performance.
Plasma-derived therapies (PDT): The company faces headwinds in plasma-derived therapies, particularly in albumin, due to softening demand in China and pressure on other markets where supply is reallocated. This could result in missing full-year forecasts.
Medicare Part D redesign: IVIG sales have been impacted by Medicare Part D redesign in the U.S., which has affected revenue growth in this segment.
R&D and SG&A expenses: The company is tightening expenses to manage the impact of VYVANSE erosion and to fund investments in new product launches and late-stage pipeline programs. This cost discipline is critical but may strain resources.
Regulatory approvals and product launches: The company is awaiting FDA approval for key products (oveporexton, rusfertide, zasocitinib) and preparing for their launches. Delays or challenges in regulatory approvals could impact growth projections.
China market demand: Softening demand in China for albumin and other products is creating pressure on revenue and growth in the region.
Economic uncertainties and FX impact: The company has revised its revenue and profit forecasts due to stronger-than-anticipated VYVANSE erosion and foreign exchange fluctuations, which add uncertainty to financial performance.
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Guidance & Outlook
New Product Launches: Takeda is preparing for significant new product launches, including oveporexton, rusfertide, and zasocitinib, over the next 18 months. These products are expected to transform treatment paradigms in their respective therapeutic areas.
Revenue Projections: Revenue guidance has been revised to a low single-digit decline at constant exchange rate (CER) due to stronger-than-anticipated VYVANSE generic erosion in the U.S. However, operational efficiencies are expected to offset the gross profit impact.
Pipeline Growth: Takeda's late-stage pipeline includes eight innovative programs, with three key products (oveporexton, rusfertide, and zasocitinib) expected to drive growth. Additional late-stage programs, including TAK-360 and TAK-928, are progressing well.
Operational Efficiency: The company is maintaining strong cost discipline to limit the impact of VYVANSE generic erosion and plans to continue tightening expenses to support long-term growth investments.
Future Investments: Takeda plans to ramp up investments in R&D and product launches while pursuing opportunities to offset these investments to minimize near-term profit impact.
Market Trends: The company anticipates additional tenders in Q4 to support growth in albumin sales, although demand in China remains soft. Growth in other areas, such as vaccines and oncology, is accelerating.
Regulatory Filings: Regulatory filings for oveporexton and rusfertide have been submitted to the FDA, with launches expected this calendar year. Zasocitinib is expected to launch in the first half of 2027.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What are Milano-san's thoughts about the next fiscal year, considering new product contributions, marketing expenses, and dividend increases?
A:Milano-san stated that it is too early to provide guidance as the next fiscal year's budget is being finalized. He mentioned that growth products and launch products are maturing, and the gap between LOE and growth products is shrinking. The company is focused on cost-saving efforts but will invest in necessary launches. R&D expenses are expected to increase due to new projects and partnerships.
Q:Do you have any comments about shareholder returns?
A:Milano-san emphasized the company's policy of progressive dividends, either keeping them flat or increasing them. Decisions will depend on core EPS, reported EPS, cash flow, and debt reduction.
Q:When can we expect the UC CD Phase II outcome for zasocitinib, and what about dosing and psoriasis safety data?
A:Andrew Plump stated that data from UC and Crohn's disease Phase IIb studies will be available this year. Both are dose-ranging studies, with the 30-milligram dose being the low end for IBD. Higher exposures may be necessary for efficacy. Psoriasis safety data is consistent with previous studies, and detailed results will be presented at an upcoming medical conference.
Q:What are your thoughts on MFN and U.S. policy updates?
A:Julie Kim stated that Takeda is evaluating the impact of MFN and related policies. The company does not support MFN due to its potential negative impact on innovation but is taking steps to address challenges.
Q:What changes are being made to the U.S. marketing organization?
A:Julie Kim explained that the company is focusing on therapeutic and geographic structures, maintaining oncology as a separate unit, and enhancing marketing and sales excellence to ensure successful launches.
Q:Can you comment on ENTYVIO's Q3 performance and its inclusion in IRA price negotiations?
A:Christophe Weber noted that ENTYVIO's Q3 performance was strong due to improved U.S. coverage. Julie Kim added that IRA inclusion was anticipated, and the company is preparing for potential price cuts, which could impact peak sales guidance.
Q:What is the outlook for TAKHZYRO and its competition?
A:Julie Kim stated that TAKHZYRO remains the gold standard for HAE patients but faces competition from new entrants. Growth has slowed due to market maturity and Medicare Part D redesign. Real-world data supports TAKHZYRO's efficacy.
Q:How will new product launches impact mid-term profit?
A:Milano-san mentioned that new products typically contribute to profit in their second or third year post-launch. The speed of uptake will vary by product, and overall profit levels are expected to increase with new pipeline assets.
Q:What is the status of the IRA impact on ENTYVIO Pen?
A:Julie Kim confirmed that ENTYVIO Pen is expected to be included in IRA price negotiations.
Q:What are your thoughts on Alzheimer's disease prevention and the AC Immune partnership?
A:Andrew Plump expressed optimism about early amyloid plaque clearance and the AC Immune vaccine program, emphasizing the need to balance safety and efficacy.
Q:What is the outlook for PDT and immunoglobulin?
A:Julie Kim noted a slowdown in albumin demand in China due to utilization guidelines but expects mid-single-digit growth for PDT overall. Immunoglobulin is expected to meet forecasts.
Q:What should we expect from zasocitinib Phase III data?
A:Andrew Plump highlighted fast onset of action, clear skin, ease of administration, and a strong safety profile as key aspects. The data will be presented at an upcoming conference.
Q:What is the regulatory pathway and launch timing for zasocitinib?
A:Andrew Plump stated that submission is expected this summer, with review timing to be determined in dialogue with the FDA.
Q:Has the ENTYVIO biosimilar entry timing changed?
A:Julie Kim stated that the timing remains between 2030 and 2032, depending on legal challenges and market dynamics.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on the next fiscal year's performance, including profit and dividend increases, citing the need for more time to finalize budgets and assess the balance between LOE and growth products. Additionally, they did not disclose precise doses for zasocitinib studies or the exact timing of ENTYVIO biosimilar entry.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CEO elect
CER VYVANSE
Claudin antibody
FDA oveporexton
Furuta
GI
Innovent Biologics
NT
PASI skin
PV
Patients
Representative Director
Takeda future
ability
application FDA
belief medicine
calendar
cell
cost efficiency
discipline VYVANSE
drug application
hematocrit control
investment term
kidney function
line cancer
lung
myelofibrosis
oveporexton rusfertide
patient disease
patient month
quality
rusfertide zasocitinib
skin PASI
tumor
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The earnings call summary and Q&A reveal mixed signals. Revenue growth is modest, with some segments like QDENGA performing well, but others like TAKHZYRO facing competition. The company's strategic partnership and new product launches are positive but lack immediate impact. Uncertainty in guidance and potential pricing pressures from IRA negotiations further contribute to a neutral outlook. The dividend policy remains stable, but no clear shareholder return enhancement is evident. Overall, the lack of strong catalysts and mixed financial performance suggest a neutral stock price movement in the short term.
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The earnings call presents mixed signals. While there are positive developments like product launches and strategic partnerships, concerns arise from declining revenue, margin pressures, and competitive challenges. The management's reluctance to provide specific guidance and the potential impact of U.S. policy changes add uncertainty. The Q&A section highlights cautious optimism but also underscores risks, leading to a neutral sentiment.
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