Global Insight Perspective | |
Significance | In a year free of price cuts and providing beneficial year-on-year (y/y) comparisons with the average 4.2% cuts in FY2004/05, Takeda recorded a relatively strong domestic performance, while its diversified portfolio also saw robust growth overseas. |
Implications | The sales increase has enabled the company to invest in its cost base, in anticipation of the launch of two new chemical entities (NCEs) in the U.S. market. R&D and marketing expenditure have thus increased substantively (by 15% and 20% respectively) without having too much of an impact on operating income, which increased by 4.6%. |
Outlook | Having launched insomnia treatment Rozerem (ramelteon) and constipation drug Amitiza (lubiprostone) in the United States, Takeda is aiming to further ramp up its R&D investment; the company's goal of reaching 20% of sales is not as ambitious as much of the media has made it out to be. The flat growth projected for FY2006/07 is largely due to the 6.7% price cuts implemented in Japan on 1 April. |
The Last of Takeda’s Glory Years?
Japanese industry leader Takeda Pharmaceutical today presented its results for the year ending 31 March 2006, with sales increasing by 7.9% to ¥1.2 trillion (US$10.8 billion), largely driven by a strong performance in the United States (up 26.0%) and Europe (up 14.2%). In the slow-moving Japanese market, Takeda still recorded growth of 5% to ¥963.4 billion, accounting for 79% of sales. The relatively strong sales margins, though lower than the double-digit growth to which Takeda has been accustomed in non-price-cut years, allowed for significant investment in its sales and R&D infrastructure, in anticipation of the launch of Rozerem (ramelteon) and Amitiza (lubiprostone) in the United States. Selling, general and administrative (SGA) expenses increased by 13% and R&D spending grew by fully 20%, but Takeda still recorded operating income growth of 4.6%.
Takeda: Selected Results, FY2005/06 | ||
¥ bil. | % Growth, Y/Y | |
Net Sales | 1,212.2 | 7.9 |
Pharmaceutical Sales | 1,074.5 | 10.7 |
Ethical Pharmaceutical Sales | 1,019.1 | 11.4 |
JapanNet Sales | 963.4 | 5.0 |
North AmericaNet Sales | 216.3 | 26.1 |
EuropeNet sales | 124.0 | 14.2 |
AsiaNet Sales | 8.5 | 6.3 |
Cost of Sales | 282.1 | 1.0 |
Selling, General and Administrative (SGA) Expenses | 357.7 | 12.7 |
R&D Expenditure | 169.6 | 19.9 |
R&D as % of Net Sales | 14.0 | n/m |
Operating Income* | 402.8 | 4.6 |
Operating Margin | 33.2 | -3.2 |
Net Income | 313.2 | 12.9 |
Source: Takeda / Global Insight | ||
Again, the operating income results represent smaller growth than Takeda is used to, indicating that the exponential growth that the industry leader has enjoyed over the past 10 years is teetering. However, the results are slightly ahead of forecasts, with the ¥1.212 trillion sales exceeding the expecting ¥1.195 trillion by 1.4%, and net income falling in 1.0% above forecasts.
Sales were again driven by two of Takeda’s global products, hypertension treatment Blopress (candesartan), which is co-marketed with U.K. pharma AstraZeneca, and diabetes mainstay Actos (pioglitazone), which is now marketed solely by Takeda after several years of partnership with Eli Lilly (U.S.). Sales of these products grew by 25.4% and 26.4% respectively, and both still have the potential to build on their indications. Meanwhile, sales growth for products from the company's TAP Pharmaceutical joint venture (JV) has continued to fall, although there are some signs of a rebound. Competition from generic alternatives and over-the-counter (OTC) products continues to press the margins on Prevacid (lansoprazole), as buyers fail to see much virtue in paying the significant premium for Takeda’s product, while pricing pressure is keeping prostate cancer treatment Lupron (leuprolide) down.
Takeda: Product Sales, FY2005/06 | ||
¥ bil. | % Growth, Y/Y | |
Worldwide International Strategic Products | ||
Lupron/Leuplin | 182.5 | 2.5 |
Japan | 63.2 | 3.5 |
Americas | 79.6 | -3.8 |
Europe | 37.1 | 10.9 |
Prevacid/Takepron | 389.7 | 4.4 |
Japan | 55 | 16.0 |
Americas | 286.8 | 6.4 |
Europe | 44.9 | -16.4 |
Blopress/Atacand | 191.6 | 25.4 |
Japan | 123.4 | 19.2 |
Overseas | 68.1 | 38.4 |
Actos | 244.3 | 26.4 |
Japan | 24.2 | 56.5 |
Americas | 202.2 | 22.9 |
Europe | 15.5 | 35.0 |
Domestic Ethical Producs | ||
Blopress | 123.4 | 19.2 |
Basen | 63.6 | 3.4 |
Leuplin | 63.2 | 5.9 |
Takepron | 55.0 | 16.0 |
Actos | 24.2 | 56.5 |
Benet | 15.7 | 14.6 |
Seltouch | 13.7 | 1.3 |
Isovorin | 12.8 | 24.1 |
Pansporin | 12.7 | -5.6 |
Glovenin | 8.5 | 6.3 |
Dasen | 8.5 | -3.7 |
Firstoin | 7.5 | -4.8 |
Calslot | 7.4 | -15.1 |
Leucovorin | 6.8 | 70 |
Rheumatrex | 6.7 | 6.6 |
Source: Takeda | ||
Outlook and Implications
In effect, sales growth in Japan during years such as FY2005/06 must be looked at within a two-year framework, as domestic firms will not be able to leverage such growth in FY2006/07. The government-imposed biennial price cuts, which averaged 6.7% in April 2006, ensure that the year ahead will see bleak performances from most of Japan’s operators, and Takeda is no exception. Indeed, Takeda is forecasting a mere 1.5% growth for the year ahead, with net income inching up by 2.2%. As a result, unless Takeda reneges on its conservative cash flow policy and begins to adopt a robust licensing spree, similar to that of major dometic rival Astellas, the 7.9% sales growth seen in FY2005/06 will largely determine the investment capabilities not just for last year, when Rozerem and Amitiza reached the market, but also for the year ahead.
Takeda: Outlook, FY2006/07 | ||
¥ bil. | % Growth, Y/Y | |
Net Sales | 1,230 | 1.5 |
Ordinary Income | 486 | 0.1 |
Net Income | 320 | 2.2 |
Source: Takeda | ||
Takeda has also presented its management plan up to FY2010/11, setting itself a robust target for increased research expenditure. Much has been made of a target for R&D to reach 20% of sales, which is unheard of among leading companies in the non-biotech drug sector, but this only uses in-house ethical product sales as a standard. R&D spending will still increase to around ¥280 billion according to this measure - an increase of about 65% on FY2005/06, over a five-year period.
Takeda: Targets, FY2010/11 | |
Sales (In-House Ethical) | ¥1.4 trillion |
Market Share | 2.5% |
R&D | To reach 20% of in-house ethical sales |
Source: Takeda Management Plan 2006-10 | |
Takeda's pipeline is currently focused on DPP-IV inhibitor SYR-322 (now in Phase III trials for type 2 diabetes), Prevacid follow-up TAK-39MR (also in Phase III trials in the United States) and Phase III cancer adjuvant Tavocept (dimesna). Takeda is playing catch-up in the DPP-IV inhibitor stakes, and will be entering a highly competitive market; rival candidates include LAF-237 and Galvus (vildagliptin) from Swiss giant Novartis, and Januvia (sitagliptin) from U.S. pharma Merck & Co. Bristol-Myers Squibb’s (U.S.) saxagliptin is also in Phase III development. R&D spending will also be consumed by lipase inhibitor ATL-962 (cetilistat), which is being tested against Xenical (orlistat; Roche (Switzerland)) to show fewer side-effects in an obesity setting.
Related Articles:
- Japan: 23 February 2006: 'Big Three' Dominate, as Japanese Drug-Makers Position Themselves Ahead of April's Price Cuts
- Japan: 31 January 2006: Q3 Offers No Surprises, as Takeda Remains on Course to Meet FY2005/06 Guidance
- Japan: 11 May 2005: Profits at Industry Leader Takeda Hit by Increasing Costs During 2004/05