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Takeda braces for FY'19 revenue crunch ahead of Shire acquisition

Osaka, Japan-based Takeda Pharmaceutical Co. Ltd. is expecting a significant slump in profits in the year leading up to its anticipated acquisition of Shire PLC.

Japan's largest drugmaker projects its core earnings to slide 4% in the coming fiscal year, with revenues also pegged for a 1.9% dip.

The decline in its earnings forecast is primarily due to the negative impact of foreign exchange and divestitures, Takeda's new CFO Costa Saroukos said during a conference call after the company reported financial results for the fiscal year ended March 31.

In 2017, Takeda's core earnings had been propped up by the deferred income from its joint venture deal with Teva Pharmaceutical Industries Ltd., as well as its sale of Wako Pure Chemical Industries Ltd. at the end of 2016, Saroukos said.

"I want to emphasize that the decline in operating profits and earnings per share in 2018 are mainly driven by one-time items, and that underlying business is strong," said Saroukos.

According to the CFO, the company plans to soften the anticipated growth decline by boosting its noncore asset disposals during the fiscal year ending March 31, 2019.

A year from Shire deal

Takeda said its outlook for fiscal year 2019 does not include the impact of the proposed Shire acquisition.

Less than a week ago, the company agreed to buy the Dublin-based drugmaker for £46 billion, paving its path to become one of the top 10 largest pharmaceutical companies in the world.

To fund the acquisition, the Japanese drugmaker took on more debt, which it said it would move quickly to repay.

Analyst Fumiyoshi Sakai from Credit Suisse raised questions on the call about Takeda's share price vulnerability before the cash and stock deal completes in the first half of 2019.

CEO Christophe Weber said the agreement with Shire will remain in place regardless of market dynamics until the closing of the deal.

"Of course, there is a lot of movement in the trade, because there are a lot of arbitrage as well between Shire shares and Takeda shares. So in a way, the entire [market's dynamic] has changed," Weber said.

"When it's closing time … of course the situation of the two companies will have evolved, but we believe that the rationale for the Shire acquisition will remain."

As of May 11, US$1 was equivalent to ¥109.40.