Takeda Delivers Strong Third Quarter FY2021 Results and Raises Full-Year Forecast Reflecting Strong Momentum

February 3, 2022

− Delivered Q3 FY2021 Year-to-Date Growth in Reported Revenue of +11%

− Grew Q3 FY2021 Year-to-Date Reported Operating Profit to 462.5 Billion Yen ($4.0B) and Delivered Competitive Underlying Core Operating Profit Margin of 29.4%

− 14 Global Brands Represent 42% of Year-to-Date Core Revenue with +12% Underlying Growth and Further Growth Expected in Q4 FY2021

Osaka, JAPAN, February 3, 2022 – Takeda (TSE:4502/NYSE:TAK) today announced strong financial results for the third quarter of its fiscal year 2021 (period ended December 31, 2021) driven by robust topline growth of its 14 global brands. Based on the strong third-quarter results and business momentum, the company upgraded forecasts for full fiscal year revenue, reported and core operating profit, reported and core EPS and free cash flow.

Takeda remains positioned for long-term business growth with solid margins and strong cash generation. Its 14 global brands are projected to continue driving topline growth in the near-term, through continued market penetration, geographic expansion, improving access and life cycle management. In addition, the company remains committed to growing its late-stage pipeline by advancing its diverse portfolio of approximately 40 clinical stage assets, which is poised to deliver sustained value over the long-term. In December 2021, Takeda announced the launch of LIVTENCITY™ (maribavir), its second new molecular entity approved by the U.S. FDA in FY2021, following the EXKIVITY™ (mobocertinib) approval and launch in Q2 FY2021.

Costa Saroukos, Chief Financial Officer, commented:

“Takeda’s third-quarter results demonstrate the continued strength of our portfolio, particularly our 14 global brands, and conviction in our long-term strategy. We have raised our full-year FY2021 forecast to reflect strong business momentum and now expect to deliver full-year Free Cash Flow of 700 to 800 billion yen.

We remain committed to growing revenue over the next decade through continued investment in our 14 global brands and our innovative pipeline of approximately 40 clinical-stage assets, which is already starting to deliver with the recent launch in the U.S. of LIVTENCITY, the second major regulatory approval for our pipeline in FY2021 after EXKIVITY.”

FINANCIAL AND BUSINESS HIGHLIGHTS
Results for Q3 FY2021 YTD Ended December 31, 2021

(billion yen, except percentages and per share amounts)	REPORTED		CORE (Non-IFRS)^(a)		UNDERLYING^(b)(Non-IFRS)^(a)
(billion yen, except percentages and per share amounts)	Q3 FY2021 YTD	vs. PRIOR YEAR	Q3 FY2021 YTD	vs. PRIOR YEAR
Revenue	2,695.7	+11.0%	2,562.7	+5.6%	+7.1%
Operating Profit	462.5	+28.9%	757.9^(c)	-2.9%	+5.4%
Margin	17.2%	+2.4pp	29.6%	-2.6pp	29.4%
Net Profit	241.4	+34.9%	521.5	+0.3%
EPS (JPY)	154	+34.5%	333	-0.0%	+9.9%
Operating Cash Flow	747.5	+22.6%
Free Cash Flow (Non-IFRS)^(a)(d)	671.3	-6.4%

^{(a) Further information regarding certain of Takeda’s Non-IFRS measures is posted on Takeda’s investor relations website at https://www.takeda.com/investors/financial-results/.}

^{(b) Underlying growth compares two periods (quarters or years) of financial results under a common basis and is used by management to assess the business. These financial results are calculated on a constant currency basis and excluding the impact of divestitures and other amounts that are unusual, non-recurring items or unrelated to our ongoing operations.}

^{(c) Core Operating Profit represents net profit adjusted to exclude income tax expenses, the share of profit or loss of investments accounted for using the equity method, finance expenses and income, other operating expenses and income, amortization and impairment losses on acquired intangible assets and other items unrelated to Takeda’s core operations, such as non-recurring items, purchase accounting effects and transaction related costs.}

^{(d) Free Cash Flow represents cash flows from operating activities, excluding acquisition of plant, property and equipment, intangible assets and investments, and any other cash that is not available to Takeda’s immediate or general business use, and including proceeds from sales of property, plant, sales and redemption of investments and businesses, net of cash and cash equivalents divested.}

Reported Revenue Increased +11%; Underlying Revenue Increased +7.1% vs Q3 FY2020 YTD, Driven by 14 Global Brands

Takeda’s 14 global brands, with an aggregate reported revenue of 1,073.2 billion yen ($9.3B), posted year-over-year underlying revenue growth of +12% and now represent 42% of total core revenue, with growth momentum expected to continue beyond FY2021.
Takeda’s five key business areas, with 2,213.6 billion yen ($19.2B) in reported revenue, represented 86% of core revenues.
- Gastroenterology (GI), with 665.7 billion yen ($5.8B) in reported revenue, grew +8% on an underlying basis driven by gut-selective ENTYVIO^®(vedolizumab). Following a review of assumptions regarding ENTYVIO biosimilars, Takeda is no longer expecting entry of biosimilars upon loss of data exclusivity.
- Plasma Derived Therapy (PDT) Immunology, with 363.2 billion yen ($3.2B) in reported revenue, grew +10% on an underlying basis driven by Immunoglobulin and Albumin/FLEXBUMIN^®.
- Rare Diseases, with 462.9 billion yen ($4.0B) in reported revenue, declined -1% on an underlying basis, with treatments for Rare Hematology impacted by intensified competition. HAE had underlying growth of +5% due to growth of the prophylactic market, continued geographic expansion and strong patient uptake.
- Oncology, with 359.1 billion yen ($3.1B) in reported revenue, grew +8% on an underlying basis driven by increased market penetration and strong demand increases in Growth and Emerging Markets, particularly China.
- Neuroscience, with 362.6 billion yen ($3.1B) in reported revenue, grew +10% on an underlying basis driven by a strong rebound of VYVANSE^® following the impact of COVID-19 in FY2020.

Reported Operating Profit Increased +28.9%; Underlying Core Operating Profit Margin was 29.4% for Q3 FY2021 YTD

Reported operating profit increased +28.9% to 462.5 billion yen ($4.0B) compared to Q3 FY2020 YTD, driven by a gain on the sale of the diabetes portfolio in Japan and lower integration costs. These items more than offset a decrease in other operating income, primarily due to a one-time gain recorded in Q1 FY2020 and a gain from non-core asset divestitures recorded in Q3 FY2020.
Underlying core operating profit for the current period increased +5.4%, attributable to underlying revenue growth.

Accelerating Efforts to Meet the Growing Demand for COVID-19 Vaccines

Takeda is partnering with Novavax in Japan for the development, manufacturing and commercialization of TAK-019, their COVID-19 vaccine candidate, utilizing Takeda’s Hikari manufacturing site in Japan, for the pandemic and beyond.
The company also entered into an agreement with the Government of Japan’s Ministry of Health, Labour and Welfare (MHLW) for the purchase of 150 million doses of TAK-019. Distribution of the first doses in Japan is planned for early 2022, subject to regulatory approval.
Takeda continues to deliver on its three-way agreement with Moderna and MHLW to import and distribute Moderna’s COVID-19 vaccine in Japan.
To date, 50 million doses of Moderna’s COVID-19 vaccine have been imported to Japan. Takeda has started importation and distribution of an additional 93 million booster doses from the beginning of 2022 for a total distribution of 143 million doses.

Important Pipeline Milestones in Q3 FY2021

Takeda expects key proof-of-concept readouts over the next two years for potential therapies that could unlock significant additional value, and a continued focus on strategic partnerships that allow Takeda to harness cutting-edge innovation no matter where it resides, delivering life-transforming treatments to patients around the world. The company gained momentum toward that goal in Q3 FY2021, and to date, through:

LIVTENCITY received approval from the U.S. FDA for the treatment of adult and pediatric patients over the age of 12 with post-transplant cytomegalovirus (CMV) infection/disease that is refractory to treatment (with or without genotypic resistance) with ganciclovir, valganciclovir, cidofovir or foscarnet.
In December 2021, Takeda received a Complete Response Letter (CRL) from the U.S. FDA for TAK-721 (budesonide oral suspension) for the treatment of eosinophilic esophagitis. In the CRL, the FDA indicated that the New Drug Application could not be approved in its present form and requested additional data that would require an additional clinical trial. The company has completed a comprehensive review of the CRL and will discontinue the TAK-721 development program.
In January 2022, Takeda announced an intent to acquire Adaptate Biotherapeutics to further accelerate the development of innovative γδ (gamma delta) T cell-based therapies. The acquisitions of Adaptate and the previously announced intent to acquire GammaDelta are expected to be finalized in Q1 of Takeda’s fiscal year 2022. Also in January 2022, Takeda obtained antitrust clearance from the FTC regarding its acquisition of GammaDelta pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in the U.S. No additional antitrust approvals are required.
In January 2022, ENTYVIO received approval from the European Commission for intravenous treatment of adult patients with moderately to severely active chronic pouchitis, who have undergone proctocolectomy and ileal pouch-anal anastomosis for ulcerative colitis and have had an inadequate response with or lost response to antibiotic therapy.

FY2021 GUIDANCE
Upgrading Full-Year FY2021 Forecast

(billion yen)	FY2021 PRIOR FORECAST (October 2021)	FY2021 REVISED FORECAST (February 2022)	Underlying Management Guidance (Unchanged from May 2021)
Revenue	3,370.0	3,510.0	Mid-single-digit growth
R&D Expenses	-522.0	-522.0
Reported Operating Profit	488.0	515.0
Core Operating Profit	930.0	970.0	Mid-single-digit growth ~30% margin
Reported EPS (Yen)	117	155
Core EPS (Yen)	394	416	Mid-single-digit growth
Free Cash Flow	600.0-700.0	700.0-800.0
Annual Dividend per Share (Yen)	180	180

Key Assumptions in FY2021 Forecast

Company forecast reflects favorability of updated FX assumptions and management’s expectations for continued business momentum across Takeda’s five key business areas, underlying revenue growth of its 14 global brands, and discipline in operating expenses.

FY2021 forecast and guidance reflect the following key assumptions, including (1) Takeda expects at least one 505(b)2 competitor for subcutaneous VELCADE^® to launch in the U.S. in late FY2021; (2) Takeda does not expect to restart sales of NATPARA^® in the U.S. market in FY2021; and (3) FY2021 forecast and guidance do not include the impact of any potential further divestitures beyond what has already been disclosed by Takeda.

To date, Takeda has not experienced a material effect on its financial results as a result of the global spread of COVID-19. Based on currently available information, Takeda believes that its financial results for FY2021 will not be materially affected by COVID-19 and, accordingly, Takeda's FY2021 forecast reflects this belief. However, the situation surrounding COVID-19 remains highly fluid, and future COVID-19-related developments in FY2021, including new or additional COVID-19 outbreaks and additional or extended lockdowns, shelter-in-place orders or other government action in major markets, could result in further or more serious disruptions to Takeda’s business, such as slowdowns in demand for Takeda’s products, supply chain related issues or significant delays in its clinical trial programs. These events, if they occur, could result in an additional impact on Takeda’s business, results of operations or financial condition, as well as result in significant deviations from Takeda’s FY2021 forecast.

For more details on Takeda's Q3 FY2021 results and other financial information, please visit: https://www.takeda.com/investors/financial-results/

More information on Takeda’s approach to ESG and values-based corporate governance can be found in the 2021 Annual Integrated Report for FY2020, which ended March 31, 2021. This report can be accessed on Takeda’s website at: https://air.takeda.com.

About Takeda

Takeda is a global, values-based, R&D-driven biopharmaceutical leader headquartered in Japan, committed to discover and deliver life-transforming treatments, guided by our commitment to patients, our people and the planet. Takeda focuses its R&D efforts on four therapeutic areas: Oncology, Rare Genetic and Hematology, Neuroscience, and Gastroenterology (GI). We also make targeted R&D investments in Plasma-Derived Therapies and Vaccines. We are focusing on developing highly innovative medicines that contribute to making a difference in people’s lives by advancing the frontier of new treatment options and leveraging our enhanced collaborative R&D engine and capabilities to create a robust, modality-diverse pipeline. Our employees are committed to improving quality of life for patients and to working with our partners in health care in approximately 80 countries and regions. For more information, visit https://www.takeda.com.

Contacts

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Financial information

Takeda’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). Convenience translations of JPY figures into USD are included for reference and have been calculated at a rate of JPY/USD of 115.17.

Certain Non-IFRS Financial Measures

This press release and materials distributed in connection with this press release include certain IFRS financial measures not presented in accordance with International Financial Reporting Standards (“IFRS”), such as Underlying Revenue, Core Operating Profit, Underlying Core Operating Profit, Core Net Profit, Underlying Core EPS, Net Debt, EBITDA, Adjusted EBITDA and Free Cash Flow. Takeda’s management evaluates results and makes operating and investment decisions using both IFRS and non-IFRS measures included in this press release. These non-IFRS measures exclude certain income, cost and cash flow items which are included in, or are calculated differently from, the most closely comparable measures presented in accordance with IFRS. By including these non-IFRS measures, management intends to provide investors with additional information to further analyze Takeda’s performance, core results and underlying trends. Takeda’s non-IFRS measures are not prepared in accordance with IFRS and such non-IFRS measures should be considered a supplement to, and not a substitute for, measures prepared in accordance with IFRS (which we sometimes refer to as “reported” measures). Investors are encouraged to review the reconciliation of non-IFRS financial measures to their most directly comparable IFRS measures.

Further information on certain of Takeda’s Non-IFRS measures is posted on Takeda’s investor relations website at https://www.takeda.com/investors/financial-results/

Medical information

This press release contains information about products that may not be available in all countries, or may be available under different trademarks, for different indications, in different dosages, or in different strengths. Nothing contained herein should be considered a solicitation, promotion or advertisement for any prescription drugs including the ones under development.

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Takeda Delivers Strong Third Quarter FY2021 Results and Raises Full-Year Forecast Reflecting Strong Momentum