Takeda Reports Second Quarter FY2018 Results

• Strong underlying growth driven by business momentum and strict OPEX discipline;
  Underlying Revenue +4.2%, Underlying Core Earnings +31.8%, Underlying Core EPS +32.7%
• Reported results impacted by large one-time gains in FY2017 and Shire related costs in FY2018
• Raising full year outlook on Velcade upside, Growth Driver momentum and OPEX discipline

Takeda Pharmaceutical Company Limited (TOKYO:4502):
Underlying Revenue +4.2%, led by Growth Drivers, with growth in every region

• Underlying Revenue was solid at +4.2%, with continued strong momentum from Takeda's Growth Drivers (Gastroenterology, Oncology, Neuroscience and Emerging Markets), which grew +9.8%.
  Key growth products Entyvio (+33.1%) and Ninlaro (+38.0%) were important contributors to revenue, as were the products acquired from Ariad in 2017. Every region achieved positive growth versus prior year (U.S. +9.2%, Japan +4.1%, Europe & Canada +4.3%, Emerging Markets +2.4%).
• Reported revenue decreased -0.1%. Although our Growth Drivers remained strong, there was a negative impact from foreign exchange rates (-1.0pp) and divestitures (-3.2pp). The divestiture impact included the sale of additional products to the Teva JV in FY2017, and Multilab and Techpool in FY2018.

Underlying Core Earnings +31.8% with margin +5.1pp driven by strict OPEX discipline

• Underlying Core Earnings grew +31.8%, reflecting revenue growth and a margin step-up of 5.1pp, of which two-thirds (3.3pp) was driven by OPEX improvements. This was a result of the Global OPEX Initiative being fully integrated into ways of working at Takeda.
• Reported operating profit declined -26.6%. This was impacted by two large one-time gains booked in FY2017: the sale of Wako shares for 106.3 billion yen, and the sale of additional products to the Teva JV. Furthermore, Takeda booked one-time expenses in FY2018 related to the proposed acquisition of Shire. Excluding these major one-time items, Operating Profit grew +64.5%.
• Underlying Core EPS was up +32.7%, and reported EPS declined -26.9% to 162 yen per share, impacted by divestitures and Shire related costs.

Several important pipeline milestones achieved in first half of FY2018

• Ninlaro post-stem cell transplant multiple myeloma maintenance (TOURMALINE-MM3 study), Alunbrig first line ALK+ non small cell lung cancer (ALTA-1L study), Adcetris frontline CD30+ peripheral T-cell lymphoma (ECHELON-2 study), and Entyvio subcutaneous formulation in ulcerative colitis (VISIBLE 1 study) all met their primary endpoints.
• 7 New Molecular Entities have entered the Phase 1 pipeline since April 2018.

On track with plan to divest non-core assets

• Year-to-date Operating Free Cash Flow decreased -29.7% mainly due to the impact of the sale of additional products to the Teva JV in FY2017.
• Sale of real estate and marketable securities generated an additional 44.2 billion yen of cash, and sale of non-core businesses Techpool and Multilab generated a further 27.2 billion yen.
• Net debt / EBITDA ratio is 1.7x, improved from 1.8x in FY2017 Q4 and 2.7x in FY2016 Q4.

Christophe Weber, Chief Executive Officer, commented:
"Strategic focus and superior execution has driven a robust performance in the first half of fiscal 2018, as we continue to deliver against our key priorities to grow the portfolio, strengthen the pipeline, and boost profitability. Our Growth Drivers continue to contribute significantly to both revenue and profit, and I am pleased to report that two thirds of the 510 basis points of underlying Core Earnings margin improvement was driven by cost discipline as a result of the Global OPEX Initiative.
In the first half of the year we have also achieved several important regulatory and financial milestones towards the proposed acquisition of Shire plc. I want to emphasize that Takeda’s current strategy is working, and that the Takeda Board, Takeda Executive Team and I are confident that the acquisition of Shire will enable Takeda to significantly accelerate its transformational journey to become a global, values-based, R&D-driven, biopharmaceutical leader headquartered in Japan."

FY2018 Underlying Guidance: Raising underlying profit guidance
		Previous Guidance (growth %) (May 14, 2018)		Revised Guidance (growth %) (October 31, 2018)
Underlying Revenue		Low single digit		Low single digit
Underlying Core Earnings		High single digit		High teen
Underlying Core EPS		Low teens		Mid twenties
Annual Dividend per Share		180 yen		180 yen

• Guidance assumes one additional therapeutically non-equivalent competitor to Velcade with intravenous and subcutaneous administration launching in the U.S. in March 2019, an upside of 35.5 billion yen from the previous guidance (Global revenue in FY2017: 129.6 billion yen, FY2018: 111.0 billion yen)*
• Underlying Core Earnings margin expansion projected at the higher end of +100-200bps range.
• This underlying guidance excludes the full fiscal year 2018 estimated financial impact related to the proposed acquisition of Shire plc by Takeda.

*(applying constant currency based on FY2018 plan rate)

https://www.biospace.com/article/releases/takeda-reports-second-quarter-fy2018-results/

Is the Biotech Bull Market Over?

…And How Long Will The Bear Market Last?

It may not have always felt like it, but biotech has been in a bull market mode over the past two-and-a-half years, ever since the iShares Biotechnology Index (IBB) bottomed out at $80.01 on February 9, 2016. From that nadir, right up until the start of this month, the IBB rose unevenly but steadily, gaining 54%.

The reason those gains may not always have felt so thrilling is that the S&P 500 did even better, gaining 60% over the same timeframe. And biotech never re-achieved the peak it had reached in July of 2015, which probably put a damper on investors’ excitement.

Nevertheless, it hasn’t been a bad show. Even for the year-to-date, the IBB was up 14% on October 1.

That’s all changed. As the month advanced, those gains evaporated, making 2018 look like it never happened. The rout has spared almost no one—not profitable bellwethers like Celgeneand Biogen; not biotech “value” stocks like Gilead Sciences and Amgen; not hot momentum companies like Editas Medicine or CRISPR Therapeutics; not on-the-cusp names like bluebird bio or Alnylam.  It’s been a very select group of companies that have eked out a gain over the past month.

True, this comes in the context of a broader market decline; but once again, biotech is underperforming. And it’s happening despite a background of decent news, including some exciting data coming out of the European Society for Medical Oncology (ESMO) conference this month. Companies are touting positive data in tough indications like triple-negative breast cancer. Loxo Oncology is finding success with a relatively new approach to cancer-based on molecular profile rather than the origin of a tumor (and nevertheless saw shares decline this month).

Better After November?

So what gives?

If 2015’s biotech bull market was killed by politics—worries about price controls that ironically weighed heavily on companies with nothing to sell—then could this be an echo? With mid-term elections around the corner, investors could conceivably be worried that we’ll see a serious round of reforms that could hurt company prospects.

Frankly, that seems like a stretch. Complete Republican control of Congress and the White House hasn’t amounted to much in the way of substantive change in terms of drug pricing policy. If the Democrats take the House but not the Senate—as appears likely—that’s a formula for cementing inaction rather than spurring fresh reform.

Nevertheless, Wall Street hates uncertainty, and until we know how the election really turns out, there’s going to be caution around biopharmaceutical companies. As we move closer to the end of 2018, recent drops could turn out to be a buying opportunity.

While biotech stocks have dropped across the board, it is small- and mid-cap companies that have paid the highest price. With larger companies in a comparatively stronger position, and generally flush with cash, we could see a new round of M&A. That was a big feature of the 2015 bull market that hasn’t been as prominent over the past couple of years. Meanwhile, other factors driving market declines—like geopolitical events and rising interest rates—generally have a muted impact on the biotech sector and will weigh less heavily.

Biotech is already in official “correction” territory. That doesn’t mean things won’t get worse in the short run—they very well may. But biotech’s history is a long, albeit uneven, uphill climb. Right now some bargains are starting to take shape.

https://www.biospace.com/article/is-the-biotech-bull-market-over-/

Galderma, Nestlé Skin Health, Positive Phase 2b Atopic Dermatitis Med Study

Galderma, Nestlé Skin Health’s medical solutions business, today announced positive results from a Phase 2b dose-ranging study of nemolizumab in adult patients with moderate-to-severe atopic dermatitis (AD), a serious, chronic form of eczema. Nemolizumab, an investigational subcutaneous anti-IL-31 receptor A monoclonal antibody, met the primary endpoint of a greater improvement in Eczema Area and Severity Index (EASI) scores from baseline compared to placebo, and met secondary endpoints of major significance to Quality of Life improvement, such as Peak Pruritus Numerical Rating Scale (NRS) score vs. baseline for example.

“These clinical data, coupled with previous phase 2a results from our licensing partner Chugai, support the growing scientific evidence that the IL31 pathway may be an important driver in atopic dermatitis. These results clearly support dose selection and will allow us to pursue the development as planned. We confirm our intent to progress nemolizumab into phase 3 in 2019 ” said Thibaud Portal, Ph.D., Vice President of Galderma’s Prescription business.

Atopic dermatitis is a chronic inflammatory skin disease, and is the most common form of eczema which frequently begins in childhood and can last through adulthood, although in some patients it may start in adulthood. Moderate-to-severe atopic dermatitis is characterized by an allergic response driven by a subset of immune cells called Type 2 helper T cells, or Th2 cells. IL-31, a cytokine released by Th2 cells, is involved in AD associated pruritus by interacting with IL-31 receptor alpha expressed by neurons, and is also thought to play a role in AD skin inflammation and AD skin barrier impairment. Moderate-to-severe forms of atopic dermatitis can be characterized by pronounced cutaneous dryness, and skin lesions marked by redness, infiltration/papulation, crusting/oozing, and lichenification, with periods of lesion exacerbation accompanied by intense itching, scratching, and skin damage that can lead to secondary infections. Moderate-to-severe atopic dermatitis can negatively impact patients’ lives and is associated with a high burden to patients particularly with itching, sleep deprivation and depression.

Nemolizumab, a humanized monoclonal antibody, is directed against the IL-31R alpha, which blocks IL-31 signaling. Nemolizumab, initially developed by Chugai, was subsequently licensed to Nestlé Skin Health in 2016. Nemolizumab is an investigational agent under clinical development and its safety and efficacy have not been fully evaluated by any regulatory authority.

https://www.biospace.com/article/releases/galderma-nestle-skin-health-s-medical-solutions-business-announces-positive-results-from-phase-2b-study-of-nemolizumab-in-patients-with-moderate-to-severe-atopic-dermatitis/

Sarepta CEO acquires 16,695 common shares

In a regulatory filing, Sarepta Therapeutics president and CEO Douglas S. Ingram disclosed the acquisition of 16,695 common shares of the company in two transactions. The first transaction of 13,561 shares was bought at $120.26 per share, while the second transaction of 3,134 shares was bought at $120.94 per share.

https://thefly.com/landingPageNews.php?id=2814019

Clovis price target lowered to $18 from $33 at Piper Jaffray

Piper Jaffray analyst Joseph Catanzaro lowered his price target on Clovis to $18 and kept his Neutral rating while also lowering his FY19 revenue view to $171.7M from $220M and FY19 EPS view to ($5.35) from ($3.96). The analyst cites the company’s Q3 Rubraca sales coming in well below expectations in just its second quarter of reporting since the label expansion, which he suggests may be a sign of difficulty in “penetrating the market opportunity”. Catanzaro adds that while the management intends to launch a new “branding campaign that will highlight Rubraca’s ability to continue tumor shrinkage”, he is “not convinced” that these efforts will be sufficient.

https://thefly.com/landingPageNews.php?id=2814026

Twist Bioscience 5M share IPO priced at $14.00

The deal priced at the low end of $14.00-$16.00 range. JPMorgan and Cowen acted as joint book running managers for the offering.

https://thefly.com/landingPageNews.php?id=2814027

Orchard Therapeutics 14.3M share IPO priced at $14.00

The deal was upsized from 13.33M and priced at the low end of the $14.00-$16.00 range. JPMorgan, Goldman Sachs, Cowen and Wedbush are acting as joint book running managers for the offering.

https://thefly.com/landingPageNews.php?id=2814028