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[Interpreted] Thank you, very much and I would like to take questions from the participants.
On the panel, we have participants from our side: Christophe Andy Costa and Masato Iwasaki, Japan General Affairs. Ramona Sequeira, President, Global Portfolio division. Julie Kim, President, U.S. Business Unit, Giles Platford, President PDT Business Unit; and Teresa Bitetti, President, Global Oncology Business Unit. [Operator Instructions] First, Mr. Yamaguchi, Citigroup. Mr. Yamaguchi. Please start asking your questions. Let me go to the next person. Next is Jefferies, Steve Barker, please.
Yes. It's Steve Barker from Jefferies here. My first question, I think it's probably for Julie. It's about the plasma business. Do you have any comment about CSL's adoption of the Rika Plasma Collection Center, which they developed with Terumo. There's some commentary with -- that says that the collection times at CSL are currently about 66 minutes but could come down to 50 minutes with the new system, does that pose a competitive threat to Takeda?
That's my first question. Second question, is for Andy. You mentioned mesagitimab, TAK-079 for Myasthenia Gravis. According to clinicaltrials.gov, there was a Phase II trial that reached primary completion in March. And I was wondering if you had any comment on that, please?
Perhaps I can take the first question. This is Giles Platford. I have taken over the Plasma-Derived Therapies business unit from Julie. Thank you very much for the question. Yes, we're aware that Fresenius Kabi, Hemonotics and Terumo all have new apheresis machines. And whilst we believe these are important improvements, not a fundamental shift in technology, we continue to evaluate the landscape and potential partnerships to identify opportunities to improve our operations, but have nothing to announce at present. And important to reinforce, we continue to explore and invest in ways to make the entire donor experience more efficient and effective for our donors through both incremental and [indiscernible] approaches. We firmly believe that beyond the apheresis machines and technology we're using, improving the entire end-to-end experience, both before donors come into the center and how quickly we move through -- move them through the experience of donation is really important, and that's been demonstrated in our ability to maintain and even exceed pre-pandemic donation levels in fiscal '21.
Steve, it's Andy. I can take the second question. So as you know, mezagitumab is our naked CD38 monoclonal antibody. And we've seen broadly across immunoglobulin subclasses, reductions. We actually are now in 3 proof-of-concept studies. You mentioned myasthenia gravis, which will be the first to read out ITP, both testing the hypothesis of whether reductions in IgG as elicited by this mechanism can result in disease benefit. And then quite interestingly, the largest reductions that we see are in circulating IgA. And so we're in the process of starting up a proof-of-concept study in IgA nephropathy as well. Specifically the timing, we haven't seen data yet from the myasthenia gravis study. We expect to see data in the first half of this year.
[Interpreted] We'd like to move on to the next question from JP Morgan Securities, Mr. Wakao, please.
[Interpreted] This is Wakao from JPMorgan. My first question, in the fourth quarter, the COGS deteriorated. What were the reasons behind it? Maybe it was a shipment timing of ENTYVIO. And of course, there was an increase in revenue and profit of PDT. So can you please give us details. Was it a transient factor that was mentioned in the presentation. What was the background for that transient factor? And of course, for PDT, this year, the margin is going to improve. It was mentioned in the fourth quarter, the revenue did go up and the fee did go up, but is that fee going to continue to go up. And the second question about the narcolepsy franchise. About 861, POC will be received, that was mentioned this year. So on Page 15 and Page 16, looking at these 2 pages you're in Phase I. And after the Phase I study, Phase IIa will be done and POC will be gained. And with that result, you are going to make a decision of go or no go? Is that a correct flow?
[Interpreted] Thank you very much for your questions. About the donation fee question, Giles, would you be able to answer that question, please?
Yes. Thank you very much for the question. As Christophe and Costa rightly outlined, we saw very solid growth at, and above guidance, across all areas of our PDT portfolio in fiscal '21, driven by continued expansion of our plasma sourcing footprint with the opening of 23 centers -- new centers in fiscal '21 and continued operational improvements across our entire value chain.
Whilst we have seen some increase in donation fees during the course of the pandemic, we do feel very confident that as the pressures of the pandemic now ease, we will see some moderation of those fees, and we feel confident that the operational improvements that we have made over the past couple of years and with the continued expansion of capacity and particularly with the uptake of the new donation centers and increased productivity of those donation centers that we've opened in fiscal '21, we will be well positioned to resume in improving our margins over time from fiscal '22.
And Wakao-san, this is Andy. On the question regarding the clinical development strategy for 861, let me say that one of the benefits that we have in working in this mechanism is the availability of proximal pharmacokinetic and pharmacodynamic as well as clinical endpoints that we can measure even after a single dose. And so our ability to understand whether a molecule has efficacy and the level of that efficacy across a range of different populations even in a single dose is really immense.
We also have huge experience here and databases that we can relate to going back to our work with 994 and 925. So even in our Phase I -- Phase I, Phase II, Phase III nomenclature here also becomes a little bit blurred. And our goal with 861 is to go as rapidly as possible to bring this medicine as rapidly and safely as possible to patients. In our Phase I program, again, nomenclature being a little funny. We actually are enrolling patients with type 1 narcolepsy currently right now with a dose that we -- for 861 that we believe will have activity. We're also enrolling healthy volunteers who are sleep-deprived. And through those 2 assessments, we should be able to generate a range of information, understanding effects in type 1 narcolepsy, understanding the potential for effects in diseases of sleep-wake disorder that are characterized by normal orexin levels and also very importantly, understanding dose. With that information, we'll be making a go decision later this year to kind of a mid-stage study, whether that's a Phase IIa study or a Phase IIb dose-ranging study that can accelerate us rapidly until late development, we haven't fully decided. But our intent is to make rapid decisions and to really accelerate this program.
And Wakao-san, it's Costa here. I'll just answer the question on the gross margin and COGS for Q4. And this is largely impacted by the ENTYVIO shipment timing. There we had, unfortunately, some logistical challenges in the last few days. of Q4, which has now moved into Q1 of this fiscal year. We've already seen the rebound happening for ENTYVIO the month of April, and you can also refer to some third-party data sources, which also show strong end-market demand for ENTYVIO. So overall, it was just the timing of the logistic challenge, but we we're seeing that rebounding already in Q1. Thank you for your question.
[Interpreted] I'd like to ask a follow-up question, if I may. About the donor fee during the pandemic, it went up, but now it's moderating. But with the inflation, is there a concern that it may go up? And as for 861 Phase I, in your explanation, you mentioned that in the first half, you may see a recovery. But that data, I do not know if it's going to be Phase IIa, Phase IIb, but some kind of data will it be disclosed to us before you go into that stage, please?
So this is Giles. I can take the first part of that question. Absolutely, we did see increase in donor fees during the course of the pandemic. We're incredibly proud of the performance that Takeda has delivered across the value chain, as I said, through the expansion of our plasma sourcing footprint. Most importantly, the increase in operational efficiencies and how we've leveraged data and digital to improve the donor experience and to drive efficiency and productivity across the value chain that has enabled us to be in a position where in fiscal '21, our overall donation volumes were actually 3% above pre-pandemic levels and with the increased productivity from previously open centers increasing through fiscal '22. And with the addition of a further 25-plus new opening of centers in fiscal '22, we're confident to be able to sustain the growth. And with those increased volumes of plasma available we do expect donor fees to moderate during the course of '22, and we don't expect any further increase in donor fees.
And then Wakao-san, with respect to our disclosure intents around 861 data, our intent would not be to disclose our Phase I data before we move into our Phase IIa/IIb program. the exact timing of when and how we present and disclose data both to the scientific and to the investor community for 994, for which we have a very extensive chronic data set and 861 is something that we're still working through.
[Interpreted] Stacy from Cowen, please.
Hi, this is Stacy from Cowen. Can you guys hear me okay? Can you hear me?
Yes, we can hear you. Go ahead.
Okay. Perfect. Stacy Ku from Cowen. Congratulations on the progress. We have one follow-up and the second question. First for Giles. Regarding PDE guidance, beyond improving margins, what else is underpinning your expectations for growth what segments are expected to drive some contribution? Should we be thinking about subcutaneous adoption, which indications are you thinking might be driving growth more immunodeficiencies or the autoimmune space? That's the first question as we think about the underlying contributors to PDE guidance. The second question is another question on Orexin that go, no-go decision. To just follow up on all the questions that have been asked, to the extent that you can, just given the changing competitive landscape for orexin 2 agonist and narcolepsy and other sleep disorders, could 861 still be first mover in this space at this point? Any type of thoughts there would be appreciated.
Thank you very much for the question. I will take the first part on PDT. As I said, we -- and as Christophe and Costa outlined, we're in a strong position to maintain and accelerate our growth in fiscal '22. We see overall growth for PDT business unit. Our outlook is high single digits with between 10% to 20% growth, both on our immunoglobin and albumin portfolio. In immunoglobin portfolio, we expect to see a strong rebound in primary immunodeficiency segment on the back of increased diagnosis rates as we come out of the pandemic, and that has been an area that has impacted PID over the past 2 years and continued strong performance also in SID. And of course, with a positive outlook in the future with our CIDP R&D program moving forward and expected launch in fiscal '23 into CIDP.
And Stacy, it's Andy again. So with regard to your question, we have we are very confident in TAK 861. And as we continue to accrue more and more data and more and more information, our confidence level grows. At this point, there are still some unknowns that we're sorting through, including ultimately interactions with the regulatory agencies to understand what ultimately a pivotal program will look like, And we knew what that looked like for TAK-994, but obviously, with now the overhang of safety issues, we're going to have to go back and have those conversations again. But our expectation is that TAK 861 will be the first-in-class molecule in this field. And we're very cognizant of the competitive landscape, which is one of the reasons that we're trying to go as fast as we are. And it's also another reason why we're being very careful in terms of our data disclosures.
[Interpreted] Next is Mr. Sakai, Credit Suisse, please.
Sorry. Can you hear me now? I'll speak in English because my questions are very simple. First question for Giles-san. This is more like a semi-macro question for PDT, but U.S. Court of Appeals reversed decision on the Mexican border ban actually for the plasma donors. So the migrants coming from Mexican border with the U.S. for donation, that ban is going to be lifted. Or that's what I read from the article. And obviously, your competitors are collecting more plasma alongside with the Mexican border. So is that going to benefit your competitors? And what do you think about the landscape of the plasma collection going forward? So that's the first question. And second question for Costa san. Why your cash flow forecast FY 2022 is shrinking from FY '21? Given that your confidence and the outlook with efficiency, the cash flow must be improved. However, your cash flow is almost down by nearly 20%, 25%, if my math is right. So what's causing this cash flow shrink for FY '22?
Thank you for the question. I can take the first part. So yes, we have indeed heard the news on a positive ruling in regards to the Mexican border. I do believe there is one additional legislative step in there. But we view this, of course, as very positive for patients and the ability to improve the level of donations, which may ultimately have a positive fee on overall dynamics for both volumes of donation and fees.
We continue to focus on our transformation and growth, as I said, having opened 23 new centers in fiscal '21, over 25 centers expected to be opened in fiscal '22, continued operational improvements, leveraging data and digital to improve efficiency. And with the expected increase in plasma donation volumes between 10% to 20% as per the guidance we've given for fiscal '22, we're very confident on our ability to deliver on our revenue growth guidance and to meet the demands of patients both in the U.S. and around the world. Thank you for the question.
Thanks, Sakai-san. It's Costa here. I just want to highlight that the guidance for '22 is very similar to the original guidance we had for fiscal year 2021, in the same range. In 2021, we did have some onetime benefits, in particular, the accounts receivable initiatives that we were able to unlock working capital improvements. We also had less CapEx. If you go to Slide 60 in the appendix, you'll see that our CapEx cash flow base for fiscal year '21 was JPY 186 billion. It was -- it's much less than what we expect in fiscal year '22.
Main reason for that is there was in fiscal year '21, an underspend due to some R&D milestone payment delays, which we expect to incur in fiscal year 2022. And then in fiscal year 2022, we have a bigger envelope for business development types of initiatives to enhance our pipeline. So this is what really driving the fluctuations. But nevertheless, anywhere between JPY 600 billion to JPY 700 billion, it's a cash flow. When you -- strong free cash flow, in particular, also allows us to manage the debt profile and maturity, our dividends and interest payments comfortably. Thanks for your question.
Costa-san, thanks for clarifying me, but I was asking for free flow. You're saying JPY 600 billion, JPY 700 billion doesn't make much difference from the JPY 943.7 billion from previous year. Is that what you're saying?
Yes, because in 2021, we had some onetime benefits like the accounts receivable initiatives that we unlock the working capital. And then on top of that, you can see the CapEx in 2021, the CapEx was much less than what we're proposing in fiscal year 2022, mainly because of some R&D milestone payment delays from 2021 to 2022 and also the fact that we're increasing the envelope for certain BD development opportunities to enhance our pipeline.
Yes, I'm talking about free cash flow. So you unlocked cash flow, free cash for JPY 100 billion the last year. So that is that what you're saying? CapEx and the BDT is not inclusive in cash flow, free cash flow?
In free cash flow, it's included. It's included.
Okay. So that's -- that's the difference.
That's the difference, yes. Thank you.
[Interpreted] Next question, Mr. Yamaguchi from Citi, please. [Operator Instructions]
The first point on Page 9, you talk about core sales for fiscal year '22, but also '23. You're hinting '23 is going to be flattish compared to '22, which is -- might be a little bit higher than the consensus. And also you touched upon the earnings just a little bit saying that I just confirm you are saying that your earnings for '23 never going down below '21. Now compared to '22, the sales is flattish, but it's because costs may go up. So earnings might be a little bit weak, but you are saying that it shouldn't be lower than '21. That's what I'm trying to confirm. That's the first question. The second question is regarding 755. It's going to be a first Phase III readout coming soon. And this is one of the major I would say, a Wave 1 project with the potential market of, I think, USD 1 billion to USD 1.5 billion you talked about a few years ago. Is this still exactly what you think about as far as the market size is concerned? And how much this first indication may capture this potential of these peak sales?
Thank you, Yamaguchi-san. It's Christophe here. And I'll take the first question and I guess Ramona will take the second one on 755. On the first question, you're right. What we are seeing is that we expect to be flattish in 2023. In fact, that -- you do the math, you see our growth and launch products generate JPY 240 billion of incremental revenue in '21. That's accelerating in '22 because this group of products are growing faster and faster. So the absolute growth is growing faster. And you have a product like VYVANSE, which is [indiscernible], but will not lose everything in '23 because the generic is expected to enter in August '23. So you do -- I mean, we do much more precise forecast, but if you do the math you see that we believe that we can be flattish.
And it's true also that we are seeing that we expect our core operating it not to be lower than the '21 level. So just to indicate that while we are able to manage our revenue, we are also able to manage our bottom line.
Thank you. And it's Ramona here. I will take the second question on TAK -- sorry, I'll take the second question on TAK-755. So first of all, when we presented those R&D, I think it was called our R&D Day a few years ago, we talked about the peak revenue potential for 755 that was based on 3 indications. So congenital TTP, ITTP and then sickle cell disease as well. We're still continuing to progress work across all 3 of those indications. The first indication that's coming is cTTP, that's a congenital portion. That's actually the smallest one, but incredibly important and incredibly high unmet need. There is really nothing available for these patients. So we're -- we're very excited about this indication coming. It will be the first time we can get this ADAMS-13 replacement therapy into the market. And then we are continuing work on ITTP.
We're pleased with what we're seeing so far. That is a much larger indication and so we'll be reporting out on that in due course. Thank you.
[Interpreted] Due to the time constraints, I'd like to have the last question. From Daiwa Securities, Hashiguchi-san, please. I think Hashiguchi-san has taken down his hand. So Muraoka-san from Morgan Stanley, please.
Muraoka from Morgan Stanley. First question, and it's slide -- Page 27. For this fiscal year, as the assumption for the guidance, COVID-19 vaccine, 500 [indiscernible] Modena and Novavax put together and Novavax's assumption is 150 million doses and 20% of that will be supplied during this fiscal year. And is this -- is this a conservative number or upside potential being incorporated already? Or do you expect to see such a low demand for Novavax. So that's my first question. And the second question is -- for this fiscal year, core OP plus 15.2%, JPY 1.1 trillion.
Your performance is great. And the next year, the situation is not going to go any worse. And -- but you are going to maintain the dividend of JPY 180 and not increasing it. Why?
Thank you very much for your question, Iwasaki would like to answer your question.
So 20% of the Novavax supply, we are looking at this number from many different angles. So whether the actual supply will be higher or lower, we're not in a position to make such a comment. But in terms of the supply volume, this is to do with the government allocation of vaccine doses to different municipalities, and that determines our supply. So it's not as if it's up to us. So that's something I would like you to understand.
[Interpreted] So this is more or less a correct the number?
[Interpreted] yes, that's what we think.
Muraoka-san, it's Costa here. I'll address your second question about the potential increase in dividend is what I understood it to be. So I do just want to highlight the importance of our capital allocation policy. It hasn't changed. The strategy hasn't changed. Firstly, continuing to invest in our growth drivers, in particular, R&D, both in-house and partnerships, new product launches, investing in China and PDT. The deleverage rapidly is a very important theme for us. We've broken the 3x net debt-to-adjusted EBITDA ratio this year. In fiscal year '21. We're down 2.8x. We've committed to low 2x and we want to get there by fiscal year '23. So that's something that we are very much committed to.
And then we have the shareholder returns where we maintain the JPY 180 a share annually for dividend policy, but we also have the potential, as we did in fiscal year '21, potentially do share buybacks when appropriate. So at least for the short term, this doesn't change. This allocation, capital allocation, we're committed to being steadfast with our approach to capital. Thank you for your question.
[Interpreted] So instead of increasing the dividend, your priority may be on the share buyback. Is that right?
Again, we will prioritize based on the capital allocation theme. So -- of course, we'll look at share buybacks when appropriate. But of course, we'll also make sure that we don't underinvest in the business for growth, such as R&D and partnerships, new product launches, et cetera. So we'll consolidate see how we go throughout the course of the year. If there's opportunities, we may, if it's not in fiscal year '22, we can potentially do it in future years.
But it's part of our capital allocation policy. So there is a potential we may be able to do a share buyback. We just will continue to see how we go throughout the course of the year.
[Interpreted] With this, I would like to conclude the webinar today. If you have more questions, please contact IR team members and also our contact address information is available on the screen at the end. Thank you very much for your participation. We would like to ask for your continued support and cooperation. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]