Takeda Pharmaceutical Company Limited (4502.T) Q2 2026 Earnings Call Transcript

Christopher David O'Reilly: [Interpreted] Thank you very much for joining us today for Takeda's 2026 Q2 earnings announcement despite your busy schedules. My name is O'Reilly, Head of IR. I'll be serving as the MC today. Thank you for this opportunity. [Operator Instructions] Before starting, I would like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those discussed today. The factors that could cause our actual results to differ materially are discussed in our most recent Form 20-F and in our other SEC filings. Please also refer to the important notice on Page 2 of the presentation regarding forward-looking statements and our non-IFRS financial measures, which will also be discussed during this call. Definitions of our non-IFRS measures and reconciliations with the comparable IFRS financial measures are included in the appendix to that presentation. Now we would like to start today's presentation. We will hear from President and CEO, Julie Kim, Chief Financial Officer, Milano Furuta; and R&D President, Andy Plump. And this will be followed by a Q&A session. Now we'll get started. Julie, please go ahead.

Julie Kim: Thank you, Chris, and thank you all for joining us today for Takeda's second quarter earnings call for fiscal year 2026. Our goal is to deliver a meaningful impact for patients and lasting value for our shareholders. And in the first half of this fiscal year, I am proud of what we've accomplished towards achieving that. We'll continue delivering impact and value by leading in our therapeutic areas, building portfolio depth through science, innovation and speed from discovery to access. Our generational promise to boldly reinvent for a healthier world remains at the heart of everything we do. And I want to thank our colleagues as well as the patients, families and health care professionals who make this progress possible. Starting with Slide 5. Our fiscal 2026 first half results demonstrate strong execution across our priorities. Let me walk you through the numbers. In the first half, core revenue was just over JPY 2.4 trillion, a decrease of 1% at constant exchange rate or CER. This reflects the resilience of our core in-line brands and headwinds in our mature and off-patent portfolio that are not yet fully offset by our recent launches. Core operating profit was JPY 710.6 billion, an increase of 0.7% at CER. And core EPS was JPY 308, a decrease of 1.2% at CER. As we outlined in May, core operating profit reflects the investments we're making to support our new launches and our late-stage pipeline. And we're largely offsetting those investments with the savings our transformation program is delivering. Overall, our first half results demonstrate that we are on track against our FY 2026 priorities, and we will continue our disciplined execution to deliver on our revised full year forecast and management guidance. The right side of the slide highlights our pipeline and portfolio progress since last earnings. Our first priority in Horizon 1 is to execute successful new product launches. We are pleased that ORZEYFUL launched in Japan and China this month for the treatment of narcolepsy type 1, and we expect to launch in the U.S. in early November following the completion of DEA scheduling. We also launched MIMRYLO in the U.S. in August, a first-in-class new treatment for patients with polycythemia vera. In addition, we secured approval for ELAHERE, which we're commercializing only in Japan for folate receptor alpha-positive platinum-resistant recurrent ovarian cancer. We also made progress with regulatory submissions, reflecting our continued momentum to bring new medicines to patients. The FDA accepted our new drug application for zasocitinib in psoriasis under priority review and the EMA accepted our marketing authorization application. We also filed TAK-881, our 20% hyaluronidase facilitated subcutaneous immunoglobulin program in the U.S. for primary immunodeficiency. Our second priority this year is to advance our late-stage pipeline, where we have made significant progress across other late-stage programs. At the European Society for Medical Oncology Congress last week, we shared positive results from our Phase III study of TAK-921 in previously treated advanced gastric cancer. The study met its dual primary endpoints of overall survival and progression-free survival while demonstrating a manageable safety profile. These findings will support our planned regulatory filing in Japan, which we intend to submit during fiscal year 2027. In addition, we've initiated a Phase III study of elritercept in myelofibrosis. We also remain committed to supporting our core in-line brands, which continue to deliver value for patients and underpin our performance. To this end, we presented positive results from the VERDICT study, adding to the strong body of evidence for ENTYVIO in ulcerative colitis. The study generated compelling evidence that ENTYVIO can achieve deep remission and meaningfully reduce the risk of UC-related complications with sustained benefit over time. Andy will dive deeper into this ENTYVIO study and our pipeline developments later in the call. Lastly, our transformation is progressing well as we continue to strengthen our capabilities and drive efficiencies across the organization. As these initiatives gain traction, the realized savings are funding new launches and late-stage pipeline while protecting core operating profit. Beyond these financial benefits, our transformation is building the agility we need to support Takeda's next phase of growth. Milano will walk through our savings progress later and how we are reinvesting for accelerated growth. Let me now turn to ORZEYFUL and how excited we are about this new class of medicine. ORZEYFUL is a first-in-class oral orexin receptor 2 agonist for the treatment of narcolepsy type 1 or NT1. Unlike treatments that focus on individual symptoms, it is designed to address the underlying orexin deficiency. We believe it has the potential to redefine the standard of care by delivering transformative efficacy across a broad range of NT1 symptoms. NT1 diagnosis is a challenge. The diagnosis rate ranges from less than 10% in China to roughly 40% and 50% in Japan and the U.S., respectively. And in the U.S., more than half of patients diagnosed with NT1 continue to experience symptoms despite switching treatments or taking multiple medications. In all markets, we will first focus on individuals who have already been diagnosed. At the time of our last call, ORZEYFUL had just been approved in China. And since then, it has also been approved in the U.S. and Japan, all within about 1 month. ORZEYFUL launched simultaneously in Japan and China on October 15, and we're really excited about the potential to fundamentally change how NT1 is managed with great early response from both patients and HCPs. In the U.S., we've been preparing for launch for more than a year with our medical teams engaging sleep specialists and our specialty pharmacy network and patient support programs now in place. We expect to launch ORZEYFUL through specialty pharmacies as soon as DEA scheduling is complete, which we anticipate by early November. Finally, it makes me extremely proud to share that ORZEYFUL was recently selected as one of TIME Magazine's best inventions of 2026 in the scientific innovation category. Turning to the next slide. We're also thrilled about the early progress with MIMRYLO, an FDA-approved treatment for erythrocytosis in adults with polycythemia vera. MIMRYLO received FDA approval on August 28 and became commercially available very soon thereafter. This is a first-in-class hepcidin mimetic and is administered once weekly by subcutaneous injection. MIMRYLO provides rapid, stable and durable hematocrit control, the primary goal of PV treatment and has been shown to reduce the burden of phlebotomy and improve fatigue. The prescribing label allows physicians to use MIMRYLO at any point in the treatment paradigm with no box warning, giving us clear differentiation over other advanced therapies approved in this area. Also, it is the only PV treatment listed as a category 1 recommendation in the NCCN guidelines for both high- and low-risk patients. This medicine addresses a disease affecting approximately 90,000 people in the United States. We have been educating physicians about the burden of uncontrolled hematocrit and repeated phlebotomy and identifying patients who can benefit from a new treatment option. We are also leveraging our established hematology capabilities, payer relationships and patient support resources to support the launch and build momentum. At this early stage, we are focused on raising physician awareness and securing payer coverage so that appropriate patients can access MIMRYLO. Our goal is to build the foundation for both durable adoption and meaningful patient impact. If we go to Slide 8, we've talked about ORZEYFUL and MIMRYLO, so let me focus on our third transformative medicine that we expect approval for within this fiscal year, zasocitinib. The FDA has accepted our application under priority review and the EMA has also accepted our application. The clinical data for zasocitinib are compelling, including head-to-head Phase III results demonstrating superiority versus deucravacitinib in achieving clear skin. These results further strengthen our confidence in zasocitinib's potential to become a leading oral treatment for people with plaque psoriasis with rapid, durable and consistent skin clearance. Andy will walk you through details of the head-to-head data shortly. Our payer engagement and field team preparations are well underway. We are positioned for a potential U.S. launch following the FDA approval decision planned in the fourth quarter of fiscal year 2026. For each of these medicines, we are tailoring our launch approach to the market while applying the same proven fundamentals, engaging with physicians and payers establishing specialty pharmacy and patient support programs and preparing our field teams. With ORZEYFUL and MIMRYLO launches already underway, zasocitinib will build on that experience and the experience from across our portfolio. Today, we are in Horizon 1 of our 2 Horizon strategy, and our focus is clear: transform Takeda for growth. We are building the capabilities we need to lead and establish the foundation for accelerated growth. At the halfway point of this fiscal year, I am encouraged by the progress we have made against our priorities. Looking ahead, our focus remains on executing successful launches for medicines that are now reaching patients, advancing our late-stage pipeline with speed and quality, ensuring the resilience of our core in-line brands and executing transformation to position Takeda for sustainable, profitable growth. Each milestone we achieve builds our path towards Horizon 2, our growth acceleration phase. At our Capital Markets Day later this year, we will share more details on our progress and provide a lens into our longer-term growth strategy. With that, I will hand the call over to Milano.

Milano Furuta: Thank you, Julie, and hello, everyone. Let me walk you through our FY '26 first half results and updated full year outlook. Slide 11 summarizes our H1 results. Overall, I'm pleased to say that our financial performance is well on track with our expectations. We have positioned FY '26 as a year of investment. We are managing headwinds in our mature and off-patent portfolio while advancing our pipeline and launching new products that will be the drivers of future growth. Revenue in H1 was JPY 2.4 trillion, an increase of 8.4% at an actual FX rate or a decline of 1% at constant exchange rates or CER. Core operating profit was JPY 710.6 billion, up 11.2% at an actual exchange rate and 0.7% at CER. We are seeing the benefits of the transformation program we initiated this year with savings being reallocated towards investments in new product launches and R&D. Core EPS was JPY 308, a decline of 1.2% at CER. Meanwhile, reported EPS was JPY 193 with year-on-year growth of 169% at actual FX. This reflects an increase in reported operating profit due to lower amortization and impairment expenses as well as a very low tax rate in H1 this year, partially due to timing of legal entity restructuring, which will be normalized in H2. Operating cash flow was JPY 431.9 billion, and adjusted free cash flow was JPY 325.7 billion. This was lower than prior year due to reduction of our trade receivables factoring program as well as a payment to Protagonist related to their decision to opt out of MIMRYLO co-commercialization in the U.S. The transformation program started earlier this year, an initiative to strengthen Takeda's competitiveness and accelerate our future growth outlook. In the 6 months since we started the program, we have made progress across our transformation initiatives such as centralizing and streamlining corporate functions such as HR, finance and communications, reducing layers, particularly in the commercial organizations, bringing leaders closer to patients and customers, strengthening procurement excellence and simplifying processes with digital technologies and expanding our global capability centers. Related to the organization design, we have moved with speed to implement changes. As of September 30, approximately 3,000 impacted roles have been communicated. In procurement, to date, we have implemented initiatives resulting in approximately JPY 30 billion of annualized savings. This program remains on track to achieve JPY 100 billion of gross savings with JPY 160 billion of restructuring costs in FY '26, JPY 10 billion less than our original forecast. Over the next few slides, I'll explain more about our year-on-year performance. First, revenue. New launches, which are products that launched in the past 5 years, still represents only 4% of total revenue today, but are growing well at 17.3% at CER. We look forward to expanding this category significantly in the coming quarters as we launch and drive uptake of ORZEYFUL, MIMRYLO and zasocitinib. Core in-line brands, which includes large established products such as ENTYVIO, immunoglobulin and TAKHZYRO represented 58% of total revenue and grew 0.5% at CER. The growth of new launches and the core in-line brands partially offset headwinds from loss of exclusivity products such as VYVANSE and a mature portfolio such as hemophilia franchise, resulting in overall revenue decline of 1% at CER. On an actual FX basis, the depreciation of the yen had a positive impact of JPY 210 billion, resulting in reported revenue of JPY 2.407 trillion, up 8.4% versus prior year. Slide 14 shows the bridge in core operating profit. Overall, growth was 0.7% at CER with OpEx savings from our transformation program helping to fund increased investment behind our growth priorities, including launch preparation for ORZEYFUL, MIMRYLO and zasocitinib and the continued progression of our R&D pipeline. FX was also positive for core operating profit, pushing the growth to 11.2% at an actual exchange rate. Next, reported operating profit on Slide 15. The main items driving the 60.4% improvement versus prior year were lower amortization costs due to the conclusion of VYVANSE amortization in January 2026 and lower impairment of intangible assets compared to the prior year, mainly due to a charge in FY '25 related to discontinuation of our cell therapy efforts. Moving now to our updated outlook for full year FY '26. Starting with management guidance for CER growth, we maintain our revenue guidance of low single-digit percent decline. We have made some adjustments on a product-by-product basis, which you can confirm in our supplemental materials. This includes reducing our forecast for albumin to reflect ongoing market dynamics, while on the other hand, increasing VYVANSE and TRINTELLIX. We maintain our outlook for immunoglobulin with expectation of a growth rebound in second half, and we will continue to monitor competitive and pricing dynamics. We are raising our management guidance for core operating profit and core EPS to reflect transaction FX benefits. Outside of FX, the underlying business continues to perform very much in line with our initial expectations for the year. The bottom half of the slide shows our forecast on an absolute basis. We are raising our revenue forecast by JPY 60 billion and the core operating profit forecast by JPY 30 billion, also mainly due to a change in FX rate assumptions. The final slide in my section shows a bridge from our original operating profit forecast of JPY 1.16 trillion to the revised forecast of JPY 1.19 trillion. As explained on the previous slide, the main reason for the increase is FX. There is some movements by line item in our forecast as a savings target originally in the SG&A budget has been reallocated to opportunities we identified in R&D and cost of goods. Overall, the key message here is that our first half results are on track. We are tightly managing costs across the P&L while still making the necessary investments to drive future growth. Thank you for your attention. I will now hand over to Andy for pipeline highlights.

Andrew Plump: Thank you, Milano, and hello to everyone joining us on the call. Today, I would like to focus on 3 areas: emerging data for our flagship brand, ENTYVIO, that could change clinical practice, pipeline progress with an emphasis on our launch products and exciting new data for TAK-921. Together, these updates demonstrate progress against our Horizon 1 priorities, strengthening the resilience of our core in-line brands, delivering successful launches and advancing our pipeline. Treat-to-target strategies have improved outcomes across many chronic diseases by moving beyond symptom control towards deeper objective measures of disease control. VERDICT is the first and only prospective treat-to-target trial in both moderate and severe ulcerative colitis patients, evaluating whether treating to more stringent composite endpoints with gut-focused ENTYVIO can improve long-term outcomes. Patients received standard ENTYVIO induction and every 8-week maintenance with steroid tapering. Physicians had the option to escalate treatment every 4 weeks as needed to hit targets. The results demonstrate that treating to more stringent endpoints with ENTYVIO reduced the risk of UC-related complications by approximately 70% with this benefit extending up to 80 weeks after target achievement. ENTYVIO has been on the market for over 12 years with over 2 million patient years of therapy and a strong safety profile. It was thus not surprising that the safety was similar across the groups, even with the potential for more frequent dosing. VERDICT also provides compelling evidence that deep remission is achievable with ENTYVIO. More than half of the patients, 52.1% assigned to Group III, achieved the stringent disease clearance target. These findings reinforce an important shift in our ambition for UC, moving beyond symptom control towards disease clearance. By treating earlier and to more stringent targets with ENTYVIO, we have the potential to reduce future complications and change the trajectory of this progressive disease. These data were very well received at the United European Gastroenterology Week, or UEG, and provide important new evidence supporting the role of ENTYVIO in a treat-to-target approach. Let me now turn to our rapidly maturing pipeline that we believe can drive Takeda's next phase of growth. As Julie mentioned, we believe these 3 medicines will change the trajectory of Takeda's growth and importantly, make a meaningful difference for patients. ORZEYFUL is one of the most exciting stories in medical science today. The journey began with Emmanuel Mignot and Masashi Yanagisawa, whose identification of orexin deficiency as the root cause of narcolepsy earned them the 2026 Lasker Basic Medical Research Award. This summer, ORZEYFUL's Phase III data were published in the New England Journal of Medicine, the third time orexin biology has been highlighted there. More recently, as Julie shared, TIME Magazine named ORZEYFUL one of the "Best inventions of 2026." Narcolepsy type 1 is a lifelong disorder caused by the loss of orexin signaling, leading to disabling daytime and nighttime symptoms. We have presented groundbreaking Phase III results and continue to generate additional data across the broad disease spectrum, which includes daytime symptoms like excessive daytime sleepiness and cataplexy as well as nighttime symptoms, cognitive symptoms, functional improvements and quality of life. ORZEYFUL does more than manage symptoms. It addresses the underlying orexin deficiency in NT1. As a single, well-tolerated oral therapy, it could restore how a majority of NT1 patients feel and function. ORZEYFUL is now available in Japan and China. We anticipate a DEA scheduling decision in the coming days with the U.S. launch to begin immediately thereafter. MIMRYLO, our first-in-class hepcidin mimetic, represents a fundamentally different approach to managing polycythemia vera or PV. Rather than relying on repeated phlebotomy to remove excess red blood cells, MIMRYLO mimics the physiologic action of hepcidin, restricting iron availability for erythropoiesis and thereby controlling excessive red blood cell production. In clinical trials, MIMRYLO was able to provide rapid, stable and durable hematocrit control, reduce phlebotomy requirements and improve fatigue. Following its late August approval, MIMRYLO was rapidly incorporated into the NCCN guidelines in September as the only category 1 option for both low and high-risk PV. Category 1 is reserved for medicine supported by high-level Phase III evidence and uniform expert consensus. Encouraging early physician and patient feedback further reinforce the potential for MIMRYLO to change how PV is managed. Zasocitinib is our next-generation, highly selective oral TYK2 inhibitor, which has demonstrated rapid and durable skin clearance in a convenient once-daily pill. We have filed for approval in the U.S. and Europe. We also had new data presented at EADV that makes the profile even more compelling. The Phase III LATITUDE Atlas trial directly compares zasocitinib with deucravacitinib using PASI 100 as the primary endpoint. The key takeaway is straightforward. At week 16, 36.5% of patients treated with zasocitinib achieved complete skin clearance. This is the highest rate of skin clearance demonstrated by an oral therapy in psoriasis. For patients, complete clearance is the desired outcome. We also saw improvement in itch in zasocitinib beginning as early as week 2. Importantly, the safety profile was consistent with prior trials. Taken all together, these results reinforce our confidence in zasocitinib as a potentially important oral treatment for people living with psoriasis. We are looking forward to updating you on our regulatory progress in the U.S. and Europe. And later this fiscal year, we plan to share additional zasocitinib data, including robust 52-week durability data from our 3003 study. We continue to execute across our broad late-stage portfolio with many important Phase II and Phase III readouts ahead. Today, I'll focus on 2 programs that generate frequent questions, zasocitinib in ulcerative colitis and Crohn's disease, and TAK-360 in narcolepsy type 2 and idiopathic hypersomnia. While we had initially planned to disclose the zasocitinib UC and Crohn's results together, we've decided to share a directional summary of the UC data today. Our expectations have been somewhat more measured in UC given the mechanistic rationale, which we believe may be even stronger in Crohn's disease. Against that backdrop, we found the UC results encouraging. In brief, we've completed our zasocitinib Phase II ulcerative colitis study and are pleased with the clinical remission rate observed at week 12. We saw a strong separation from placebo and a nominally significant p-value at 1 of the 2 doses tested. Overall clinical remission results are on par with other investigational oral products in Phase II UC studies. Safety across all dose arms remain consistent with our experience in previous trials. While we have not observed a dose-dependent efficacy effect, this is not unusual in dose-ranging IBD studies, and we are actively evaluating potential factors that may have contributed to the dose response profile. Importantly, the full dose-ranging Crohn's disease study will provide additional data. We expect the Phase IIb Crohn's readout around the end of fiscal year 2026. We are planning for success, and our team is working on Phase III scenarios in both indications. And ultimately, our path forward will be based on the totality of evidence across the program. Next, the orexin franchise continues to advance well with ORZEYFUL approved in the United States, Japan and China for narcolepsy type 1. NT1 is the only orexin-deficient disease. In other more heterogeneous patient populations, we are working hard to untangle the biology and determine the right orexin profile for each central disorder of hypersomnolence and for the other potential indications. TAK-360 is being studied in orexin normal populations like NT2 and idiopathic hypersomnia, where we aim to address key symptoms and expect to have results in Q4 of fiscal year 2026. Now let me turn to oncology. Oncology continues to execute across its broad portfolio with the approval of MIMRYLO in the U.S. Elritercept has started Phase III trials in myelofibrosis and in first-line myelodysplastic syndrome and is enrolling well. TAK-921 had potentially practice-changing data in advanced gastric cancer, which we will review shortly. In PDT, we have completed a U.S. regulatory filing for TAK-881, our 20% next-generation facilitated subcutaneous IG for primary immune deficiency, and are on track to complete filings in multiple indications in Europe and Japan later this fiscal year. Let me close our pipeline review with the latest data for TAK-921. TAK-921 is our investigational Claudin 18.2 targeted antibody drug conjugate with an Fc-silenced backbone, delivering a potent exatecan topoisomerase I inhibitor payload to tumors. Last week at ESMO, we presented groundbreaking Phase III data for TAK-921 in advanced gastric cancer versus chemotherapy. The patients enrolled were refractory to at least 3 lines of therapy with 30% of patients on their fourth or fifth line, representing an area of true unmet need. In this very sick patient population, TAK-921 delivered an exceptional improvement in objective response rate, statistically significant progression-free survival that hit at the first interim analysis and statistically significant and clinically meaningful overall survival with a hazard ratio of 0.57. The safety also remained differentiated with limited severe gastrointestinal toxicities, including nausea and vomiting. Grade III or higher treatment-related adverse events, dose reductions and delays were less frequent than in the chemotherapy arm. We believe TAK-921's Fc-silenced design provides a competitive advantage in gastrointestinal tolerability relative to other Claudin 18.2 targeted therapies. This profile may make it more suitable for combination with current and future standards of care in first-line gastric and pancreatic cancer. We plan on filing for approval in Japan for previously treated advanced gastric cancer in fiscal year 2027. Proof-of-concept studies are ongoing globally for first-line gastric and pancreatic cancer with readouts expected over the next 18 months. Let me conclude by repeating that this is the best pipeline Takeda has had in the modern era. I have never been more confident in the science, the team behind it or our ability to improve our patients' lives and build a healthier world for generations. We look forward to sharing our continued progress with you. Thank you. And with that, I'll now turn it back to Julie for closing remarks. Julie?

Julie Kim: Thank you, Andy. As you've heard today, we are making steady progress across all 4 of our Horizon 1 priorities. We are building new growth drivers through the ongoing and upcoming launches of 3 new medicines for ORZEYFUL, MIMRYLO, and zasocitinib. Our late-stage pipeline continues to move through key inflection points, including positive overall survival and progression-free survival data for TAK-921 and the start of a Phase III study for elritercept. Our core in-line brands such as ENTYVIO, continue to be resilient and performed broadly in line with our expectations. And our transformation is delivering. It is unlocking new capabilities and generating savings that we are reinvesting in our launches and pipeline. Taken together, this progress gives us confidence in our trajectory. Each milestone strengthens the foundation for Horizon 2 and brings us closer to sustainable, profitable growth and greater impact for patients. With that, I'll turn the call over to Chris for questions.

Christopher David O'Reilly: [Interpreted] Now we would like to start receiving questions. We have Julie, Furuta and Andy and also Rhonda Pacheco, President, U.S. Business Unit, Teresa Bitetti, President, Oncology Business Unit; and Ramy Riad, President, Plasma-Derived Therapies Business Unit as well. [Operator Instructions] The floor is now open. First question from Yamaguchi-san from Citi.

Hidemaru Yamaguchi: I have 2 questions. The first question is regarding MIMRYLO. The product looks pretty good, but you hinted that it takes some time to get the reimbursement treatment. But can you give me some early launch sort of impressions, number-wise or some other key success factor-wise? That's the first question. And the second questions is that thank you very much for sharing the UC, the top-line data of zaso. And the information you gave me are still a little bit confusing to me, especially the dose dependency issue. And I understand it didn't happen on IBD in the past, but can you clarify out of 2 doses, which has a good data and which one didn't? And what do you need to understand further to decide whether you can go to the Phase III or not because a dose dependency issue, a bit of a question from the investment community at the moment.

Christopher David O'Reilly: Thank you, Yamaguchi-san, for your questions. So the first question on MIMRYLO launch uptake and reimbursement. So our President of Oncology, Teresa Bitetti, can answer that question. And your second question on the UC top line announcement and what we would need to see for a Phase III decision. Andy Plump can comment on that one, please. Teresa?

Teresa Bitetti: This is Teresa. Thank you so much for that question. We're very excited around how the launch is going. I'll remind you that MIMRYLO was the first time in over 10 years that we have had a new mechanism in this marketplace that truly addresses the gold standard of treatment for PV, which is keeping that hematocrit level consistently, durably and rapidly below the 45% range. And as we move into this market, we know that 78% of the patients remain above at various points in time, the 45% mark. And if you're above 45%, you're at a 4x higher risk of death or a cardiovascular event. So we have found the reception. It is early days in the launch. We were approved at the end of August. The reception from the HCP market and from patients has been very excited, very positive. The execution of the launch is going very well. It is early days, so we don't have quantitative measures to share, but I can tell you from what I'm hearing on the ground that there is enthusiasm across the board and things are proceeding exactly as we planned with a real focus on education, awareness as well as ensuring access. So thank you for the question.

Andrew Plump: Yes, Yamaguchi-san, this is Andy, and thank you very much for the question. We are, of course, expecting questions on the UC zaso disclosure. So you may recall that we had originally disclosed that we would share data together for UC and Crohn's. So we decided to pivot and there are a couple of reasons behind the pivot. One is that there's going to be about a 6- to 7-month delay between the UC data and the Crohn's disease data. So that's a bit longer than what we had hoped for. The second is that the UC data were actually more encouraging in many ways than what we had expected. As we've discussed previously, we're quite excited about the broad profile of zasocitinib. We think that this is truly a best-in-class TYK2 inhibitor. We do -- the mechanism in ulcerative colitis has carried a little bit of baggage historically because there's been 2 failed trials in UC. And mechanistically, the rationale points to, we think, a greater likelihood of success in Crohn's disease -- so we put all that together, our initial plan was to disclose the 2 data sets as one. When we saw the UC data set, we were quite pleased with the efficacy at the middle dose. And as I mentioned in the presentation, directionally, the efficacy is on par with what's been seen with other oral agents in ulcerative colitis. And importantly, at both doses, the safety profile was very consistent with the safety profile that we've seen at the 30-milligram dose in psoriasis. The study is a complex study, though, because we don't see a dose response. So we see a robust efficacy at the 50-milligram dose with a strong nominal p-value, but we're not seeing that with the 75-milligram dose. And as I mentioned, it's not uncommon in IBD to see, especially in smaller Phase IIb studies, a lack of a dose response. We're working hard to understand this mechanistically. And in the end, we'll look forward to seeing the Crohn's data and putting those 2 data sets together to make a decision on whether and how we move forward with Phase III.

Hidemaru Yamaguchi: Just a little bit of update. You're happy with the 50 milligram, but the 50 milligram, 75 milligram didn't show. So is it fair to say you can go ahead with the 50 milligram or you need a more dose dependency analysis even further?

Andrew Plump: Well, I think that the data as -- the data stands suggests that we have a path forward in IBD. But before we make that decision and before we decide what Phase III will look like, we really want to look at the Crohn's disease data and the 2 data sets together. There's also, I'll say -- and many of you may have seen this from the United European Gastroenterology Week, there's a huge push towards combination therapies, particularly with parenterally administered agents. But I think that's going to happen more and more with oral agents. And we think given the nature of zasocitinib and the early data that we've seen in UC, we'll wait for Crohn's disease. We think that not only could this be effective as a monotherapy, but this could be a cornerstone of combination therapies potentially in the future.

Christopher David O'Reilly: [Interpreted] Thank you. Next. Morgan Stanley, Muraoka-san.

Shinichiro Muraoka: [Interpreted] Muraoka from Morgan Stanley. My first question is about that UC topic. And in your presentation deck, clinical remission rate compared to other investigational oral drugs, it was comparable. That's 30% and 20% at the doses of 400 milligrams and at 200 milligrams, respectively. And that number was not obtained, but you saw the dose dependency. Is that right understanding? And next question is about NT2. I think the way that you disclosed the data, did you say January through March, it will be press released first and then it will be presented at the medical scientific convention. Is it what you are planning? These are 2 questions.

Christopher David O'Reilly: So the first, if we could provide any more insight on to the comment around the zasocitinib UC data being on par with other orals in this space? And then the second question on TAK-360. We commented data expected in January to March 2027. What would be the plan in terms of disclosing the top line, whether a press release and/or Congress presentation. So Andy Plump to take both of those questions, please.

Andrew Plump: Thank you, Muraoka-san. So again, on the zaso UC Phase II data, we see a strong nominal p-value at the 50-milligram dose. We see a robust effect size on our primary endpoint clinical remission. We see consistent effects on our secondary endpoints, including objective endoscopic endpoints. And directionally, these are on par with what's been seen with other oral agents. At this point, we don't have additional details to share. When we get the Crohn's disease data, which we anticipate at the end of this fiscal year, we'll have a chance to evaluate those data together and share them as a complete data set. With regards to TAK-360, 2 ongoing studies in IH and in type 2 narcolepsy. As we've discussed previously, the design of these studies is adaptive that allows us within the study to rapidly shift from different doses and different dosing administration strategies, which we think is critical to understanding how you thread the needle with dosing in these populations given the potential for efficacy and for some of the tolerability issues. The data from those studies will be presented later in the -- we will have the data from those studies later in the fiscal year. How and where exactly we share those data will depend on what those data look like and strategically how we'd like to disclose. We don't have a precise plan at this point.

Christopher David O'Reilly: Up next, I'd like to call on Stephen Barker from Jefferies.

Stephen Barker: Steve Barker from Jefferies. Two questions again about zaso in UC and MIMRYLO. So regarding zaso in UC, can you clarify if it was the high dose or the low dose, which showed indications of efficacy? And then regarding MIMRYLO, can you give us some indication of what the percentage of covered lives is right now? And how long -- what's the path to broader coverage, please?

Christopher David O'Reilly: Thanks, Steve. So again, a question on zaso UC for Andy on the dosing clarification and then MIMRYLO on reimbursement to Teresa again, please?

Andrew Plump: Stephen, we saw the robust effect with the strong nominal p-value at the 50-milligram dose, and we didn't see that effect at the 75-milligram dose.

Stephen Barker: So as a follow-up, considering that the higher dose didn't reach significance, is there any reason to think that the low dose result is meaningful rather than just by chance?

Andrew Plump: Well, of course, that's always a concern when you see a study with a lack of a dose responsiveness. There are a few pieces that make us feel that this is a robust result. The first is the magnitude of the result. And again, we're not going to share numbers, but we've said that directionally, it's on par with what's been seen with other agents. This was a well-powered Phase IIb study with approximately 210 patients enrolled over the 3 arms. The second is we see consistency of data across both the clinical endpoints and the objective endoscopic endpoints. And then third, we see -- we have some mechanistic rationale that we're building that might explain why a TYK2 inhibition at higher doses may actually -- one may lose some of the anti-inflammatory and gain some pro-inflammatory effects at higher doses. So we're going to try to put all of that together. But of course, in the end, the Crohn's disease study will be, we think, definitive in terms of understanding the robustness of the UC data and what that path forward will look like.

Teresa Bitetti: This is Teresa. Thank you for the question around MIMRYLO. I'll remind you, it's still early days. So the data is coming in. What I can tell you is that given the fact that this is the first time in 10 years that we really have an agent that is consistently addressing the gold standard of treatment, which is maintaining the hematocrit below 45%. We've also seen sort of that reflected in the fact that we have NCCN Category 1 for both low risk and high risk. So that bodes very well as we move forward in our access discussions. As you would typically see, we expect Medicare to come on first, followed more by the commercial. But what I can tell you right now is that we see scripts that are going through the system with prior auth, and we're feeling very good about the early conversations that we're having with payers who are clearly recognizing the value that we're bringing to patients with this medicine. And of course, that's reflected in the NCCN category 1 listing. So thank you for the question.

Stephen Barker: Just a follow-up. Can you comment on the mix between low-risk phlebotomy patients and those that the high-risk patients already on therapy?

Teresa Bitetti: Your high-risk patients are defined by patients that have had 65 years and older or have had one thrombotic event. So I mean, I would say that given that it tends to be a larger population, you probably skew a little bit more towards the high risk. But I mean, I would say rather evenly distributed.

Christopher David O'Reilly: [Interpreted] Thank you. Next question, Nomura Securities, Matsubara-san.

Matsubara: [Interpreted] This is Matsubara. My first question is about zaso UC. So dose dependency is still being analyzed in detail. But how does it compare against ENTYVIO? And in terms of safety, is there any problem, for example, TB? For ORZEYFUL, diagnosis rate and the treatment rate improvement, how is it working? So sales started in Japan and China. Do you have any feedback through the education of the physicians in the United States? How is the initial action?

Christopher David O'Reilly: Any further commentary you can give on efficacy, for example, compared to ENTYVIO or anything in the safety profile worth noting? So Andy can comment on that one. And then the second question on prelaunch activities for ORZEYFUL in the U.S. Any initial feedback from health care practitioners, et cetera? Any detail as we prepare to get the launch underway shortly in the U.S., Rhonda Pacheco to answer that one, please?

Andrew Plump: Well, Matsubara-san, thank you very much. So again, the efficacy at the 50-milligram dose looks robust and directionally on par with what we've seen for -- in UC for other oral agents. And unlike in areas like psoriasis, the parenteral agents are typically on par as well. So I would say directionally, and again, we'll have a chance early next year to share these data with you on par with what's been seen with other agents. I think we were particularly pleased to see that at both the 50-milligram and the 75-milligram dose, the safety profile for zasocitinib was very consistent with what we had seen previously in our psoriasis and psoriatic arthritis studies at the 30-milligram dose.

Rhonda Pacheco: Great. I'll jump in here. This is Rhonda. Thank you for the question. I'll start with launch preparation in the United States. We are ready. We are ready across the field, the access and patient support. We have all commercial and medical teams in the field, and we're focused on 3 things. First is education. We're building that awareness of the NT1 true burden and the role of orexin in NT1 patients for patients and HCPs, making significant investments in supporting disease awareness and education. We initiated the non-branded disease awareness campaign in the U.S., and we have reached thousands of HCPs across individual meetings, congress participation and supported educational programs. The feedback has been overwhelmingly positive, and they are ready and excited for ORZEYFUL launch. The second that we're focused -- the second topic that we're focusing on is access and patient support. Our payers have been engaged pre-approval to support broad formulary coverage. Our specialty pharmacy distribution is ready, and our patient support program is prepared and committed to helping patients gain access to medication at launch. This is an area where we bring real experience because of our rare disease portfolio. Lastly is diagnosis, which we know is important for this launch, improving the accurate and early diagnosis of NT1, we have been leveraging data, digital and technology that aim to accelerate accurate diagnosis and improve the patient journey. For example, we're pursuing digital and fluid biomarker tools to support diagnosing the NT1 from other sleep-wake disorders. And lastly, partnerships like with EnsoData on developing and validating AI-based PSG algorithms to improve the detection and diagnosis of NT1 during routine sleep lab studies. Lastly, in bottom line, we are ready. We're building that awareness to activation, which means making sure HCPs and patients are aware of our ORZEYFUL through all competitive channels, and we're meeting our customers where they are through direct-to-consumer initiatives. Thank you for the question.

Julie Kim: And Matsubara-san, this is Julie. Let me just add a quick comment about Japan and China. So as I shared during the presentation, we launched in both countries on October 15. So it's only been 2 weeks, but we've -- we're very pleased with the initial response. And in terms of targeting, we are also in both Japan and China, targeting patients who have already been diagnosed and are on treatment first, and then we'll have to work on the diagnosis.

Christopher David O'Reilly: [Interpreted] Thank you, Matsubara-san for the question. Okay. Moving on to the next question in the line. So I'd like to call on Mike Nedelcovych from TD Cowen.

Michael Nedelcovych: I have some clarifying questions on zasocitinib in Crohn's and then a question on TAK-360. So in Crohn's, can you remind us why there is greater confidence for zasocitinib relative to ulcerative colitis? And depending on those Phase II data, is it possible you would pursue pivotal trials for zasocitinib only in Crohn's and not in ulcerative colitis? And then just to clarify, what is the reason for the delay that emerged between the 2 Phase II readouts? So those are my zasocitinib questions. And then on TAK-360, Management had previously articulated some good reasons why marketing 2 different products for NT1 and NT2 made commercial sense. But of course, you've now initiated a Phase II trial of TAK-360 in both NT1 and NT2. So my question is, why did you change course on that front? It seems to me one possibility is that the company wants to put its best foot forward in all indications and likes what it sees so far from TAK-360. Could that have been part of the reasoning?

Christopher David O'Reilly: [Interpreted] Thank you, Mike, for the questions on zaso and CD rationale and then on TAK-360, NT1 and NT2 studies. So Andy, if you could answer those ones, please.

Andrew Plump: Sure. Thank you very much, Mike. So firstly, why do we -- why mechanistically do we believe that there's a greater likelihood for benefits in Crohn's for a TYK2 inhibitor such as zasocitinib in UC? There are 2 lines of evidence. The first is that agents that signal through TYK2. When you look at medicines that block those agents, they tend to have stronger effects in Crohn's than in UC. And then secondly, when we look at the human genetics, which has been a guidepost for us these years, patients that have heterozygous loss of function in their TYK2 gene are protected from Crohn's, but not from ulcerative colitis. Patients have to have homozygous deficiencies in TYK2 to be protected for ulcerative colitis. So those would be the 2 reasons we think Crohn's has a stronger rationale. And then the second, you asked about the timing of the 2 trials. There are really 2 reasons that create the separation. The first and most importantly is the Crohn's study is a larger study. The UC study has 3 dose arms and the Crohn's study has 4 dose arms. The second reason is that right now, Crohn's is an incredibly competitive space to enroll trials in. And to be very frank, we've been working with a disadvantage given the experience of investigators with prior TYK2 inhibitors. As we've said all along, zasocitinib is truly a best-in-class molecule. And we think that now the UC data confirm that, and we'll really look forward to seeing the Crohn's disease data. We'll think, Mike, that having some positive halo behind a TYK2 inhibitor in IBD will help us to really accelerate that Crohn's trial as well. For 360, I wouldn't look too deeply into our decision to run an NT1 study. It's a relatively small proof-of-concept study. We're just, I mean, as you know, we've talked about this many times, we are incredibly enthusiastic about ORZEYFUL and the ORZEYFUL profile, truly believe that it's not just a first-in-class, but it's a best-in-class agent. We're running the Phase II study for 360 in NT1 really just to keep our options open.

Christopher David O'Reilly: Thank you, Mike. Moving to the next question. I'd like to call upon Tony Ren from Macquarie.

Tony Ren: Tony Ren from Macquarie. Can you guys hear me?

Christopher David O'Reilly: Yes, Tony, we hear you.

Tony Ren: Yes. Okay. Perfect. My first question is on your Claudin 18.2 data presented at ESMO. And then I'll also ask about ORZEYFUL's launch pricing and the strategy. So first, Claudin 18.2. So at ESMO, right, your AstraZeneca presented some data at the -- with their competing Claudin 18.2 at the Presidential Symposium. I think it's probably fair to say that it is generally considered practice changing based on the feedback that I've gathered at the conference. It appears to be slightly ahead of you guys in regulatory time line. They are in the second-line plus setting with a Claudin 18.2 cutoff of 25%. How do you expect to differentiate? Would you say that in a disease setting where the median overall survival is about 10 to 11 months, safety alone may not be a good enough selling point? That's my first question. And the second one is that you launched ORZEYFUL in both Japan and China. Could you comment on the launch pricing? We recently saw several large European pharmaceutical companies saying that they will carefully consider their ex-U.S. launches because of MFN. And you guys are obviously thinking about this quite differently. So could you explain that as well?

Christopher David O'Reilly: [Interpreted] Okay. Thank you, Tony, for your questions. So the first on our recently announced data for TAK-921 and how we may differentiate versus other Claudin 18.2 ADCs. So Andy can take that question. And then the second question on ORZEYFUL pricing ex-U.S. in the markets where we've already launched. Julie can take that question.

Andrew Plump: Thank you, Chris. And then I'll also ask if Teresa may want to add to the 921 discussion. But Tony, thank you very much. We're, I mean, incredibly excited by the data that we presented for 921 at ESMO. And we think that it has -- when you look at all the endpoints, OS, highly significant effects in PFS and overall response rate as well as safety and tolerability, we think that this is a best-in-class profile. Remember that this is an extremely refractory third line plus population. In fact, 30% of the patients enrolled in this study were fourth line or fifth line. So this is really a very high unmet medical need, very sick patient population. And to see overall survival rates of over 10 months median is really just extraordinary. Remember that this is an Asian study that was enrolled in China and Japan and will be filed and eventually launched in those 2 countries. We don't have the intent of bringing the program into highly refractory settings in U.S. and Europe. Our goal is to rapidly move towards a first-line study, and we're evaluating a number of different combinations with established standards of care chemotherapy regimens as well as now KRAS agents. So we think that this data sets us up extremely well to be highly competitive in the first-line setting.

Teresa Bitetti: Yes. And Andy, if I could just add on to that, Tony, thanks for the question. We're actually feeling very confident because when you look at our data, indeed, the safety was something outstanding and very reflective of the mechanism that we have with Fc-silenced linker as well as the fact that we have a TOPO1 payload, which is very strong, very low on the GI tox. So we do stand out there. But the efficacy, when you look at what we delivered in what was a very sick patient population, we're feeling very confident in terms of our ability to compete on both efficacy and safety, and we're looking forward to moving at speed to get TAK-921 into frontline studies. So thank you for that question.

Julie Kim: And Tony, I'll take your question about pricing for ORZEYFUL in both Japan and China. So for China, let me clarify that for NRDL reimbursement, there's only one opportunity per year to submit for NRDL reimbursement, and we received approval for ORZEYFUL after that date. So right now, we are selling via the private market. And so we do not have the NRDL listing yet. So we will be submitting that next summer, and then we should have NRDL listing, hopefully, in January of '28. For Japan, we have received pricing in Japan, as you may be aware, and the equivalent in U.S. dollars is roughly about $100,000 on an annualized basis.

Christopher David O'Reilly: [Interpreted] Next question from Wakao-san, JPMorgan.

Seiji Wakao: [Interpreted] This is Wakao from JPMorgan. First, about zaso IBD in our Capital Markets Day. I understand you show our true colors in December at Capital Market Day. Is there a Phase III development strategy for zaso in IBD has not yet been finalized until the Capital Markets Day. How will you reflect that opportunity and its uncertainty in the outlook? Also given the encouraging efficacy signal at the 50-milligram UC, is it fair to say that we should not be overly pessimistic about the lack of dose response? And second about product performance. Could you provide some more color on the second quarter performance and second half outlook for ENTYVIO and PDT? ENTYVIO delivered strong result in second quarter. What were the key driver of this performance? And do you expect this positive momentum to continue into the second half, giving you confidence in achieving your revised full year guidance? In PDT world, second quarter was weak. What were the main reason for the weakness? What is your outlook for the second half? And how confident are you in achieving your full year guidance?

Christopher David O'Reilly: [Interpreted] Thank you, Wakao-san. So the first question around whether we'll have any further updates on zasocitinib in IBD by Capital Markets Day in December. And again, a question around how we should think about the lack of dose response. So Andy, call on you again for that question. Next, a couple of product-specific questions on sort of Q2 performance and rest of the year outlook. So first one, ENTYVIO. Perhaps Rhonda can take that one to talk a little bit about the U.S. performance. And then on our IBD portfolio, Ramy can comment on that one, please.

Andrew Plump: Great. Great. Thank you very much, Wakao-san. And if you could see me, I have a big, big smile because we knew that there would be a lot of questions on the UC zaso data. So maybe if I may, let me dial up for a second and just paint the picture for zasocitinib. So this is a best-in-class TYK2. It's a once-daily conveniently administered oral agent. We've just filed for psoriasis with really truly best-in-class data. We've just completed a head-to-head study against deucravacitinib that shows the strongest PASI 100 data in psoriasis that any agent has ever seen. We are incredibly excited to get this launched in psoriasis. Next year, we'll have Phase III data in psoriatic arthritis. Our Phase IIb results that we presented last year are very compelling. We have 4 Phase II studies. The UC is the first to read out. We'll have Crohn's reading out at the end of the fiscal year. And then next year, we'll see data from HS and very excitingly, vitiligo, and both of those studies are enrolling extremely well. We are very enthusiastic about the potential for zasocitinib. Now drilling down on UC and what we'll present at Capital Markets Day. We will not share the UC data at Capital Markets Day. As I mentioned, our intent would be to share the UC and Crohn's disease data sets together, and we'll see those data towards the end of this fiscal year. We're sharing the data today because we were encouraged, to be frank, by the data. It's a complex data set. Any time you have a lack of dose response and a stronger effect in a middle dose versus a higher dose, it creates some complexity. But given the robustness of those data directionally in line with what other agents have seen, other oral agents and even many parenterally administered agents and the robustness of the nominal p-value, we felt it was important to get those data out there. We think that this will change the mindset around TYK2 and IBD. And in the end, we'll look forward to seeing the Crohn's disease data to see what that overall data set will look like.

Rhonda Pacheco: Thank you for the ENTYVIO question. A couple of points on ENTYVIO performance. ENTYVIO is performing in line with our expectations, and we remain on track against the plan we laid out for 2026. That is driven by sustained demand growth and a favorable comparison to a softer Q4 fiscal year '25. ENTYVIO is in its 13th year on the market and continues to deliver sustained growth. As you see in Q2, global growth was 2.7% at constant exchange rates. The brand is growing with the market in first line, which is where our strategy is, supported by our continued uptake of the pen formulation across different regions. Specifically in the U.S., again, in line with our expectations with overall demand continuing to grow. So in summary and to conclude, we remain confident in our ENTYVIO's guidance for 2026. Thank you for the question.

Ramy Riad: So thank you for the PDT question. So I will start with IG first for Q2 IG. Overall, we have a very solid underlying demand that continued to grow by mid-single digits. For the H1 results, it's in line with our expectation. SCIG continued to grow by double-digit growth at 17% growth, supported by our broad differentiated portfolio. For IV, we declined versus the last year first half as a result of the phasing as well as market and price dynamics. H2, we expect the SCIG, the subcutaneous IG to sustain its strong growth. IVIG growth, we expect it to accelerate, driven by the momentum of the large contracts in the U.S. specifically. And this time, we are continuing to monitor the market because we are in a supply-demand dynamic change emerging. However, we are also balancing our short-term growth of profitability and margin expansion with revenue growth. For albumin to continue the PDT portfolio, albumin for PDT continue to be a very important product for our portfolio. For the first half of the year, it's impacted by phasing in U.S. specifically and stronger-than-expected cost containment measures in China. China remains our largest market for albumin and the underlying demand remains very positive and strong. We expect China to return to growth in the near term as cost containment policies settle and demand rebounds. At the same time, we are diversifying the growth by building sustainable markets ex-China, securing tenders outside China, where we started to already deliver in and it's contributing to our performance side. Thank you.

Julie Kim: Thanks, Ramy, and thank you, everyone, for your questions. Apologies, we ran a few minutes over, but hopefully, you've seen that we've made notable progress in the first half of the fiscal year. And our focus now is on continued disciplined execution, bringing these medicines to patients, supporting access and driving adoption. At the same time, our transformation is strengthening the capabilities and agility we need to lead in every therapeutic area where we operate and sustain long-term growth. We look forward to connecting today's progress with our longer-term ambition at our Capital Markets Day on December 11, where we will share more details on our growth strategy and how we will build sustainable leadership in our core therapeutic areas. Thank you, and have a good rest of your day or evening. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]