Takeda Pharmaceutical Company - Earnings Call - Q2 2021

Transcript

Operator (participant)

Good day, everyone, and welcome to the conference call of Takeda Pharmaceutical Company Limited. During the opening remarks from the company, all the telephone lines are placed for listening mode only. We will then hold a question-and-answer session. Now we start the conference. Mr. O'Reilly, please go ahead.

Christopher O'Reilly (Head of Investor Relations)

Hello, good evening, everyone. Thank you very much for joining this conference call to discuss the fiscal 2020 second quarter financial results of Takeda Pharmaceutical Company. My name is Christopher O'Reilly, Global Head of Investor Relations. Before starting, I'd like to remind everyone that we will 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 our other SEC filings. Please also refer to the important notice on page one of the earnings presentation.

Now, please let me introduce to you today's presenters and panel: Christophe Weber, President and CEO, Costa Saroukos, Chief Financial Officer, Andy Plump, President of R&D, Ramona Sequeira, President of the U.S. Business Unit and Global Portfolio Commercialization, and Julie Kim, President of the Plasma-Derived Therapies Business Unit. After opening remarks from management, we will open the lines for Q&A. You can ask your questions through the call, or you could also email them to the IR team at [email protected] or to any member of the Takeda Investor Relations team. Thank you, and let's get started. Christophe, over to you.

Christophe Weber (CEO)

Thank you, Chris. Hello, everyone. A pleasure to have this interaction with you this evening, Japan time. I'll make a few remarks. We won't redo the presentation. First, about the COVID-19 crisis, I believe that we are managing the situation well within Takeda. We kept our employees safe. We moved to remote way of working very early on for our office-based employees. It has led, actually, to a clear strategy to move towards a hybrid model of working post-COVID. So Takeda will embrace a model of in-person and virtual way of working in the future, and we are actively working on that. At the same time, we kept our manufacturing operation going, and so we have not experienced any supply disruption because of COVID-19. Our R&D activities have been slowed down in some cases, but we do see a recovery of our clinical development at the present time.

We are very active in the fight against COVID-19. We are active in the vaccines area. We are developing a hyperimmune globulin product, and we are also testing some in-line products, Firazyr and Takhzyro, to assess whether they can have an activity against COVID-19. So that's the first point I wanted to highlight. The second is our financial results. They are good. They allow us to confirm our full-year management guidance, which in the current context, we believe, is a great achievement. We are, in fact, raising our forecast for cash flow and reported EPS. Costa, just after me, will summarize rapidly this financial performance for the first semester and the outlook for the year, and then we are preparing the future. We are developing our pipeline. We are more and more excited by our pipeline. We are planning to file seven new molecular entities in the next 12 months.

We have 12 new products in the next five years. The quality of this pipeline is more and more clear, and we are looking forward to a meeting in December with you to go further into the detail of this pipeline to really understand better the value of this pipeline, which is progressing, and it's very exciting. And we did add one molecule to this pipeline recently with TAK-999, and we will be very happy to answer questions about this pipeline. I will not go more into detail at this stage, and I will let Costa develop our financial results. Thank you.

Costa Saroukos (CFO)

Thank you, Christophe. And hello, everyone. This is Costa Saroukos speaking. I'd like to provide a quick summary on the key financial highlights for the first half of fiscal year 2020. Firstly, as Christophe mentioned, the Takeda portfolio has been quite resilient in the first half of the year, and that's despite the challenges faced due to COVID-19. Our underlying revenue grew at 0.5%. It's driven by our growth in our 14 global brands, growing at just over 15%. Our underlying core operating profit margin was 31.6%. It benefited from continued synergy and OpEx efficiencies, and reported operating profit was up 98%, reflecting lower acquisition-related costs. Our operating cash flow grew by approximately 15% versus prior year, and the free cash flow was approximately $4 billion.

Based on this resilient performance, again, just confirming that we are delivering our full year, we will deliver our full-year management guidance for fiscal year 2020, and furthermore, we're increasing our reported operating profit and reported EPS forecast. In addition, we will also upgrade our free cash flow outlook to reflect the positive impact of additional non-core asset sales. And finally, in the first half of the year, we continue to make great progress towards our midterm financial commitments, including exceeding our ¥10 billion non-core asset divestiture targets. We also remain solidly on track to reach our target of mid-30s margin and our two times net debt to adjusted EBITDA ratio within the fiscal year 2021 to 2023. So with that said, I'd like to open it up to the floor for Q&A. Thank you.

Christopher O'Reilly (Head of Investor Relations)

Thank you, Operator. If you could open up the line for calls, please, for questions.

Operator (participant)

You are now in a Q&A session. Press zero one to join the queue to ask a question. Press zero two to cancel your request at any time during the session.

Our operator is checking the name of the question applicant and the company name now. Hold on, please. Our check will end soon. Hold on, please. The first question is from Mr. Stephen Barker from Jefferies. Please go ahead.

Stephen Barker (Equity Analyst)

Hello, it's Stephen Barker here from Jefferies. Thank you for taking my question. I have two questions. Firstly, I wanted to ask about your three-month results. Compared to consensus figures that you've compiled from nine brokers, the actual revenues and actual OT was a little bit lower than consensus estimates. Obviously, you can't control what brokers are forecasting, and you may not know why the analysts as a group got it wrong. But if you do have a view on why the brokers as a group overestimated your second quarter sales and OP, I would appreciate any insights that you have. Second question is related to Xiidra. On slide 36, you have said that the divestiture of Xiidra could generate cash of up to $5.3 billion. However, Novartis appears to have given up on E.U. approval of Xiidra, and I'm therefore wondering if the $5.3 billion is still realistic.

Thank you.

Christophe Weber (CEO)

Thank you, Stephen. Costa, can you take the question?

Costa Saroukos (CFO)

Sure. Thanks for the question, Stephen. So when we compared the results versus the consensus, the big gap was that the analysts did not capture the FX impact. And as you know, and you saw in the reports, we were impacted from the first half of the year by 3.1 percentage points on just FX. So it's been a heavy headwind towards our results on a reported basis. The other point I do want to say from an underlying standpoint, however, we're growing for the first half of the year at 0.5%. We're confident we'll deliver the management guidance of low single-digit growth. And the reason behind that is we had some softness in the actual quarter two because of predominantly some supply phasing. So there were shipment delays specifically in the hematology franchise.

We had some shipment delays for Firazyr in the emerging markets area, and also, we highlighted that in PDT, you see our quarter two results were negative 0.4%. Our quarter one was plus 19%, and that's just a delay in the shipment for albumin towards shipment for China. So we're still very confident that our PDT franchise will be growing for the full year in double digits between 10% and 20%. It's just a phasing. So I'd like you to just really focus on the year-to-date because in our portfolio, there will be certainly some phasing challenges quarter by quarter. Now, with Xiidra, you mentioned in our divestiture slide, I think it's number if you go to slide number 36, we say Xiidra up to $5.3 billion. The deal's been closed. $1.9 billion is milestones. $1.9 billion is milestones.

Sure, we don't expect, and we haven't expected that the full $1.9 billion in our internal modeling. We've been quite conservative, but nevertheless, even with that conservative approach, conservatism on the upfront, sorry, the milestones of $1.9 billion, we still exceed the $10 billion target, and we'll still drive towards our financial commitments, in particular the net debt to adjusted EBITDA ratio of 2x within fiscal year 2021 to 2023. Thank you, Stephen.

Stephen Barker (Equity Analyst)

Thank you.

Christopher O'Reilly (Head of Investor Relations)

Thank you. Next question, please.

Operator (participant)

The next question is from Ms. Stacy Ku from Cowen. Ku, please go ahead.

Stacy Ku (Biotechnology Equity Research Analyst)

Hi, all. Stacy Ku from Cowen. Thanks so much for taking my questions, and congratulations on the progress. I have a few for the immunology franchise and a pipeline question. So first, given the potential COVID-19 impact on immunoglobulin collections, wondering if at this point there is enough clarity in whether we would see the shortage sometime in next year, 2021, or if we still have enough collections or finished supplies to still potentially smooth things over. In addition, wondering if you could provide your updated thoughts on the competitive landscape for immunoglobulin therapies with the potential approval of an FcRn in myasthenia gravis next year and a much smaller indication for IG use versus the potential hypersialylated IVIG seems to be now a much later date threat. So just wondering how you think this might all play out.

Finally, for the SARS-CoV-2 hyperimmune program, could you speak more about the dosing of the single infusion? Do you believe the optimal dosing has been met, and when would you expect the next disclosed update? And finally, on the pipeline question for the orexin program, will we still have a preliminary disclosure later this fiscal year in narcolepsy, and can we speak more to the potential additional CNS indications for TAK-994 and TAK-861? Thanks.

Christophe Weber (CEO)

Thank you, Stacy. Julie and Andy.

Julie Kim (President of the Plasma-Derived Therapies Business Uni)

Thanks, Christophe. And thanks for the question, Stacy. I think I've gotten them all here, but if I've forgotten something, please remind me. So first, in terms of the plasma collections and the overall supply impact to immunoglobulins, let me give you a number of points. So first, we are in a much better inventory position now than we were 12-18 months ago. And so when you do take into consideration future impact on supply, as you indicated in your question, we are looking at plasma collections in addition to work in progress inventory and finished goods inventory. So it's all components that we are looking at together. At this point, in terms of collections, we did see a significant improvement in our Q2 collections over Q1.

However, as I'm sure you're aware, and we are all watching very closely, the European cases have been increasing dramatically over the past month or so. The U.S. still doesn't have cases under control, and so we are closely monitoring the progression of the pandemic, especially as we go into flu season in the U.S., where it is uncertain what impact that might also have on the progression of the pandemic, so while I would say we had a strong Q2 versus Q1 in terms of collections, overall, the pandemic still remains a concern. We continue to pull all of the levers that we have available to us in terms of efficiencies, whether that's in the collection process or on the manufacturing side or in our marketing, to maximize our ability to collect plasma to support the supply for our patients.

For a more forward-looking outlook on IGs, we can't provide that at this point, but we are on track to deliver our FY 2020. As you heard Costa mention for the IG portfolio, we are on track to deliver between 10%-20% growth this year, and we will continue to manage as best we can to provide continued supply for our patients going into 2021. Your second question in terms of an update on the competitive landscape, there hasn't been any new data that has been released in regards to the anti-FcRns or hypersialylated other than the acquisition by J&J. So at this point, we wouldn't have a revised outlook in terms of the impact of these potential disruptive technologies on our IG portfolio.

And then in terms of the dosing for the hyperimmune in the ITAC trial, so you all would have seen by now that the trial has finally started. First patients have been dosed. And in the trial, if you go to clinicaltrials.gov, you will see the entire protocol, but we are using a 400 mg per kg dose. It's a one-time dose. And this is what the trial is being done in conjunction with NIAID, the National Institute for Allergy and Infectious Diseases under the NIH. And this was the dose that they determined to be the appropriate dose for the clinical study. So I think I got all three of them, but if I forgot something, Stacy, please ask again.

Stacy Ku (Biotechnology Equity Research Analyst)

No, that was covered well. Thank you.

Christophe Weber (CEO)

Julie, perhaps can you elaborate a little bit on the IG demand that we see and the dynamic between the demand and the competitive pressure with the fact that, with what we know today, we don't believe that the IG demand will continue to grow the overall market?

Julie Kim (President of the Plasma-Derived Therapies Business Uni)

Sure, Christophe. So when we look at IG demand going forward over the mid to long term, we still do see a significant runway for growth despite the entrance of the potential disruptive products. So as you pointed out, Stacy, the initial indication for the anti-FcRn products are in myasthenia gravis, which is a very small indication for IG utilization overall. The second indication that's being pursued is ITP. So those are the first two that will come to market and will likely help to establish a safety profile, etc. But again, relatively small in terms of overall IG usage. The big one is CIDP. And here the challenge is that for CIDP, the patient population is very heterogeneous. And so unlike myasthenia gravis and ITP, where there's a relatively clear mechanism of action and expected impact for patients, for CIDP, it's not as straightforward.

There will likely be a continued use of multiple therapeutic options to maintain CIDP patients and their treatment. We see a continued place for IG therapy as it relates to anti-FcRns in CIDP. Part of what we are doing at the moment is to help further the understanding behind why immunoglobulins work so well in CIDP, as well as focusing on securing the indication for HyQvia, which is our facilitated subcutaneous product, which is differentiated vis-à-vis other immunoglobulins on the market. In addition, when you look at areas that cannot be impacted by the anti-FcRn, so primary and secondary immunodeficiencies, these are areas that have still relatively high growth, primary immune deficiencies being driven by the fact that there's still high levels of underdiagnosis and optimal treatment is not achieved across all geographies.

For secondary immune deficiencies, it's primarily being driven by the growth in advancements of oncology care, which often has as a side effect the need for immunoglobulin therapy to support those patients, so when you take all of that into consideration, this is why we still believe that there is a long runway for growth for the IG portfolio.

Stacy Ku (Biotechnology Equity Research Analyst)

Thank you.

Andy Plump (President of R&D)

Hi, Stacy. It's Andy, Andy Plump. On your second question regarding orexin, let me step back and update you more broadly on where that franchise stands. So we continue to generate more data with TAK-925. We presented earlier data that was released at a European Sleep Research Conference last year. I would encourage you to get that poster. The reference is on the slide deck. We presented seven-day repeat dosing with the IV infusion, and we continue to see profound efficacy on the 40-minute maintenance of wakefulness tests, which you know is a pivotal endpoint. We didn't present today, but at the meeting in September, we did that. At the 44-mg dose, we see complete correction of the Epworth Sleepiness Scale Index, not just bringing patients into what's a normal range, but no evidence of sleepiness, complete functional correction.

And then for the first time, we've generated signals on cataplexy. And in that seven-day study, we didn't see any cataplexic episodes in patients that were treated with 925. We also continue to use it as a probe molecule to expand proof of concept. We now have proof of concept in Type 1 narcolepsy, which is the only condition that's due to a deficiency of orexin. And then we're now accumulating evidence for efficacy in orexin conditions, which are characterized by normal orexin levels or slightly depleted levels. Those include Type 2 narcolepsy and shift work disorder or sleep-deprived healthy individuals. In both cases, we see profound efficacy. We're running now a study in idiopathic hypersomnia. We'll have data soon, and we've completed a study in obstructive sleep apnea, and we'll be presenting those data shortly.

We also have found a path forward for TAK-925 in an indication where an IV infusion is appropriate to the population, and we'll be discussing that over the coming months in the beginning of proof of concept study. For TAK-994, we have two ongoing studies. The more critical of the two is the phase two study in Type 1 and Type 2 narcolepsy patients. It's both a proof of concept study and a dose ranging study. And so there are regulatory implications to this study. And so we're very careful in terms of how and when we will disclose data from this study, and we're still trying to figure out the best way to do that, but also maintain the integrity of the data for future submissions.

I will say that given the profound efficacy that we see with these molecules, it's very hard to stay blinded at a site level because these patients are essentially functionally cured for a disease where symptoms are quite dramatic. The second study is a study that we'll read out in the early 4Q 2020 time point, and that's a sleep-deprived healthy volunteer study. In terms of our focus, our focus is really hyper like a laser on type 1 narcolepsy because the dosing is likely to be different in type 1 narcolepsy versus some of these other conditions. That's our primary focus right now. It's also, of all the indications that we're immediately thinking about, by far the largest and with the greatest unmet medical need.

We are, in parallel, working towards an indication expansion program that would include all of the rare diseases that I just mentioned and possibly some of the more common diseases. In terms of disclosure, what I can say is that we're not going to be disclosing anything substantive at the December R&D day. We're going to focus on other programs, but we are intending to come with an iteration on these R&D days and have another one sometime in the first half of calendar year 2021. And at that event, we do intend to provide an extensive update on this overall program. We're still tracking, by the way, towards our filing date and launch date of 2024, which means a pivotal start in the 2021, 2022 time frame.

Stacy Ku (Biotechnology Equity Research Analyst)

Thank you so much.

Christopher O'Reilly (Head of Investor Relations)

Thank you. Next question, please.

Operator (participant)

The next question is from Mr. James Gordon from JPMorgan. Please go ahead.

James Gordon (Equity Analyst)

Hi, everyone. Good evening. Good morning. Thanks for taking the questions, James Gordon, JPMorgan. A couple of rare disease or plasma questions, please. One was just on plasma collections, following up on the previous question. Are you able to quantify actually how much plasma collections were down during the quarter and what the exit rate was? And then what was the trend you were seeing? Or what trend are you seeing right now? That was the first question, please. Second question was immunoglobulin performance. And I know you had a tougher year-on-year comparator, but sequentially sales are down about 9% as well. Was that to do with demand? Or is it at all to do with supply? Or is it just U.S. sort of phasing? And if it's just phasing, should we expect to have a rebound back up again in Q3 so Q3 could sort of overshoot?

And then third and final question to Arrowhead and the RNAi therapy, which looks interesting. So clearly you've got economics on the Arrowhead product, which was promising. But presumably part of the appeal would be you try and get people to use your plasma-derived products as well, so to treat both the liver and the lung symptoms. How will you go about doing that? As in, could someone say, "Well, we'll just use the Arrowhead product, but use it with the market-leading plasma-derived product"? Or is there a way you can ensure that someone uses the Arrowhead product with your plasma products?

Christophe Weber (CEO)

Thank you, James. Julie, can you take the plasma collection? And then Andy, the third question?

Julie Kim (President of the Plasma-Derived Therapies Business Uni)

Yes, thanks, Christophe. Thanks for the question, James. In terms of the collections, while we're not providing specific data points, in Q1, we did see a decline as the entire industry. For Q2, as I mentioned earlier, we did see a very strong recovery in our collections in Q2. The difficult part is that the coming months are going to be very unpredictable, and it's difficult to say at this point whether the recovery would continue, whether it will flatten off, whether we'll see another dip because the trajectory of the pandemic is quite high, but yet deaths are lower. So, in states thus far haven't put in place the same type of shelter-in-place orders. We've not seen shelter-in-place orders come into effect in Europe, although further restrictions are being put in place. So it's very unpredictable.

And so it's hard for me to give you an indication of what the coming months is going to look like in terms of plasma collections. I will reiterate that we are continuing to closely monitor and leverage all of the parameters that we have available to us to make sure that we are maximizing our ability to collect plasma. In terms of the IG quarter growth numbers, we do need to take a look back at FY 2019. We had a phasing issue to the U.S., our largest market, in 2019. And so in Q1, we had an artificially low quarter, and Q2 of 2019 was artificially high because of this phasing issue, which resulted in a very high Q1 for us this year and a low Q2. But if you look at the first half results, you'll see that for the IG portfolio, we have 14% growth.

I would encourage you to think about the 14% versus the individual Q1 and Q2 growth numbers. We are still on track to deliver the full year of IG growth between 10% and 20%. James, on your question with respect to the Arrowhead program and our Aralast and Glassia PDT fractions, they're very complementary, and they treat different aspects of the disease. The most common form of alpha-1 antitrypsin disease is a mutant protein called the Z protein, the PIZZ protein. That protein, when it's made, aggregates in the liver, and some of it gets secreted into the plasma. The aggregates in the liver are toxic and cause end-stage liver disease in a fraction of the alpha-1 antitrypsin patients. The secreted protein is active and prevents lung disease. In the Arrowhead program, we're knocking that message down. So we're knocking down that protein.

So that does two things. One is it reduces the buildup of that toxic aggregate, so it will protect the liver. But inadvertently, it also reduces the amount of circulating enzyme, and so it has the potential to exacerbate lung disease. So you can imagine the potential for additive effects between both the siRNA and the replacement protein, one to treat liver disease and one to then subsequently treat the potential increased incidence of lung disease.

James Gordon (Equity Analyst)

Okay. I think you can still just to clarify this. So my question wasn't whether the two approaches would be complementary. I think they clearly could be very complementary because one would work for the liver and one would work for the lung. But my question was, how do you ensure that a prescriber would use both approaches coming from Takeda rather than use the Arrowhead product with someone else's plasma-derived product?

Costa Saroukos (CFO)

Christophe, do you want to try to take that?

Christophe Weber (CEO)

Yeah, I can comment, and Ramona can jump in as well. First, I mean, when you have complementary products like that, depending on where you operate, in which country you operate, you can sometimes contract with payers to optimize their healthcare cost. Sometimes you cannot. You certainly can always co-position the two products, so you have some synergies in terms of promotional expense synergies. So I think it opens a lot of opportunities to really try to synergize this type of product. But also, our philosophy is very innovation-based. We are focusing by therapy area. This new product is completely placed in the GI space, which we know perfectly because that's one of the four areas that we are focusing on. Our philosophy is that if we don't do this innovation, someone else will do it anyway. So we are better positioned to do it ourselves.

And so we are very excited about this new product. Perhaps, Ramona, you want to add anything?

Ramona Sequeira (President of the U.S. Business Unit and Global Portfolio Commercialization)

Christophe, I think you just answered it perfectly. Nothing to add.

Thank you.

Christophe Weber (CEO)

Okay. Thank you, James, so next caller, please.

Operator (participant)

The next question is from Mr. Yamaguchi from Citigroup. Please go ahead.

Hidemaru Yamaguchi (Managing Director)

Hello? Can you hear me?

Costa Saroukos (CFO)

Yes, we hear you loud and clear.

Hidemaru Yamaguchi (Managing Director)

Great. Great. Thank you. So Yamaguchi from Citi, two questions. The first one, you mentioned a little bit on the Japan call about the Hikari factories warning letter situations. But I wasn't quite sure about the timing because you mentioned it takes around 12 months from last, I think, October-November. So the timing-wise, that issue will be resolved pretty soon. So I understand it's very difficult to talk about the regulatory issue, but can you add some comments about your confidence, which you showed three months ago about the resolution of those warning letters by the end of this year? That's the first question. The second question is that the COVID-19, you started dosing, but I think it's 500 cases or patients. And you are thinking about the filing by the end of this year or within this fiscal year anyway. So I found it very quick.

Can you let me know what kind of schedule you're talking about? You have to finish 500 within these several months, or you can file without finishing up the dosing? Can you talk about the filing timing of COVID projects? Thank you.

Christophe Weber (CEO)

Sure. Thank you very much, Yamaguchi. I answered the first question, and Julie's the second one. On Hikari, what I mentioned earlier is that we will be inspection-ready by the end of this year. It means that we'll have executed the remediation necessary, and inspection-ready means that if the inspection is positive, and if we are ready, we expect that it is positive, it could change the status of the site, meaning that the status will not be under the current status, which led to this warning letter. So we are on track. As we mentioned earlier, we are on track, and we'll be inspection-ready by the end of this year.

Hidemaru Yamaguchi (Managing Director)

Okay. Thank you.

Julie Kim (President of the Plasma-Derived Therapies Business Uni)

And in terms of your question on COVID, Yamaguchi, so it is 500 patients that we need to enroll in the trial, 250 on placebo, 250 on treatment. So we would not be able to file before the end of the calendar year, but we do hope to be able to file before the end of the fiscal year. What Christophe was mentioning on the call earlier was that we hope to have top-line data to share. So that will come before we file. And that's what he was referring to.

Hidemaru Yamaguchi (Managing Director)

Okay. But you're confident about the dosing of 500 within six months or so?

Julie Kim (President of the Plasma-Derived Therapies Business Uni)

As I was mentioning earlier, given the significant increase in cases that we're seeing in the U.S. and Europe, it shouldn't be too challenging. Of course, we are not running the trial. It is being run by NIAID, so that is under their control. 500 is a relatively small number given the caseloads that we see in the U.S. and Europe. The primary endpoint is at seven days. Secondary endpoints are at 28 days.

Hidemaru Yamaguchi (Managing Director)

Thank you.

Christophe Weber (CEO)

Thank you.

Christopher O'Reilly (Head of Investor Relations)

Okay. Thank you, Yamaguchi. I just want to take a question from the email now. So could Andy please comment a couple of questions on TAK-007, the CAR-NK program? So first of all, comments on responses and safety profile seen in DLBCL with current formulation for fresh cord blood-derived NK cells? And when will we see a presentation at a medical conference? And then the second question, how does the cryopreserved formulation differ from the current formulation? And can we infer efficacy for the cryopreserved formulation based on what we've seen with the current fresh cord blood formulation?

Andy Plump (President of R&D)

Thank you, Chris. And thanks for the question. As I mentioned at the earnings announcement, we've been continuing to dose patients only at the MD Anderson Cancer Center. We had expectations for enrolling an aggressive number of patients over the course of this year as we were collaborating to generate a cryopreserved formulation and to initiate a multi-site trial. We have continued to enroll some patients, but we've fallen well short of what our projections were. And that has a lot to do with the COVID pandemic disruptions. We did, as you'll remember, present. Katy Rezvani had a paper in the New England Journal of Medicine earlier in this calendar year that discussed extensively the safety and efficacy in the 11 patients that were first dosed. And in that cohort, it was a mixture of lymphoma patients, CD19-positive cancer patients that included some DLBCL patients as well.

When the remainder of those patients will be presented, I don't know what the answer to that question is. We can try to get that date for you. We at Takeda don't have any plans. We'd have to check with our partners at MD Anderson. In terms of the cryopreservation formula, it's something that we've been working very intensively on. It's a frozen and thawed cell, which is one that you can use for a supply chain that allows you to work off the shelf, is quite different than having a fresh supply. And the NK cells are notoriously difficult to freeze and thaw, which is why it's taken quite some time to develop that formulation and to establish the analytical assays that allow us to conclude, to the best of our knowledge, that a frozen and thawed cell is equivalent to a fresh cell. We think we have that.

We're continuing to optimize, but we think we have a formulation and a drug substance that will allow us to now proceed. We're in the process. We've had a good conversation with the FDA, and we're in the process of putting our IND together. We hope to submit that in the next couple of months and start enrolling a Takeda-sponsored multi-site study, a real true proof-of-concept study at the end of this fiscal year. The answer to your question is, how well does what we've seen predict the future, and I think the answer is we have high hopes and expectations that it will be predictive, but I think it's still an unknown that we have to test. The first unknown was, could we get the cryopreservation formula and come up with cells that seemed equivalent analytically? The answer to that is yes, unequivocally.

We now have a product that can be distributed off the shelf. The next question is whether in humans with cancer, whether we see the same response characteristics and safety characteristics, and that's to be tested. And then there's still a third question that we'll be testing in that next study, which is the amount of mismatch. So is it one cell that can treat everybody, or do we have to do some HLA matching? And that's something that we'll figure out over the course of the next 12-18 months.

Christopher O'Reilly (Head of Investor Relations)

Thank you, Andy. I'm going to take another question that's coming through email as well. So while not providing any formal guidance, could you discuss potential growth prospects for fiscal 2021? What are the early pushes and pulls for next fiscal year?

Costa Saroukos (CFO)

Christophe, do you want to take that?

Christophe Weber (CEO)

Yeah, sure. Thank you. Thank you for the question. So the initial pushes would be the 14 global brands' growth momentum. So as you saw already, we're growing our 14 global brands at 15%+. The annualized base of the 14 global brands is approximately $11 billion. So we expect that momentum to continue for fiscal year 2021. We also should start to see the impact of our first Wave 1 pipeline launches, such as TAK-721. And then the investment in China will start to accelerate on the new product launches, in particular products such as Entyvio and Takhzyro. So there's the summary of the pushes. On the pulls, obviously, the COVID uncertainty.

We need to keep monitoring the impact of COVID, the potential LOE of Velcade, and that's something that we'll hopefully, before earnings 2021 guidance, we will have much more clarity on, and the Dexilant LOE in summer of 2021. I think they're the key pulls. And then the one final comment, especially for the investors, sorry, the analysts in Japan that are looking at significantly reported on revenue, just to remember that the divestitures that we've already announced will have approximately $1.3 billion revenue impact for fiscal year 2021. So on a divestiture standpoint, that's something you need to consider. Thank you.

Thank you, Christophe. I would just add that we see more push than pull overall. The big uncertainty is really the COVID-19. And we are like everyone. Every week is a new week.

Christopher O'Reilly (Head of Investor Relations)

Great. Thanks, Christophe. I believe we have another caller on the line.

Operator (participant)

The next question is from Mr. Fumiyoshi Sakai from Credit Suisse. Please go ahead.

Fumiyoshi Sakai (Research Analyst)

Hi. Just one question. U.S. presidential election coming in six days. And well, it's everything up in the air, but just assuming, hypothetically, if Biden and Democrat win, he's talking about the universal insurance coverage and even reducing the age coverage of the Medicare, how this change would impact first U.S. industry, reinvestment pricing system? Not reinvestment, pricing impact the U.S. pharma and also particular business to Takeda. I know this is probably the question without answer, but as long as you could provide some color, I would really appreciate it. Thank you.

Christophe Weber (CEO)

Thank you, Sakai. Well, Ramona is very well positioned to answer that question. She's not only in charge of our U.S. business, our global portfolio commercialization, but she's very active with the Pharma Trade Association. Ramona?

Ramona Sequeira (President of the U.S. Business Unit and Global Portfolio Commercialization)

Yeah. Thank you. And you did acknowledge that you asked me a question that's also very difficult to answer at this time because there's so many different things up in the air right now. So assuming that in the election, the Biden administration wins, what's your question? I think we still have to know what happens with the Senate. And so that is still an outstanding question that we need to have answered. Generally, if you look at the Biden administration program, you're right. It is about providing care to more people through expanding Medicare to a lower age, etc., and kind of beefing up the Affordable Care Act.

I would say that in general, if you look at some of the policies you've seen, for instance, if there's something like inflation-based price increases in the U.S., it's very, very little impact on a company like Takeda because we tend to be pretty responsible with our price increase policy, so we don't see much impact. When you look at expansion of care, you tend to get a push and a pull between price and volume. So you'll get more accessible patients, but potentially some price dampening. And there are many different ways that could happen. It could happen through changing the way pharma pays for patients as they go through Medicare in the Donut Hole or in the catastrophic coverage stage.

I think there's really too many unanswered questions right now, but I would say all of these things are manageable for us to deal with and negotiate with the administration. Where we really want to focus our efforts is to avoid international price setting and international price referencing. That becomes difficult for us because it's just too difficult to compare the U.S. system where you have a big private payer environment to other healthcare systems. For instance, probably the worst policy that we've seen would be the Most Favored Nation policy that this current administration has put forward. But in general, that's where our focus will be: protect our ability to set our launch prices and work with any administration to continue to allow for increased coverage and increased care for patients and have some role for pharma to play in that too.

Really difficult to predict what the answers will be and what the actual impact will be at this time, but we're staying very close. Christophe, is that anything to add there?

Fumiyoshi Sakai (Research Analyst)

Great. Great. Thank you.

Christophe Weber (CEO)

Yes. Very clear. Thank you very much.

Christopher O'Reilly (Head of Investor Relations)

Okay. Thank you, Sakai-san. I've got a couple of email questions, but maybe we'll see if there's any other phone questions to come. Anyone else who wants to ask a question on the call?

Operator (participant)

If you have a question, please press 01.

Christopher O'Reilly (Head of Investor Relations)

Okay. While we're waiting for any additional callers, some next questions, some product-specific questions that we've received. So firstly, Ninlaro. So growth seems to have slowed down Q1 to Q2. What was the key driver of Ninlaro's slowdown, and do you expect a re-acceleration in the second half of the year? So first one is Ninlaro. Second, on Vyvanse. Looks like there was a recovery in Q2, but would a resurgence of COVID impact the outlook for the second half? And then the third product question is on Natpara. So what's the status there, and when might we expect a return to the U.S. market for Natpara? So Ninlaro, Vyvanse, Natpara, if we could get some updates on those, please.

Christophe Weber (CEO)

So I'll start with Ninlaro, and perhaps Ramona can cover the two others. I think first, I mean, I know it's hard, but don't look too much at quarterly results because there are a lot of movements between quarters. Overall, Ninlaro has benefited from the COVID-19 situation. Will it last? We don't know. It depends how the COVID-19 situation evolves, but it is a product which continues to grow. It's a product which is responding to a specific need from patients who are looking for efficacy but with convenience. And I think that it will continue to be this product in the future. As you know, we have reset our aspiration with Ninlaro because of the change in the market, but we still believe that this aspiration is the correct one.

Julie Kim (President of the Plasma-Derived Therapies Business Uni)

So, Chris, I can jump in on Vyvanse and Natpara. So Vyvanse, really, I think if you look at the first two quarters, we hit a little bit of the perfect storm with healthcare systems shutting down, patients not going in to see doctors, and schools shutting down as well. What we see in our underlying trends now as we head into the fall and are heading into the fall season is that those trends are starting to improve. So I think that the whole healthcare system has learned as outbreaks increase that completely shutting down isn't viable. And so we do see patients going back to see their doctor now. We see prescriptions starting to be initiated. And even with schools, we see more of those hybrid models coming into play.

And so we are seeing the underlying trend start to pick up now as we look at the fall for Vyvanse. Really, the uncertainty is how bad do hospitalization rates get? We see infection rates growing, but depending, state by state, that doesn't necessarily correlate with any spikes in hospitalization rates or death rates, certainly in the immediate aftermath of rates growing. So we're just keeping a close eye on that. But as I mentioned, the underlying trends are looking better from Q1, Q2, which was kind of the perfect storm of everything shutting down and then going into the summer holidays on top of that. So to be determined on Vyvanse, keeping close on that. On Natpara, we are working very closely with the FDA. We did say we don't expect this in FY 2020.

I would say we're not ready to update any guidance yet as to when we do expect it, but understand that you do want to know and are preparing for certainly before the end of this year to be able to be more clear on when we would expect Natpara back, but just no answers at this point. But continuing dialogue. Very, very close continuing dialogue.

Christopher O'Reilly (Head of Investor Relations)

Great. Thank you, Ramona. I think we have another caller on the line.

Operator (participant)

The next question is from Mr. Stephen Barker from Jefferies. Please go ahead.

Stephen Barker (Equity Analyst)

Thank you for taking my call. I wanted to ask about the divestiture of your OTC business in Japan. You have yet to include the profit impact of that deal into your full year estimates because of presumably lingering uncertainty about the prospects for the closure of that deal in the current fiscal year. What are the potential hiccups? Why aren't you more confident that this deal would be completed on schedule by the end of March?

Christopher O'Reilly (Head of Investor Relations)

Christophe?

Christophe Weber (CEO)

Thanks, Stephen, for the question. When we announced the divestiture, we said that we expect to close the deal by March 31st 2021. So at this stage, we're still heading towards that target, and we don't see any roadblocks. But having said that, if it slips one week or two, that's a difference between a $1.3 billion miss on our reported operating profit forecast, something that I don't want to put on the table right now. I'd rather wait until a few quarters. Maybe next quarter, we'll have greater visibility. But given the current situation with the COVID pandemic, there are delays in many business activities no matter where you look. And so right now, Stephen, we felt that we would flag that we're not including this closure, the financial impact for fiscal year 2021, but we have flagged the potential upside should we close.

That's an upside both on the reported operating profit by approximately $140 billion and gross proceeds on the free cash flow of approximately $230 billion. $230 billion, sorry. That's something that we will continue to monitor, but right now, we don't see there as being a slip. The magnitude of a one- or two-week delay causes a significant impact on the guidance. Hope you can appreciate that challenge. Thanks.

Stephen Barker (Equity Analyst)

Understood. Thank you.

Costa Saroukos (CFO)

Great. Thank you, Stephen. So I believe there's no more callers on the line, but we did have one further email question that links in a little bit to that previous question. So we'll ask this and then finish. So around the divestitures, obviously, very, very good progress has been made over the course of this year, and we've exceeded the $10 billion target. What's next beyond this in terms of potential asset sales? Will there be further divestitures beyond the $10 billion?

Christophe Weber (CEO)

Look, I think the divestiture, there are two main objectives with divestiture programs. One is to be more aligned with our strategy to focus on our five core businesses. So we are divesting non-core businesses to reduce our complexity, to improve our margin, to improve our growth moving forward because many businesses that we have divested are not growing or potentially declining businesses. So that's the first objective. And the second objective was, of course, to accelerate our deleveraging. So we have done the majority of the divestment. We might have a few more to come, but it's clearly marginal compared to what we have achieved so far.

Christopher O'Reilly (Head of Investor Relations)

Great. Thank you, Christophe. With that, that brings the call to an end. Thanks, everyone, for joining us today, and we look forward to further communication going forward. Thank you, and have a great day.

Costa Saroukos (CFO)

Thank you, everyone. Bye for now.

Christophe Weber (CEO)

Thank you, everyone.

Operator (participant)

Thank you for your time, and that concludes today's conference call. You may now disconnect your line.