Pessimism Overdone: Takeda Undervalued By 40% Under Modestly Enhanced Post-Deal Financial Assumption

Takeda Acquires Shire for US$64 Billion – We Continue Our Support of the Deal

Asia Healthcare Analyst, Pathology Associates Limited

Dion Stéfan Büchner M.D., FCAP

Asia Healthcare Analyst

Pathology Associates Limited

Equity Bottom-Up

<p><strong>Key highlights</strong></p><ul>
<li>Notwithstanding brisk contribution by the key growth drivers including Entyvio (+33% to ~¥129b), Ninlaro (+36% to ~¥30b), Takecab (+22% to ~¥27b) and Trintellix (+16% to ~¥27b), overall revenue stayed flat y-o-y to ~¥880b, primarily due to the negative impact from divestitures in FY17</li>
<li>However, favorable sales product mix drove gross margin improvement of ~130bps to 74%</li>
<li>Furthermore, decline in Core SG&amp;A (-4% to ~¥286b; excluding Shire integration related costs) and R&amp;D (+2.4% to ~¥151b) resulted in ~14% and 20% increase in Core EBIT (to ~¥212b) and Core EPS (~¥ 215 / share) respectively.</li>
<li>While the company essentialy maintained topline guidance, it revised Core EBIT ~+7% to ~¥330b primarily due to growth driver momentum.</li>
<li>On Shire, the company commented that the proposed acquisition is on track and that integration planning is well underway.</li>
</ul>

Key highlights
Notwithstanding brisk contribution by the key growth drivers including Entyvio (+33% to ~¥129b), Ninlaro (+36% to ~¥30b), Takecab (+22% to ~¥27b) and Trintellix (+16% to ~¥27b), overall revenue stayed flat y-o-y to ~¥880b, primarily due to the negative impact from divestitures in FY17
However, favorable sales product mix drove gross margin improvement of ~130bps to 74%
Furthermore, decline in Core SG&amp;A (-4% to ~¥286b; excluding Shire integration related costs) and R&amp;D (+2.4% to ~¥151b) resulted in ~14% and 20% increase in Core EBIT (to ~¥212b) and Core EPS (~¥ 215 / share) respectively.
While the company essentialy maintained topline guidance, it revised Core EBIT ~+7% to ~¥330b primarily due to growth driver momentum.
On Shire, the company commented that the proposed acquisition is on track and that integration planning is well underway.


Takeda 1H FY18 (YE Mar'19) Results - First Glance

Takeda Pharmaceutical

Takeda 1H FY18 (YE Mar'19) Results - First Glance