Takeda Pharmaceutical Co Ltd Q3 FY2023 Earnings Call

Thank you very much for joining us for Takeda's FY '23 Q3 Earnings Announcement. I'm the host today, I'm already Head of IR. First of all, I would like to explain about the language. Please find the language button at the bottom of the Zoom window. If you wish to listen in Japanese, please choose Japanese. If in English, please choose English. If you want to listen to the original language, please turn it off. Before starting, I'd 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 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 recommendations. Reconciliations with the comparable IFRS finance measures are included in the appendix to the presentation. Without further ado, we would like to start the presentation today. We have President and CEO, Christophe Weber; R&D President, Andy Plump; and the Chief Financial Officer, Costa Saroukos presenting today, followed by a Q&A session. Now let us begin. Christophe, please go ahead.

Thank you, Chris, and thank you, everyone, for joining our third quarter earnings call for fiscal year '23. Our vision at Takeda is to discover and deliver life-transforming treatments carried by our commitment to patients, our people, and the planet. This purpose-led approach is at the core of our strategy for sustained growth and long-term value creation for our stakeholders. Our performance in the third quarter of fiscal year '23 further demonstrates our progress in executing on that strategy as we look ahead to a return to top-line profit and margin growth. Our top line continued to be driven by the strong momentum of our growth launch product, which now represents 43% of total revenue and which grew at 2.7% year-to-date at constant exchange rate. In Q3 year-to-date, core revenue was JPY 3.2 trillion with flat growth at constant exchange rate compared with the same period in the previous year. And this is despite significant loss of exclusivity impact, primarily from VYVANSE in the U.S. and AZILVA in Japan. On an actual exchange rate basis, revenue grew 4.6%. Core operating profit was JPY 865.6 billion with a decline of 12.7% at constant exchange rate, reflecting the loss of exclusivity on high-margin products as well as our investment in R&D and data and technology to secure long-term competitiveness. At actual exchange rate, our core operating profit declined by 9.3%. Despite this, we remain on track to exceed JPY 1 trillion core operating profit for the full year. On a reported basis, operating profit and EPS were impacted by noncore items, including the impairment of intangible assets, which were mostly booked in the second quarter. As you know, we provide full year management guidance for core growth at constant exchange rate, and I am pleased to report that our year-to-date core performance continued to be in line with expectations, keeping us well on track to our management guidance for the year. On the next slide, we are confident in our R&D strategy, and we continue to advance highly innovative, life-transforming medicines for patients affected by rare or more prevalent disease in our core therapy areas. Our pipeline delivered well in the third quarter with 2 new molecules approved in the United States, FRUZAQLA for previously treated metastatic colorectal cancer and ADZYNMA for an ultra-rare blood clotting disorder called congenital thrombocytopenic purpura, or cTTP. FRUZAQLA, which we acquired through an exclusive license agreement, is the first and only targeted therapy approved for metastatic colorectal cancer regardless of biomarker status in more than a decade. In fact, the unmet need is so significant that FRUZAQLA was available within 24 hours following FDA approval with the first prescription received the day after approval. I want to acknowledge here the work of our oncology team in preparing for the launch and giving these patients hope. Regarding ADZYNMA, this is the first and only therapy of its kind for the treatment of cTTP, and its approval and launch are a significant milestone for this rare disease community, which we are proud to continue focusing on. Since Q2, we have also made strong progress in our existing portfolio with important life cycle management approvals for our growth and launch product. The livtencity is now approved in China for refractory post-transplant CMV. Patients in China now have access to this therapy that can enable sustainable effective treatment against post-transplant cytomegalovirus infection, which could save an organ or a life that might otherwise be lost. In November, the European Union approved takhzyro for pediatric patients with hereditary angioedema. It is the first and only long-term proprietary treatment for this rare disease available in the EU for patients under the age of 6. And in January, we had some fantastic progress in our plasma-derived therapy portfolio with 3 approvals for our immunoglobulin portfolio for chronic inflammatory demyelinating polyradiculoneuropathy or CIDP, a rare disorder affecting the peripheral nervous system. HYQVIA, the only facilitated subcutaneous IG, was approved by both the U.S. FDA and the European Commission for maintenance treatment of CIDP and Gammagard Liquid was approved by the FDA for the IV treatment of CIDP. We are also expanding our late-stage pipeline through targeted business development. Just a few hours ago, we announced a collaboration and license agreement with Protagonist Therapeutics for the development and commercialization of rusfertide, an investigational therapy in rare hematology. Rusfertide is currently in Phase III development for polycythemia vera, a rare chronic blood disorder. This agreement fits well within our overall business strategy, leveraging our rare disease and hemophilia franchise. Turning to the next slide, I'd like to provide an update on 2 important products in our growth and launch portfolio, ENTYVIO and Qdenga. ENTYVIO is our #1 product by revenue and it continues to outperform the IBD market with year-to-date revenue growth of 7%, with a slight growth acceleration in Q3. It has maintained its lead in the U.S. as the most prescribed treatment for IBD overall as well as for IBD bio-naive new start. And it is achieving mid-teen percentage patient growth in Europe, driven mostly by our subcutaneous administration. In November, we also launched an ENTYVIO pen in the U.S. for maintenance therapy in moderate to severely active ulceraative colitis. Subcutaneous therapies are estimated to represent approximately 35% to 40% of the total U.S. IBD market. So this is a significant milestone in enabling us to access this segment while providing more flexibility and choice to patients. ENTYVIO is now the only branded therapeutics with both IV and subcutaneous maintenance option, and we are seeing a high degree of interest among health care professionals. I'm happy to share some market research data with you. 98% of surveyed health care professionals are aware of the ENTYVIO pen, and 94% express willingness to prescribe it in the next 6 months. We expect an FDA decision on the ENTYVIO pen in Crohn's disease early in fiscal year '24. Shifting now to Qdenga, we are very encouraged by how our launch has been progressing globally. To date, we have launched the vaccines in 21 countries, including most recently Argentina. Qdenga is available in 17 European countries, and travel recommendations support its use to help protect travelers to dengue-endemic areas. There has been a strong initial demand in the private market where Qdenga has launched, and now we are seeing progress toward inclusion in national immunization programs too. In December '23, the Brazilian National Commission for the incorporation of Health Technology recommended Qdenga for inclusion in the national immunization program. Subsequently, the Brazilian government has decided to initiate some focused vaccination program in areas with high dengue incidence rates. We are also in productive discussions with governments in other endemic countries and we are pushing private and public partnerships with government, institutional businesses, NGOs, and manufacturers to expand access. We are committed to our goal of reaching a total manufacturing capacity of 100 million doses per year to comprehensively address the growing burden of dengue infection. Turning to our high-level outlook for the near, medium, and long term. As we have entered the final quarter of this fiscal year, we are confident in our business strategy and are committed to growth and shareholder return. Based on our current assumptions, we still expect to return to revenue, profit, and margin growth in the near term, driven largely by the continued expansion of our growth and launch product. We have achieved significant regulatory milestones since Q2 in the form of new product approval, an important indication expansion for the existing portfolio, and we continue to see significant potential in our late-stage pipeline. Generic competition for VYVANSE and AZILVA continued to impact revenue and profit growth this fiscal year. However, once that impact has washed out, we'll have limited loss of exclusivity exposure until the launch of ENTYVIO biosimilar, which could occur as late as 2032 in the U.S. Momentum for our growth and launch product, combined with our continued investment in R&D, will drive progress in the medium and long term. Looking ahead, we are committed to returning to core operating profit margin in the low to mid-30s, supported by our growth on launch product, cost control, and value creation enabled by data and technology, including AI. We believe AI has the potential to create significant, scalable, and sustainable value at Takeda. It will enable us to improve efficiency across our entire value chain, including in R&D, manufacturing, patient engagement, and business operation. We believe that data, technology, and AI will completely change how we operate as a company, and we are moving at full speed across the value chain to implement digital and AI tools and applications. We'll share more detail on this topic in our future presentation. Looking ahead, we'll continue to evaluate asset-specific business development opportunities to further enhance our pipeline and reinforce our growth profile. Our bid strategy has been proving successful with the approval and launch of FRUZAQLA and the positive progress of TAK279 through this pipeline this fiscal year. This approach to innovation, combined with a robust clinical pipeline of potential best-in-class or first-in-class assets will position Takeda well for the long-term growth. Finally, our progressive dividend policy of increasing or maintaining the dividend each year will allow us to continue to return value to shareholders. In closing, we are confident about the path we are on. Our year-to-date performance demonstrates the strong momentum in our growth and launch product, the potential in our pipeline, and solid execution against our business strategy. With the approval and launch of 2 new therapies this quarter in the U.S. and multiple life cycle management approvals around the world, we are very much confident that the strength of our commercial execution combined with the potential of our pipeline will help to fuel our long-term growth. And this brings us back to the vision that drives us to discover and deliver life-transforming treatments guided by our commitment to patients, our people, and the planet. With that, I will now turn the call over to Andy to update you on our pipeline.

Thank you very much, Christophe, and hello to everyone on today's call. If we can go to the next slide, please. We've had a very successful quarter, delivering some major milestones while continuing to build momentum across our pipeline. Here are a few examples of the significant pipeline achievements from the third quarter. As Christophe mentioned, ADZYNMA and FRUZAQLA, 2 new molecular entities have received approval in the United States. ADZYNMA is a recombinant ADAMTS13 protein designed to replace the missing enzyme, which causes patients living with congenital TTP to face serious life-threatening health challenges. This approval is based on ADZYNMA's favorable efficacy profile, notably a 60% reduction in the incidence of thrombocytopenic events for plasma-based therapies. In fact, Takeda was awarded a priority review voucher for this approval as it addresses a major unmet need in patients with this rare pediatric disease. We are also evaluating ADZYNMA in a Phase IIb study in immune thrombotic thrombocytopenic purpura or ITTP, which is significantly more prevalent. FRUZAQLA, an oral VEGF inhibitor was approved in the U.S. for certain patients with previously treated metastatic colorectal cancer. It demonstrated a significant improvement in overall survival with a manageable safety profile, and not surprisingly, initial commercial uptake has been quite strong. In addition, we continue to rapidly advance the development of our allosteric TYK2 inhibitor, TAK279, initiating the LATITUDE clinical trial program with 2 Phase III psoriasis trials that are enrolling well. Following the presentation of positive and very exciting psoriatic arthritis Phase IIb data at the American College of Rheumatology, we plan to initiate enrollment in the LATITUDE psoriatic arthritis Phase III program in fiscal year 2024. To support the development of TAK279 in inflammatory bowel disease, we have aligned with the FDA on the clinical trial design for Phase IIb studies in Crohn's disease and ulcerative colitis utilizing much higher doses than studied in psoriasis or psoriatic arthritis. TAK279 is our leading pipeline priority, and we continue to make steady progress as we work to bring this potentially best-in-class treatment to patients. In the third quarter, we also delivered important indication and geographic expansions for our growth and launch products. As Christophe just mentioned, in the U.S., GAMMAGARD LIQUID and HYQVIA received their first approvals for induction and maintenance of CIDP, respectively. With these approvals, we can now offer treatment for patients with this rare acquired immune-mediated neuromuscular disorder throughout their journey. HYQVIA was also just approved for CIDP maintenance in the EU. We also continued to expand our pipeline with targeted late-stage deals. A few hours ago, we announced a worldwide license and collaboration agreement with Protagonist Therapeutics for rusfertide. The rusfertide in a pivotal Phase III trial for the treatment of polycythemia vera, a rare chronic blood disorder that affects as many as 160,000 patients in the United States. The rusfertide Phase III trial is expected to complete enrollment soon.

Thank you, Andy, and hello, everyone. This is Costa Saroukos speaking. Today, I'll walk you through the financial highlights of our fiscal 2023 Q3 year-to-date results. Starting with the top line, revenue was JPY 3.2 trillion or USD 22.8 billion, which is flat versus prior year at constant exchange rate or 4.6% on an actual basis, including FX upside from the depreciation of the yen. We have started to see significant erosion of VYVANSE since generics entered the U.S. market in August 2023. But offsetting the VYVANSE decline was continued growth of our growth and launch products. These now represent 43% of total revenue and grew 12.7% at constant exchange rate. Core operating profit was JPY 865.6 billion or USD 6.1 billion with a core operating profit margin of approximately 27%. Reporting operating profit was JPY 224.1 billion, reflecting the significant impact of non-cash impairment losses and other non-core items that were primarily booked in Q2. Core EPS was JPY 412 and reported EPS was JPY 94. Moving to cash flow, we continue to see strong cash generation from the business with operating cash flow of JPY 437.8 billion or $3.1 billion year-to-date. Free cash flow was JPY 36.3 billion, which reflects almost JPY 300 billion of cash out for acquisitions and in-licensing so far this fiscal year, including the bills for TAK279 and FRUZAQLA. We maintained a resilient financial base with 100% of outstanding debt at fixed interest rates. And I'm pleased to share that our weighted average fixed interest rate has improved from approximately 2% to 1.6%, driven by debt pay down of USD 1.5 billion year-to-date. With regards to the outlook for full-year fiscal 2023, we continue to track well towards our management guidance for performance at a constant exchange rate. There is no change to our full-year management guidance and no change to our full-year P&L forecast. However, it's important to note that there is potential upside to revenue and core operating profit if current FX rates continue. Also, I want to emphasize that we are not changing our full-year free cash flow forecast of JPY 400 billion to JPY 500 billion with some working capital phasing that has impacted us year-to-date expected to unwind in Q4. On Slide 16, let me run through our Q3 year-to-date financial performance in more detail. Starting with our core results. On the right-hand side, you can see that revenue was JPY 3.2 trillion with growth of 4.6%, flat at constant exchange rate with our growth and launch products offsetting the significant loss of exclusivity impact. Core operating profit was JPY 865.6 billion, a decline of 9.3% on an actual basis or 12.7% on a constant exchange rate. This reflects the impact of generic competition for high-margin products such as VYVANSE, VELCADE, Dexilant, and AZILVA, as well as lower COVID-19 vaccine revenue. Meanwhile, we have continued to make the necessary investments in R&D and data and technology to secure the long-term success of the business. Core net profit declined by 12.2% at constant exchange rate, and core EPS was JPY 412. On the left-hand side of the slide, you can see our reported results. Reported revenue is the same as core revenue. Reported operating profit was significantly impacted by large non-core items that we booked in Q2. These are reflected in our reported operating profit results of JPY 224.1 billion or a year-on-year decline of 44.2%. Reported net profit and reported EPS declined approximately 49%, reflecting the decline in reported operating profit. Operating cash flow was JPY 437.8 billion, lower than prior year due to working capital phasing as well as the VYVANSE generic impact. Free cash flow reflected our cash payments for TAK279 and FRUZAQLA, but there is no change to our full year forecast of JPY 400 billion to JPY 500 billion. On Slide 17, I would like to highlight the performance of our growth and launch products, which are the key drivers of top line performance. These products generated 43% of total revenue Q3 year-to-date with 12.7% growth at constant exchange rate. Within our 5 key business areas, GI grew at 4% at a constant exchange rate, a slowdown versus last year, impacted by the generic entry of Dexilant in the U.S. in January 2023. Our largest product, ENTYVIO continues to perform well with growth of 7%, outperforming the overall IBD market, and initial feedback on the ENTYVIO subcutaneous launch has been positive.

Thank you, Costa. As you might have seen earlier today, we announced that after 20 years working abroad, Costa has decided to return home to Australia to be closer to his family. He will step down as the Chief Financial Officer on April 1 and remain with the company as a Board Director until June 28, 2024. Milano Furuta, who is currently President of Takeda Japan Pharma Business Unit, will succeed Costa as CFO, effective April 1, 2024. Costa joined Takeda in 2015 as the CFO of the U-Can business unit, and he was appointed global CFO in April 2018 at the time of Takeda's proposed acquisition of Shire. Since then, he has been instrumental in Takeda's transformation into a global biopharmaceutical company and is handing over an exceptional finance organization. Costa has been a trusted colleague to me and the Board, and I wish him all the best as he returns to his home country. I'm very pleased that Milano Furuta will succeed Costa as Global CFO to continue to drive our strategy forward and deliver growth and shareholder return. Milano is a long-time Takeda colleague with a deep understanding of Takeda's business and culture. He has held a number of leadership roles at Takeda around the world. Prior to joining Takeda in 2010, Milano worked as an equity research analyst at an investment management firm in the United States. He began his career in banking and private equity investment in Japan, where he was involved with several types of financial transactions, including leverage buyout and debt restructuring. Prior to becoming President of the Japan Pharma Business Unit, Milano served for 2 years as Corporate Strategy Officer and Chief of Staff. He has been a member of the Takeda executive team for the last 5 years. I would like to invite Costa and Milano to say a few words. Costa, would you like to go first?

Thank you, Christophe, for the kind words. It's been an incredible journey and a true privilege to work at Takeda for the best part of a decade, in particular, the past 6 years as the Global CFO. It's been a point of pride to come to work every day at a company with a deeply rooted values-based culture and with colleagues who really put patients at the center of everything we do. I'm immensely proud of what we've accomplished through a period of unprecedented transformation and growth for Takeda. But as Christophe said, after 20 years working abroad, I'm ready to move back to Australia to be closer to my family. Until the end of March, my focus will be on delivering our management guidance for fiscal year 2023 and ensuring we are set up for success in fiscal year 2024. I will also be working closely with Milano on the transition. I would truly like to thank you all for your support and friendship, and I wish Takeda and you all the best.

Thank you, Christophe, and thank you, Costa. Hi, everyone. My name is Milano. First of all, I would like to congratulate Costa for all the great achievements he has delivered in the past 6 years, and I'm really excited to be part of the financial organization and, in the future, leading the finance organization. Looking forward to meeting many of you after April. I have been, as Christophe said, a member of the Takeda executive team for the past 5 years, and I'm fully aligned with Takeda's strategy, especially for the investment, for growth, and the shareholder returns. But after April 1, I am very much looking forward to meeting you all and discovering the new chapter.

Now we would like to entertain questions from the participants. Christophe and Costa will be answering. In addition, U.S. President Julie Kim will be participating.

This is Yamaguchi from Citi. I have two brief questions. The first question is about ENTYVIO. Are ENTYVIO sales in dollar terms growing slightly compared to the previous quarter? However, it seems like growth is still in the high single-digit range. Can you provide an update on the current situation and the new patient numbers? Also, regarding SG, could you share the penetration ratio? My second question is about the timing you mentioned. You talked about discovery timing by the end of March, which seems expedited compared to what I thought would be April to June. Is it correct to say that you will make a decision by March, and how will you share the data with us after this decision? Will this decision be publicly announced, as the data will be interesting? That’s my second question.

Thank you, Yamaguchi-san for the question. In regards to ENTYVIO, let me talk a little bit about our overall position as well as subcutaneous. So from an overall perspective and in terms of new patient starts, as Christophe mentioned, we still remain the market leader in terms of IBD bio-naive new patient starts. And particularly in UC, I'm pleased to share that our share grew by 1.1% in UC over the last 12 months and that's significant growth within that indication. So when you look at the start of the ENTYVIO pen in the U.S., please remember that new patients have to have an induction period on IV first. So at this point, it's very early to say what the patient uptake has been on the ENTYVIO pen. But as Christophe mentioned, we're very pleased with the information to date in terms of the awareness of the pen amongst our target healthcare professionals, and I'm also happy to share that we've recently signed an agreement with one of the big 3 national PBMs, as well as signing agreements with 5 regional plans, and we're very pleased with the direction of progress.

Yamaguchi san, it's Andy. Good evening. You're right that the orexin program has moved forward quickly. We launched the two Phase IIb studies for TAK-861 in type 1 narcolepsy and type 2 narcolepsy in January of last year, right after completing our Phase I program in December. We anticipated the study would take about 18 months for full enrollment and completion, but we finished it in under 12 months. Both studies for type 1 and type 2 narcolepsy have completed enrollment, and we are now awaiting data. We plan to make a decision this fiscal year before March on advancing to the Phase III program, which we are preparing to undertake at risk due to our excitement. The rapid progression of the study can be attributed to several factors: the enthusiasm from patients and investigators about this mechanism, our experience in narcolepsy, and the new tools we are using to expedite our clinical trial. We are eager to move forward. Regarding the timing and presentation of data, we are still finalizing those details internally.

I have two questions. First, regarding the safety profile of TAK-861. I understand that there has been no noticeable improvement in vision with 861. However, you mentioned at our conference that 861 needs to be evaluated for potential risks. I'd like more clarification on this matter. Should we be concerned about the risks associated with 861, or is it not a significant issue? This is my first question. My second question is about the gross margin for the three months of the third quarter. It appears that the gross margin has declined compared to the second quarter. Could you explain this? Is this expected? Additionally, how should we think about the gross margin for the fourth quarter? This is my second question.

Thanks, Chris. Thanks, Wakao-san. So in order to fully understand the safety profile of TAK-861, we need to look at the full data set. What I can say is that based on the blinded data, we don't see any evidence of visual disturbances. Based on the blinded data and the data safety monitoring board looking at unblinded data, we don't see any evidence of liver toxicity. And in terms of cardiovascular risk, it's something that we have a deep understanding of, and at this point, don't have concerns that that's going to be a significant issue for this program.

Thank you, Wakao-san, for your question. Generally, we prefer to examine year-to-date figures due to fluctuations and variations that occur on a quarterly basis. For the year-to-date, the gross profit margin has decreased by 2.1% based on reported figures. This aligns with our internal forecast and is mainly caused by challenges related to the loss of exclusivity. We are experiencing a higher impact on margins from products like VYVANSE, Velcade, and Azilva, as well as lower revenue from COVID vaccines. Although our newly launched products are growing significantly at 12.7%, they have not reached a level sufficient to counteract the effects of the loss of exclusivity. Nevertheless, the 2.1% decline compared to the prior year is consistent with both our internal and external forecasts.

I have 2. The first is broadly on the oncology segment. You've had some wins and some setbacks in this area. But I think it's fair to say that this segment lacks what could be considered a flagship product or pipeline candidate. Would you disagree with that statement? And what oncology asset do you think deserves more attention than it perhaps receives? And then my second question is on Qdenga. You've made impressive progress so far. How should we think about the path from here to potential USD 2 billion in peak sales? Will growth come in big boluses as government contracts are signed? Or will it be more linear and gradual.

Thank you, Michael. I think it's a combination actually because of the private markets. So when you introduce the vaccines in the private market, that's a bit more linear. So we can model. But the big volume is more a national immunization program. And that's more non-linear, if you like, because certainly, if a country like Brazil, for example, wants to introduce a very vast immunization program, obviously, you will have a sort of a big jump when that happens. So that's why it's not easy to forecast long term this type of vaccines. Now the peak of $1.6 billion to $2 billion is really correlated to our ability to reach a $100 million dose per annum production capability. We are not there yet, but we are very actively looking at expanding our own manufacturing capacity in our site in Singen in Germany. We have a current CMO, and we are in discussions with other potential partners to achieve this 100 million dose goal as quickly as possible. As you know, the data has been even stronger than what we expected, including the approval and label. And so frankly, today, the demand is greater than the supply of these vaccines. So we are very actively looking at expanding our manufacturing capacity.

On the oncology front, we have seen both successes and challenges. Our goal is to become a leader in oncology, although we have not reached that point yet. We are actively engaged in this area. In our pipeline, we have some assets that are not as advanced as others, like 861 and 279, which are in Phase III. However, there are a couple of promising assets worth mentioning. We believe we are making the right investments in oncology. The key now is to utilize the expertise we are developing and move these programs forward to decision-making stages. Just this Monday, we appointed a new head of oncology R&D, PK Moro, who is highly experienced and an expert in the field. We are excited for PK to lead our oncology initiatives.

This is Muraoka from Morgan Stanley. My first question is for Christophe. Looking ahead to the next fiscal year, what is your outlook? Currently, foreign exchange seems favorable. VYVANSE is not decreasing as quickly, so given the current situation, what are your expectations for next year? Three months ago, you indicated that the upcoming fiscal year would be challenging. Has your perspective changed in that time? That's my first question. My second question is regarding the 279 pipeline. The Phase IIb trials for UC and CD high dose are set to begin. Can you explain the timeline towards filing or approval? After the Phase IIb, will Phase III be conducted first, and will there be separate processes for UC and CD? Or is there a way to expedite this? Those are my questions.

Thank you, Chris. Thank you, Muraoka-san. Obviously, we'll give precise guidance on next year on fiscal year '24 in May. But what we described earlier remains valid. It will be a tight year. We can describe it as flattish or perhaps slightly positive or slightly negative. We need to see how VYVANSE is evolving still in the next 3 months. But it will be a flattish year, certainly in both revenue and core operating profit margin. Because the way to see it is that the first semester will still be a declining semester because of the generic introduction of VYVANSE in August '23. So you see it will impact the first semester. On the other hand, the second semester, it will be on a like-for-like basis. So there will be much less generic impact and headwinds in the second semester. That's why overall the year will be flattish, but we'll provide precise guidance in May.

Muraoka-san, I can briefly outline the strategy for TAK-279. Our primary focus is advancing in the continuum of psoriasis and psoriatic arthritis, where we have established strong proof of concept. We hope the psoriasis Phase III program, which is enrolling well, will accelerate, allowing us to bring it to market in the 25% to 27% range. Shortly after, we will begin our Phase III studies in psoriatic arthritis, known as the Latitude program, following approval in psoriasis. We are looking forward to receiving approval for psoriatic arthritis. This continuum of disease supports our belief that TAK-279 will be best-in-class. This year, we will initiate a head-to-head trial in psoriasis against ducavacitinib to demonstrate its efficacy. We are excited about advancing the psoriasis and psoriatic arthritis spectrum as quickly as possible. Regarding IBD, predicting approval timelines might be premature. Our primary goal is to show that a TYK2 inhibitor can be effective in treating Crohn's disease and ulcerative colitis. We are confident in this approach based on existing genetic data and the role TYK2 plays in cytokine signaling, along with robust data from animal models. We believe that with a higher dose, we can achieve efficacy, but we need to prove this in clinical trials. Starting with the Phase IIb studies is crucial, and the Crohn's study should begin in the next few months, with the UC study to follow shortly after. If those studies succeed, we can proceed accordingly. Unfortunately, the development path for IBD is lengthy, but excellence in executing clinical trials will be key to accelerating this process. We feel we are gaining control over this with our current model and the digital and technology tools we are implementing in our development programs. If everything aligns well, we anticipate approvals for IBD by the end of this decade.

Since time is up, we would like to close the Q&A session at this point. Again, thank you for joining us despite your busy schedule, and thank you for your continued support.