Takeda F1Q14 – Nesina rebounds 48% to ~$106 million – August 4, 2014

Takeda provided its F1Q14 (calendar 2Q14) performance update on Friday in a call led by CFO Mr. Francois-Xavier Roger and CMO Mr. Tsudoi Miyoshi. Although there was far less commentary on diabetes during this presentation than in the company’s previous quarterly update, the financial results for Nesina (alogliptin) and Actos (pioglitazone) featured some interesting movement. Below, we include our top three highlights from the call. There was no diabetes-related Q&A.

1. Global Nesina (alogliptin) sales rebounded 48% YOY as reported and 15% sequentially to JPY 10.8 billion (~$105 million) following a turbulent fiscal year 2013; Nesina’s US launch appears to be progressing relatively slowly though we believe the drug could possibly hit the half billion mark this calendar year – it would take a very strong performance in the second half of the calendar year but is definitely possible.

2. Actos (pioglitazone) had its first quarter of positive growth in over three years, climbing 17% to JPY 12.3 billion (~$120 million), powered by improving sales in Asia and a Managed Medicaid rebate true-up.

3. We received no further comments on management’s previously-announced decision to suspend development of the once-weekly DPP-4 inhibitor trelagliptin in the US and EU due to the high costs of late-stage development. We also heard no comments on Contrave (naltrexone/bupropion), Takeda and Orexigen’s obesity medication that is currently under review in the US and EU – this was a bit disappointing since the PDUFA date is coming up this fall. We continue to expect Takeda to partner on the SGLT-2 front sometime soon; eventually we think it will be fairly unlikely that many patients will be taking a single monotherapy and many more will be taking fixed dose combinations.  

Top Three Highlights

1. Global Nesina (alogliptin) sales grew 48% year-over-year (YOY) as reported to JPY 10.8 billion (~$105 million) in F1Q14 – this growth figure benefitted from an easy comparison, as F1Q13 was a weak quarter for Nesina (+3% YOY growth, the lowest the product experienced in calendar 2013). Sequential growth in F1Q14 was also remarkably high (15%), and also benefitted from an easy comparison (sales fell 25% sequentially in F4Q13 – as a reminder, management acknowledged during the F4Q13 update update that the Nesina franchise was not growing as fast as expected, due in part to the commoditization of the DPP-4 inhibitor class in Japan and the US. Around 90% of Nesina sales come from within Japan, where sales were highly variable over 2013 and 2014 following a previous period of more steady growth.

• Pooled 2Q14 global DPP-4 data with Merck, Novartis, AZ, Lilly, and Takeda having reported, has been $2.3 billion to date, up 6% year-over-year and up 14% sequentially.

Table 1: Global Nesina sales and growth

* Calculations use a conversion ratio of 0.0098 USD/JPY for 2Q14

• Nesina’s strong 33% growth in Japan in 2Q14 was due to a number of factors. As of the beginning of April, Takeda changed its marketing system in Japan from using general medical representatives that marketed the entire portfolio of Takeda products to a more targeted system where each representative has a dedicated therapeutic area (cardiovascular/metabolic being one of the three areas). This focus, the company suggested, could be influencing the improved uptake of Nesina and other products. Additionally, in May, the Japanese Ministry of Health, Labor, and Welfare approved an expansion of Nesina’s label to allow for concomitant therapy with all oral antidiabetic agents and insulin – the only other DPP-4 inhibitor in Japan to with an add-on indication to insulin is Merck’s Januvia (sitagliptin). 
• Outside of Japan, Nesina sales rose slightly, totaling ~$11 million in F1Q14 from ~$9 million in F4Q13 and ~$10 million in F3Q13 – this does represent over 20% growth sequentially, but given that the product has been on the market in the US for a year and has since been approved elsewhere, the total is somewhat modest. Overall, in 2Q14, the DPP-4 inhibitor class has performed quite poorly within the US – pooled US data in 2Q14, with Merck, Novartis, Lilly, AZ, and Takeda having reported, has been ~$990 billion to date, flat year-over-year and up 13% sequentially. Merck reported that Januvia (sitagliptin) sales fell 3% in the US in 2Q14, while AZ reported that US Onglyza (dapagliflozin) sales fell 14%. Tradjenta (linagliptin) from Lilly/BI was the relative winner in the US, with sales rising 65% YOY and 19% sequentially, albeit from a relatively low base (<$100 million). From the data AZ provided on Onglyza’s growth and market share, it appeared that the overall DPP-4 inhibitor class actually shrunk slightly in the US, likely due to the pancreatitis scare, slowdown of patient switches from TZDs and sulfonylureas, and the introduction of SGLT-2 inhibitors.
• One unique advantage Takeda has in the US is Oseni, a fixed-dose combination of alogliptin and Takeda’s former blockbuster TZD Actos (pioglitazone). However, with the TZDs’ fall from favor, the power of that advantage is fairly modest at this point. Alogliptin/pioglitazone is one of the drivers of overall alogliptin franchise growth in Japan (where the combination is marketed under the brand name Liovel).
• During prepared remarks, Takeda highlighted that the fixed-dose combination of alogliptin and metformin (Kazano in the US, Vipdomet elsewhere) has moved into phase 3 in Japan. This was the only mention that Takeda’s diabetes portfolio received in the entire call, including Q&A. The company’s pipeline slide suggested that the combination is on track to receive a regulatory decision in Japan in fiscal year 2016 (by the end of March 2017).

2. We were surprised to see sales of Takeda’s former blockbuster TZD Actos (pioglitazone) rise for the first time in three years – global sales rose 17% YOY and 73% sequentially to JPY 12.3 billion (~$120 million). This meant that Actos sales overtook Nesina sales, something we were not expecting to see happen again. A large part of this result, however, was due to a Managed Medicaid rebate true-up rather than organic growth.

• The majority of Actos growth in 2Q14 came from North and Latin America, where sales nearly doubled year-over-year to JPY 5.7 billion (~$60 million). Sales in “Asia and Other Regions” (which does not include Japan) also grew 43% to JPY 1.6 billion (~$15 million), driven by strong growth in multiple Asian countries (excluding Japan). Sales in Japan fell 30% YOY (leveling off sequentially) at JPY 3.0 billion (~$30 million) and sales fell slightly in “Europe and Russia/CIS.” Much of the ex-Japan growth was due to sales in the US. The increase in the US was largely due to a one-off Managed Medicaid true-up, and as a result the company has not changed its sales forecast for the full year. Although the TZDs’ fall from favor would be difficult to reverse, we wonder if the FDA’s recent exoneration of the other former blockbuster TZD Avandia (rosiglitazone) may have lightened the perceived dark cloud of safety concerns that has circled the class over the past few years.

3. Management did not comment on the decision announced during Takeda’s last update to discontinue development of the once-weekly DPP-4 inhibitor trelagliptin in the US and EU due to the magnitude of the “development costs that would be necessary in order to obtain approval.” This announcement represented one of the most explicit reminders we have seen in some time of the cost of the FDA’s 2008 CV guidance, and was especially disappointing given that the drug had been fully developed in other geographies – Takeda submitted an NDA in Japan for trelagliptin in March, and a decision is expected before the end of March 2015. Assuming Takeda’s decision holds, the once-weekly DPP-4 inhibitor race is dominated by Merck’s omarigliptin, which is currently in phase 3. We wonder if Takeda might be willing to license the rights to trelagliptin to a company that might be willing to see development through in the US and the EU. 

Honorable Mention: The call also featured no mentions of Contrave (naltrexone/bupropion), Takeda and Orexigen’s partnered obesity medication that is currently under review in the US and EU. In June, the FDA pushed back the PDUFA date for Contrave by three months to September 11. More recently, Orexigen reported receiving the EMA’s Day 180 List of Outstanding Issues (read our report).

-- by Manu Venkat and Kelly Close