Takeda Pharmaceutical Co Ltd

TSE:4502

Earnings Call Analysis

Takeda Aims for Mid-30s Margin, Pipeline Momentum

Takeda is steering towards a core operating profit margin in the low to mid-30s, propelled by new products, cost efficiency, and technology use, including AI. The FDA approved two new treatments, Adzynma for a rare pediatric disease, TTP, and Fruzaqla for metastatic colorectal cancer, both showing strong initial commercial success. Their pipeline is bolstered by a worldwide agreement with Protagonist Therapeutics for rusfertide, treating polycytemia vera, and they're preparing to advance TAK-861 for narcolepsy to Phase III trials. Meiagitamab, targeting autoimmune diseases, is also a promising candidate in their portfolio.

Commitment to Profit Margin Improvement and Growth Drivers

The company is dedicated to restoring its core operating profit margin to the low to mid-30s, hinging on the growth of new products, effective cost management, and leveraging data and AI for value creation. This forward-looking guidance is underscored by the recent approval and launch of two new therapies in the U.S., strengthening the company’s prospective growth.

Success in the Pipeline and Launches

The quarter has been marked by notable achievements including the approval of Adzynma, a recombinant ADAMTS13 protein, showing a 60% reduction in thrombocytopenic events, and Fruzaqla, a VEGF inhibitor for metastatic colorectal cancer with significant survival benefits. These accomplishments speak volumes about the firm's ability to innovate and address unmet medical needs.

Upcoming Clinical Developments and Licensing Agreements

The company is preparing for enrollment in the Phase III program for psoriatic arthritis and progressing with its inhibitor, TAK279. Additionally, a recent licensing agreement with Protagonist Therapeutics for the drug rusfertide indicates expanding the late-stage pipeline.

Financial Performance and Future Expectations

Despite headwinds like the loss of revenue from exclusivity and COVID-19 vaccines, revenue held steady at roughly USD 22.8 billion due to the strong performance of growth and launch products, which now comprise 43% of total revenue. Core operating profit was approximately USD 6.1 billion with a margin of about 27%. Full year management guidance remains unchanged, with a low single-digit percentage decline in revenue, low 10s percentage decline in core operating profit, and low 20s percentage decline in core EPS forecasted.

Investment in Research and Development

Investments in R&D continue to grow with a focus on programs like TAK-279 and the Orexin franchise. The company is also investing in data and AI, which is expected to significantly affect long-term competitiveness and return to growth. However, the core operating profit has declined partly due to an increase in impairment of assets and restructuring costs.

Debt Management and Capital Allocation Strategy

The company has prepaid all USD 1.5 billion bonds maturing this fiscal year, reducing the average interest rates to 1.6%. The prepayment and a low repayment obligation for the coming years reflect financial flexibility and a prudent capital allocation strategy aimed at fueling growth and shareholder returns. The management reaffirms its confidence in the company's strategic direction and ability to tackle the loss of exclusivity headwinds.

Leadership Transition

Costa Saroukos, the Chief Financial Officer, will be stepping down and succeeded by Milano Furuta. This transition comes at a time when the company maintains its strategic trajectory and continues to commit to delivering growth and shareholder value.

Earnings Call Transcript 2024-Q3

[Christopher David O'Reilly, executive]

Thank you very much for joining us for Takeda's FY '23 Q3 Earnings Announcement [indiscernible] scheduled. I'm the [indiscernible] 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 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. ]

[Christophe Weber, executive]

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 on 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 demonstrate 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 on 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 product 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 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 approval 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 with [indiscernible] in March last year, 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 too 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 ultra rare blood clotting disorder. Its approval and launch our significant milestone for this rare disease community, which we are proud to continue focusing on. Since the second quarter since Q2, we have also made strong progress in our existing portfolio with important life cycle management approval 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 sustain an 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 patient 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 [ supineneous ] administration. In November, we also launched an ENTYVIO pen in the U.S. for maintenance therapy in moderate to severely active arthritive colitis.

Subcutaneous therapies are estimated to represent approximately 35% to 40% of the total U.S. IBD market. So this [indiscernible] a very 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 professional 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 private market where Qdenga has launched and now we are seeing progress towards inclusion in national immunization program too.

In December '23, Brasil National Commission for the incorporation of Health Technology recommended Qdenga for inclusion in the national [indiscernible] program. Subsequently, the Brasilian government has decided to initiate some focused vaccination program in areas with high dengue incidence rates. We are also in productive discussion with government in other endemic countries and we are pushing private and public partnership with government, institutional businesses, NGOs and manufacturer to expand access.

We are committed to our goal of reaching a total manufacturing capacity of $100 million 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 assumption, 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 asset 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 demonstrate 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 approval 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 on the planet. With that, I will now turn the call over to Andy to update you on our pipeline. Thank you.

[Andrew Plump, executive]

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 a significantly more prevalent disease.

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 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.

279 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 media 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 is a first-in-class [indiscernible] in a pivotal Phase III trial for the treatment of polycytemiavera, a rare chronic blood disorder that affects as many as 160,000 patients in the United States.

The rufertide Phase III trial is expected to complete enrollment soon and will add to our growing late-stage pipeline. If we can get to the next slide, please. Our late-stage pipeline reflects Takeda's commitment to develop life-transforming medicines for rare and more prevalent diseases.

As I mentioned, TAK279 is enrolling patients in 2 Phase III psoriasis trials. Because psoriasis trials have historically lacked representations from patients of color, we are proactively taking steps for the TAK279 LATITUDE psoriasis program to reflect unprecedented patient diversity. TAK279 is a potential best-in-class oral therapy for psoriasis and we'll start a Phase III head-to-head trial against [indiscernible] in 2024. Now let me take a step back to remind everyone that Takeda is an industry leader with more than 70 years of experience working in rare diseases and hematology. We remain deeply committed to researching and developing life-transforming medicines many of which will treat patients with rare diseases in our core therapeutic areas of neuroscience, GI and inflammation.

Moreover, our plasma-derived therapies organization continues to pursue transformational therapies in rare diseases while our oncology team remains focused on cancers with high unmet medical needs across a range of patient populations. Now in keeping with our emphasis on collaboration, we will continue to partner with the health care providers and communities who support these patients while also exploring late-stage business development opportunities like the Protagonist partnership announced just recently, leveraging our deep commercial expertise to bring transformative therapies to patients with rare diseases.

And finally, Takeda continuously prioritizes our portfolio to direct resources to our most promising therapies. For example, we have decided to discontinue development of modakafusp alfa. This is a strategic decision based on a number of factors, including the existing data set, the rapidly evolving multiple myeloma treatment landscape and the long development time lines.

Takeda remains committed to oncology and will continue to develop therapies across hematologic and solid tumors. Next slide, please. We are rapidly advancing our exciting mid-stage pipeline and anticipate that a number of these programs will progress to Phase III pivotal development in the coming year. Orexin agonists have the potential to be the first agent to address the underlying cause of narcolepsy type 1, offering the potential for functional cures.

TAK-861, our lead orexin agonist completed enrollment well ahead of schedule in 2 Phase IIb trials that began in January 2023. Combined, the TAK-861 narcolepsy type 1 and type 2 trials have enrolled approximately 180 patients. Nearly all who completed the trial enrolled in the long-term extension study. These Phase II studies in the long-term extension study will help inform the TAK-861 Phase III program. As a reminder, TAK-861 is a more potent agent that may provide efficacy at a much lower dose than our previously tested oral orexin agonist, significantly reducing the potential for adverse effects, including liver toxicity, which tends to be dose-related.

Multiple external reviews by the data safety monitoring committee confirmed that no liver toxicity signals have appeared in TAK-861 Phase II trials. We are on track to make a final go/no-go decision to advance TAK-861 to Phase III in narcolepsy this fiscal year, and we are planning the Phase III program at risk to maintain momentum. Mezagitamab, our fully humanized anti-CD38 monoclonal antibody that is being studied across several rare autoimmune inflammatory diseases.

It works by depleting plasma cells and plasma blasts resulting in a number of beneficial immunomodulatory effects. We are excited by mezagitamab's mechanism of action, and we look forward to presenting data in ITP and IgA nephropathy at medical conferences later this year. Next slide, please. As you can see, the third quarter was a productive quarter with 2 NME approvals for adzynma and fruzaqla. Important indication expansions for takhzyro, HYQVIA and GAMMAGARD and positive Phase III data for maralixibat in Japan, for which we will seek approval later this year.

Takeda has generated considerable pipeline momentum in fiscal year 2023. And as you'll see next, there's much more to come in fiscal year 2024. Next slide, please. In the coming months, we anticipate several meaningful potential approvals and Phase III readouts. These include life cycle expansion opportunities for ENTYVIO subcu for Crohn's disease, potential Iclusig approval for first-line Philadelphia-positive acute lymphoblastic leukemia in the United States, and the potential approval for TAK-721 in the U.S. for eosinophilic esophagitis.

In addition, there will be 2 Phase III readouts for soticlestat in Dravet syndrome and Lennox-Gastaut Syndrome, 2 rare pediatric epilepsies, which may allow for filing in 2024. As I mentioned earlier, our teams remain laser-focused on developing TAK279 in the first 4 major indications while exploring development in others. Our pipeline is maturing. With 5 new molecular entities in Phase III development, awaiting first approvals. In addition to these 5 global Phase III NME programs, we have prioritized a group of registration-enabling regional development programs outside of the United States.

Key data readouts in our exciting -- exciting mid-stage pipeline and targeted business development opportunities will continue to add to our maturing late-stage portfolio. We look forward to important mid-stage milestones in the development of our Orexin franchise like the Phase IIb study readouts of TAK-861, and the Phase I start for our next-generation oral orexin agonist TAP360.

And as mentioned, mezagitamab's coming ITP and IgA nephropathy data will allow us to make a data-driven go-no-go decision to Phase III. Across our pipeline, we will continue leveraging data, digital and technology to develop programs faster and increase our probability of success. Now for example, we started Phase IIb trials of TAK-861 within 2 weeks of completing Phase Ib by planning at risk.

We also leveraged site selection tools trained with our deep site and investigator experience from previous orexin trials. For the TAK-861 Phase IIb studies, we use a proprietary in-house digital tool that provides real-time site performance data to analyze and manage enrollment, allowing us to complete the study 5 months ahead of plan. This tool specifically designed for clinical trial execution also helped us to improve site selection, screen patients and to provide real-time data review, data monitoring and data cleanup.

We will continue utilizing digital tools and proprietary data to help us make critical decisions to advance and deliver our pipeline to patients. Given the strong momentum of our mid- to late-stage pipeline, Takeda plans to host an R&D event in fiscal year 2024 to provide an update on our strategy, present deep dives into our flagship programs and share more about our data, digital and technology efforts. Thank you very much. And now I will turn it over to Costa.

[Costa Saroukos, executive]

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 into 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 noncash impairment losses and other noncore 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 paydown 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%, all 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 noncore 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 TAK-279 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 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 [indiscernible] subcutaneous launch has been positive. In rare diseases, Takhzyro continues its strong momentum with growth of 12%, having successfully launched in over 50 countries and with sustained demand in the U.S. Uptake of Livtencity continues to be strong, and I'm also happy to highlight the new launch of Adzynma, the first and only enzyme replacement therapy for cTTP. Although the cTTP indication is a niche commercial opportunity, this new approval is extremely meaningful for patients suffering from this disease. [indiscernible] immunology continues to deliver outstanding growth of 16%, including 18% growth of immunoglobulin and 7% growth of albumin. Both our IG and albumin products continue to see strong demand.

We have continued to expand our plasma donation center footprint with our global network now exceeding 250 centers. And we have seen donor compensation continue on a downward trend since fiscal year 2022 after significant increases during the pandemic. We now modulate compensation in a highly segmented way while achieving the volumes to deliver our commitments to our patients.

Together with initiatives to improve efficiency across the PDT value chain, this has enabled us to improve PDT margins year-on-year in fiscal year '23 for the first time since the pandemic. Next is oncology, which continues to decline as a result of Velcade generics. However, the timing of loss of exclusivity in May 2022 means that the impact should wash out by the end of this fiscal year. Also, I would like to highlight another new product Fruzaqla, which launched in November 2023 in the U.S. for the treatment of patients with metastatic colorectal cancer. The launch is off to a strong start, having treated the first patient just 24 hours after the approval.

Neuroscience declined minus 6% as a result of VYVANSE generics launching in the U.S. after [indiscernible] expiry in August. To date, brand share erosion of VYVANSE has been slightly molder than initially anticipated due to constraints of generic supply. We expect this situation to ease towards the end of this fiscal year, but it does mean we have slightly increased our full year assumption for VYVANSE revenue.

Finally, the other segment is declining due to lower revenue from COVID-19 vaccines and generic competition to Azilva in Japan. However, this other segment also includes our dengue vaccine, Qdenga, which is seeing strong initial demand in both endemic and travel markets. Over the next 3 slides, I'll walk you through some waterfalls to better explain the moving pieces in our Q3 year-to-date performance versus prior year.

Starting with revenue on Slide 18. You can see that versus prior year, our growth in launch products were the main reason we were able to maintain flat growth at constant exchange rates despite JPY 133.3 billion of loss of exclusivity headwinds as well as lower coronavirus vaccine revenue compared to prior year. On top of this, we had an FX tailwind due to the depreciation of the yen, taking our top line growth on an actual basis to 4.6%.

Moving to the year-on-year core operating profit bridge on Slide 19. Here, you can see how loss of exclusivity and the coronavirus vaccine decline are having a larger impact on profit compared to revenue due to the higher margins. On the investment side, we continue to allocate resources to R&D to support high potential programs such as TAK-279 and our Orexin franchise.

R&D spend increased 7.3% year-to-date on a constant exchange rate basis, but this does reflect some phasing. And we still aim to land the full year with a mid-single-digit increase. We also continue to make substantial investments in data and technology, including AI across the value chain. We believe these investments will have a transformational impact on Takeda's long-term competitiveness and play an important role in our return to growth, and therefore, we continue to allocate capital in these areas. All these factors combined resulted in our first half core operating profit decline of 12.7% on a constant exchange rate basis or 9.3% decline when factoring in the benefit of FX.

I would also highlight that although the depreciation of the yen had a significant impact, upside impact on our revenue, the benefit to profit is less pronounced. This is because of our substantial overseas expenses. And in fact, the depreciation of the yen versus the euro is actually negative to profits due to our higher proportion of cost of goods in euro.

Next is Slide 20, which explains the major items impacting our reported operating profit versus prior year. In addition to the decline in core operating profit, we had a sizable increase in impairment of intangible assets, which year-to-date totaled JPY 119.3 billion. Most of this was already booked in Q2 when we recognized impairments related to the negative Phase III study readout of Alofisel and the voluntary global withdrawal of Exkivity. In addition, we have higher restructuring costs this year related to exiting AAV gene therapy and consolidating our office footprint. All these items combined led to the reported operating profit decline of minus 44.2%.

Moving to Slide 21 and our outlook for full year fiscal 2023. Based on our year-to-date performance, we do not see the need to make any changes to our management guidance at this time. We still anticipate low single-digit percentage decline in revenue, low 10s percentage decline in core operating profit and low 20s percentage decline in core EPS, all on a constant exchange rate basis.

We are also keeping our reported and core forecast on an actual FX basis unchanged. There is some potential upside to revenue and core operating profit if current FX rates continue, and we've included a currency sensitivity chart on Slide A19 in the appendix for your reference. Our free cash flow forecast is unchanged at JPY 400 billion to JPY 500 billion with some of the working capital phasing I mentioned earlier, expected to unwind in Q4, and we remain committed to paying the fiscal year '23 dividend of JPY 188.

On Slide 22, we show our updated debt maturity ladder. By the end of December, we had prepaid all of the USD 1.5 billion of bonds maturing this fiscal year, which brought our weighted average interest rate down to 1.6%.

As a reminder, 100% of our debt is at fixed rates with an average maturity of approximately 8 years. I would also highlight that our repayment obligations in fiscal year '24 and fiscal year '25 are minimal which means we have flexibility in how we allocate cash over the next couple of years, including potentially prepaying some of the fiscal year '26 maturities.

To close out on the presentation on Slide 23, I'd like to reemphasize that we are well on track towards our full year management guidance. We have been preparing for the loss of exclusivity headwinds we faced in fiscal year 2023 for many years. We have confidence in our portfolio and pipeline to deliver our return to growth in the near term, and we will continue to allocate capital with discipline as we focus on delivering sustainable growth and competitive shareholder returns. I'd like to now hand it back to Christophe. Thank you.

[Christophe Weber, executive]

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 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, the [indiscernible] 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 role 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 2019 in banking and private equity investment in Japan, where he was involved with several type 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.

[Costa Saroukos, executive]

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. I'll pass it now over to Milano for a few words. Thank you all.

[Milano Furuta, executive]

Thank you, Christophe, and thank you, Costa. Hi, everyone. My name is Milano. And I have -- I have been -- first of all, I would like to congratulate [indiscernible] for all the great achievement he has been delivered in the past 6 years. And I'm really [indiscernible] to be the part of the financial organization and in the future, leading the finance organization. And then looking forward to meeting you -- many of you after April. And I have been -- as Christophe said, I have been as a member of the Takeda executive team members for the past 5 years, and I'm fully aligned with Takeda's strategy, especially for the investment, for the growth and the shareholder returns.

But after April 1, I'm very much looking forward to meeting you all and then listen and discover the new chapter. Thank you.

[Operator]

[Interpreted] Now we would like to entertain questions from the participants. Christophe and Costa, Milano will be answering. In addition, U.S. President, Julie Kim will be participating. [Operator Instructions]. First question from Citigroup.

[Hidemaru Yamaguchi, analyst]

This is Yamaguchi from Citi. I'll have to make briefly 2 questions. The first question is regarding Entyvio. Is it true that the Entyvio sales in the dollar term is growing a bit compared to Q-on-Q. But at the same time, [indiscernible] still sort of high single-digit growth. So can you give us some current situation, how the new patient situation is? And also you talk about SG, but can you give us some penetration ratio basically -- sorry, if you have so first one is regarding Entyvio.

The second one is the direction [indiscernible] timing. You talk about this discovery meaning by the end of March. I thought it looks a little bit expedited, but I thought it was April to June. So is it fair to say that you are going to decide by March, then how are you going to share some data with us after this decision? And if this decision will be public announced because it's going to be interesting -- the data. And that's the second question. So timing and why it is expedited I think -- if it is expedited, and there's 2 questions.

[Christopher David O'Reilly, executive]

Great. Thank you, Yamaguchi-san. So the first question on ENTYVIO in terms of the market evolution and uptake of the ENTYVIO pen. I'd like to ask Julie to comment on that. And then the second question on Orexin timing and the communications around that. I'd like to ask Andy to comment on that one.

[Julie Kim, executive]

Thank you, Yamaguchi-san for the question. In regards to ENTYVIO, let me talk a little bit about overall our position as well as subcu. 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 the significant growth within that indication. So when you look at the start of Entyvio pen in the U.S., please remember that new patients have to be have an induction period on IV first.

So at this point, it's very early to say what the patient uptake has been on ENTYVIO pen. But as Christophe mentioned, we're very -- we're very pleased with the information to date in terms of the awareness of pen amongst our HCPs, our target HCPs, 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 as well. So very pleased with the direction of progress, and we hope to share more detailed information on patient uptake with the pen at a future call.

[Andrew Plump, executive]

Yamaguchi san, it's Andy. So good evening. You're correct that the orexin program has accelerated. So you remember, we started the 2 Phase IIb studies for TAK-861 in type 1 narcolepsy and type 2 narcolepsy in January of last year on the heels of finishing our Phase I program in just December. So we had accelerated the start of that study. Our expectation was that, that study would take about 18 months to fully enroll and complete and we ended up completing it in under 12 months.

So that study, both studies, the type 1 and type 2 narcolepsy studies have completed enrollment, and we're waiting to see data. And correct, we'll be making a decision this fiscal year before March to move forward with the Phase III program. We're planning the Phase III program at risk because of our enthusiasm. The excitement -- the ability to roll the study quickly stems from probably a number of different factors. One is the excitement that patients and investigators have over this mechanism. The second is our experience now in narcolepsy. And the third, as I mentioned, are our new tools that we're leveraging to accelerate our clinical trial. So we're very excited to move that forward. In terms of when and how data will be presented, we're still working through that internally.

[Christopher David O'Reilly, executive]

So the next question will be from Seiji Wakao from JPMorgan. Wakao-san. Please go ahead.

[Seiji Wakao, analyst]

I have 2 questions. First, about safety profile, 861. So I understand that there has been no [indiscernible] or vision progress with 861. On the other hand, you have committed our conference -- our conference that 861 need to be checked for [indiscernible] risk. I'd like to understand more on this point. Should we be cautious about the [indiscernible] risk of 861, or is it not of a big issue? This is a first. And second is the gross margin on the 3 months of the third quarter. Third quarter gross margin seems to be declined compared to second quarter. Could you please explain this? And is this [indiscernible]? And how should we consider the gross margin in the fourth quarter? This is second question.

[Christopher David O'Reilly, executive]

Great. Thank you, Wakao san. So the first question on TAK-861, safety on the hepatotoxicity, the visual side effects but also specifically on CV risk. I'd like to ask Andy to comment on that. And then the second question on gross margin. In Q3, the reasons for the gross margin decline and also the outlook for Q4. I'd like to ask Costa to comment on that.

[Andrew Plump, executive]

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.

[Costa Saroukos, executive]

Thank you, Wakao-san for your question. Typically, we prefer to look at year-to-date because of fluctuations and phasing on a quarter-by-quarter basis. So year-to-date, the gross profit margin has declined from a reported basis by 2.1%. It's on target to our internal forecast -- is predominantly driven by the loss of exclusivity headwinds. We have a higher loss of exclusivity margins for products like VYVANSE, Velcade, Azilva, and less revenue for COVID vaccines.

The growth in launch products, although they're growing quite considerably at 12.7%. They're still not at the level to offset the loss of exclusivity headwinds. But overall, the 2.1% decline versus prior year is on track to our internal forecast and externally. Thank you.

[Christopher David O'Reilly, executive]

Okay. The next question, we'd like to take from Mike Nedelcovych from Cowen.

[Michael Nedelcovych, analyst]

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.

[Christopher David O'Reilly, executive]

Great. Thank you, Mike. So the question on Qdenga, I'd like to ask Christophe to take that one. And on the oncology, the portfolio and the pipeline, perhaps Christophe can comment on that, and then Andy can follow up with some pipeline comments.

[Christophe Weber, executive]

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 -- that's a bit more linear. So it's -- we can modelize or takeoff. But the big volume is more a national immunization program. And that's more nonlinear, if you like, because certainly, if a country like Brazil, for example, want to introduce a very vast immunization program, obviously, you have, you will have a sort of a big jump when that happens. So that's why it's not obviously quite difficult to actually forecast long term this type of vaccines.

Now the [ 1.6 billion to 2 billion ] peak is really correlated to -- now to our ability to reach the [ 100 million dose ] per annum production capability. We are not there yet, but we are very, 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 discussion with other potential partner to go to this 100 million dose as quickly as possible.

As you know, the data has been even stronger than what we expected. The approval, the label also. 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, we had some wins. We had some setbacks. We want to be a leader in oncology. We are not there yet. So we are very much active on that. They are actually in our pipeline, there are less -- they are less advanced some other assets like 861 and 279 in Phase III, they're not there yet. But we have a couple of asset in our pipeline, which are very promising, perhaps Andy can say a few words about these assets.

[Andrew Plump, executive]

Yes. Thanks, Christophe. Thanks, Mike. And I'll mention that having worked in R&D for 25 years, in some ways, the most exciting therapeutic area. But also the most challenging that I've been involved in has been oncology. And we know that if we look at the investment in oncology in the venture world, if we look at the amount of NIH and academic research that's focused on oncology, there isn't an area where we spend more and where we understand more. And there also isn't an area where we face as many challenges.

The failure rates in oncology continued to be amongst the highest in the industry. So I don't think it's just us. I think this is the field. On the flip side, the opportunity to change patients' lives and the revenue potential is just immense. And so we're really committed to oncology. We're really excited about our pipeline. We still haven't had that breakthrough out.

That -- but I think, as you know, it can happen very quickly. We have a handful of programs in mid-stage development right now. Subasumstat is the lead. We have 2 STING agonist. We have 2 T-cell engagers that came in through a company that we bought a few years ago that we had to help to create -- called Maverick Therapeutics.

And then we have a number of programs in early development, and we have our cell therapy engine. So we feel that we're making the right investments in oncology. And the key now is to leverage the excellence that we're building in development and just bring these programs to decisions. I'll mention that just Monday, we actually brought in a new oncology R&D, had [ PK Moro ], who's a real deep [indiscernible], highly experienced across oncology and multiple modalities. So we're really looking forward to PK taking the reins and carrying our oncology efforts forward, Mike. Thank you.

[Christopher David O'Reilly, executive]

Great. Thank you, Mike. Okay. So the next question, we're going to take from Shinichiro Muraoka from Morgan Stanley. Muraoka-san, please go ahead and ask your question.

[Shinichiro Muraoka, analyst]

[Interpreted] This is Muraoka, Morgan Stanley. My first question is to Christophe. Next fiscal year and how do we look at this. Well, FX is positive right now. VYVANSE is not declining as fast and based on the situation, how do we look at the next year. Three months ago, you said next fiscal year was going to be tough. But 3 months have passed since then. Have you changed your mind about what would happen in the next fiscal year or not. That's my first question.

And my second question is about 279 pipeline. UC and CD high dose Phase IIb is going to start. And I want to know the pathway until filing or approval. After Phase IIb, Phase III will be conducted first, and then for UC and CD, you'll have separately? Or is there a pathway that would accelerate this process? Those are my questions.

[Christopher David O'Reilly, executive]

The first question to Christophe on thoughts for next fiscal year, fiscal year 2024. Q2, you said it would be a tight year. Has anything changed over the past 3 months since your previous comments on FY 2024 outlook. And then the second question on TAK-279 on the path to submission in ulcerative colitis and Crohn's disease. Will we need to do a Phase III study in both those indications after the Phase IIb. So what is the path to submission in those indications? I'd like to ask Andy to take that question.

[Andrew Plump, executive]

Thank you, Chris. Thank you, Muraoka-san. Obviously, we'll give a precise guidance on next year on fiscal year '24 in May. But what we described earlier remain valid. It will be a tight year. It will be -- we can describe it as flattish year, flattish 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 if you like. 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. Thank you.

[Christophe Weber, executive]

And Muraoka-san, maybe I can dial up and walk you just briefly through the strategy for TAK-279. So first and foremost is to push forward in this continuum of psoriasis and psoriatic arthritis, where we have strong proof of concept. Our hope is that the psoriasis Phase III program, which is enrolling quite well, we can accelerate, bring that to market in the 25% to 27% range. Shortly thereafter, we'll start -- we're starting our Phase III studies in psoriatic arthritis, the Latitude program, shortly after approval in psoriasis, we're looking forward to approval in psoriatic arthritis.

And as we've discussed, this is a continuum of disease, and we strongly believe that TAK-279 will be a best-in-class. This year, we'll start a head-to-head in psoriasis against [ ducavacitinib ] to demonstrate that experimentally. So we're very excited about pushing that psoriasis psoriatic arthritis spectrum forward as rapidly as possible.

For IBD, it may be getting a little bit ahead of ourselves to start to predict approval time lines. I think the first -- the first inflection for us is really demonstrating that a TYK2 inhibitor can be effective in Crohn's disease and ulcerative colitis. We believe strongly, based on the genetic data that exists based on the role that TYK2 plays in cytokine signaling based on robust animal model data, we really believe that with a higher dose, we can be efficacious. But it's incumbent on us to demonstrate that in clinical trials.

So first and foremost is getting the Phase IIb studies off the ground. The Crohn's study should start in the next couple of months. UC study shortly thereafter. And then if those studies are successful, we -- that's our plan. The acceleration path, unfortunately, IBD is somewhat of a long development track. The acceleration path is through excellence in clinical trial execution. And that's something, as I mentioned with 861, we feel we're really getting a handle on with the model that we have in place and with the digital and technology tools that we're starting to implement in our development programs. If everything goes well, I think we'll be looking at approvals in IBD by the end of this decade.

[Christopher David O'Reilly, executive]

So next question, moving on. I'd like to call on Hiroyuki Matsubara from Nomura. Matsubara san, please unmute and ask your question.

[Matsubara, analyst]

[Interpreted] first question about [indiscernible], and switch back is developing nucleic acid and the efficacy seems better than [indiscernible], what do you think of this? And the next-generation Orexin and the potential of the next generation and what's the difference between the next-generation compound and 861.

[Christopher David O'Reilly, executive]

[indiscernible] how we're seeing the competitive landscape evolving, including both switchback from orladeyo, but also next line of therapies coming through. I'd like to ask Julie perhaps to comment on that. And then the next question on the next-generation Orexin agonist, how are we positioning that vis-a-vis TAK-861, I'd like Andy to comment on that.

[Julie Kim, executive]

Matsubara-san, for the question. In regards to takhzyro, when you look at the patient switching from takhzyro. We have seen patients switch back to takhzyro. Again, takhzyro has very strong efficacy and safety data proven over multiple years. And so that has been the reason why patients switch back to takhzyro from Orladeyo, the convenience of the oral does not trump the stronger efficacy that takhzyro presents.

In regards to new entrants, you were mentioning, in particular, garadacimab. What we've seen from the data that's been shared thus far, it does seem to have efficacy that is similar to takhzyro. But again, we believe that with takhzyro's strong position in the marketplace. We have market share leadership, particularly in the prophylaxis segment of HAE. That -- that long performance in terms of efficacy and safety is a benefit for takhzyro.

[Andrew Plump, executive]

And Matsubaro-san, on the next-generation Orexin, oral Orexin agonist, TAK-360, which is going to have its IND filed in the next several weeks. It's an entirely novel structure relative to TAK-861 in novel properties, potency, PK, et cetera. How we position that to a large extent will depend on the data sets that we'll see in the near future on TAK-861. But there are lots of possibilities. And it's something that we hope that we'll be able to share during an extended discussion at an R&D event that we're planning for later in 2024.

[Christopher David O'Reilly, executive]

Okay. Let's move on to the next question. I'd like to call upon [indiscernible] from Jefferies. It looks like the hand has been lowered. So I'd like to move on to the next question from Macquarie. So if Frande from Macquarie is still on the line. Please go ahead and unmute and ask your question. Hello, is that you, Tony?

[Tony Ren, analyst]

This is Tony Ren from Macquarie.

[Christopher David O'Reilly, executive]

Hi, yes, Tony. Yes, we can hear you.

[Tony Ren, analyst]

Okay. Perfect. Okay, sorry. So a couple of questions. So first of all, about the licensing of Protagonist Therapeutics, rusfertide. Just want to get a sense from you about your expectation of this asset. When do you think it's going to launch? What's the peak sales estimate. So that sound like rusfertide.

The other one is that I want to go back to -- I want to go back to ENTYVIO again. So basically, I always think about ENTYVIO as the market size in terms of the size of the pie which is determined by the number of colonoscopy procedures being performed. I want to see how that's trending after COVID. And then the other one is that I did notice, I think on Slide #27, there was a bit of a market share decline compared to the second quarter slides. So I just want to get some clarity on that.

[Christopher David O'Reilly, executive]

Okay. Julie, would you like to take both of those questions perhaps.

[Julie Kim, executive]

Sure. Thanks, Tony, for the questions. In terms of rusfertide, we've not provided peak market share data yet. We will do that in the future. In terms of when we expect launch, as Andy mentioned, currently, the product is in Phase III clinical trials. We do understand that the trial is enrolling quite well.

So it will still be a few years before we see launch. But again, we will provide more details later on in terms of rusfertide. For the questions in regards to ENTYVIO, as I mentioned earlier, in terms of first-line treatment where ENTYVIO is strong. We still maintain our market share leadership position where we have seen some market share loss is in second line and further. This is where the new competitive entrants have come in, and that's typically where they come in second line and beyond. And so you are correct in that overall, it has led to a slight market share decline, but we remain quite strong in first line.

[Christopher David O'Reilly, executive]

Thank you, Tony. And I think, [ Yamagita-san ] from Jefferies is back. Yamagita-san or if that's Steve Barker perhaps, if you would like to unmute and ask a question, please.

[Stephen Barker, analyst]

It's Steve Barker from Jefferies. My first question is related to Qdenga. I'm looking at the geographic split of the sales to date. And it looks like it's about 70% weighted towards emerging markets. I was wondering if you expected that to continue or whether the weight of emerging markets would be higher in the future. And then also potential $2 billion peak sales related to a 100 million doses, should we assume that you're aiming for an average sales price of about $20 per dose?

And then my second question is related to margins. you are aiming to get your core OPM back up -- well, back up to low to mid-30s ultimately. I was hoping you could help us understand the path to that high level of profitability in terms of improvements for cost ratios and GPM. Where is the improvement likely to come from?

[Christopher David O'Reilly, executive]

Great. Thank you, Steve, for those questions. So a question on Qdenga and the revenue split and also average cost of dose and then also the return to low to mid-30s. I'd like to ask Christophe to comment on both of those questions.

[Christophe Weber, executive]

Thank you, Steve. I think the -- on Qdenga, as we progress, most of the revenue will come from emerging countries. So in fact, it will come from endemic countries and the countries which are initiating on national immunization program. Right now, we are more in the private market and the travel market. And so I think the large volume type of demand will come later from on the mid countries.

And I think obviously, you can do the ratio between the [ 100 million dose ] and the [ 2 billion. ] So yes, I mean, on average, we will be around that type of price per dose. I mean, today, in the private market in Indonesia, we launched at USD 26 per dose in Indonesia.

And typically, the national immunization program to allow lower price when we contract with government. So -- and that's what our intent, our intent was to make these vaccines, to create access and to -- this is a very innovative vaccines. But we want these vaccines to be bringing -- to be brought into immunization program rapidly. And so that's our strategy. Regarding return to low to mid-30s corporating profit margin, we'll give more detail in May about the path to get there, it will to be a combination of revenue return to growth.

And our growth of launch product gross margin is high because they're highly innovative medicine. So that will help. It will be about leveraging technology, AI and gain productivity and it will be also cost control. So it will be a combination of all 3. But in May, we will be more indication about how and how quickly we'll go back to low to mid-30s.

[Operator]

[Interpreted] 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.