Takeda 2Q16 (F1Q16) – Nesina (alogliptin) up 9% YOY to $123 million driven by growth in emerging markets; Actos (pioglitazone) sales no longer reported; Contrave (naltrexone/bupropion extended-release) down 19% YOY – August 2, 2016

Takeda recently provided its 2Q16 (F1Q16) update in a call led by CEO Mr. Christophe Weber. While there was no mention of diabetes during the call, please see below for our top three highlights and an honorable mention from the update.

1. Sales of DPP-4 inhibitor Nesina (alogliptin) rose 9% year-over-year (YOY) as reported (10% in constant currencies) to $123 million (13.3 billion JPY), driven primarily by ex-Japan sales.

2. Management did not break out sales for TZD Actos (pioglitazone) in its 2Q16 update materials.

3.  Takeda’s share of Contrave (naltrexone/bupropion extended-release) revenue totaled $12 million in 2Q16, down 19% as reported (22% operationally) from $16 million in 2Q15.

4.  On the pipeline front, there were no updates on Takeda’s fixed-dose alogliptin (DPP-4 inhibitor)/metformin combination tablet, which was submitted as a New Drug Application (NDA) in Japan in September 2015. This combination is approved in the US under the brand name Kazano.

Top Three Highlights

1. Supplementary financial information revealed that sales of DPP-4 inhibitor Nesina (alogliptin) rose 9% year-over-year (YOY) as reported (10% in constant currencies) to $123 million (13.3 billion JPY). Sequentially, worldwide revenue grew 24% against an easy comparison, as Nesina sales fell 21% sequentially in 1Q16. By geography, Japan sales contributed $86 million (9.3 billion JPY), US sales contributed $14 million (1.5 billion JPY), Europe and Canada sales contributed $14 million (1.5 billion JPY), and emerging markets contributed $9 million (1 billion JPY). Growth in 2Q16 was once again driven by ex-Japan sales, and particularly, by expansion in emerging markets – management highlighted that sales in emerging markets rose a remarkable 35% YOY operationally. Total revenue from all markets excluding Japan reached $37 million (4 billion JPY), which marks a 48% YOY increase as reported for Nesina sales outside Japan. US sales of Nesina rose 3% YOY operationally, while sales in Japan declined 2% YOY operationally and as reported. See the graph below for trends in Nesina sales since 4Q10 – international sales do continue to increase from a small base.

Figure 1: Total Nesina Sales (4Q10-2Q16)

• By value, Nesina accounted for 5% of the overall worldwide DPP-4 inhibitor market in 2Q16. 2Q16 was a fairly strong quarter for DPP-4 inhibitors on the whole (up 8% YOY to $2.6 billion) and for Nesina, although Takeda’s DPP-4 inhibitor share of the market by value continues to lag behind that of competitors. For comparison, Merck’s Januvia (sitagliptin) franchise holds 63% of the market share by value; Lilly/BI’s Tradjenta (linagliptin) franchise holds 13%; Novartis’ Galvus (vildagliptin) franchise holds 12%; and AZ’s Onglyza (saxagliptin) franchise holds 7%. We note that these percentages are based on our estimates of total Tradjenta franchise sales, since only Lilly’s portion of revenue is reported publicly. We estimate Lilly’s share of revenue at ~36% based on Lilly’s reported Tradjenta franchise sales for 2015 ($357 million) and global net sales for the franchise in 2015 (€909 million, or ~$1 billion) released in BI’s recent diabetes update. See our pooled analysis of DPP-4 inhibitors for more thoughts on directions for this drug class and see the graph below for a class-wide look at the market.

Figure 2: DPP-4 Inhibitor Sales (1Q07-2Q16)

*Lilly/BI’s Tradjenta/Jentadueto sales are estimated from Lilly’s publicly-reported share of revenue (~36%).

2. Notably, management did not break out sales for TZD Actos (pioglitazone) in its 2Q16 update. As Takeda stopped reporting on Actos’ non-Japanese revenues since 4Q15, this did not come as a huge surprise to us. This update is the first of Takeda’s fiscal year and we assume that Takeda will no longer be reporting Actos sales moving forward. Lilly similarly ceased breaking out Actos sales with its 1Q16 update, likely due to declining revenue for the product over the last few years due to loss of patent exclusivity and safety concerns over bladder cancer, heart failure, and bone fractures. This decision reflects the waning popularity and revenue of the now generic TZD class, though we’ve recently been curious if the results of the IRIS trial might spark renewed interest in generic pioglitazone, particularly for patients with prediabetes at high risk for cardiovascular events. We have long heard that the side effect profile can be mitigated if Actos is taken in a lower dose and given the paucity of other compounds that address insulin resistance, we’d love to see TZDs used successfully in more combinations. That said, the perception has become quite negative over time and HCPs do not seem to be able to prescribe it successfully. While it is clearly not the easiest medicine to prescribe, we also don’t know that other compounds that address insulin resistance will be able to be developed successfully given the baggage attached, much of which is not completely “fair” in our view. 

3. On the obesity front, Takeda’s share of Contrave (naltrexone/bupropion extended-release) revenue totaled $12 million in 2Q16, down 19% as reported (22% operationally) from $16 million in 2Q15. Sequentially, sales fell 7% as reported from 1Q16. These numbers represent a relatively significant decline, compared to how Contrave performed in 1Q16, and considering that Contrave was one of the obesity drug market’s leaders, this not a promising sign for other obesity companies to come – we’ll learn more when Orexigen reports its own update on August 4 but overall we believe that the baggage that comes alongside obesity drugs is substantial (similar, in fact, to baggage associated with TZDs). We question whether it will be possible for Contrave to recover given this negativity. 

• Orexigen announced yesterday that it has completed its acquisition of the US rights to Contrave from Takeda. There was little discussion of Contrave in Takeda’s 2Q16 update, though management did suggest in Q&A that the sale of rights to Orexigen has allowed Takeda to optimize its US margins by reducing its sales force – see below for more on this. This announcement comes two months ahead of the anticipated timeline outlined in Orexigen’s original announcement regarding the acquisition this past March.

Honorable Mention

• On the pipeline front, there were no updates on Takeda’s fixed-dose alogliptin/metformin combination tablet, submitted as a New Drug Application (NDA) in Japan in September 2015. We consider the NDA a very smart move by Takeda, given how combination drugs are driving DPP-4 inhibitor class growth, and we’ll be keeping an eye out for regulatory action. This combination is approved in the US under the brand name Kazano.

Questions and Answers:

Q: For Takecab and Trintellix, we understand that you need a sales force, but probably next year or so. I think almost you have had enough resource-taking activities, because it's been some time already since their launches. So, therefore I think you don't need any extra.

A: You're right in the sense that we don't need to increase anymore. Remember in 2014, we increased our sales force, especially in the United States to launch Trintellix. In Japan, we reallocated resources. But TAKECAB is a new product. There is no way we can stop promotion now. We just launched. We have a very new product to support in Japan. So, we need to support this new product in Japan.

The only area where we actually optimize our resources and reduce our cost has been by selling back Contrave. We could actually reduce significantly our sales force we bought and we optimized quite a bit of our margin in the United States through that.

-- by Payal Marathe, Helen Gao, Melissa An, and Kelly Close