Streamlining Takeda's Profit Story

Takeda needs to execute on cost-cutting, pipeline to meet EPS expectations

After spending a decade growing the company via acquisition, Takeda Pharmaceutical Co. Ltd. is now focused on getting its costs in line with its global pharma peers. But to grow EPS in line with Street expectations, the pharma also will have to hit its existing pipeline on all cylinders.

New president Christophe Weber's predictable first move since taking the operational helm appears to be a continued implementation of cost-cutting plans that were unveiled before he joined Takeda in April.

Takeda's revenues of ¥1.7 trillion (.4 billion) in FY13, which ended on March 31, 2014, were the pharma's highest since 1999 and up 8.6% from ¥1.6 trillion in FY12. Net sales were ¥796.5 billion (.7 billion), up 5.1% from ¥789.9 billion in FY12 on a constant currency basis.

But profits have been declining and in FY13 were the lowest since 1999. FY13 net profits were ¥109.6 billion (.1 billion), down 27.4% from ¥150.7 billion in FY12.

The pharma expects net profits to fall again in FY14 (see "The Bottom Line," page 2).

Takeda's market cap has fallen along with its profitability and now stands at ¥3.6 trillion ( billion). The pharma's stock price has fallen from a peak of ¥8,400 in June 2007 to ¥4,587 last Friday, driven down in part by patent expirations for several blockbusters and the fallout tied to the risk of bladder cancer associated with diabetes drug Actos pioglitazone (see "Takeda Chronicles," page 3).

In May 2013, Takeda unveiled a plan to get costs in line, and subsequently hired several outsiders, including Weber, to fill C-level positions and implement the plan.

Weber became president in June and last month announced his first changes: a plan to streamline operations by establishing five regional commercial business units and two specialty business units, and to condense the R&D organization's therapeutic area units from six to four (see "Streamlining Operations," page 4).

Weber reports directly to Chairman and CEO Yasuchika Hasegawa and is the company's first non-Japanese president. He was previously president and general manager of the GSK Vaccines unit of GlaxoSmithKline plc and CEO of GSK Biologicals S.A.

The cutting is already improving Takeda's cost structure, but meeting expectations for EPS growth will require Weber and his team to execute on new product launches in challenging categories, as well as execute on a late-stage pipeline beset by delays and setbacks.

More details on Weber's long-term plans for

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