Virus Outbreak Underscores Takeda’s Bet on Vaccines, CEO Says

(Bloomberg) -- The spread of novel coronavirus infections is starting to make one thing clear: more vaccine investment is needed, the chief executive officer of Asia’s biggest drugmaker said.

“The world has to be more proactive than reactive,” Christophe Weber, CEO of Takeda Pharmaceutical Co., said in an interview. Although vaccine sales totaled $54.2 billion in 2019, that was less than 5% of total global revenue for pharmaceutical companies, according to data from Statista.

With more than 1,700 deaths and 70,000 infected, the coronavirus outbreak from China’s Hubei province is drawing attention to the lack of investment by the global pharmaceutical industry in vaccines, which are less profitable than specialty drugs.

Weber used to run the vaccines business of GlaxoSmithKline Plc before joining Takeda and later leading its $62 billion purchase of Shire in 2019. Weber aims to make vaccines a core business segment. While Takeda doesn’t disclose how much it has invested in its vaccines unit, it is seeking approval for its first vaccine for dengue fever within the next two years. Takeda’s main efforts focus on oncology, neuroscience and gastrointestinal therapies and rare diseases.

“Whatever you do, it will always take time to bring a treatment for vaccines,” Weber said.

There will be more outbreaks as the global population increases and the climate changes, according to the CEO. “We talk a lot about coronavirus because it is impacting developed countries,” he said. “But there are threats like Ebola, which people don’t talk too much about. We forget there are many threats like that which are already here.”

Balancing Act

That also highlights one of Weber’s challenges at the two-centuries old Takeda: balancing the need for lucrative drugs in a cutthroat industry with its mission of bringing medicine to all and improving public health. Takeda joined the ranks of top 10 global drugmakers by sales after the Shire acquisition, which was completed in early 2019. The deal, the biggest outbound acquisition by a Japanese company, was noteworthy for its size and the amount of debt Takeda took on.

Even more than a year later and with cost savings from the acquisition ahead of schedule, doubts still persist about Weber’s vision and Takeda’s drug candidate pipeline — which some analysts view as too sparse in terms of late-state development drugs and with too many unknowns. Takeda’s stock price remains sluggish, and is down more than 20% from just before the merger’s unveiling.

“In the near term pipeline for Takeda’s drugs, only a handful has blockbuster potential. The other interesting drug candidates and their approval are more longer term from now,” Jay Lee, an analyst at Morningstar Investment Service, said. The distant timeline makes analysis and predictions on future revenue more volatile, he added.

Global Targets

One of Takeda’s top drugs, a blood-cancer treatment called Velcade, has already lost patent protection, and its current best-selling drug for ulcerative colitis is expected to face market competition and lose patent protection starting in 2024.

Weber said he thinks two medicines in the pipeline — one for narcolepsy and another to treat blood cancer using cell engineering — could have the highest potential for sales. Both are in late-stage testing but aren’t projected to be up for market approval until around 2023.

China’s market is also critical for Weber, who expects it to surpass Japan to become the company’s No. 2 market in the next 10 to 20 years, as market reforms incentivize more innovative drugs. The current coronavirus outbreak doesn’t change Takeda’s long-term plans in China, where the company expects to introduce 15 drugs over the next three years.

In order to tackle Takeda’s 5.2 trillion yen ($47.4 billion) in net debt, Weber has been divesting non-core assets that include a mixture of off-patent drugs and over-the-counter medicines, although some have questioned their attractiveness. The pharmaceuticals company is seeking to cut its debt-to-earnings ratio by half by 2024. Weber said he thought it would be easy to sell off baskets of businesses in certain markets, and that negotiations on divestments are always ongoing.

Looking beyond that, Weber thinks the big-figure acquisition days for Takeda are over. “We don’t need scale anymore. We are big enough,” he said. “We will grow in the future because of our current portfolio and our pipeline.”

To contact the reporter on this story: Lisa Du in Tokyo at ldu31@bloomberg.net

To contact the editors responsible for this story: Rachel Chang at wchang98@bloomberg.net, Reed Stevenson

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