Lack of blockbuster candidates at Takeda? Don’t worry, Shire has it covered

Takeda’s revenue of 449.8 billion Japanese yen ($4 billion) during the April-to-June quarter was flat compared to last year. But the challenge in analysts’ eyes is not sinking Velcade sales but a lack of up-and-coming products to buoy future revenue. Luckily, it has Shire to fill the gap.

The Japanese drugmaker's quarterly results only underlined that need. Velcade's freefall continued, with sales of the once-blockbuster blood cancer drug dropping by 13.4% to 31.4 billion Japanese yen ($281.6 million). For the full year, Takeda expects the Velcade sales hit to top 40%.

Meanwhile, strong growth from multiple myeloma drug Ninlaro and inflammatory bowel disease therapy Entyvio again helped compensate for Velcade's decline. To be specific, Entyvio grew sales by 33.6% to 61.3 billion yen and Ninlaro sales were up 39.6% to 14 billion yen.

But with few new products on their way to help Entyvio and Ninlaro carry the load, analysts are worried that the real problem lies in Takeda’s pipeline. And that, in turn, underscores the importance of its pending $62 billion acquisition of Shire.

Takeda has struck numerous R&D pacts as it refocuses its drug development efforts, but most of those collaborations are either for drug discovery or early clinical-stage compounds. In fact, aside from research aimed at expanding use of approved products, Takeda only has three phase 3 drugs: the NAE inhibitor pevonedistat; Myovant-partnered prostate cancer treatment relugolix; and a dengue vaccine dubbed TAK-003.

In comparison, Shire has 16 phase 3 programs—including multiple indications—and seven products in registration. For 2018 alone, it's awaiting two key FDA decisions, one for hereditary angioedema (HAE) therapy lanadelumab in August and the other for chronic idiopathic constipation (CIC) treatment prucalopride in December. Shire has previously projected peak sales of $2 billion for lanadelumab.

According to GlobalData analyst Thomas Moore, by 2023, seven of the top ten best-selling new products for the combined company would come from Shire’s pipeline.

For the second quarter, Shire product sales of $3.8 billion represented 6% growth, beating analyst expectations across multiple products, including ulcerative colitis drug Lialda, GLP-2 analog Gattex, its HAE franchise and immunoglobulin therapies, Bernstein analyst Ronny Gal wrote in a Tuesday note to investors.

"Shire delivered well this quarter with some product beating and critically, no added concerns that could reflect on the Takeda deal," wrote Gal.

But not all Takeda investors have been sold on the Shire buy. Some say they're worried about growing competition in hemophilia—a key Shire focus area—from Roche’s recently launched Hemlibra. CEO Christophe Weber assured them that Takeda has that competitive threat built into its financial model for the deal. During the quarter, Shire’s hemophilia sales of $747 million came in flat year over year, roughly meeting consensus expectations, according to Gal.

Takeda itself hasn't been without positive R&D news, however: It recently delivered some promising interim data from a phase 3 trial showing its ALK-positive lung cancer drug Alunbrig beat Pfizer’s Xalkori in previously untreated patients, potentially giving it a chance to compete with Xalkori, Novartis’ Zykadia and Roche’s Alecensa.

Outside of revenue, Takeda’s operating profit dropped by half, which Takeda attributed to two large-scale asset sales to Wako Pure Chemical and a Teva joint venture in Japan during the same period last year.

The Shire deal, still pending blessings from regulators in Europe and China, is expected to close in the first half of 2019.

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