Takeda Pharmaceutical Company Limited (TAK) on Q4 2022 Results - Earnings Call Transcript
Ayako Iwamuro: Thank you very much for your participation in Fiscal Year 2021 Earnings webinar of Takeda Pharmaceuticals. I am Ayako Iwamuro, IR of Takeda Pharmaceuticals. 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 in our other SEC filings. Please also refer to the important notice on Page 2 of the presentation. Now let us move on to the presentation of today's call. Christophe Weber, President and CEO; Andy Plump, R&D President; and Constantine Saroukos, Chief Financial Officer, will give you a presentation. After that, we will take questions. Now let us begin.
Christophe Weber: Thank you very much, Ayako, and thank you, everyone on the phone, for joining us today. This is a really incredibly exciting time at Takeda. We had a remarkable year, as you will see in our fiscal year 2021 earning results. It is also clear that we are moving into a new phase of the pandemic and many of us are using our offices again with a renewed energy and optimism. At Takeda, we are embracing a flexible way of working, leveraging our offices which will be transformed into a more collaborative workspace enhanced by technology. At the same time, we are constantly reminded about the need to lead with our values in these very uncertain times. Since the start of the war, a humanitarian crisis in Ukraine, we have been supporting with monetary and medicine donations. Recently, we made the decision to significantly reinforce the donation for humanitarian support and ensure that our life-saving medicines are still available in Ukraine. In regards to Russia, we made a decision to align with our values to and all nonessential business activities in the country while still ensuring that Russian patients can benefit from our medicines. We stopped new product registration, new clinical trials, enrollment for existing trials and other activities. But we are continuing activities that are essential to maintain the supply of our medicines to patients in need. As the situation continues to evolve, we are committed to respond in line with our values brought to action through patient trust, reputation business in that order. Starting with Slide 4. I am really proud of where we are today and energized by our prospect for the future. Our purpose to create better health for people and a brighter future for the world is a core foundation of our global growth strategy and will help us create value for decades to come. Our growth strategy starts with our balanced and diverse portfolio that includes oncology, rare genetics and hematology, neuroscience, gastroenterology, plasma-derived therapies and vaccines. Within this portfolio, we have a category of growth drivers that we are calling our Growth and Launch products. We will expand on this more in a moment. And our new Global Portfolio division is already making significant progress in optimizing our commercial execution capabilities through a focus on global product growth, launch excellence, elevating our strategic focus in China and geographic expansion for many of our most important medicines. You can look at China as the best example of the potential that we have as we expand into new markets. We are leading with the most approval in China of any global biopharmaceutical company over the past 2 years. Our investment in the second largest pharmaceutical market in the world will effectively allow us to expect to double our revenue in China in the next 3 years. Next, we leverage our commercial momentum to nurture a pipeline with approximately 40 clinical stage medicines driven by our R&D engine. We have a holistic approach to R&D through our dynamic in-house research capability and a network of over 200 partnerships. We continue to invest in building a presence in cutting-edge cell and gene therapies that have the potential to redefine how we treat serious and life-threatening disease. We have multiple exciting opportunities with critical proof of concept on pivotal study data over the coming quarters. We are confident in the commercial potential of our pipeline to deliver in the medium term with 10 of our programs in late-stage development. Finally, all of this is possible, thanks to our strong financial foundation. We continue to focus on growing our revenue and delivering a competitive core operating profit margin. Our strong margin drive important cash flow, which allow us to invest in our growth drivers while also paying down debt. It also allows us to return cash to shareholders in the form of our well-established dividend and share buybacks when appropriate. I credit our people around the world for our progress on growth. They come to work each day, living our values and our commitment to patients. We are working to continuously deliver an exceptional people experience to all our colleagues wherever they work. We are redesigning our workspace and way of working to provide the flexibility that our people value while reinforcing the power of human connection and creative collaboration. We are also ramping up our data and digital learning programs to make sure that we are creating a resilient, future-ready organization. And when we think about the future, we are also reminded of the importance of our mission to build more sustainable health systems and foster a better planet for future generation. We are on a continuous journey with our colleagues and others in the community to challenge our ambitious sustainability for us. Our work is more important than ever before, particularly in the time of great uncertainty. As we look to the future, it is clear that we have unlimited possibilities to make an impact for patients, our people on the planet. On Slide 5, as you will see today, our performance in fiscal year 2021 reinforce that our strategy is working. We remain well positioned for long-term business growth. Fiscal year '21 was a year of significant top line acceleration with underlying revenue growth of 7.4%. On a reported basis, revenue was ¥3,569 billion with a year-on-year increase of 11.6%. This top line growth was driven by our growth and launch product which delivered strong performance across our key business areas in spite of the COVID-19 challenge. We also continued to generate robust free cash flow, reaching ¥943.7 billion, which allowed us to invest in our growth drivers while also paying down debt, ending the year with a net debt to adjusted EBITDA ratio of 2.8x. This solid financial foundation and commercial momentum allow us to continue to develop a pipeline that shows significant potential. As a science-driven organization, we are committed to build for the future, and we are doing that. We are proving our ability to bring new therapies to patients, expand indication and launch products in new geographies. Notable approvals, EXKIVITY and LIVTENCITY have exceeded launch expectation and added even more momentum. Let's start with EXKIVITY. We launched within days of approval in the U.S. and are off to a strong start. In fact, EXKIVITY is capturing approximately half of all new patient starts among the 2 branded EGFR Exon 20 treatment options. The broad prescribing use and high numbers of individual prescribers can be attributed to EXKIVITY's durable response and overall administration. We are expanding EXKIVITY into new markets and are reaching new patients with the recent conditional approval in the U.K. We are seeing similar success with our post-transplant antiviral infection treatment, LIVTENCITY, which launched in the U.S. in December 2021. More than 500 patients have been treated with LIVTENCITY in the months following the launch, and demand is continuing to grow. To date, more than 30% of the approximately 300 transplant centers in the U.S. have prescribed LIVTENCITY. This speaks to the unique value of LIVTENCITY. We also recently announced an exploratory data analysis of LIVTENCITY that showed meaningful reduction in hospitalization rate and length of hospital stay. Patient by patient, we are seeing the impact we are making. It is clear that both LIVTENCITY and EXKIVITY are addressing important and distinct patient needs. To help address the COVID-19 pandemic, we are continuing to gain traction in our effort to bring vaccines to the people of Japan. Last month, we received approval to license and manufacture NUVAXOVID and will soon begin distribution in Japan. This past fiscal year has been remarkable. We have clearly demonstrated our ability to bring new therapies to patients. We received our highest number of global approvals during any fiscal year in our history, and we are passively proud to be leading the industry in drug approval in Japan. I've talked in the past about how we complement our in-house R&D expertise with a robust network of some of the most innovative and respected partners. The acquisition of 3 innovative immuno-oncology companies, GammaDelta Therapeutics, Maverick Therapeutics and Adaptate Biotherapeutics serve as a great example of our strategy in action. Another great example is a collaboration and license agreement with JCR Pharmaceuticals to develop a new way to treat Hunter syndromes and help maintain or improve committed function in patients living with this rare disease. We have also announced a collaboration with Frazier Healthcare Partners in fiscal year '21 to launch HilleVax, a biopharmaceutical company to develop and commercialize Takeda norovirus vaccine candidate. We follow the best science and collaborate to unlock innovation wherever it originates. These partnerships offer exciting new opportunities to advance our pipeline. On Slide 6, looking ahead to fiscal year 2022, we expect that our strong revenue growth will continue and will more than offset impact from loss of exclusivity. Going forward, we will use the concept of constant exchange rate, or CER growth, to give management guidance on our core financial. Previously, we had used a more complex underlying methodology, which adjusted for divestiture as well as foreign exchange. But because our divestiture program is essentially completed, we will now only be adjusting for foreign exchange. On a constant exchange rate basis, we expect core revenue to grow low single digits -- at the high end of low single digit, and we expect core operating profit on core EPS to grow at high single digits. We expect to continue delivering robust cash flow. And for the first time ever, are forecasting a core operating profit that exceeds ¥1 trillion, the first for Takeda with a core EPS of ¥484. We also expect a rebound on a reported earnings basis, with reported EPS to increase by 27.9%. With regards to shareholder returns, we remain committed to maintaining our well-established dividend policy of ¥180 per share annually, alongside share buyback when appropriate. Developing our diverse pipeline continues to be a priority. We have many exciting opportunities in front of us with 10 late-stage development programs with upcoming NMEs filing and expansion opportunities. I'd like to point to a few near-term highlights. Our dengue vaccines, TAK-003 is currently under review with various dengue endemic countries and with European authorities and we anticipate a decision this year in fiscal year 2022. We believe that we have a best-in-class vaccines for dengue, the fastest spreading mosquito borne disease, named by the WHO in 2019 as one of the top 10 threats to public health. Other late-stage milestones include data readout for label expansion opportunities for LIVTENCITY in frontline cytomegalovirus infection, IQVIA in CIDP, chronic inflammatory demyelinating polyradiculoneuropathy, and TAK-755 in CTTP, congenital thrombotic thrombocytopenic purpura. The late-stage data readout should allow for global filing in this indication with future label expansion opportunities to cover. Finally, there will be multiple proof-of-concept readouts across the pipeline over the next 2 years, which could lead to additional approval later this decade. In particular, we remain focused on continuing to develop the Orexin franchise, and we expect to see data for our next oral program, TAK-861, in the coming year. On Slide 7, I'd like to turn now to an area of our business that is driving impressive growth and making a positive impact on patients with life-threatening condition. Our PDT portfolio continued to grow faster than the market, driven by the strong performance of immunoglobulin and albumin. This is a remarkable achievement given the pressure of the pandemic that greatly challenge the industry. I'm proud to say that our total revenue growth in calendar year 2021 was the highest of the major industry players. As you can see here, immunoglobulin grew 9% and albumin grew at a rate of 42% year-over-year. Our remarkable growth can be attributed to our efforts to invest in, expand and transform our end-to-end plasma operation and capabilities. Throughout the pandemic, our primary objective has been to maintain continuity of patient supply, which require consistent donation volume growth as new patients are diagnosed and brought on to therapy. We have met all our supply commitments to patients worldwide in the past fiscal year. Looking ahead, we see potential for growth in our PDT business and anticipate growth of both our immunoglobulin and albumin portfolio of between 20 and 20 -- 10% and 20%. The past 2 years have demanded that we do more with less plasma, and we have. We expect also compensation of donors in the U.S. to start to moderate closer to prepandemic levels to enable year-over-year margin improvement. Indeed, we are well positioned to capture the full benefit of our digital and organizational transformation to improve PDT business margin over time. We have already done much to mitigate costs through operational efficiencies and advance in data and digital. We were also the first major plasma manufacturer to return to pre-pandemic plasma donation volumes and fully expect to deliver an additional 10% to 20% plasma donation volume growth in fiscal year 2022. Our strategy here is working. Strong top line growth paired with bottom line optimization has enabled PDT to successfully maintain our growth trajectory and meet our commitment. Next, on Slide 8, I would like to share with you how we are classifying our commercial portfolio. Moving forward, we will look at our most important global products and future growth drivers under a category called Growth and Launch products. This category generated ¥240 billion or USD 2 billion in incremental revenue in last fiscal year and delivered underlying growth of 19%. It includes ENTYVIO, TAKHZYRO, ALUNBRIG and our immunoglobulin and albumin product. We will also look at our newest launches in this category, including EXKIVITY and LIVTENCITY as future source of revenue. This growth and launch product represents 1/3 of our global revenue and the vast majority of our growth. These products address important unmet needs, bring substantial value to patients and are expanding rapidly to new markets, as illustrated by the recent approval of ALUNBRIG in China and TAKHZYRO in Japan. This is a slight adjustment from our previous focus on 14 global brands, but one that allow us to put strategic emphasizes on specific growth drivers and new launches, that represent the main driver of our future revenue growth. In addition to this change and the shift from underlying to constant exchange rate, we are also slightly adjusting how we describe our pipeline to reflect our future-forward business evolution. Looking ahead, we will place emphasizes on our life cycle management pipeline, on our late-stage pipeline, and our pipeline with expected key proof-of-concept readout. This will all be reflected in this presentation shortly. This reporting adjustments are all intended to show with clarity and simplicity the direction of our business in the coming years. On Slide 9, I would like to start on the next slide by reinforcing that we see ENTYVIO, TAKHZYRO, our immunoglobulin and albumin portfolio and new product continuing to generate substantial growth into the end of the decade. We are confident that these growth drivers will allow us to offset the impact coming from losses of exclusivity, which is especially significant in the next 2 years as products like VELCADE, VYVANSE and AZILVA will be impacted. As a consequence, we expect our revenue compound annual growth rate to be in the low single-digit range between fiscal year '21 and '23. Even in 2023, when we will likely face VYVANSE generic entry in August that year, we believe that there is enough momentum coming from the rest of the portfolio to hold revenue approximately flat. The headwinds we are facing are temporary. As we think about the long-term outlook, it is important to remember that after VYVANSE, we have significantly lower loss of exclusivity exposure in the second half of this decade. We can manage the loss of exclusivity headwinds we face in '22, '23, and we do not expect future loss of exclusivity exposure of this magnitude until the launch of ENTYVIO biosimilars in the U.S. As previously communicated, we do not expect to see any biosimilar entry for ENTYVIO at the time of that exclusivity expiration. We have patents for ENTYVIO that run out to 2032 and any biosimilar of ENTYVIO that seeks to launch prior to then will need to address potential infringement or the validity of all relevant patents. As it stands today, we also have yet to see any biosimilars onto our clinical development. And as our infrastructure cost is competitive, our PDT margin improved and we leverage new investments in data and digital, we aim to minimize the margin impact of VYVANSE generics and deliver a core operating profit on adjusted EBITDA at or above the fiscal year '21 level. This will, in turn, allow us to continue to deleverage towards our low 2s target while also investing in continued expansion of our growth and launch products and enriching our R&D pipeline either organically or through targeted business development. Moving to Slide 10. We never lose sight of the fact that our success can be connected to our relentless focus and patients on our underlying values. Our vision is to discover and deliver life-transforming treatments aided by our commitments to patients, our people, and the planet. This purpose-led and value-based approach drives all our action and decision. And as we look to the future, I see significant potential in data and digital. Technology will revolutionize -- is already revolutionizing our business and create better experience and outcome for patients, accelerating the discovery, development and delivery of life-transforming treatment. And we will transform the way we work. Our goal is to continue to grow Takeda into the most trusted, science-driven digital biopharmaceutical company. In summary, I'm really proud of our progress as well as our ability to lead with our values and continue to challenge our own ambition. This last fiscal year was a remarkable year. We brought new life transforming medicines to patients and saw strong growth in our key business area. We focus on areas where we can make the greatest impact for patients, including scientific advancement in rare disease, where there is a desperate need for effective treatment option. Our diverse portfolio will position us to continue to generate steady organic top line performance while also driving competitive margin and strong cash flow to fuel future innovation. With our recent approval, we are even more confident today that the strength of our commercial execution, combined with the potential of our pipeline, will help to fuel our long-term growth. We expect growth momentum to continue next fiscal year through market penetration, new indication and geographic expansion, particularly in markets such as China. We are confident that this growth outlook will signify societal and business value in the mid- to long term. With that, I would like to provide Andy with an opportunity to discuss our exciting R&D pipeline. Thank you.
Andy Plump: Thank you very much, Christophe. And if we can go to Slide 12, please. As you just heard, 2021 was truly an inflection year for Takeda R&D. We gained momentum with the first approvals of 2 new medicines, EXKIVITY and LIVTENCITY. This was the most new medicine approvals in the U.S. in a single year for Takeda since 2014. And our late-stage pipeline continues to build with 3 new additions: TAK-999, pabinafusp alfa and modakafusp alfa. We expect our R&D strategy centered around deep therapeutic area focus, strong translational science and choosing the right modality for the right target to improve our overall probability of success. But our high innovation bar and focus on first-in-class mechanisms will also carry risk. We experienced some setbacks in the last year. But as a science-driven organization, we are resilient, learned from setbacks and are ready to continue to build for the future. As Christophe mentioned, we are investing in and truly embracing data and digital technologies to accelerate and complement our pipeline development. Our ultimate goal is to deliver innovative medicines to patients faster, and we are making meaningful progress. Next slide, Slide 13, please. Focusing now on recent regulatory updates. In 2021, calendar year, Takeda had the most new molecular entity and overall approvals of any pharmaceutical company in Japan. Our global expansion efforts continued this quarter with approvals for TAKHZYRO and VONVENDI in Japan and EXKIVITY in the United Kingdom. The recent approval of NUVAXOVID in Japan for primary COVID-19 immunization and Booster as a highly efficacious vaccine to the pandemic response efforts in Japan. Balancing these positives, we received a complete response letter for NATPARA in the United States. And TAK-609, our drug device combination with ELAPRASE, which faced an uphill regulatory path from the beginning having missed its pivotal primary end point several years ago, was determined to have insufficient data for filing. While we have terminated this program, we remain 100% committed to the Hunter patient community and our existing ELAPRASE franchise. Turning now to recent clinical updates. TAKHZYRO had a robust data readout in our Phase III SPRING study in children. These data will be submitted to the FDA shortly to expand TAKHZYRO's label and will be presented at a medical conference later this summer. TAK-755, a recombinant ADAMTS-13 replacement therapy, has successfully completed a proof-of-concept study in immune-mediated TTP. Data from this study suggests that TAK-755 has the potential to disrupt the treatment paradigm in ITTP through the elimination of plasma exchange, which is a huge burden for both patients and health care providers. Therefore, we are making a strategic pivot and we'll be initiating a Phase IIb trial to evaluate the safety and efficacy of TAK-755 in the absence of plasma exchange. TAK-594, our first product utilizing Denali's proprietary technology to cross the blood brain barrier, has started development for frontotemporal dementia. And finally, TAK-906 did not achieve its primary endpoint for gastroparesis and was discontinued. In business development, we continue to build our gene therapy capabilities with 2 new collaborations. JCR Pharmaceuticals to develop gene therapies that apply JCR's blood-brain barrier penetration technology to treat lysosomal storage disorders, and with Evozyne to use artificial intelligence and machine learning to replicate millions of years of evolution to optimize proteins as genetic rare disease therapies. Slide 14, please. Now before walking you through our key late development programs, let me briefly discuss our evolved format for pipeline disclosure, as you just heard from Christophe. The Wave 1 and Wave 2 concept served us well the past few years as a temporary and, of course, time-bound view. Our pipeline has matured with recent approvals in stage ups. Now moving forward, we will focus on our 10 late-stage assets, upcoming key proof-of-concept readouts, and life cycle management milestones as you have seen previously at the JPMorgan and 3Q earnings calls. We will also highlight target filing date rather than target approval date for the multiyear disclosures. Why is this? Well, we have more ability to control target filing date. Our pipeline has a very high innovation bar with many first-in-class treatments. Regulatory review time lines for such breakthrough mechanisms can be variable depending on both program intrinsic considerations as well as evolution of regulatory policy. As you will see later, we will continue to highlight key approvals and Phase III readouts over a 1-year period where we hope to have better visibility on timelines to provide more transparency. Now on to our late-stage pipeline. The next potential approval is the dengue vaccine candidate, TAK-003. We have seen the final 4.5-year daily data from our pivotal trial. We are very pleased with the results, and we feel confident that it supports the overall risk-benefit profile of our vaccine. We will submit the data to CHMP shortly and will present the results next month at the Northern European Conference on Travel Medicine. We believe we are on track to see an approval this fiscal year. Soticlestat, in development for rare pediatric epilepsy disorders, has experienced a delay in the target filing date to fiscal year 2024. This delay was due specifically to the geopolitical situation in the Ukraine and Russia as well as COVID-19 lockdowns in China. We are taking multiple, multiple approaches to enhancing clinical enrollment in order to minimize delays and optimize global filing time lines. We continue to be very excited about soticlestat, and it remains one of our highest priority late-stage programs. Similarly, EXKIVITY has experienced a delay in target filing date also to fiscal year 2024. The previous timeline assumed filing an approval on a positive interim analysis for which we remain hopeful but not presumptive. In addition, the program has had global site challenges from the geopolitical situation in Ukraine and Russia, COVID lockdowns in China and U.S. enrollment challenges due to the approval of both EXKIVITY and amivantamab. Going forward, we see great potential to further enrich our pipeline. We intend to complement -- to continue to complement our exciting and maturing pipeline with selective late-stage in-licensing as we have done previously with JCR and Arrowhead. Slide 15, please. As illustrated here, there is more to come as we continue to drive data-driven decisions on our exciting early development programs. I'd like to highlight these 5 high-potential molecules that will have important proof-of-concept readouts over the next 2 years, including our longer-lasting oral Orexin agonist, TAK-861, which I'll tell you more about shortly. And mezagitamab, our CD38 naked antibody, which broadly reduces circulating immunoglobulins. We are assessing the potential of mezagitamab in proof-of-concept studies to benefit patients with autoimmune diseases caused predominantly by pathological IgG antibodies, notably myasthenia gravis, and ITP as well as those caused by pathological IgA antibodies, notably IgA nephropathy. These are just the first of many new molecular entities in a rich and transformative early-stage pipeline being continuously filled through partnerships and our powerful research engine. Slide 16, please. We are very excited about the transformative early data seen with TAK-925 and 994, the first oral agonist to be tested in up to 16 weeks of treatment in narcolepsy type 1 patients. We are leaders in Orexin biology and have a deep understanding of the mechanism, pharmacology and chemistry. Beyond type 1 narcolepsy, we have established proof-of-concept in a variety of indications. While the TAK-994 safety setback last year was unfortunate, our strategic focus and deep investment in this mechanism has allowed us to rapidly pivot. We are capitalizing on our learnings, moving forward swiftly and determined to deliver the first and best-in-class Orexin agonist. TAK-861 is progressing well in early clinical development, currently enrolling type 1 narcolepsy patients and a sleep-deprived healthy volunteer cohort. We will use the results from these studies as well as the extensive learnings from TAK-994 to make an informed and accelerated go-no-go decision in the latter part of this year. The sleep-deprived healthy volunteer study and previous TAK-994 experience will also inform on the potential for TAK-861 to be studied in other sleep disorders with normal Orexin levels, such as type 2 narcolepsy and idiopathic hypersomnia. Based on the learnings from TAK-994, we have additionally made significant advances in our laboratories, generating new optimized molecular candidates with distinct chemistries and pharmacological profiles that we intend to advance rapidly into the clinic. Slide 17, please. This last fiscal year was a productive one for our life cycle management programs, which continue to expand our geographic reach and indications for our approved drugs. Exciting recent approvals include Cabometyx and TAKHZYRO in Japan, VONVENDI in the United States for prophylaxis of Von Willebrand's disease and ENTYVIO in the European Union for active chronic pouchitis. We will continue to highlight important life cycle management activities for our key portfolio of products in future disclosures. Parenthetically, a new appendix slide has been added this quarter, which shows a comprehensive overview of our pipeline by phase with filed new molecular entity and life cycle management programs. Slide 18, please. As discussed earlier, we expect the regulatory decision for TAK-003, our dengue vaccine, in the European Union this year. Many endemic countries are likely to reference this potential approval for their own market authorization. Other important data inflections upcoming include a Phase III readout for LIVTENCITY in first-line CMV infection following hematopoietic stem cell transplants. This trial compares LIVTENCITY against the current standard of care, valganciclovir. In Phase II, LIVTENCITY showed a numerically higher rate of CMV viremia clearance versus valganciclovir with, importantly, a significantly lower rate of neutropenia at 5% versus 18%. Neutropenia is an independent predictor of mortality in stem cell transplant patients. LIVTENCITY's favorable safety profile, especially this lack of neutropenia, represents a potentially significant therapeutic advance for patients. We also anticipate important data for IQVIA in CIDP patients where this facilitated subcutaneous immunoglobulin could lower the treatment burden for patients through fewer sites, shorter times and decreased frequency of infusion versus standard subcutaneous immunoglobulin. In addition, we will see TAK-755 Phase III data in congenital TTP. The late-stage data readouts will allow for global filing in these indications with future label expansion opportunities to come. Thank you. And I'll now turn it over to Costa.
Constantine Saroukos: Thank you, Andy, and hello, everyone. This is Costa Saroukos speaking. It's my pleasure to explain the fiscal 2021 financial highlights and fiscal 2022 forecast in more detail. We positioned fiscal 2021 as a year of top line acceleration, and we certainly delivered with underlying revenue growth of 7.4%. This is the fastest underlying revenue growth at Takeda since we started measuring it back in 2013. This performance was driven by global products such as ENTYVIO, TAKHZYRO and immunoglobulin, and we also saw growth in all geographic regions. The U.S. grew at 3.5%, Japan grew at 8.1%, Europe and Canada 12.5%, and growth in emerging markets grew at 14.8% on an underlying basis. With growth in emerging markets, revenue was especially strong in China which grew close to 50%, supported by multiple innovative products we launched in recent years, in addition to strong demand for albumin. With regards to margins, we closed the year with an underlying core operating profit margin of 28%. This reflects increase in R&D investments and was slightly behind our guidance for the full year due to temporary sales mix headwinds, mainly due to ENTYVIO shipment timing. In addition, cost of goods had been impacted this year by plasma donor fee dynamics. We made temporary adjustment to fees at different intervals to make sure we would meet our commitments to patients and to ensure the long-term growth of the PDT portfolio. Cash flow was strong with free cash flow of ¥943.7 billion or close to USD 8 billion. And this enabled us to make great progress with deleveraging as we ended the year at 2.8x net debt-to-adjusted EBITDA. The outlook for fiscal 2022 is also strong with revenue and profit growth driven by our growth and launch products expected to more than offset the headwind of loss of exclusivity of VELCADE in the U.S. Slide 21 shows our results versus our full year guidance. We're really pleased with our performance as we delivered at or above the ranges we gave for underlying growth this year. Underlying revenue growth was 7.4% versus guidance of mid-single-digit growth, driven by broad strength across our portfolio, particularly our growth and launch products. Underlying core operating profit growth was 5.4%, in line with our guided range. And although underlying core operating profit margin at 28% was slightly behind guidance for the reasons I described earlier, a lower-than-expected tax rate helped us delivering underlying core EPS growth of 9.4%, exceeding our guidance for mid-single-digit growth. Free cash flow for fiscal 2021 was ¥943.7 billion, significantly exceeding our forecast of ¥700 billion to ¥800 billion. This was driven by working capital improvements, specifically accounts receivables and lower cash taxes due to the acceleration of legal entity reductions. In fact, we have more than halved our number of legal entities in recent years from approximately 400 down to 170, and we expect our current legal entity optimization project to be completed by the end of fiscal 2022. Let me go into more detail on the full year performance versus prior year on Slide 22. The quarter 4 year-to-date reported revenue was at ¥3.6 trillion, up 11.6% versus prior year, including the benefit of ¥133 billion, both this revenue from the sale of our Japan diabetes portfolio in Q1. Core revenue, which adjust our divestiture proceeds booked as revenue grew at 7% as business momentum and favorable FX more than offset the impact of divestitures. Underlying revenue, which adjust for both FX and divestitures, delivered strong growth of 7.4%. Reported operating profit was ¥460.8 billion, a decline of 9.5% versus prior year. The decline was impacted by higher onetime gains from divestitures completed in the previous fiscal year, including Takeda Consumer Health Company. In total, the 7 deals closed in fiscal year 2020 totaled approximately USD 2 billion in gains, which impacted the year-on-year growth rate. Core operating profit, which adjust for purchase accounting and nonrecurring items, was ¥955.2 billion. This was a decline of 1.3% versus prior year, mainly due to the impact of divestitures and the increase in R&D investment. If we adjust for foreign exchange and divestitures, underlying core operating profit increased by 5.4%. Our core and underlying core operating profit margins are around 28%. And as explained, this was slightly behind what we had guided for, with temporary gross margin pressure from sales mix largely driven by ENTYVIO shipment timing. I can confirm we have seen a strong rebound for ENTYVIO in April. So we're confident this was a temporary issue. In addition, fiscal year '21 margins were impacted by donor fee dynamics within plasma-derived therapies. Reported EPS was ¥147, declining 38.9%, reflecting the decline in reported operating profit and also the impact of a onetime tax gain book in the previous year. Core EPS was ¥425, an increase of 1.2% versus prior year, and underlying core EPS growth was 9.4%. Operating cash flow was ¥1.1 trillion, up 11.1% versus prior year, while free cash flow was ¥943.7 billion, a reduction of 23.8% due to higher noncore asset sales in the previous year. Slide 23 gives more insight into our top line growth dynamics. Reported revenue for fiscal year '21 grew at 11.6% to almost ¥3.6 trillion, including ¥133 billion from the sale of the Japan Diabetes portfolio as well as other small divestitures that were booked as revenue. Adjusting out those divestiture proceeds, core revenue grew at 7% to ¥3.42 trillion. This reflected 7.4 percentage points of underlying growth, driven by business momentum plus 5.2 percent points from favorable FX, partially offset by 5.6 percentage point headwind from the divestitures of noncore assets we have completed over the past year. Moving to Slide 24, which shows the factors impacting the 1.3% decline of our fiscal year '21 core operating profit versus prior year. Starting from the left-hand side of the chart, you can see the first gray bar indicating a strong profit improvement from our underlying business, primarily driven by our growth products. This underlying business momentum was partially offset by a sizable step-up in R&D investment, which we have called out in the red bar next to it. Next to that is a larger decline, which indicates the profit loss as a result of divestitures. This had a significant impact on growth rates in fiscal 2021 as a result of the multiple noncore asset divestitures that closed over the past 2 years. While this is a major headwind in fiscal year '21, the impact of divestitures should be much smaller from fiscal year 2022. Moving now to cash flow on Slide 25. It shows the evolution of our cash balance over the fiscal year 2021. Operating cash flow was ¥1.12 trillion. This includes cash from the sale of the Japan diabetes portfolio, proceeds from working capital optimization initiatives and deferred revenue from our coronavirus vaccines, partially offset by a litigation settlement in quarter 1. Free cash flow was ¥943.7 billion, comfortably covering the full year dividend payment, interest costs and our share buyback. Furthermore, we made significant progress with debt paydown this year. In total, we paid down a net ¥560 billion of debt including ¥540 billion prepayment of 2022 fiscal year, 2023 fiscal year and 2025 fiscal year maturities. Interest costs also declined by ¥16.5 billion versus prior year because of our accelerated debt paydown. Even after the substantial debt prepayment, we still ended the year with healthy levels of liquidity of ¥1.3 trillion. Slide 26 shows the net balance over fiscal year 2021. I'm very pleased to say we broke 3x net debt to adjusted EBITDA for the first time since Shire acquisition closed. We continue to make steady progress with deleveraging. And as of March 31, the net debt to adjusted EBITDA ratio had come down to 2.8x even after the full year dividend payment and ¥77 billion of share buybacks had been reflected. On Slide 27, you can see a summary of our guidance for fiscal year 2022. And as Christophe mentioned in his opening remarks, we are changing the way in which we present management guidance from fiscal year 2022. While previously, we had used the concept of underlying growth, which adjusted for foreign exchange and divestitures. Going forward, we'll only adjust for FX using constant exchange rate growth for our guidance. This is a reflection of the fact that the divestiture program we had been pursuing since the acquisition of Shire is now essentially complete. Starting from the top line, we expect reported revenue growth of 3.4% despite the ¥133 billion hurdle from the sale of the Japan Diabetes business in fiscal year 2021. On a core revenue basis, so excluding this impact, we expect to grow at 7.9%. There is a tailwind from FX reflecting in that number. And excluding that on a constant exchange rate basis, we expect to grow core revenue at low single-digit growth, but at the high end of that range. Reported operating profit is expected to grow 12.8% to ¥520 billion as we expect gross profit margin pressures related to sales mix and plasma donor fees to ease. We maintain our laser focus on costs, and we are also supported by foreign exchange tailwinds. This also reflects less impact from divestitures and lower acquisition-related costs. Core operating profit is expected to reach ¥1.1 trillion, growing at 15.2%. This is the first time in Takeda's long history that we expect to deliver above the ¥1 trillion mark. Even excluding the foreign exchange tailwind, core operating profit growth at constant exchange rate is expected to be strong in the high single digits. We expect reported EPS to grow at 27.9% to ¥188 and core EPS to increase 14% to ¥484. Core EPS growth at constant exchange rate is also expected to be in the high single digits. We think this guidance overall highlights our strong fundamentals, because in fiscal year '22, we expect to lose significant VELCADE revenue to generics. And despite losing those high-margin sales, we expect to deliver revenue growth and improved operating leverage this year. Furthermore, our forecast includes an FX rate assumption of ¥119 to the U.S. dollar. And if FX rates remain as they were at the end of April for the duration of fiscal year '22, that would represent a high single-digit upside to our forecast for both revenue and core EPS. We expect to generate between ¥600 billion to ¥700 billion of free cash flow, similar to where we initially expected to land in fiscal year '21 when we gave guidance this time last year. And finally, we remain fully committed to our dividend of ¥180 per share. On Slide 28, we have included a waterfall chart showing how we reach our core operating profit forecast for fiscal 2022 of ¥1.1 trillion. While we do have some foreign exchange tailwinds, momentum from the business is approximately double the FX benefit. We break out R&D here to show that the incremental investment is much more modest than in fiscal year '21. R&D is expected to grow slower than revenue at a constant exchange rate, so in line with what we've communicated previously. Also, you can see that the divestiture impact going forward is much lower than in previous years. So moving to Slide 29, you can see our cash flow outlook for the coming year. In fiscal 2022, we expect to generate ¥600 billion to ¥700 billion of free cash flow. This is lower than our fiscal 2021 actual result due to a few onetime items, and it also includes a higher CapEx budget than last year. This reflects our continued investment for growth, including investment in data, digital and technology and an allocation for targeted in-licensing and targeted business development to enhance the R&D pipeline. With the continued focus on deleveraging, we plan to pay down approximately ¥500 billion of debt in the coming year. That includes the ¥177 billion of debt maturing in fiscal year 2022 and approximately ¥300 billion of additional planned prepayments, similar to those we've been executing in recent years. We expect to end the year with ample available liquidity and the cash balance of ¥300 billion to ¥400 billion. Slide 30 is the latest snapshot of our debt maturity data as of March 31, 2022. As shown on the previous slides, we paid off approximately ¥550 billion of debt in fiscal year 2021, including a significant amount of prepayments. This trend will continue with ¥500 billion earmarked towards debt paydown in fiscal year 2022, including all the debt maturing this year and approximately ¥300 billion of additional prepayments. I'm very pleased with how we've structured our debt profile with a weighted average interest rate of approximately 2%. And importantly, 98% of our total debt at fixed interest rates. This gives us strong protection from any potential interest rate hikes. Furthermore, the currency breakdown of our debt very closely matches our cash flows. So we are also protected against major currency fluctuations. In terms of maturity profile, we are also very comfortable with an average of approximately ¥200 billion per annum out to fiscal year 2025. And this should improve further with prepayments we plan to make over the coming year. As a reminder, our free cash flow forecast for fiscal 2022 is ¥600 billion to ¥700 billion. And going forward, we are very comfortable with our ability to continue servicing our debt, while maintaining the dividend and also making the right investments in the business. On Slide 31, I want to share again our capital allocation priorities. As we continue to deliver on our financial commitments and generate strong cash flow, we will allocate capital to maximize value for patients and shareholders. We'll invest in our growth drivers, especially R&D, including both in-house, investment and targeted partnerships. We will invest in new product launches, including China and plasma-derived therapies. We'll continue to deleverage rapidly towards our target of low 2x net debt-to-adjusted EBITDA ratio. And finally, we'll remain committed to competitive shareholder returns. In addition to driving growth of the business, we also focus on returning cash to shareholders, maintaining our well-established dividend policy of ¥180 per share annually and continuing to consider share buybacks when appropriate. To close out the presentation on Slide 32, I'd like to reemphasize the key elements of our strategy to deliver sustainable growth and value for shareholders. We continue to see strong momentum from our commercial portfolio, which enabled us to deliver 7.4% underlying revenue growth in fiscal year '21. This portfolio is expected to drive further top line and profit growth in fiscal year 2022 with core operating profit expected to reach ¥1.1 trillion. We are also advancing our pipeline with approximately 40 assets in clinical development, 10 of which have upcoming new molecular entity filing and expansion opportunities. And our success is built on a solid financial foundation with robust cash flow bringing our net debt-to-adjusted EBITDA ratio down to 2.8x as of March 2022. We'll continue to allocate this cash towards growth opportunities. We'll continue to deleverage and continue to drive competitive shareholder returns. In closing, we believe that Takeda is in a position of strength. While we do face some loss of exclusivity headwinds in the next 2 years, we expect momentum of our growth and launch products to support top line over that period whilst continuing to strive for operational excellence across the organization. Thank you very much.
Operator: Thank you, very much and I would like to take questions from the participants.
Shinichiro Muraoka : On the panel, we have participants from our side: Christophe Andy Costa and Masato Iwasaki, Japan General Affairs. Ramona Sequeira, President, Global Portfolio division. Julie Kim, President, U.S. Business Unit, Giles Platford, President PDT Business Unit; and Teresa Bitetti, President, Global Oncology Business Unit. First, Mr. Yamaguchi, Citigroup. Mr. Yamaguchi. Please start asking your questions. Let me go to the next person. Next is Jefferies, Steve Barker, please.
Steve Barker: Yes. It's Steve Barker from Jefferies here. My first question, I think it's probably for Julie. It's about the plasma business. Do you have any comment about CSL's adoption of the Rika Plasma Collection Center, which they developed with Terumo. There's some commentary with -- that says that the collection times at CSL are currently about 66 minutes but could come down to 50 minutes with the new system, does that pose a competitive threat to Takeda? That's my first question. Second question, is for Andy. You mentioned mesagitimab, TAK-079 for Myasthenia Gravis. According to clinicaltrials.gov, there was a Phase II trial that reached primary completion in March. And I was wondering if you had any comment on that, please?
Giles Platford: Perhaps I can take the first question. This is Giles Platford. I have taken over the Plasma-Derived Therapies business unit from Julie. Thank you very much for the question. Yes, we're aware that Fresenius Kabi, Hemonotics and Terumo all have new apheresis machines. And whilst we believe these are important improvements, not a fundamental shift in technology, we continue to evaluate the landscape and potential partnerships to identify opportunities to improve our operations, but have nothing to announce at present. And important to reinforce, we continue to explore and invest in ways to make the entire donor experience more efficient and effective for our donors through both incremental and approaches. We firmly believe that beyond the apheresis machines and technology we're using, improving the entire end-to-end experience, both before donors come into the center and how quickly we move through -- move them through the experience of donation is really important, and that's been demonstrated in our ability to maintain and even exceed pre-pandemic donation levels in fiscal '21.
Andy Plump: Steve, it’s Andy. I can take the second question. So as you know, mezagitumab is our naked CD38 monoclonal antibody. And we’ve seen broadly across immunoglobulin subclasses, reductions. We actually are now in 3 proof-of-concept studies. You mentioned myasthenia gravis, which will be the first to read out ITP, both testing the hypothesis of whether reductions in IgG as elicited by this mechanism can result in disease benefit. And then quite interestingly, the largest reductions that we see are in circulating IgA. And so we’re in the process of starting up a proof-of-concept study in IgA nephropathy as well. Specifically the timing, we haven’t seen data yet from the myasthenia gravis study. We expect to see data in the first half of this year.
Operator: We'd like to move on to the next question from JP Morgan Securities, Mr. Wakao, please.
Seiji Wakao: This is Wakao from JPMorgan. My first question, in the fourth quarter, the COGS deteriorated. What were the reasons behind it? Maybe it was a shipment timing of ENTYVIO. And of course, there was an increase in revenue and profit of PDT. So can you please give us details. Was it a transient factor that was mentioned in the presentation. What was the background for that transient factor? And of course, for PDT, this year, the margin is going to improve. It was mentioned in the fourth quarter, the revenue did go up and the fee did go up, but is that fee going to continue to go up. And the second question about the narcolepsy franchise. About 861, POC will be received, that was mentioned this year. So on Page 15 and Page 16, looking at these 2 pages you're in Phase I. And after the Phase I study, Phase IIa will be done and POC will be gained. And with that result, you are going to make a decision of go or no go? Is that a correct flow?
Julie Kim : Thank you very much for your questions. About the donation fee question, Giles, would you be able to answer that question, please?
Giles Platford: Yes. Thank you very much for the question. As Christophe and Costa rightly outlined, we saw very solid growth at, and above guidance, across all areas of our PDT portfolio in fiscal '21, driven by continued expansion of our plasma sourcing footprint with the opening of 23 centers -- new centers in fiscal '21 and continued operational improvements across our entire value chain. Whilst we have seen some increase in donation fees during the course of the pandemic, we do feel very confident that as the pressures of the pandemic now ease, we will see some moderation of those fees, and we feel confident that the operational improvements that we have made over the past couple of years and with the continued expansion of capacity and particularly with the uptake of the new donation centers and increased productivity of those donation centers that we've opened in fiscal '21, we will be well positioned to resume in improving our margins over time from fiscal '22.
Andy Plump: And Wakao-san, this is Andy. On the question regarding the clinical development strategy for 861, let me say that one of the benefits that we have in working in this mechanism is the availability of proximal pharmacokinetic and pharmacodynamic as well as clinical endpoints that we can measure even after a single dose. And so our ability to understand whether a molecule has efficacy and the level of that efficacy across a range of different populations even in a single dose is really immense. We also have huge experience here and databases that we can relate to going back to our work with 994 and 925. So even in our Phase I -- Phase I, Phase II, Phase III nomenclature here also becomes a little bit blurred. And our goal with 861 is to go as rapidly as possible to bring this medicine as rapidly and safely as possible to patients. In our Phase I program, again, nomenclature being a little funny. We actually are enrolling patients with type 1 narcolepsy currently right now with a dose that we -- for 861 that we believe will have activity. We're also enrolling healthy volunteers who are sleep-deprived. And through those 2 assessments, we should be able to generate a range of information, understanding effects in type 1 narcolepsy, understanding the potential for effects in diseases of sleep-wake disorder that are characterized by normal orexin levels and also very importantly, understanding dose. With that information, we'll be making a go decision later this year to kind of a mid-stage study, whether that's a Phase IIa study or a Phase IIb dose-ranging study that can accelerate us rapidly until late development, we haven't fully decided. But our intent is to make rapid decisions and to really accelerate this program.
Constantine Saroukos: And Wakao-san, it's Costa here. I'll just answer the question on the gross margin and COGS for Q4. And this is largely impacted by the ENTYVIO shipment timing. There we had, unfortunately, some logistical challenges in the last few days. of Q4, which has now moved into Q1 of this fiscal year. We've already seen the rebound happening for ENTYVIO the month of April, and you can also refer to some third-party data sources, which also show strong end-market demand for ENTYVIO. So overall, it was just the timing of the logistic challenge, but we we're seeing that rebounding already in Q1. Thank you for your question.
Seiji Wakao: I'd like to ask a follow-up question, if I may. About the donor fee during the pandemic, it went up, but now it's moderating. But with the inflation, is there a concern that it may go up? And as for 861 Phase I, in your explanation, you mentioned that in the first half, you may see a recovery. But that data, I do not know if it's going to be Phase IIa, Phase IIb, but some kind of data will it be disclosed to us before you go into that stage, please?
Giles Platford : So this is Giles. I can take the first part of that question. Absolutely, we did see increase in donor fees during the course of the pandemic. We're incredibly proud of the performance that Takeda has delivered across the value chain, as I said, through the expansion of our plasma sourcing footprint. Most importantly, the increase in operational efficiencies and how we've leveraged data and digital to improve the donor experience and to drive efficiency and productivity across the value chain that has enabled us to be in a position where in fiscal '21, our overall donation volumes were actually 3% above pre-pandemic levels and with the increased productivity from previously open centers increasing through fiscal '22. And with the addition of a further 25-plus new opening of centers in fiscal '22, we're confident to be able to sustain the growth. And with those increased volumes of plasma available we do expect donor fees to moderate during the course of '22, and we don't expect any further increase in donor fees.
Andy Plump: And then Wakao-san, with respect to our disclosure intents around 861 data, our intent would not be to disclose our Phase I data before we move into our Phase IIa/Iib program. The exact timing of when and how we present and disclose data both to the scientific and to the investor community for 994, for which we have a very extensive chronic data set and 861 is something that we’re still working through.
Operator: Stacy from Cowen, please.
Stacy Ku: Hi, this is Stacy from Cowen. Can you guys hear me okay? Can you hear me?
Unidentified Company Representative: Yes, we can hear you. Go ahead.
Stacy Ku: Okay. Perfect. Stacy Ku from Cowen. Congratulations on the progress. We have one follow-up and the second question. First for Giles. Regarding PDE guidance, beyond improving margins, what else is underpinning your expectations for growth what segments are expected to drive some contribution? Should we be thinking about subcutaneous adoption, which indications are you thinking might be driving growth more immunodeficiencies or the autoimmune space? That's the first question as we think about the underlying contributors to PDE guidance. The second question is another question on Orexin that go, no-go decision. To just follow up on all the questions that have been asked, to the extent that you can, just given the changing competitive landscape for orexin 2 agonist and narcolepsy and other sleep disorders, could 861 still be first mover in this space at this point? Any type of thoughts there would be appreciated.
Giles Platford: Thank you very much for the question. I will take the first part on PDT. As I said, we -- and as Christophe and Costa outlined, we're in a strong position to maintain and accelerate our growth in fiscal '22. We see overall growth for PDT business unit. Our outlook is high single digits with between 10% to 20% growth, both on our immunoglobin and albumin portfolio. In immunoglobin portfolio, we expect to see a strong rebound in primary immunodeficiency segment on the back of increased diagnosis rates as we come out of the pandemic, and that has been an area that has impacted PID over the past 2 years and continued strong performance also in SID. And of course, with a positive outlook in the future with our CIDP R&D program moving forward and expected launch in fiscal '23 into CIDP.
Andy Plump: And Stacy, it’s Andy again. So with regard to your question, we have we are very confident in TAK 861. And as we continue to accrue more and more data and more and more information, our confidence level grows. At this point, there are still some unknowns that we’re sorting through, including ultimately interactions with the regulatory agencies to understand what ultimately a pivotal program will look like, And we knew what that looked like for TAK-994, but obviously, with now the overhang of safety issues, we’re going to have to go back and have those conversations again. But our expectation is that TAK 861 will be the first-in-class molecule in this field. And we’re very cognizant of the competitive landscape, which is one of the reasons that we’re trying to go as fast as we are. And it’s also another reason why we’re being very careful in terms of our data disclosures.
Operator: Next is Mr. Sakai, Credit Suisse, please.
Fumiyoshi Sakai : Sorry. Can you hear me now? I'll speak in English because my questions are very simple. First question for Giles-san. This is more like a semi-macro question for PDT, but U.S. Court of Appeals reversed decision on the Mexican border ban actually for the plasma donors. So the migrants coming from Mexican border with the U.S. for donation, that ban is going to be lifted. Or that's what I read from the article. And obviously, your competitors are collecting more plasma alongside with the Mexican border. So is that going to benefit your competitors? And what do you think about the landscape of the plasma collection going forward? So that's the first question. And second question for Costa san. Why your cash flow forecast FY 2022 is shrinking from FY '21? Given that your confidence and the outlook with efficiency, the cash flow must be improved. However, your cash flow is almost down by nearly 20%, 25%, if my math is right. So what's causing this cash flow shrink for FY '22?
Giles Platford: Thank you for the question. I can take the first part. So yes, we have indeed heard the news on a positive ruling in regards to the Mexican border. I do believe there is one additional legislative step in there. But we view this, of course, as very positive for patients and the ability to improve the level of donations, which may ultimately have a positive fee on overall dynamics for both volumes of donation and fees. We continue to focus on our transformation and growth, as I said, having opened 23 new centers in fiscal '21, over 25 centers expected to be opened in fiscal '22, continued operational improvements, leveraging data and digital to improve efficiency. And with the expected increase in plasma donation volumes between 10% to 20% as per the guidance we've given for fiscal '22, we're very confident on our ability to deliver on our revenue growth guidance and to meet the demands of patients both in the U.S. and around the world. Thank you for the question.
Constantine Saroukos: Thanks, Sakai-san. It's Costa here. I just want to highlight that the guidance for '22 is very similar to the original guidance we had for fiscal year 2021, in the same range. In 2021, we did have some onetime benefits, in particular, the accounts receivable initiatives that we were able to unlock working capital improvements. We also had less CapEx. If you go to Slide 60 in the appendix, you'll see that our CapEx cash flow base for fiscal year '21 was ¥186 billion. It was -- it's much less than what we expect in fiscal year '22. Main reason for that is there was in fiscal year '21, an underspend due to some R&D milestone payment delays, which we expect to incur in fiscal year 2022. And then in fiscal year 2022, we have a bigger envelope for business development types of initiatives to enhance our pipeline. So this is what really driving the fluctuations. But nevertheless, anywhere between ¥600 billion to ¥700 billion, it's a cash flow. When you -- strong free cash flow, in particular, also allows us to manage the debt profile and maturity, our dividends and interest payments comfortably. Thanks for your question.
Fumiyoshi Sakai : Costa-san, thanks for clarifying me, but I was asking for free flow. You're saying ¥600 billion, ¥700 billion doesn't make much difference from the ¥943.7 billion from previous year. Is that what you're saying?
Constantine Saroukos: Yes, because in 2021, we had some onetime benefits like the accounts receivable initiatives that we unlock the working capital. And then on top of that, you can see the CapEx in 2021, the CapEx was much less than what we're proposing in fiscal year 2022, mainly because of some R&D milestone payment delays from 2021 to 2022 and also the fact that we're increasing the envelope for certain BD development opportunities to enhance our pipeline.
Fumiyoshi Sakai: Yes, I'm talking about free cash flow. So you unlocked cash flow, free cash for ¥100 billion the last year. So that is that what you're saying? CapEx and the BDT is not inclusive in cash flow, free cash flow?
Constantine Saroukos: In free cash flow, it's included. It's included.
Fumiyoshi Sakai : Okay. So that's -- that's the difference.
Constantine Saroukos: That’s the difference, yes. Thank you.
Operator: Next question, Mr. Yamaguchi from Citi, please.
Hidemaru Yamaguchi: The first point on Page 9, you talk about core sales for fiscal year '22, but also '23. You're hinting '23 is going to be flattish compared to '22, which is -- might be a little bit higher than the consensus. And also you touched upon the earnings just a little bit saying that I just confirm you are saying that your earnings for '23 never going down below '21. Now compared to '22, the sales is flattish, but it's because costs may go up. So earnings might be a little bit weak, but you are saying that it shouldn't be lower than '21. That's what I'm trying to confirm. That's the first question. The second question is regarding 755. It's going to be a first Phase III readout coming soon. And this is one of the major I would say, a Wave 1 project with the potential market of, I think, USD 1 billion to USD 1.5 billion you talked about a few years ago. Is this still exactly what you think about as far as the market size is concerned? And how much this first indication may capture this potential of these peak sales?
Christophe Weber: Thank you, Yamaguchi-san. It's Christophe here. And I'll take the first question and I guess Ramona will take the second one on 755. On the first question, you're right. What we are seeing is that we expect to be flattish in 2023. In fact, that -- you do the math, you see our growth and launch products generate ¥240 billion of incremental revenue in '21. That's accelerating in '22 because thi
