Takeda Earnings: Results Beat Expectations; Qdenga Shows Promise

Narrow-moat Takeda’s first-quarter earnings beat our expectations even after adjusting for significant currency tailwinds, driven by the outperformance of a handful of drugs, including dengue fever vaccine Qdenga. Sales grew 14% on a reported basis and 2% on a constant-currency basis. Gross profit margin declined 1.8 percentage points compared with the same period last year, which we think is a useful reference point as it reflects recent loss-of-exclusivity events. Takeda reiterated its full-year guidance of JPY 4.35 trillion in revenue and JPY 1 trillion in core operating profit. We maintain our fair value estimate of JPY 4,700 per share and view the current share price as slightly undervalued.