Takeda CEO Says 2021 an 'Inflection Point' for Company
- By Barry Cohen
Takeda Pharmaceuticals Inc. (NYSE:TAK) has cleared the decks and sees smoother sailing ahead. That's according to the Japanese company's CEO, Christophe Weber. Investors sure hope he's right. The stock has been listing badly for years; at $17.36, it is about $4 below where it was five years ago.
Weber's optimism stems from his view that Takeda's principal business is positioned for growth now that the company made a big dent in the bill it incurred when it acquired Shire in 2019, a massive purchase that saddled Takeda with burdensome debt.
Since the $59 billion Shire deal, Takeda has dumped medicines with a limited future to concentrate on promising therapeutic areas. With its non-performers thrown overboard, the company is on course to grow and even pump more money into research and development, the lifeblood of pharma companies.
Takeda is focusing on gastroenterology, rare diseases, oncology, neuroscience and plasma-derived therapies as its five focus therapeutic areas. During the company's fiscal year that ended in March, those treatments accounted for more than 80% of Takeda's revenue, a percentage that is expected to jump to 90% this year.
Weber called 2021 "an inflection point" for the company as it seeks to gain regulatory approval of several drugs from its pipeline.
It wasn't too long ago that there were fears that Takeda wouldn't be able to meet its debt payments goals. Those concerns have been put to bed; as of March, Takeda has reduced its net debt to 3.2 times of adjusted earnings, from 3.8 times a year ago. This year, Chief Financial Officer Costa Saroukos said the company is shooting to get it down to 3 times.
Takeda slimmed down via 12 product deals that shed nearly $13 billion, about $3 billion more than what is expected.
This year, Takeda forecasts revenue to grow 5.4% to $31 billion from $29.5 billion. It expects to keep its profit margin at around 30%.
"The end is in sight for defensive efforts to improving finances," Takashi Akahane, senior analyst at Tokai Tokyo Research Institute, told Nikkei Asia. "The sales target of 5 trillion yen is the starting gun for going on the offensive."
Takeda management is saying all the right things, but so far investors seem to be in the "show-me" mode given the stock's tepid performance.
The analysts who follow the company are more enthusiastic. CNN Money reports that the 13 professionals offering 12-month price forecasts for Takeda have a median target of $21.49, a high estimate of $31.22 and a low of $18.74. The shares are rated a buy.
Disclosure: The author has no position in Takeda.
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
This article first appeared on GuruFocus.
