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Share buyback program signals confidence in business strategy

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Interview with CFO Costa Saroukos 

 

Takeda has announced that it will buy back shares of its own common stock on the open market at a total consideration of up to JPY 100 billion. The share repurchases—the first that Takeda has implemented in 13 years—are scheduled to take place from November 2, 2021 through April 29, 2022.

We spoke with Costa Saroukos, Takeda’s Chief Financial Officer, to learn more about what this means for our shareholders.

 

Interview
Q: What led you to pursue this new share buyback program?

CS: There were a number of factors in our decision. First, based on our share price, we felt that the market was undervaluing Takeda and we saw an opportunity to buy back our shares at a substantial discount to what we perceive is their underlying, or intrinsic, value.

Second, we are in a position to leverage our operating cash flow, which is driven by strong revenue growth in our 14 Global Brands, and working capital improvements to fund the buyback.

Finally, with this share buyback we wanted to signal to the market that we have confidence in our overall business strategy, and that we are committed to shareholder returns. This buyback does not compromise any other aspect of our capital allocation strategy, and we remain committed to investing in our growth drivers, hitting our deleveraging target, and maintaining our well-established dividend policy of JPY 180 per share annually.

 

Q: What does this mean for future shareholder returns?

CS:  We expect Takeda’s topline growth momentum to continue, driven by our 14 Global Brands and new product launches, and we believe that our R&D strategy, with a highly innovative pipeline of approximately 40 clinical stage assets, will deliver for the long term. We expect that this momentum will put us in a strong financial position moving forward, and the combination of revenue growth and solid margins will allow us to continue generating abundant cash flow.

 

Takeda’s Capital Allocation Policy

Takeda is delivering on its financial commitments and has a strong cash flow outlook driven by revenue growth and strong margins. Guided by our values and our commitment to patients, people and the planet, we will allocate capital to maximize value for patients and shareholders.

Takeda's policy in the allocation of capital is as follows:

  • Invest in growth drivers
    • Strategic investment in R&D (in-house and partnerships)
    • New product launches, including in China
    • Plasma-Derived Therapies
  • Deleverage rapidly
    • Net Debt / Adjusted EBITDA1 ratio to reach 2x (i.e. “low-twos”) within fiscal years ending March 2022 – March 2024
    • Maintain solid investment grade credit ratings
  • Shareholder returns
    • Underlying growth momentum expected to continue over the mid-term
    • Return cash to shareholders: maintain well-established dividend policy of 180 yen per share annually, alongside share buybacks when appropriate.

 

Go deeper into our share buyback announcement

 

Forward-Looking Statements

This article and any materials distributed in connection with this article may contain forward-looking statements, beliefs or opinions regarding Takeda’s future business, future position and results of operations, including estimates, forecasts, targets and plans for Takeda. Without limitation, forward-looking statements often include words such as “targets”, “plans”, “believes”, “hopes”, “continues”, “expects”, “aims”, “intends”, “ensures”, “will”, “may”, “should”, “would”, “could” “anticipates”, “estimates”, “projects” or similar expressions or the negative thereof. These forward-looking statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those expressed or implied by the forward-looking statements: the economic circumstances surrounding Takeda’s global business, including general economic conditions in Japan and the United States; competitive pressures and developments; changes to applicable laws and regulations, including global health care reforms; challenges inherent in new product development, including uncertainty of clinical success and decisions of regulatory authorities and the timing thereof; uncertainty of commercial success for new and existing products; manufacturing difficulties or delays; fluctuations in interest and currency exchange rates; claims or concerns regarding the safety or efficacy of marketed products or product candidates; the impact of health crises, like the novel coronavirus pandemic, on Takeda and its customers and suppliers, including foreign governments in countries in which Takeda operates, or on other facets of its business; the timing and impact of post-merger integration efforts with acquired companies; the ability to divest assets that are not core to Takeda’s operations and the timing of any such divestment(s); and other factors identified in Takeda’s most recent Annual Report on Form 20-F and Takeda’s other reports filed with the U.S. Securities and Exchange Commission, available on Takeda’s website or at www.sec.gov. Takeda does not undertake to update any of the forward-looking statements contained in this article or any other forward-looking statements it may make, except as required by law or stock exchange rule. Past performance is not an indicator of future results and the results or statements of Takeda in this article may not be indicative of, and are not an estimate, forecast, guarantee or projection of Takeda’s future results.

 

Certain Non-IFRS Financial Measures

This article and materials distributed in connection with this article include certain IFRS financial measures not presented in accordance with International Financial Reporting Standards (“IFRS”), such as Underlying Revenue, Core Operating Profit, Underlying Core Operating Profit, Core Net Profit, Underlying Core EPS, Net Debt, EBITDA, Adjusted EBITDA and Free Cash Flow. Takeda’s management evaluates results and makes operating and investment decisions using both IFRS and non-IFRS measures included in this article. These non-IFRS measures exclude certain income, cost and cash flow items which are included in, or are calculated differently from, the most closely comparable measures presented in accordance with IFRS. By including these non-IFRS measures, management intends to provide investors with additional information to further analyze Takeda’s performance, core results and underlying trends. Takeda’s non-IFRS measures are not prepared in accordance with IFRS and such non-IFRS measures should be considered a supplement to, and not a substitute for, measures prepared in accordance with IFRS (which we sometimes refer to as “reported” measures).  Further information on certain of Takeda’s Non-IFRS measures is posted on Takeda’s investor relations website at https://www.takeda.com/investors/financial-results/  

 


1 Please refer to slide 36 of FY2021 Q2 Investor Presentation for definition and slides 53-55 for FY2021 H1 reconciliation