Deep dive: Voyxact offsets the patent cliff; focus shifts to the next growth drivers

Research evidence excerpt

Deep dive: Voyxact offsets the patent cliff; focus shifts to the next growth drivers

iQprofile SM Otsuka HD (4578)

Key Income Statement Data 12/24A 12/25A 12/26E 12/27E 12/28E Company Sector

(¥ Millions) IFRS IFRS IFRS IFRS IFRS Pharmaceuticals

Sales 2,329,861 2,468,892 2,599,000 2,647,600 2,744,100

% Change NA NA 5.3% 1.9% 3.6%

Gross Profit 1,669,428 1,769,776 1,826,200 1,856,500 1,930,400 Company Description

EBITDA 557,583 621,965 573,633 597,033 656,433 Otsuka is a hybrid company with two major businesses:

Operating Profit 323,564 479,375 431,100 454,500 513,900 Pharma and nutraceuticals-related products (health foods).

% Change NA NA -10.1% 5.4% 13.1%

Pharma generates c.70% of sales. Otsuka has a strong

Net Interest & Other Income 12,290 (11,338) (11,338) (11,338) (11,338)

presence in CNS disease treatments and is set to maintain

Pretax Income (ex extraords.) 335,854 468,037 419,762 443,162 502,562

growth after the Abilify patent expires through Abilify % Change NA NA -10.3% 5.6% 13.4%

Net Income 343,120 363,150 316,762 342,562 388,862 Maintena and Rexulti. In the fourth MTP, Otsuka laid out

how it aims to offset several expiring patents with its

Key Cash Flow Statement Data

Global 10/Plus 2 (Core 2, Next 8, and Plus 2). Nutraceuticals

Net Income from Cont Operations (GAAP) 343,120 363,150 316,762 342,562 388,862

business to continue expanding. Depreciation & Amortization 234,019 142,590 142,533 142,533 142,533

Change in Working Capital (62,723) (100,018) (11,500) (14,500) (25,500)

Capital Expenditure (244,920) (228,948) (174,300) (192,800) (203,350)

Investment Rationale Free Cash Flow* 109,718 174,631 273,495 277,795 302,545

Share Issue / (Repurchase) (50,016) (70,096) 0 0 0 Our Buy rating is premised on: (1) Solid earnings guidance