• Takeda is a Pharma company from Japan formally started on 1981. The company is very attractive and there are many reasons for that. This is probably what you would expect from a $43.78 Billion pharma company.
• Takeda’s valuation has been however, very punished in the last months. There are three main reasons for that.
1) The company has been helping moderna to manufacture covid vaccines in Japan and in August, because of Human Error, a batch of the vaccines manufactured in their facilities was contaminated with stainless steel particles.
2) On October, Takeda halted the trials of an experimental sleep disorder treatment.
3) The patents of some extremely interesting products from Takeda expire in 2023/2024. We will go more in depth into these products in a separate paragraph because they are key for our valuation of Takeda as a company.
• All of these bad news, have led the valuation of this amazing company to extreme, irrational and historic lows. The dividend yield of Takeda’s stock reached 6% yesterday, when we reinstated our 32.5$ (3-Year) price target. The ADR of the stock was trading at 13.92 USD on the NYSE. Historically, Takeda’s shares never traded so cheaply. On 2010, the ADR shares were at 21.5$.
• The reason we got interested into the stock was one of Takeda’s products called “Elvanse”. Elvanse is a drug used as treatment for “ADHD”. The biggest competitor for this product is the Novarti’s “Ritalin”. We at Unflagged Research determined that the side effects produced by “Elvanse” are inexistent when compared to the side effects produced by “Ritalin”. “Elvanse’s” efficiency is also way superior than Ritalin. Basically, this is a live changer for people who suffer “ADHD”, also known as Attention Deficit Hyperactivity Disorder. We at Unflagged Research think “Elvanse” will win market share in this particular market and dethrone the old “Ritalin”. We think “Elvanse” is the future for “ADHD” treatment.
• Ritalin’s patents are long expired and now any Pharma Company is able to sell generic versions of the drugs to compete with the traditional Novartis’ Ritalin version. This is however not the case for Takeda’s Elvanse. The way Elvanse works is completely different than most of the already existing treatments. Elvanse is a product of R&D at Takeda’s Labs and is still protected by patents. This means, Takeda is the only one allowed to produce and sell an ADHD treatment with the chemical component used in “Elvanse”. In other words, no generic alternatives and no competition. There is a very important catch here, these patents expire on 2023 and 2024.
• The date for the expiry of those patents has been worrying analysts covering Takeda for months now and many downgraded the stock because of concerns of declining revenue starting those years.
• At Unflagged Research we are convinced of four things.
(1) The first one is that Takeda will still generate a ton of revenue after the patents for Elvanse expire. It will take a very long time until customers currently using Elvanse switch to a generic version, if they switch. The main reason for that is how delicate ADHD treatment is. There are so many side effects that come with medicaments, that once you find something that works, you just don’t switch, unless you have to because of shortages. And right now, 100% of people treated with Elvanse's chemical components are using Takeda’s products. They won’t switch as easily as Analysts expect.
(2) The ADHD treatment industry is one of the best places to be if you believe in an economic recovery. With people interested on going back to work, study and having an organized live back again, the people who, sadly and unfortunately, suffer from ADHD will need treatment more than ever in the last years. It is also important to note that many people who suffer ADHD stopped taking their medication during lockdown because of shortage and the interruption of professional performance required overall in live during covid-19. All of those patients are suffering hardly from falling into stopping taking their meds. All of them need help, and Takeda is helping them. Be a proud shareholder if you are in Takeda :)
(3) Takeda’s Elvanse is probably the best treatment for ADHD right now. With so many people struggling to find their appropriate doses and appropriate medication to resume their lives after covid, many of them will not only be looking at new doses, but also looking for the best medication available for them. We forecast many will find Elvanse as a solution.
(4) Takeda as a company is positioned tight now in a unique and more than attractive spot for investors. To start, Takeda has what probably is the best treatment for people with ADHD. They also are the only company with a treatment developed so recently, that they still own the patents and have no competition guaranteed. Finally, Takeda holds such an advantaged position during a time, that we at Unflagged Research would describe as the most important time in history for the ADHD treatment industry. A Global Pandemic hit the world and interrupted the supply of medication for people suffering ADHD. Now, all of them are trying to resume their previous or a new treatment at the same time. Demand for ADHD treatment is and will experiene an historic demand peak that may not be matched until 2030/40. The demand peak may not ever even be matched if ADHD becomes less common among new generations, what is however unlikely to happen.
• Because of our conviction in the privileged spot in which Takeda is right now, we have been conducting research on the company for the last few months. When the bad news arrived and the stock’s price dropped below 14$, we rushed to share our price target and interest in the company in advance of Q3 Earnings and in advance of this article.
• Two days ago, we released many target prices in advance of upcoming detailed reports on our website, like this one. Here is a screenshot of the tweet in which we shared our conviction in the company on October 26.
• Because the stock continued to drop irrationally yesterday, October 27, we decided to reinstate our price target when the stock precentes and even bigger discount.
• You can check on your own the veracity of these claims on our Twitter “@broadcast_real”
• Today, October 28, Takeda beat expectations in Q3 financial results. Takeda also announced a share repurchase program of 2% of the shares outstanding. Great move given how undervalued the company is right now.
• We hold our 3-Year price target for Takeda’s ADR shares, listed on the NYSE (ticker: “TAK”), of 32.5 USD.
• Price when coverage was initiated: 14.07 USD
• Lowest price as target price was reinstated: 13.92 USD
• We expect the stock to revalorízate after this earnings beat, that will possibly generate more interest among analysts and change the problematic previous narrative.
• We are happy to finally share our detailed report here on our website. Remember that if you want to know our price targets for the companies we think present an interesting investment opportunity, you just need to check our Twitter profile “@broadcast_real”.
As always, thank you very much for reading and have a nice day :)
UNFLAGGED RESEARCH 🚩 - October 28, 2021
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