Second Quarter of FY2014
(March 2015)
Earnings Results
Takashi Saito, Executive Officer
Taisho Pharmaceutical Holdings
October 31, 2014
Results for the 2nd Quarter of FY2014
(¥ bn)
FY2013
2Q(4-9)
Net sales
FY2014
2Q(4-9)
YOY change
Vs.
previous
E*
144.6
141.8
-2.8
-1.9%
-5.2
Self-Medication
91.4
88.1
-3.4
-3.7%
-5.0
Rx Pharmaceutical
53.1
53.7
+0.6
+1.1%
-0.2
Operating income
21.5
16.2
-5.3
-24.5%
+1.2
Ordinary income
25.6
19.6
-6.0
-23.4%
+0.6
Net income
16.5
12.6
-3.9
-23.8%
+0.6
E: Estimates
Note: Fractions of 1 billion are rounded down. Changes are calculated in millions of yen.
*Comparison with forecast of July 31, 2014
1
Overview of FY2014 2nd Quarter Results (1)
• Self-Medication Operation Group (Taisho, Japan)
– Results did not meet initial forecasts mainly due to the impact of
the consumption tax hike being greater than anticipated, and to
unsettled summer weather in Jul.- Sept.
• Self-Medication Operation Group (Overseas)
– Overall, performed largely as planned as a whole
– Sales up year on year due to contribution from brand acquisition
(Flanax)
– Results did not meet initial forecasts due to the sluggish
consumption caused by the political instability in Thailand
<For reference: Market conditions>
– Domestic OTC drugs market
FY2014 2Q (Apr.- Sept.): contracted 3.9% YOY
(Apr.- Jun.: contracted 6.4% YOY, Jul.- Sept.: contracted 1.5% YOY)
(Taisho’s estimates based on INTAGE SDI/SRI data on a value basis)
2
2Q of FY2014: Sales of Leading Brands
(Self-Medication Operation Group in Japan)
(¥ bn)
FY2014
2Q(4-9)
Lipovitan series
YOY change
Vs.
previous
E*
35.3
-2.3
-6.1%
-2.7
Pabron series
9.9
-0.4
-4.1%
-0.3
RiUP series
6.7
-0.3
-3.7%
-0.3
Livita series
1.9
-0.3
-12.7%
-0.4
GI drugs series
1.9
-0.1
-4.8%
-0.2
NARON series
1.9
-0.2
-8.4%
-0.1
Colac series
1.6
-0.1
-7.4%
-0.2
E: Estimates
Note: Fractions of 1 billion are rounded down. Changes are calculated in millions of yen.
*Comparison with forecast of July 31, 2014
3
Overview of FY2014 2nd Quarter Results (2)
• Overseas Business
(¥ bn)
Main components of net sales
FY2014
2Q(4-9)
YOY change
Vs.
previous E*
13.5
+0.5
+3.5%
-0.2
13.5
+0.5
+3.5%
-0.2
Overseas
energy drinks
4.7
-0
-0.7%
-0.1
Overseas OTC drugs
8.3
+0.5
+6.0%
-0.1
Asia
6.9
+0.2
+3.5%
-0.3
Other
1.4
+0.2
+20.6%
+0.2
Overall Overseas Business
Self-Medication
overseas business
E: Estimates
Note: Fractions of 1 billion are rounded down. Changes are calculated in millions of yen.
*Comparison with forecast of July 31, 2014
4
Overview of FY2014 2nd Quarter Results (3)
• Prescription Pharmaceutical Operation Group
– Sales trend in major brands (YOY change)
• Infectious diseases field:
– ZOSYN (+3.1%): Continued to contribute to expanded indications
– Clarith (-18.6%): Sales were lower due mainly to NHI drug price
revisions and the contraction of the antibacterial agent market
• Inflammatory / immunologic diseases field:
– Edirol (+27.1%): Penetrated market as a base-drug osteoporosis
agent
– Bonviva: Launched in August 2013 and is being steadily adopted
by an increasing number of medical facilities
• Metabolic diseases field:
– Lusefi: Launched in May 2014 and increased provision of
information emphasizing its safety
<For reference: Market conditions>
The prescription pharmaceutical market contracted by 1.3% YOY
The market for antibacterial agents –Taisho’s core market–
shranked by 9.2% overall (Oral: down 12.0%, Injection: down 6.0%)
(©2014 IMS Health. All rights reserved.
Source: IMS JPM 2013 and 2014 (Apr.-Sept.), reprinted with permission)
5
Prescription Pharmaceutical:
Sales of Leading Products for 2Q of FY2014
(¥ bn)
FY2014
2Q(4-9)
Vs.
previous E*
YOY change
Infectious diseases field
ZOSYN
12.5
+0.4
+3.1%
-0.5
Clarith
5.5
-1.3
-18.6%
-0.5
OZEX
2.6
-0.5
-17.3%
-0.5
Inflammatory / immunologic diseases field
Edirol
7.6
+1.6
+27.1%
+0.5
Bonviva
1.5
+1.2
+488.1%
+0.3
Palux
3.5
-0.4
-11.0%
±0
Lusefi
2.4
+2.4
-
±0
Metabolic diseases field
Note: Fractions of 1 billion are rounded down. Changes are calculated in millions of yen.
E: Estimates *Comparison with forecast of July 31, 2014
6
Factors Affecting FY2014 2nd Quarter
Net Sales and Profits
(Year-on-Year change)
Net sales
Self-Medication
(down ¥2.8bn) (down ¥3.4bn)
Rx Pharmaceutical
(up ¥0.6bn)
Operating
Gross profit* down ¥2.0bn
income
(Gross margin* FY13 2Q: 62.7%  FY14 2Q: 62.6%)
(down ¥5.3bn)
SG&A expenses
up ¥3.3bn
(Main factors behind changes)
・R&D expenses
down ¥0.6bn
・Advertising expenses
up ¥1.8bn
・Sales promotion expenses
up ¥1.7bn
・Personnel expenses
・Other
down ¥0.7bn
up ¥1.1bn
Non-operating items: Equity method loss: ¥0.3bn
(down ¥0.8bn from last year’s profit of ¥0.6bn)
*After provision/reversal of reserve for returned unsold goods
Note: Fractions of 1 billion are rounded down. Changes are calculated in millions of yen.
7
FY2014 Full-year Forecasts
(¥ bn)
Full-year E
(new)
Full-year E
(previous)
YOY Change
Vs.
previous
E*
293.0
-3.0
-1.0%
299.0
-6.0
Self-Medication
178.9
-2.9
-1.6%
184.3
-5.4
Rx Pharmaceutical
114.1
-0.1
-0.1%
114.7
-0.6
Operating income
29.0 -12.7 -30.4%
30.5
-1.5
Ordinary income
37.0 -14.2 -27.8%
38.5
-1.5
Net income
24.0
25.5
-1.5
314.56
-
Net sales
EPS (Yen)
296.05
-8.7 -26.6%
-
-
E: Estimates
Note: Fractions of 1 billion are rounded down. Changes are calculated in millions of yen.
*Comparison with forecast of July 31, 2014
8
FY2014: Business Forecast Revisions
Net sales: Revised downward ¥6.0bn based on the first-half performance
• Self-Medication Operation Group (down ¥5.4bn)
– Domestic (down ¥5.2bn):
Downward revision of forecast for leading brand sales reflecting
temporary factors in effect until the second quarter
• Lipovitan series
• Pabron series
• RiUP series
•
down ¥2.8bn
down ¥0.3bn
down ¥0.2bn
Prescription Pharmaceutical Operation Group (down ¥0.6bn)
– Intermediate products, etc.: Revised downward
Operating income, ordinary income and net income:
Revised downward ¥1.5bn
• SG&A expenses: Revised to reflect the first-half performance
• Equity in earnings of affiliated companies:
Revised from ¥1.4bn to ¥0.9bn
9
Initiatives for FY2014
• Self-Medication Operation Group (Taisho, Japan)
– Medium-term period of strengthening and nurturing brands
• Lipovitan series:
Stimulating demand and increasing new users
• Pabron series:
Steadily ensuring the leading share
• RiUP series:
Expanding the hair regrowth market
• Livita series:
Focusing on the lifestyle-related diseases field
• Self-Medication Operation Group (Overseas)
– Rapidly achieve consolidated sales ratio of 10%
• Develop businesses in growth markets centered on Asia
• Expand businesses by increasing presence in countries with
existing operations, using acquired businesses as a platform
10
FY2014: Forecasts for Leading
Brands/Products (Self-Medication, Japan)
(¥ bn)
Full-year E
(new)
YOY Change
Full-year E
(previous)
Vs.
previous
E*
Lipovitan series
64.0
-3.4
-5.1%
66.8
-2.8
Pabron series
25.7
-0.3
-1.0%
26.0
-0.3
RiUP series
14.0
-1.6
-10.3%
14.2
-0.2
Livita series
4.2
-0.5
-11.1%
4.8
-0.6
GI drugs series
4.0
-0.3
-6.4%
4.2
-0.2
NARON series
3.9
-0.2
-4.1%
4.1
-0.1
Colac series
3.4
-0.2
-4.7%
3.6
-0.2
E: Estimates
Note: Fractions of 1 billion are rounded down. Changes are calculated in millions of yen.
*Comparison with forecast of July 31, 2014
11
FY2014 Forecasts: Overseas Business
Main components of net sales
(¥ bn)
Full-year
E
(new)
Overall Overseas Business
Self-Medication
overseas business
Overseas energy drinks
Overseas OTC drugs
Asia
Other
YOY Change
Full-year
E
(previous)
Vs.
previous
E*
27.7
+2.3
+9.2%
27.7
±0
27.7
+2.3
+9.1%
27.7
±0
9.4
+0.4
+4.8%
9.6
-0.2
17.4
+1.9
+12.4%
17.2
+0.2
14.7
+1.5
+11.5%
14.6
+0.1
2.7
+0.4
+17.5%
2.6
+0.1
E: Estimates
Note: Fractions of 1 billion are rounded down. Changes are calculated in millions of yen.
*Comparison with forecast of July 31, 2014
12
Initiatives for FY2014
• Prescription Pharmaceutical Operation Group
– Sales and Marketing
• Further strengthen information provision as the leading
company in the infectious diseases field
• Nurture the osteoporosis agents Edirol and Bonviva
Expand the inflammatory / immunologic diseases field
• Strengthen information provision about the Type 2 diabetes
treatment Lusefi
Offer a new option for treating diabetes
– Research and Development
• Initiatives to create new drugs in the priority fields of
infectious diseases, orthopedic disorders, CNS, and
metabolic diseases
13
FY2014: Forecasts for Leading
Brands/Products (Prescription Pharmaceutical)
(¥ bn)
Full-year E
(new)
Full-year E
(previous)
YOY Change
Vs.
previous
E*
Infectious diseases field
ZOSYN
26.5
+1.1
+4.4%
27.0
-0.5
Clarith
13.8
-2.6
-15.9%
14.5
-0.7
OZEX
6.4
-0.8
-11.1%
6.9
-0.5
Inflammatory / immunologic diseases field
Edirol
16.5
+2.4
+17.4%
15.5
+1.0
3.6
+2.4
+193.4%
3.0
+0.6
Palux
7.0
-0.9
-11.2%
7.0
±0
Lusefi
2.7
+2.7
-
2.7
±0
Bonviva
Metabolic diseases field
E: Estimates
Note: Fractions of 1 billion are rounded down. Changes are calculated in millions of yen.
*Comparison with forecast of July 31, 2014
14
Factors Affecting FY2014 Full-year Forecasts
Net Sales and Profits
(Year-on-Year change)
Net sales
(down ¥3.0bn)
Self-Medication
(down ¥2.9bn)
Rx Pharmaceutical
(down ¥0.1bn)
Operating
income
(down ¥12.7bn)
Gross profit* : down ¥3.2bn
(Gross margin* FY13: 62.4%  FY14: 61.9%)
SG&A expenses
up ¥9.5bn
(Main factors behind changes)
・R&D expenses
up ¥0.6bn
・Advertising expenses
up ¥2.7bn
・Sales promotion expenses
up ¥2.7bn
・Personnel expenses
・Other
down ¥0.3bn
up ¥3.7bn
Non-operating items: Equity method income of ¥0.9bn (down ¥1.5bn)
*After provision/reversal of reserve for returned unsold goods
Note: Fractions of 1 billion are rounded down. Changes are calculated in millions of yen.
15
Prescription Pharmaceuticals:
New Drug Development
•
Changes since FY2014 1Q earnings announcement (July 31)
(As of October 31, 2014)
TT-063 (Anti-inflammatory analgesic patch formulation containing S-flurbiprofen)
Planned
application
Osteoarthritis (Before change: osteoarthritis and other conditions)
Changes
Phase 3  Filed for application
Announced filing for manufacturing and marketing approval on Oct. 20, 2014
NT-702
Planned
application
Changes
Asthma
Intermittent claudication caused by arteriosclerosis obliterans
Phase 2  Removed from pipeline
Removed from pipeline based on the decision to not participate in the
development of this drug as a result of a comprehensive review of the clinical
trial results and knowledge obtained to date
TS-121
Planned
application
Depression
Changes
Added to Phase 1
16
Prescription Pharmaceuticals:
New Drug Pipeline (1)
Drugs under development by Taisho Pharmaceutical: From Phase 2
(As of October 31, 2014)
Development with
In Japan/Overseas
Originator
Anti-inflammatory analgesic patch formulation
containing S-flurbiprofen
Osteoarthritis
TOKUHON
In Japan
TOKUHON
Antiresorptive bisphosphonate
Osteoporosis
Chugai
In Japan
Roche
Improvement of excessive daytime sleep
Central disorders of hypersomnolence
In-house
In Japan
Taisho
Description
Planned application
Filed for application
TT-063
(Topical)
Phase 3
CT-064*
(Oral)
Phase 2
TS-091
(Oral)
*CT-064: Generic name: Ibandronate Sodium Hydrate, Chugai Pharmaceutical development code: RG484
17
Prescription Pharmaceuticals:
New Drug Pipeline (2)
Drugs under development by Taisho Pharmaceutical: Phase 1
(As of October 31, 2014)
Target disease
In-house/Licensed-in
In Japan/Overseas
TS-071*
(Oral)
Type 2 diabetes
In-house
Overseas
TS-111
(Oral)
Depression
In-house
Overseas
TS-121
(Oral)
Depression
In-house
Overseas
Phase 1
*TS-071： Generic name: Luseogliflozin Hydrate, Product name: Lusefi
18
Trends in R&D Expenses
2Q of FY2014: ¥10.1bn (down ¥0.6bn YOY)
(Breakdown) Self-Medication: about same;
Rx Pharmaceutical: down ¥0.6bn
FY2014 full-year forecasts: Reduced ¥0.8bn to ¥22.5bn (up ¥0.6bn YOY)
(Breakdown of reduction) Self-Medication: down ¥0.3bn;
Rx Pharmaceutical: down ¥0.5bn
(¥ bn)
(Fiscal year)
19
Dividends
• Annual dividend for FY2014 (forecast): ¥110 per share
– Interim dividend:
¥50 per share in December 2014 (forecast)
Year-end dividend (forecast):
¥60 per share
Dividends per share and payout ratio
(Yen) 150
60%
120*
*
110
110
100
40%
36.9%
37.2%
Dividends per share (left scale)
Payout ratio (right scale)
27.3%
50
20%
0
*Includes the commemorative
dividend for the 100th anniversary
of the founding of Taisho
Pharmaceutical
0%
2012
2013
2014E
(Fiscal year)
20