Third Quarter Consolidated Financial Results
for the Fiscal Year Ending March 3131, 2017
1. Overview of consolidated results
2. Highlights of Business Performance
3. Main Product Sales Update
4 Revision of Forecasts
4.
5. Development pipeline【Reference】
6. Segment information
7. Financial summary and Revision of Forecasts
February 3, 2017

KYORIN Holdings, Inc.
These forecast performance figures are based on information currently available to theCompany and may include uncertain factors or risk that affect our future performance.
Accordingly, actual business results may materially differ from the forecasted figures due
to various factors in the future.

Outline of Third Quarter Consolidated Financial Results
for the Fiscal Year Ending March 31, 2017
Dec/2013

Dec/2014

Dec/2015

Dec/2016

YoY change(%)

Net Sales

83,43083,602

89,46986,836

Operating Income

13,503

10,691

14,666

Ordinary Income

13,961

11,181

9 272
9,272

9 571
9,571

（¥ million）

Net Income

Mar/2017

Mar/2017(revised forecast)

YoY change(%)(original forecast)

YoY change
(%)

－2.9

115,000－3.8

120,000

＋0.4%

7,313

－50.1

10,000－49.1

14,500－26.2%

14,946

7,716

－48.4

10,400－48.0

14,900－25.5%

10 831
10,831

4 723
4,723－56
56.4
46 600
6,600

－51.6
51 6

10 70010,700－21.6%
21 6%

Third Quarter Consolidated Financial Results for the Fiscal Year Ending March 31, 2017
【Net Sales】 Sales of new pharmaceutical products in Japan decreased due to decline in prescriptions of long-listed items and the drug price revisions. On theother hand
hand, sales of generic drugs increased due to the launch of an authorized generic (AG) of Montelukast (KIPRES),(KIPRES) and sales in the ethical pharmaceuticals
category in Japan were higher than last year. However, new pharmaceutical products overseas declined in the absence of upfront payment income recorded in
the previous year. Accordingly, total net sales fell to 86,836 million yen (2.9% year-on-year decrease).
【Profit】Gross profit on sales decreased by 5,737 million yen due to a rise in the cost rate, reflecting drug price revisions and an increase in the sales weight ofgeneric drugs, as well as a decline in upfront payment income in new pharmaceutical products overseas. SG&A expenses increased by 1,614 million yen(including a 705 million yen increase in R&D expenses), and operating income decreased to 7,313 million yen (a 50.1% year-on-yearyear on year decrease). Net income
attributable to owners of parent came to 4,723 million (down 56.4% from a year earlier) because expenses of around 1,000 million yen related to the settlementof a lawsuit for violation of US antitrust laws in connection with an in-licensed product (Gatifloxacin eyedrops) were recorded as an extraordinary loss.

Consolidated Financial Results for the Fiscal Year Ending March 31, 2017 (forecast)
The consolidated financial results forecast for the fiscal year ending March 31, 2017 announced in the news release of May 12 2016 Summary of Consolidated
Financial Results (For the fiscal year ended March, 2016) was revised as follows.
【Net Sales】 It is now expected that, in new pharmaceutical products in Japan, sales of core products will be less than initially forecast and, in newpharmaceutical products overseas, upfront payment income relating to an in-licensed product will be postponed to a subsequent term. Meanwhile, in genericdrugs, sales of the AG version of Montelukast (KIPRES) are expected to exceed the initial forecast. Accordingly, the initial forecast for overall net sales waslowered.
【Profit】The forecasts for operating income, ordinary income and net income attributable to owners of parent were lowered, mainly because net sales are now
expected to be lower than initially forecast. As explained above, an extraordinary loss of around 1,000 million yen was recorded in the third quarter.
【Dividends】
There is no change to the dividend forecast (annual dividend of 58 per share) announced on May 12, 2016.

1

Highlights of Business Performance（ Units: ¥ billion ）¾Net Sales decreased ¥2.7billion year on year.

Cost of Sales

35.2

38 3
38.3

Cost of Sales Ratio¾Cost of sales ratio increased 4.8%.

Cost of Sales Ratio

39.3%
Net sales

・Decrease of new ethical drugs sales(Japan and overseas)
generic drugs
g sales・Increase of g

Cost of Sales

・Drug price revisions
・Sales of ratio generic drugs increased
・Decrease of upfront payment income fori li
in-licensed
d productd t overseas

44.1%
Net sales

R&DR&D101■Gross Profit decreased ¥5.7billion
year on year .

10.9
SG&A

SG&A

(excluding R&D)

39.6

29.5

SG&A
(excluding R&D)

Operating
Income

SG&A

41.3

30 4
30.4

¾SG&A expenses increased ¥1.7billion¥1 7billion
year on year.
・R&D expenses increased ¥0.8billion
・SG&A(excluding R&D) increased ¥0.9billion■Operating Income decreased¥7.4billion year on year.
Operating
IncomeDec/15

Dec/162

Consolidated Financial Results
for the Third Quarter ending March 31, 2017
Year on Year

（unit : ¥ billion）
Dec/2015

Dec/2016

Change89.5

86.8－2.7

Ethical drugs
Business

85.3

82.5－2.8◆Sales of newethical drugs●Overseas

73.9
68.8
5.1

64.4
64.1
0.3

－9.5－4.7－4.8◆Generic drugs

11.4

18.1

6.7

4.2

4.3

0.1

Net Sales (total)●JapanHealthcareBusiness
Operating
Income14.7

7.3－7.4

Ordinary
Income

14 9
14.9

77
7.7

－7 2－7.2

Net
Income10.8■Net Sales¥86.8bln(－ 2.7)◆Ethical drugs business¥82.5bln(－ 2.8)¥64.1bln(－ 4.7)● Sales of new ethical drugs
Dec/2015⇒Dec/2016

・ Kipres※32.0 ⇒ 26.0 (－6.0)
・ Flutiform
5.2 ⇒
7.6 (＋2.4)
・ Uritos
U it57 ⇒5.7
5 8 (＋0.1)
5.8(＋0 1)
・ Pentasa
12.7 ⇒ 12.0 (－0.7)
9.9 ⇒
7.5 (－2.4)
・ Mucodyne※ Launch of an authorized generic drug（AG） for KIPRES●Sales of new ethical drugs in Overseas¥0.3bln・ Decrease of upfront payment income for FPR-2
FPR 2 agonists (12/2015)●Sales of Generic drugs¥18.1bln(－ 4.8)(+ 6.7)・Seles of the MONTELUKAST”AG” for KIPRES and the other generic drugs increased◆Healthcare Business¥4.3bln( + 0.1)■Operating Income¥7.3bln(－ 7.4)

◆Operating Income margin decreased 8.0 percentage points to 8.4%
●Cost of Sales Ratio : 39.3%⇒44.1% increased 4.8 percentage points
・ Drug price revisions
・Sales of generic drugs increased

・Decrease of upfront payment income for in-licensed product overseas●R&D Ratio : 11.3%⇒12.5% increased 1.2 percentage points

4.7－6.1(Note ) The details of the Sales Segment have been changed from the first quarter
ending March 31, 2017. Following the change, the Pharmaceutical Business comprises
New Drugs and Generic Drugs, while the Health Care Business comprises Skincare,
Environmental Hygiene and Over the Counter Drugs and Others.

＊¥10.1bln⇒¥10.9bln（＋¥0.8bln）

progress of project(KRP－AM1977X、KRP－114V)●SG&A Ratio : 33.0%⇒35.0% increased 2.0 percentage＊¥29 5bln⇒¥30 4bln（＋¥0 9bln）＊¥29.5bln⇒¥30.4bln（＋¥0.9bln）■Net Income

increase of Labor costs･increase¥4.7bln(－ 6.1)＊ Expenses of around 1,000 million yen relating to the settlement of a lawsuit for violation of U.S.
antitrust laws in connection with an in-licensed product (Gatifloxacin eyedrops) were recorded as
an extraordinary loss .

3

Main Product Sales Update（ Units: ¥ billion ）(originalforecast)

Sep/2016

Dec/2015

Dec/2016%Change

18.8

17.8

32.0

26.0

－18.8%

44.1

31.9

33.3

3.0

4.5

5.2

7.6

+44.1%

7.2

10.1

12.9

37
3.7

38
3.8

57
5.7

58
5.8

+0.5%
0.5%

75
7.5

76
7.6

78
7.8

―

――

0.7

―

―

1.9

1.9

(Ulcerative colitis andCrohn’s disease treatment)

8.1

7.9

12.7

12.0

－5.2%

16.1

15.5

15.8

Mucodyne

595.9444.4

99
9.9

7.5

－24.4%

13.0

9.7

10.8

―

1.8―

5.3―

―

7.1

4.1

Kipres（LT receptor antagonist）

Flutiform（Combination drug for asthmatreatment）

Uritos（Kyorin）(Overactive bladder)

Desalex(Antiallergic Agent)

P t
Pentasa（Mucoregulant）

Genericdrugs

Mar/2017((revisedforecast)

Sep/2015

Product namenewethicaldrugs(Japan)Mar/2017
Mar/2016

MONTELUKAST Tablets“KM”※※Authorized generic drug for KIPRES

4

Revision of Earnings Forecasts（unit : ¥million）

Mar/2017(original forecast)

Mar/2016

Mar/2017(revised forecast)Versus theoriginal forecast

Sales

119,483

120,000

115,000－5,000

Ethical drugs business

113,970

114,000

109,100－4,90098,506

92,40084,900－7,50092,92088,50084,000－4,500

5,586

3,800

800

－3,00015,46521,50024,100＋2,600

5,512

6,000

5,900－100◆Sales of new
ethical drugs●Japan●Overseas◆Genericdrugs
healthcare business【Main factors behind revision of net sales forecast】¾New pharmaceutical products
Japan: Initial forecast was revised to reflect lower than anticipated sales of core products
Overseas: Initial forecast was revised to reflect the postponement of upfront payment income relating to an in-licensed product to a subsequent term
¾Generic drugs: The forecast was revised to reflect sales of the AG version of Montelucast (KIPRES)【【Maina factors
acto s behindbe d tthee revisione so oof forecastso ecasts foro operating
ope at g income,co e, ordinaryo d a y income
co e anda d net
et incomeco e attributable
att butab e to oowners
e soof pa
parent】
e t】¾The initial forecasts were revised mainly because net sales were less than forecast.
¾Expenses of around 1,000 million yen relating to the settlement of a lawsuit for violation of U.S. antitrust laws in connection with an in-licensed
product (Gatifloxacin eyedrops) were recorded as an extraordinary loss in the third quarter.

5Main R&D Activities -1 (Feb 3 , 2017 Release)
Ph III ~ Application submitted
StageJJapanO
Overseas

Compound/Code

Therapy area/Action※Changes from the previous announcement(Nov 7 2016)

OriginFeatures

KRP-114V

Overactive bladder

Merck &Co.,

KRP-114V is expected to improve urinary
frequency through stimulation of the beta 3
receptor in bladder which improves bladdermuscle relaxation.

※Preparing forApplication

KRP-AM1977X(Oral agent）

New quinolone
synthetic antibacterial
agent

In-house

PhⅢ(3/2016)

KRP AM1977Y
KRP-AM1977Y(Injection）

New quinolone
synthetic antibacterial
agent

In-house
Inhouse-Superior ability to combat drug-resistant grampositive bacteria (incl. MRSA)-has a powerful antimicrobial activity against
anaerobic bacteria- Expectation of high clinical effects with excellent
tissue penetration-High degree of safety expected since safetyhurdles cleared prior to clinical trials

PhⅢ(1/2015)

PhⅡclinical
trial end
Merck & Co.,

Comments
License agreement withMerck & Co., Inc.,(7/2014)
Co-Development and CoMarketing Agreement withKissei Pharmaceutical Co.,,
Ltd. affiliate . (3/2016)※Release of DESALEX Tablets 5mg for treatment of allergic diseases (November 18, 2016）

6

Main R&D Activities -2 (Feb 3 , 2017 Release)
POC Project (Ph I ~ Ph II)
StageJapan

Overseas

Compound/
Code

Therapy area/Action

OriginFeatures

Comments

PhⅡ(8/2015)

PhⅢ
Merz

KRP-209

Tinnitus

Merz

KRP-209 (Neramexane) is expected to improve thepatients' annoyance and difficulties in their life caused bytinnitus, mainly through its two pharmacological properties:
1) NMDA antagonistic activity and 2) Nicotinic acetylcholine
antagonistic activity

License agreement withMerz (11/2009)
Merz:Ph I clinical trial ofJapanese patients in US
completed (3/2010)

PhⅠ,Ⅱ（7/2015）(US)
Momotaro-Gene
prostate cancer(5/2014)

Ad-SGE-REIC

malignant pleural
mesothelioma

Okayama
University

A gene-therapy product using a novel tumor suppressor
gene of reduced expression in immortalized cells/ Dickkopf3 (REIC/Dkk-3), which was discovered by researchers fromOkayama University, as a therapeutic gene.
It is expected to have direct effect on primary tumor lesions
and indirect effect on metastatic tumor lesions as a g
genetherapy product that simultaneously induces tumor cellselective apoptosis and the activation of antitumor
immunity respectively.

Adopted to Next
generation Technology
Transfer Program(NexTEP)(6/2014)7

Main R&D Activities -3 (Feb 3 , 2017 Release)
Licensing development（preclinical）
Compound/CodeLicensee /CollaborativeresearchTherapy
area/Action

KRP-203Novartis

GVHD

Stage/Overseas
PhⅠ

OriginIn-house

Features
Sphingosine-1-Phosphate Receptor Agonist .
immunomodukatory drug.

Comments
License agreement with Novartis(2/2006)
Novartis has decided to proceed with
development of KRP-203 for GvHD.

Preclinical-BMS

Nondisclosure

In-house

FPR-2 agonists that mainly inhibit themigration of neutrophils and exhibit antiinflammatory action.

License agreement with BMS(12/2015)

8Reference9Segment information
for the Third Quarter Ending March 31, 2017
Sales, Profit or Loss of each report segment（ Units: ¥ billion ）Saleschange Y/YProfitchange Y/Y

Net Sales ((total))

86.8

－2.7

7.3

－7.4

Ethical drugs business

82.5

－2.8

7.1

－7.4

64.4

－9.5

○Overseas

64.1
0.3

－4.7－4.8◆◆Genericdrugs

18 1
18.1

67
6.7

Healthcare business

4.3

0.1

00－－02
0.2

0◆Sales of new ethical drugs○JapanA
Amountt off adjustment
dj tt(Note ) The details of the Sales Segment have been changed from the first quarter ending March 31, 2017. Following the change, thePharmaceutical Business comprises New Drugs and Generic Drugs, while the Health Care Business comprises Skincare, Environmental
Hygiene and Over the Counter Drugs and Others.

10Consolidated Financial Results
for the Third Quarter ending March 31, 2017
Interim term
（unit : ¥million）

Third quarter

Full term
Mar/2017

Mar/2017(revisedforecast)(originalforecast)

119,483

115,000

120,000

3.3%
3%
－3

113 970
113,970

109 100
109,100

114 000
114,000－9,486－12.8%

98,50684,90092,40064 116
64,116

－4
4,678
678

8%
－6.8%
－692 920
92,92084 00084,00088 50088,5005,098

290－4,808－94.3%

5,586

800

3,800

10 32110,321

11 435
11,43518 101
18,101＋6 681＋6,6815%＋58.5%＋58

15 465
15,46524 10024,10021 50021,500

603

2,691

910

4,327

＋171

＋4.1%

5,512

5,900

6,000

Operating
Income

4 099
4,099

3 663
3,663

14 666
14,666

7 313
7,313

7 353
－7,35350 1%－50.1%

19 636
19,63610 00010,00014 50014,500Ordinary
Income

4,266

3,921

14,946

7,716－7,230－48.4%

19,995

10,40014,900Net
Income

2,967

2,684

10,831

4,723－6,108－56.4%

13,6396,600

10,700

Sep/2015

Sep/2016

Dec/2015

Dec/2016

Change% Y/Y

Mar/2016

Sales

52,38654,62889,46986,836－2,633－2.9%

Ethical drugs
b ibusiness

51 78351,78351 936
51,93688 55988,55982 50882,508

－2
2,805
805

42,22941,61573,71364,40741 634
41,63441 272
41,27268 61568,615594

343◆Genericddrugs

7 393
7,393

healthcare
business◆Sales of new
ethical drugs●Japan●Overseas

11