Consolidated Earnings Report for the First Nine Months of Fiscal 2020
[Japanese GAAP]

August 4, 2020

EPS Holdings, Inc.
First Section, Tokyo Stock Exchange4282
http://www.eps-holdings.co.jp
Yan Hao, Chairman & CEO
Kazuki Sekitani, Board Member, Vice President and Corporate
OfficerTel:+81-3-5684-7873
Filing of Quarterly Securities Report:
August 13, 2020
Scheduled Payment of Dividends:―
Supplementary explanatory materials prepared: None
Explanatory meeting:
None
Company Name:
Stock Listing:Code Number:
URL:
Representative Director:
Inquiries:

1.

(¥ millions are rounded down)

Consolidated Results for the First Nine Months of Fiscal 2020 (October 1, 2019 to June 30,
2020)(1) Consolidated Operating Results
First Nine Months(¥ millions; percentage figures represent year-on-year changes)

Net sales

Operating income

Profit attributable toowners of parent

Recurring profit

Fiscal 2020
48,481 (3.3)%
3,174 (17.2)%
3,279 (15.8)%
2,077 1.2%
Fiscal 201950,155 3.5%
3,836 (30.1)%
3,896 (31.3)%
2,053 (40.5)%
Note: Comprehensive income: June 30, 2020: ¥1,372 million [(40.9)%], June 30, 2019: ¥2,322 million [(35.7)%]

Fiscal 2020

45.98

Profitper share (diluted)(¥)―

Fiscal 2019

45.61

―

First Nine Months

Profitper share (¥)(2) Consolidated Financial Position
Total assets(¥ millions)
Equity ratio(%)

Net assets

June 30, 2020
66,14947,533September 30, 2019
66,566
46,337
Note: Equity: June 30, 2020: ¥44,663 million, September 30, 2019: ¥43,301 million

2.

67.5
65.1

Dividends
Dividend per share (￥)First Quarter

Second Quarter

Third Quarter

Fiscal 2019

―

13.00

―

Fiscal 2020

―

10.00

―

Fiscal 2020 (forecast)
Note: Revisions to recent dividend forecasts: None.
The dividend forecast is to be determined.

Year End

Full Year

15.00

28.00

―

―

3.

Forecast of Consolidated Results for Fiscal 2020 (October 1, 2019 to September 30, 2020)(¥ millions; percentage figures represent year-on-year changes)

Net sales
Full year

62,000~65,000(10.2)%~(5.8)%

Operating income

Recurring profit

Profit attributable toowners of parent

Profitper share
(¥)

2,500
~3,5002,500~3,5001,000~1,50022.29~33.44(60.2)%~(44.3)%(60.1)%~(44.2)%(72.5)%~(58.7)%

Note: Revisions to recent consolidated results forecasts: Yes

Regarding the consolidated earnings forecast, please refer to “Notice of Revision to Earnings Forecast” released today (August
4, 2020).

*Notes(1) Changes to important subsidiaries during the first six months changes in specified subsidiaries resulting inrevised scope of consolidation: None
(2) Application of special accounting methods in the preparation of quarterly consolidated financial statements:
None(3) Changes in accounting principles, accounting estimates and restatements
a. Changes in accounting policies in conjunction with revisions to accounting standards: Noneb. Other changes: Nonec. Changes in accounting estimates: None
d. Restatements: None
(4) Number of shares issued (common stock)a. Number of shares issued at end of
Fiscal 2020, 3Q end
period (including treasury stock):

46,311,389 Fiscal 2019 end

46,311,389

b. Number of treasury stock at end of
period:Fiscal 2020, 3Q end

1,450,153 Fiscal 2019 end

1,971,195c. Average number of stock during theperiod:Fiscal 2020, 3Q

45,188,533 Fiscal 2019, 2Q

45,011,032

Note: The number of treasury shares at end of period includes 93,090 shares of the Company held by EPS EKISHIN Co.,Ltd.

* This financial report is outside the scope of the quarterly audit reviews performed by certified public
accountants or auditing firms.
* Explanation concerning the appropriate use of financial forecasts and other notable matters.

Earnings forecasts and other forward-looking statements in this report are based on data currently available to management
and certain assumptions that management believes are reasonable. Actual results may differ materially from these statementsfor various reasons.

2Table of Contents of Supplementary Materials
1. Qualitative Information Concerning Quarterly Financial Statements(1) Explanation Regarding Consolidated Operating Results(2) Explanation Concerning Forward-Looking Statements such as Consolidated Financial Forecasts(3) Risk Information Concerning COVID-19
2. Quarterly Consolidated Financial Statements and Main Notes(1) Quarterly Consolidated Balance Sheets(2) Quarterly Consolidated Statements of Income and Comprehensive Income
Quarterly Consolidated Statements of Income(The nine months ended June 30, 2020)
Quarterly Consolidated Comprehensive Income(The nine months ended June 30, 2020)(3) Notes Concerning Quarterly Consolidated Financial Statements(Note Concerning the Going Concern Assumption)(Note Concerning Significant Changes in the Amount of Shareholders’ Equity)(Segment Information)

1

2
2
4
4
6
6
8
8
9
10
10
10
10

1. Qualitative Information Concerning Quarterly Financial Statements(1) Explanation Regarding Consolidated Operating Results
Overview of Operating Results for the Nine Months Ended June 30, 2020
The First Nine Months of
Fiscal 2019
Amount%(¥ millions)

The First Nine Months of
Fiscal 2020
Amount%ChangeAmount%Net sales

50,155100.0

48,481100.0(1,674)(3.3)

Operating income

3,836

7.6

3,174

6.5

(661)

(17.2)

Recurring profit

3,896

7.8

3,279

6.8

(616)

(15.8)

Profit attributableto owners ofparent

2,053

4.1

2,077

4.3

24

1.2

Forward-looking statements contained in this document are based on a judgment of operating results for thenine months ended June 30, 2020.
In the nine months ended June 30, 2020, the EPS Group posted consolidated net sales of ¥48,481 million, adecrease of 3.3% year on year. Due to the spread of COVID-19, the overall decrease in net sales, centering on
the CRO and SMO businesses, was mainly due to delays in new project starts and the impact of a decrease inclinical trial subjects visiting hospitals, while shipments in the EKISHIN (China) Business were affected by
the temporary suspension of manufacturing lines stemming from China’s Revised Drug Administration Law
and there was an impact on the Global Research Business from the conclusion of a large-scale project in theprevious fiscal year. Additionally, consolidated operating income decreased 17.2% year on year to ¥3,174
million. The decrease in income owes primarily to a decline in supply due to production line suspension in the
EKISHIN (China) Business and in the CRO Business, the conclusion of a highly profitable monitoring project
and a large-scale clinical study in the previous fiscal year and delays in studies caused by the impact of
COVID-19.
Furthermore, the Group exceeded the consolidated net sales which projected from the revised forecast
announced on May 8, 2020 due mainly to continuing clinical trials with orders completed and the negative
impact on self-restraint in visits to medical institutions being less than expected, despite a state of emergency
being declared in Japan and taking measures to combat the spread of COVID-19. Moreover, consolidated
operating income rose significantly due to consolidated net sales exceeding their budget and a higher level ofcost control.
Operational segments are outlined as follows.
Segment Overview
The Group primarily operates businesses in the following five segments (three domestic segments and two
overseas segments).

CRO
Domestic
BusinessSMO
CSO

The First Nine
Months of
Fiscal 201922,183
3,390
10,616
1,062
6,696
285
3,496
(1)
8,986

Net sales
Operating income
Net sales
Operating income
Net sales
Operating income
Net sales
Operating income (loss)
Net sales

The First Nine
Months of
Fiscal 2020
21,756
2,767
9,961
1,234
8,632
720
2,655
124
6,046

(¥ millions)
ChangeGlobalResearch
EKISHIN(China)Operating income (loss)
319
(251)
Business
EPS Associates Co., Ltd., which was in the CRO Business, merged with EPS International Holdings Co., Ltd.
in the Global Research Business on October 1, 2019. For the year-on-year comparisons above, consolidated
figures for the nine months ended June 30, 2019 have been reclassified into their business segments following
the merger.
Overseas
Business

2

(431)
(622)
(655)
171
1,936
435
(831)
125
(2,940)(571)

1) CRO BusinessIn the CRO Business, the Group conducts operations based on the following structure:a. Contract-based clinical study and post-marketing surveillance (PMS) services: EPS Corporationb. Clinical research services: EP- CRSU Co., Ltd.
c. Pharmaceutical and medical IT services: EP-Techno Co., Ltd.
Looking at performance in the CRO Business by service, contract-based services including clinical studies
and PMS services had brisk inquiries and alliance contracts with business partners made solid progress, while
in monitoring, utilization rates tended toward recovery. Sales and income declined year on year, in the CRO
Business, mainly owing to delays in the progress of clinical trials due to the impact of COVID-19, while inmonitoring, high-value projects wrapping up in the previous fiscal year as well as sluggish inquiries in the
2nd half of previous year.
In clinical research services, although net sales decreased year on year due to the conclusion of a largescale clinical trial in the previous fiscal year, joint research has started with the National Cancer Center andinquiries about clinical research remained undiminished. Operating income increased as proactive acceptanceof physician led clinical trial orders maintained good operating rates and cost cuts were effective.
In pharmaceutical and medical IT services, the Group is promoting digitization in the CRO business. In
product sales for clinical studies and PMS services, inquiries have increased as the academic alliances
progressed despite struggling to capture orders.
As a result, net sales were ¥21,756 million, a decrease of ¥431 million, or 1.9%, year on year, andoperating income was ¥2,767 million, a decrease of ¥622 million, or 18.4%, year on year.
2) SMO Business
The SMO Business is undertaken by EP-SOGO Co., Ltd.
In this business, the Group is striving to fully deploy proposal-based sales activities targeting clinical trial
sponsors, secure orders through alliance contracts, and concentrate resources on preferred facilities with goodpatient recruitment rates, among other things.
At the same time, the Group is bolstering education focused on specialties such as cancer, mental illness,and dermatology while enhancing profitability and efficiency through appropriate placement of personnel
such as clinical research coordinators (CRCs) and site management associates (SMAs), moving forward on
the Institutional Review Board’s remote review system and giving consideration to maintenance of internalframeworks and regionality. Comparing with the same period from the previous year, COVID-19’s impact
has delayed progress in clinical trials and sales have decreased, but income achieved targets due to cost
controls and improved productivity.
In addition, the Group launched a collaborative project between the CRO Business and the Global
Research Business in the previous fiscal year, and is deploying a new business model with the aim of rapidly
recruiting clinical trial participants and reducing clinical trial costs. Specifically, site data managers (SDMs)
that have received training in CRO are assigned to medical facilities and are designated to perform tasks suchas carefully examining clinical testing data and data entry for systems to allow CRCs to concentrate on
responding to clinical trial subjects and medical staff, and recruiting patients and enhance efficiency.
As a result, net sales were ¥9,961 million, a decrease of ¥655 million, or 6.2%, year on year. The
initiatives noted above are benefitting operating income, which rose ¥171 million, or 16.2%, year on year, to¥1,234 million.
3) CSO Business
The CSO Business is undertaken by EP-PharmaLine Co., Ltd., EP-Force Co., Ltd., and ES-Link Co., Ltd.
The CMR (Contract Medical Representative) business was aggregated with the EP-PharmaLine Co., Ltd.
Contract MR Division in EP-Force Co., Ltd. in June 2020 for the purpose of responding rapidly to customer
needs and efficient and agile business operations. CMR business performance was broadly in line with
forecasts since the decline in demand for CMRs spurred by the pharmaceutical industry’s ongoing MR
reductions in recent years wound down, and the Group was able to increase CMR service personnel alongwith inquiries also on a recovery trajectory.
The medical call center business, which handles call center operations for medical facilities, exceeded
forecasts due partly to first half orders in contracts for highly profitable spot projects and maintaining
operations under the impact of COVID-19 by switching some contact center duties to work from home.
Academic materials production business performance surpassed forecasts as progress was made shifting fromvariable, volume-based charges to contracts with fixed monthly fees and earnings stabilized. In addition, theBPO business was broadly in line with forecasts.
As a result, net sales were ¥8,632 million, an increase of ¥1,936 million, or 28.9%, year on year. Operating
income was ¥720 million, an increase of ¥435 million, or 152.8%, year on year.

34) Global Research Business
The Global Research Business comprises EPS International Holdings Co., Ltd. and its overseas groupcompanies. This business, which encompasses the CRO business in China, is primarily carried out in the AsiaPacific region.
In the Asia-Pacific region, the Group continues to strengthen the business base and is focusing on orders
for projects in each country. Further, the Group aims to bolster CRO business operations in China whereinquiries are rising in tandem with market expansion.
Orders from overseas for trials within Japan experienced a decrease in sales, owing to the conclusion of alarge-scale project in the previous fiscal year, suspension of an existing project, and sluggish new orders. As aresult, net sales were ¥2,665 million, a decrease of ¥831 million, or 23.8%, year on year. Operating income
started to see the effects of business base improvement, and came to¥124 million, an increase of ¥125 million(compared to an operating loss of ¥1 million in the same period of the previous fiscal year).
5) EKISHIN (China) Business
The EKISHIN (China) Business comprises the two regional holding companies EPS EKISHIN Co., Ltd. and
EPS (China) Co., Ltd., and related overseas Group companies.
In this business, under a solid capital and business partnership with SUZUKEN Co., Ltd., the Group
provides product-related services centered on pharmaceuticals and medical devices, international tradingrelated services and peripheral support services. The Group is working to further expand earnings as a
specialist trading company in the healthcare industry linking Japan and China.
In product-related services, sales and profit declined in earnings-driving pharmaceutical manufacturing
and sales. This owes to impact from sweeping inspections and examinations being carried out at existing
manufacturers accompanying the announcement of revisions to China’s Drug Administration Law in August
2019, as well as temporary suspension of manufacturing lines at a Group company in China. Although theaffected manufacturing lines resumed operations in December 2019, logistics and sales operations wereaffected by COVID-19. The impact of declining demand continued to be felt from the effects of an ongoingdecrease in the number of patients visiting medical institutions.
In medical device sales, new business development advanced steadily and sales and profit grew.
Additionally, product sales were firm in international trading business.
As a result, net sales were ¥6,046 million, a decrease of ¥2,940 million, or 32.7%, year on year, andoperating losses were ¥251 million (¥319 million in operating income posted in the same period of theprevious fiscal year).
(2) Explanation Concerning Forward-Looking Statements such as Consolidated Financial Forecasts
Based on its recent performance, the Company has revised the earnings forecast for the fiscal year ending
September 30, 2020 announced on May 8, 2020. Please refer to “Notice of Revision to Earnings Forecast ”
released today (August 4, 2020).
(3) Risk Information Concerning COVID-19
The Group supports pharmaceutical development, mainly for pharmaceutical companies, and conducts
clinical trials at medical facilities for new drug development. Clinical trials require the participation ofsubjects (patients).
As a basic principle, the Group makes ensuring the safety of employees, clinical trial subjects, medical
facility personnel, and clients a top priority in business operations. However, the Group believes there arerisks such as those noted below of the current COVID-19 situation affecting its financial position, operating
results, and other matters.
Once it has recognized a risk, the Group’s policy is to work to avoid or mitigate the risk. However, theGroup could be affected substantially by a variety of factors that could arise going forward.
Forward-looking statements contained in this document are based on a judgment of operating results forthe nine months ended June 30, 2020.
① Risk of employees contracting COVID-19
Since much of the Group’s business entails direct work with medical institutions, we are exercising extreme
care in taking steps to prevent employees from contracting COVID-19. However, in the event that it becomesdifficult for a long period of time to continue operations, owing to events such as Group employees
contracting the virus and an inability to secure alternative personnel, the Group’s financial position, operating
results, and other matters could be affected.
② Risk of clients suspending or postponing development due to COVID-19
In the event that there is a prolonged situation wherein clients postpone or suspend activities such as clinical
trials that are planned or underway with a view to preventing the spread of COVID-19, the Group’s financial
position, operating results, and other matters could be affected.

4

③ Risk of medical institutions becoming unable to conduct clinical trials and so forth due to COVID-19
In the event that medical facilities become unable to continue clinical trials for a long period of time due tothe status of the COVID-19 outbreak, the Group’s financial position, operating results, and other matters
could be affected.

52. Quarterly Consolidated Financial Statements and Main Notes(1) Quarterly Consolidated Balance Sheets(¥ millions)
As of September 30, 2019(Previous Fiscal Year-End)
AssetsCurrent assets:
Cash and time deposits
Notes and accounts receivable－ tradeMarketable securities
Merchandise and finished goods
Work in process
Other current assets
Less: Allowance for doubtful accounts
Total current assets
Fixed assets:
Property, plant and equipment
Intangible fixed assets:
Goodwill
Other intangible fixed assets
Total intangible fixed assets
Investments and other assets:
Investment securities
Lease and guarantee deposits
Other investments and other assets
Less: Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total assets

6

As of June 30, 2020
(End of the First Nine Months)

17,283
16,125
1,858
992
1,464
3,248
(137)
40,834

19,81813,907
1,241
962
2,347
3,665
(200)
41,742

5,658

6,561

6,762
991
7,754

6,728
1,339
8,067

4,786
2,067
5,492
(27)
12,31925,732
66,566

4,152
2,058
3,594
(26)
9,778
24,407
66,149(¥ millions)

Liabilities
Current liabilities:
Accounts payable
Short-term loans
Current portion of long-term loans payable
Income taxes payable
Allowance for employees’ bonuses
Provision for loss on order received
Other current liabilities
Total current liabilities
Non-current liabilities:
Long-term debt
Allowance for directors’ and corporate auditors’
retirement benefits
Net defined benefit liability
Asset retirement obligations
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity:
Capital stock
Additional paid-in capital
Retained earnings
Treasury common stock, at cost
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

7

As of September 30, 2019(Previous Fiscal Year-End)As of June 30, 2020
(End of the First Nine Months)

648
1,265
449
1,302
3,051
242
9,030
15,991

664
2,665
224
440
1,486
332
9,098
14,911

424

256

395

105

2,146
614
656
4,238
20,229

2,091
586
663
3,704
18,615

3,888
13,66928,628(3,765)42,4203,888
12,876
29,583(2,037)44,310

808
544
(470)
881
3,035
46,33766,566

192
528
(367)
353
2,870
47,533
66,149(2) Quarterly Consolidated Statements of Income and Comprehensive Income
Quarterly Consolidated Statements of Income(The nine months ended June 30, 2020)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income:Interest income
Dividend income
Gain on insurance cancellation
Subsidy income
Other non-operating income
Total non-operating income
Non-operating expenses:
Interest expenses
Foreign exchange losses
Loss due to COVID-19
Other non-operating expenses
Total non-operating expenses
Recurring profit
Extraordinary gains:
Gain on sales of investment securities
Gain on step acquisitions
Surrender value of insurance
Total extraordinary gains
Extraordinary losses:
Loss on transition of retirement benefit plans
Business reorganization losses
Total extraordinary loss
Profit before income taxes
Income taxes
Income tax adjustment
Total income taxes
ProfitProfit (loss) attributable to non-controlling interests
Profit attributable to owners of parent

8First Nine Months of
Fiscal 2019
(October 1, 2018
to June 30, 2019)50,15532,55917,596
13,7593,836(¥ millions)First Nine Months of
Fiscal 2020
(October 1, 2019
to June 30, 2020)
48,48133,536
14,944
11,770
3,174

74
55
82
34
29
276

83
59
56
98
84
381

11
169
―
35
216
3,896

11
19
195
50
276
3,279

274
198
―
472

―
―
668
668

84
―
84
4,283
1,150
739
1,889
2,394
341
2,053

―
274
274
3,673
1,053
715
1,769
1,904
(172)
2,077

Quarterly Consolidated Comprehensive Income(The nine months ended June 30, 2020)

ProfitOther comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

9

First Nine Months of
Fiscal 2019
(October 1, 2018
to June 30, 2019)
2,394(¥ millions)First Nine Months of
Fiscal 2020
(October 1, 2019
to June 30, 2020)
1,904

306
(382)
0

(615)
(21)
103

2

1

(72)
2,322

(532)
1,372

2,143

1,549

178

(177)

(3) Notes Concerning Quarterly Consolidated Financial Statements(Notes Concerning the Going Concern Assumption)
None(Note Concerning Significant Changes in the Amount of Shareholders’ Equity)
The Company disposed of 1,400,000 treasury shares through a third-party allocation to Hongkong TigermedCo., Limited on December 12, 2019 based on a resolution at the Board of Directors meeting held on October
29, 2019.
In addition, the Company disposed of 35,463 treasury shares for restricted stock compensation on January
17, 2020 based on a resolution at the Board of Directors meeting held on December 20, 2019.
Furthermore, the Company acquired 913,900 treasury shares on based on a resolution at the Board of
Directors meeting held on February 1, 2019 and March 18, 2020.
As a result, treasury shares decreased by ¥1,727 million during the nine months ended June 30, 2020, to
stand at ¥2,037 million as of June 30, 2020.
(Segment Information)
I. The First Nine Months of Fiscal 2019 (October 1, 2018 to June 30, 2019)
1. Information Concerning Net Sales and Operating Income for Each Segment

Net sales
Sales to outside
customers
Inter-segment
sales andtransfers
Total
Segment operating
income(¥ millions)

CRO

SMO

CSO

GlobalResearch
Business

EKISHIN(China)Business

Others

20,576

10,577

6,609

3,256

8,957

179

1,612

39

86

240

29

22,188

10,616

6,696

3,496

3,390

1,062

285

(1)

Adjustment(Note 1)

Amount recorded onquarterly consolidated
financial statements

50,155―50,155

1,386

3,393

(3,393)

―

8,986

1,565

53,549(3,393)50,155

319

51

5,108

(1,272)

3,836

Total

Note: Adjustment of ¥(1,272) million for segment operating income includes inter-segment transactions of¥18 million and corporate expenses not allocated to each reportable segment of ¥(1,290) million. The
main corporate expenses comprise expenses related to the Company (the holding company).
2. Information Concerning Impairment Loss on Fixed Assets or Goodwill in Each Reportable Segment
In the three months ended December 31, 2018, All Right Technology Inc. became a wholly owned
subsidiary of the Company by means of a stock exchange with the Company. As a result, the amount of
goodwill in the CRO Business segment increased by ¥1,164 million.
On April 1, 2019, e-Trial Co., Ltd. absorbed All Right Technology Inc. through a merger, and was
renamed as EP-Techno Co., Ltd.
Ⅱ. The First Nine Months of Fiscal 2020 (October 1, 2019 to June 30, 2020)
1. Information Concerning Net Sales and Operating Income for Each Segment

Net sales
Sales to outside
customers
Inter-segment
sales andtransfers
Segment operating
income(¥ millions)

CRO

SMO

CSO

GlobalResearch
Business

EKISHIN(China)Business

Others

20,697

9,938

8,569

2,528

6,032

714

1,059

22

62

137

13

21,756

9,961

8,632

2,665

2,767

1,234

720

124

Adjustment(Note 1 )Amount recorded onquarterly consolidated
financial statements

48,481―

48,481

1,350

2,646

(2,646)

―

6,046

2,065

51,127(2,646)48,481

(251)

47

4,643

(1,468)

3,174

Total

Notes: 1. Adjustment of ¥(1,468) million for segment operating income includes inter-segment transactions of¥9 million and corporate expenses not allocated to each reportable segment of ¥(1,477) million. The
main corporate expenses comprise expenses related to the Company (the holding company).
2. EPS Associates Co., Ltd. and EPS International Holdings Co., Ltd. merged on October 1, 2019.
EPS Associates Co., Ltd. was the surviving company in the merger by absorption upon which its
name was changed to EPS International Holdings Co., Ltd. Accompanying this, it was moved fromthe CRO Business to the Global Research Business segment. Segment information for the ninemonths ended June 30, 2019 is disclosed based on the reporting segments for the nine months ended
June 30, 2020.
10