Financial Results forthe 1st Half of FY2017(Apr. 1 to Sep. 30)

Code 4555, First Section of the TSE

Nov. 13, 2017

Overview of the Financial Results
for the 1H of FY2017
 With the Japanese generic market as a whole growing at a slower pace and salesof contract manufacturing down from the prior year, sales in Japan grew just
1.7%
 Overall sales grew 8.2% thanks to the inclusion of the June sales of US-based
Upsher - Smith Laboratories (USL) Operating income excluding M&A related expenses of 1.3 billion yen rose 9.7%
（Unit: Millions of yen）

FY2017 1H
FY2016
1H

Year on Year

Sale and Profit by RegionJapanNorth America

Mil. yen

Growth(%)

Net Sales

65,41670,75866,555

4203

5,341

8.2%

Operating Income

11,36011,144

11,596-452-216-1.9%

11,36012,457

11,596

861

1,097

9.7%

Ordinary Income

11,326

11,801―

―

475

4.2%

profit attributable to owners ofparent

8,565

8,791―

―

226

2.6%

Operating Income(excluding extraordinary factors)※*1. A goodwill amortization expense of 535 million yen associated with the USL acquisition was recorded in the North America segment*2. Extraordinary factors: expenses related to the acquisition of the US firm Upsher-Smith Laboratories, LLC (USL)
Exchange rates: 110.9 yen/dollar

Copyright © 2017 Sawai Pharmaceutical Co., Ltd. All Rights Reserved.

1Analysis of Factors Causing Changes in Operating Income(Unit：Billion. Yen)

＋1.4

-0.5

-1.3+0.6-0.6
+0.2

11.3
11.1

FY2016 1H
Operating income

Net sales
increase

Improvement
inVariable cost,
Increase in Fixed
Expenses etc.

Decrease in SG&A

Copyright © 2017 Sawai Pharmaceutical Co., Ltd. All Rights Reserved.

North AmericaOperation income

Amortization ofgoodwill

M&A-related
expenses

FY2017 1H
Operating income2Sales per Medical Institution Types(non-consolidated)

Although growth in adoption amounts was somewhat weak for both hospitals andpharmacies, the adoption amount increased overall
The Track Record of SAWAI's Products Delivered to Medical Institutions
by Distribution Companies（Unit：Number of Medical Institution）
Institution Typea) Nationwide
Total Numbe r

FY20161H

FY2017
1H

Numbe r ofCustome rs

Sales ShareYear on Year
Changes inb) Numbe r ofCustome rs

CoverageRate (b/a)

Sales Share

Sales Growth

Number ofCustomers

Hospital

8,459

7,831

12.9%

7,906

(93.5%)

13.0%

75

8.4%

DPC Hospital

1,667

1,646

8.0%

1,650

(99.0%)

7.9%

4

6.4%

Clinic105,61031,726

10.4%

32,552(30.8%)

10.1%

826

4.0%

Pharmacy

87,59055,89675.6%

56,555(64.6%)

75.3%

659

7.0%

Dispensing Pharmacy

60,55855,55975.0%

56,250(92.9%)

74.7%

691

7.0%

Drug Stores, etc.

27,032

337

0.5%

305

(1.1%)

0.6%

-32

11.3%

Others

--

1.1%

-

1.6%

-

50.8%

Total

201,659

95,453100.0%100.0%

1,560

7.4%

97,013(48.1%)

DPC: Diagnosis Procedure Combination, means fixed payment system for inpatients

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3

Sales by Listed Year of Drugs
 Sales of products listed since FY2014 steadily grow Sales of new products in FY2017 are in line with expectations（Unit: Millions of yen, %）Unit: Millions of yen

Copyright © 2017 Sawai Pharmaceutical Co., Ltd. All Rights Reserved.

FY20161H

FY2017
1H

Y on Y(%)

Mil. yenMil. yen

GrowthListed in FY2017-1,065-

Listed in FY2016

165499202.2%

Listed in FY2015

2,441

2,980

22.1%

Listed in FY2014

1,848

2,061

11.5%

Listed in FY2013

2,674

2,816

5.3%

Listed in FY2012

1,953

2,061

5.5%

Listed in FY2011

4,568

4,743

3.8%

Listed in FY2010

2,596

2,552

-1.7%

Listed in FY2009

10,895

11,2102.9%

Listed in FY2008

3,753

3,857

2.8%

Existing Drugs andTransferred Drugs, etc.

34,52032,705

-5.3%

Total

65,416

66,555

1.7%

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Comparison of Sales Volume Cardiovascular and central nervous system drugs have steadily
increased
Volume Composition

Therapeutic Category

FY20161H

FY2017
1H

Y on Y(volume)Y on Y(value)(Note)

Other metabolic drugs
Respiratory organ agents
Antibiotics drugs
Antiallergic drugs
Antineoplastic agents
Others

26.8%
23.3%
12.1%
8.0%
7.4%
6.4%
2.7%
2.0%
0.2%
11.1%

28.1%
23.3%
12.4%
7.9%
6.8%
5.5%
2.6%
2.2%
0.2%
11.0%

6.4%
1.4%
4.2%
0.0%
-6.4%
-13.2%
-3.6%
8.7%
14.5%
2.4%

7.4%
0.1%
6.6%
1.9%
3.8%
-5.5%
-2.2%
10.7%
11.4%
9.8%

Total

100.0%

100.0%

1.6%

4.6%

Cardiovascular drugs
Gastro-intestinal drugs
Central nervous system drugs
Blood/body fluid pharmaceutical products

Note: The contracted sales of the Kashima factory are excluded from the calculation.
Copyright © 2017 Sawai Pharmaceutical Co., Ltd. All Rights Reserved.

5

FY2017 Earnings Forecasts (IFRS：Core basis)
Earnings forecast revised to reflect the forecast for USL (for the 10-month period
from June 2017 to March 2018), which we acquired on May 31
 With the adoption of IFRS, we have introduced “Core Operating Income” as anindicator of recurring profitability, and we regard this as a key indicator of businessperformance that excludes non-recurring factors from operating income（Unit: Millions of yen）

FY2017

IFRS

ChangeInitialForecasts

Revised
Forecasts

Sale and Profit by Region

Net Sales
Gross Profit

142,000
56,700168,800
71,300137,100
52,80031,700 +26,800
18,500 +14,600

Operating Income

24,50030,50024,7005,800 +6,000

Net profit
EBITDA

18,40034,40021,70041,200―34,600―+3,300
6,600 +6,800

Japan

North America- Assumed exchange rate: 110 yen/dollarCopyright © 2017 Sawai Pharmaceutical Co., Ltd. All Rights Reserved.

6FY2017 Earnings Forecasts (IFRS：Full basis)
The North America segment is expected to show an operating loss of 0.3 billion yen
due to the accounting charge (about 6.4 billion yen) posted in conjunction with the PPA *and M&A related expenses (about 1.5 billion yen)
* PPA: Purchase Price Allocation（Unit: Millions of yen）

FY2017IFRS
Net Sales
Gross Profit
Operating Income
Profit before tax
Net profit

InitialForecasts

RevisedForecasts

Sale and Profit by Region

142,000
56,70024,20023,80018,200168,800
68,10023,70023,30017,300137,100
52,80024,000――JapanChange

North America

31,700 +26,800
15,300 +11,400
-300
-500
―
-500
―
-900

AssumedExchange￥110.0- Assumed
exchangeRates:1USD
rate: 110 yen/dollar
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7

FY2017 Earnings Forecasts(Adjusted from Full basis to Core basis)（Unit: Millions of yen）

IFRS

FY2017 Earnings Forecasts
Full basis

Mil. yenCore basis

Net Sales
Cost of Sales

168,800-100,700―
3,200

168,800-97,500

Gross Profit

68,1003,20071,300

SG&A Expenses
R&D Expenses-29,100-11,700――-29,100-11,700

Amortization of intangible assets andImpairment loss

-3,6003,600―

Other income( expenses)
Operating Income
Finance income (costs)±0
23,700-400±06,800――
30,500-400

Profit before tax

23,3006,800

30,100NetProfit

17,3004,400

21,700(1) Cost-of-sales increase due toinventory step-up> 3.2 billion yen(2) Amortization of intangible assets>3.6 billion yen(3.1 billion yen for USL)

(3) Other income/expense adjustment> 0.0 billion yen(500 million yen extraordinary loss,“other” -500 million yen)

AssumedExchange
Rates:1USD- Assumed
exchange
rate: ￥110.0
110 yen/dollar

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8

PPA Relating
Post-PPAPre – PPA
(Difference between acquisition
price and net assets = Goodwill)(increase in asset valuations)

Inventory 4.2

Intangible assets
55.7

Goodwill
96.3
Amortized over 15 years(-540 million yen/month)

Property, plant and equipment 3.6(Unit: Billion yen)

（Impact on accounting P/L）
Factors behind post-acquisition (Years 1 & 2)
cost-of-sales increaseYear 1 estimated impact 3.2 billion yen

Amortized over 10 years
Year 1 estimated impact
3.1 billion yen
Year 1 estimated impact 0.1 billion yen

Deferred tax assets (Net) 6.8

Goodwill30.8
At time of acquisition

PPA前（1Q時点）(JGAAP)No amortization

At time of acquisition Total 101.2
PPA後(IFRS)- Pre-audit basis PPA- Amortization months for this fiscal year: June 2017 to March 2018 (10 months)- Assumed exchange rate: 110 yen/dollar
Copyright © 2017 Sawai Pharmaceutical Co., Ltd. All Rights Reserved.

9Sales by Distribution Channels
 Sales through wholesalers expanded, with nationwide distribution network in
the area of pharmacy and hospital markets.
（Unit：Millions of yen）

Wholesalers

Agencies

Marketing Alliances

66,55565,41670,00058,958Others60,00050,00021,06240,000+885（+4.2％）

21,948＋215（＋1.0％）( 33.6%)22,164(33.3%)(35.7%)

30,00020,00033,11910,000+4,319（+13.0％）(56.2%)

37,439(57.2%)＋2,925（+ 7.8％）40,364(60.6%)

0

FY20151H
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FY2016
1HFY2017
1H

10

Consolidated Financial Highlights-1（Unit： Millions of Yen）

FY2016
1HFY

FY2017/Sales（ % ）1H/Sales（ %）Net Sales
Gross Profit
SG&A Expenses
Operating Income

Key Income Statements Data

65,416
38,794
26,622
15,261
11,360

100.0
59.3
40.7
23.3
17.4

70,75841,57829,17918,035
11,144

100.0
58.8
41.2
25.5
15.7

8.2
7.2
9.6
18.2
-1.9

Net Sales
Cost of Sales
Gross Profit
SG&A Expenses
Operating Income
Core Operating Income

Ordinary Income
Net Profit

11,326
8,565

17.3
13.1

11,801
8,791

16.7
12.4

4.2
2.6

Profit before tax
Net ProfitEBITDA *1

Key Balance Sheets Data
Total Assets
Net Assets
Capital Adequacy Ratio(%)

221,538 *2
137,600 *2
62.0 *2
FY20161H

345,920
144,148
41.6

Diluted Net Income per Share

Shareholders' Equity
Dividend (interim)

Full Year YoY（%）
Key Income Statements Data

168,800
100,700
68,10029,10023,70030,50023,30017,30041,200Net Sales
Cost of Sales
Gross Profit
SG&A Expenses
Operating Income
Ordinary Income
Net Profit

160,400
96,10064,30043,60020,700-20,800
15,300--20.4

FY2017
1HYoY（%）

Amounts Per Common S hare

Net Income per ShareFY2017 Forecast（ JGAAP）Full YearYoY（%）

Key Income S tatements Data

Cost of Sales

FY2017 Forecast（ IFRS）

FY2017 Forecast（ IFRS）
Full Year
Amounts Per Common Share

232.33232.203,722.90 *2
65.0

238.45238.303898.50
65.0

2.6
2.6
-Net Income per Share
Diluted Net Income per Share

Shareholders' Equity
Dividend (interim)469.22130.0*1. Core operating income + amortization and depreciation expenses included in core operating income + impairment charges*2. Comparison with 4Q of FY2016*3. FY2017 forecast (IFRS): earnings forecasts for 12 months of Japan operations + 10 months of North America operations (June 2017 to March 2018)*4. FY2017 forecast (JGAAP): earnings forecasts for 12 months of Japan operations + 7 months of North America operations (June 2017 to December 2017)

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11

Consolidated Financial Highlights-2
Sales and Operating Income by Area
Japan（Unit： Millions of Yen）

FY

FY2017FY2016
1H

1H/Sales（ %）Cost of Sales
Gross Profit
SG&A Expenses
Operating Income

Full Year YoY（%）

YoY（%）Key Income Statements Data

Net Sales

FY2017 Forecast（ IFRS）

Key Income Statements Data65,41638,794
26,622
15,261
11,36066,55539,872
26,682
15,085
11,596

100.0
59.9
40.1
22.7
17.4

1.7
2.8
0.2
-1.2
0.0

137,100
Cost of Sales
84,300Gross Profit
52,800
SG&A Expenses
19,800Operating Income
24,000Core Operating Income
24,700EBIDA
34,600Net Sales-North America
FY2016FY

FY2017

1H

1H/Sales（ %）Cost of Sales
Gross Profit
SG&A Expenses
Operating Income

Full Year YoY（%）

YoY（%）Key Income Statements Data

Net Sales

FY2017 Forecast（ IFRS）

Key Income Statements Data

-4,203
1,705
2,497
2,949
-452

100.0
40.6
59.4
70.2-10.8-Net Sales
Cost of Sales
Gross Profit
SG&A Expenses
Operating Income
Core Operating Income
EBIDA

31,70016,40015,3009,300-300
5,8006,600-*1. Core operating income + amortization and depreciation expenses included in core operating income + impairment charges
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12

Consolidated Financial Date
（Unit： Millions of Yen）

Selling General andAdministrative Expenses

YoY（%）

Total

4,815
4,815

7.4
7.4

41.6
41.6

Total

1,061

1.6

-5.2

North America

AdvertisemetExpenses

Capital Expenditure &Depreciation and Amortization
CapitalExpenditure

YoY（%）

5,085
342
5,428

7.6
8.1
7.7

5.6
12.7

635

0.9

-40.1

4,588
93
4,681

2,915

3,738

7,800

6547001,400

460268600

93
4,800

800
0

Administration Div.
& Business Div.

-Total
4,030※ We expect to record 2,000 million yen of the R＆D costs to intangible fixed assets.

R&D Division
Administration Div. & Business Div.
(MRs)
North America
Total

FY2016
Comp.(%)
1H
1,460
224
661
501
2,345

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62.3
9.5
28.2

100.00.9

FY2017 Forecast（IFRS）

7,77607,776

Japan
Manufacturing
DivisionR&D Division

Number of Employees
Japan
Manufacturing Division

1,500

Full Year
15,700879
16,579North America

Personnel Information/Sales（ % ）Full Year
8,300
4.9
3,400
2.0
11,7006.9

FY2017 1H

Japan

North America

FY2017 Forecast（IFRS）/Sales（ % ）FY2016 1H

Total

DepreciationandAmortization

FY2017 1H/Sales（ % ）Japan
R&D Expenses

FY2016 1H

FY2017Comp.(%)
1H
1,767
248652
500
571
3,238

54.6
7.7
20.1
17.6
100.013

Disclaimer• The plans, forecasts, strategies and other information regarding the Sawai Group contained in thispresentation are based on the Company’s assumptions and judgments using information available
at the time of publication. Therefor, due to potential risks and uncertainties, there is no guarantee
as to the accuracy of this information.
• Potential risks and uncertainties may include, but are not limited to, the economic environment forprescription drugs, which is the main operating domain of the Sawai Group, market competition andservices offered by the Group.

Contact Information

Sawai Pharmaceutical Co., Ltd.
Corporate Strategy Department
PR & IR GroupE-mail ： ir@sawai.co.jp
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14