I will now give an overview of the Terumo financial results for the first quarter ofthe period ending March 2019.
Previously, we have had an earnings call for the first‐quarter announcements;
however, due to the Ashitaka matter, we have decided to ask you to gather so we
can offer direct explanation.
In addition, we have taken the approaching typhoon into consideration inproviding the option of live audio broadcast as well.
Thank you for attending today despite the heat and inclement weather.
Regarding the current status of the Ashitaka Factory; not everything is yet firmly
established, and some things remain unclear. However, I will do my best toprovide an explanation that aids in gaining some understanding of the situation.

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With that, I will now explain the quarterly results. Looking overall, despite theAshitaka situation, the first‐quarter results alone came out in line with ourguidance for the period.
I will now discuss specific items. This period differs from previous trends for
Terumo performance in two ways:
The first is in revenue. The General Hospital and Blood Management companies
drove growth in place of the Cardiac and Vascular Company, which had previously
driven overall growth, but in this quarter slowed down due to impact from thereimbursement price revision and shipping delays.
The second is the trend in SG&A. In previous fiscal years, expenses tended not toreach planned levels in the first half, but in the first quarter of this fiscal year, wesaw expenses occur in line with the annual plan. As a result, our adjusted
operating profit was negative year‐on‐year; however, this is in line with ourguidance.
Our profit before tax is significantly lower than the previous year; this is due
largely to FX loss. Specifically, this FX loss largely resulted from appraisal loss due
to emerging market currency and euro depreciations.
When excluding the FX loss, profit for the year is in line with annual guidance.

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Starting this fiscal year, we adopted IFRS accounting, and with that began using
the item “Adjusted Operating Profit.” I will explain how that number is calculated.
In the first quarter, the main item adjusted was amortization of acquired
intangible assets, and the remainder was composed an accumulation of small
amounts, without any other significant ones.

3Next is the adjusted operating profit variance analysis.
Gross profit increment by sales increase was the largest factor; however, theCardiac and Vascular company, which has the highest margins, did not growsignificantly. Because the General Hospital and Blood Management companies
grew the most, the improvement in gross profit increment by sales increase grewless than usual.
In the price item, the reimbursement price revision occurred as expected, but theprice erosion was below plan.
Increased SG&A and R&D appear larger than plan; however, this is because those
items were smaller than planned in the same part of the previous year, resulting
in this year’s first‐quarter expenses appearing higher, despite occurring asplanned.

4Next is revenue by region.
In Japan, revenue came out slightly negative, with the General Hospital andBlood Management companies nearly absorbing the negative Cardiac andVascular number.
Outside Japan, the Ashitaka situation has not yet had the same revenue impact
as in Japan, due to the following reasons:First, shipments sent by sea transport will not see impact until the following
month. Second, some of the product sold overseas is also produced outside
Japan, and such factories as Maryland, US and Vietnam are not experiencing thesame issues as Ashitaka. Third, there is remaining inventory to absorb shipment
delays. These factors prevented impact from reaching outside Japan as of thefirst quarter.
Some areas of Asia were impacted in the first quarter, but General Hospital andBlood Management growth were able to absorb the Cardiac and Vascular impact.

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I will now explain in more detail for each company.

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First, Cardiac and Vascular Company:
The TIS business saw negative growth due to the reimbursement price revisionand the Ashitaka Factory shipping delay issues. Growth was positive outside
Japan, but could not completely cover for Japan, resulting in a slight decline for
TIS overall.
Neurovascular remained strong, with double‐digit, year‐on‐year growth of 15%.
In CV and vascular graft, the same quarter of the previous year saw double‐digit
growth following the lifting of the consent decree and acquisition respectively;
this year, the first quarter went back to normal.
In adjusted operating profit, gross margin improved, while operating profit
decreased due to higher expenses.

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Next is General Hospital Company.
Alliance grew robustly inside and outside Japan, at over 20% year‐on‐year.
In Healthcare, diabetes management products showed steady growth.
Pharmaceutical and nutrition, I.V. solutions paired with AdSpray and pain
management for good overall growth.
Adjusted operating profit increased thanks to lowered manufacturing cost andincrement of gross profit driven by high‐margin products performance, even withincreased R&D expense.

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Next is Blood Management.
The company saw steady growth with blood center products in emerging markets
and therapeutic apheresis.
Adjusted operating profit was negative year‐on‐year; however, this was due tothe significant year‐on‐year increase in R&D expense. This increase will slow
down in the second quarter and beyond.

9Next, the major topics from the first quarter.
Major projects were launched on schedule which are expected to contribute tofuture performance. For example, the Bolton stent graft “Relay Pro” waslaunched in the EU in April.
The drug‐eluting stent “Ultimaster Tansei” also launched in the EU in April, andwill launch in Japan in the second half.
Further, in May, we acquired exclusive Japan distribution rights for the DexCom
continuous glucose monitoring device (CGM).

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There are other products in the 2018 pipeline, but I will keep my explanation to
those with movement in the first quarter.

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Now I will explain the shipment delays at the Ashitaka Factory. We have already covered the cause of
the occurrence in the press release, so I will give an update on the progress since then, addressing that
progress on three different levels.
The first is restoration of sterilization capacity. All ethylene oxide gas (ETO) sterilization was halted inlate May; since then each sterilization chamber was confirmed separately and restarted upon
confirmation. Sterilization capability is now back to the level it was at prior to the stoppage, and wewill increase capacity going forward.
Next, regarding shipment volume. Volume bottomed out in June and has been recovering through Julyand August. However, residual gas must escape from the product over a 10‐to‐14‐day period to meetshipment criteria; this means that restoration of shipments takes longer to restore than sterilization
capability. We expect to see full restoration of shipments to pre‐stoppage levels in September andbeyond.
Further, impact on revenue will continue beyond the resumption of shipments, due to two reasons,the inventory and the distance from Japan.
Next is our handling of the challenge going forward: We are taking the following two actions to handle
the situation, including from a business continuity perspective. One of these is expansion of oursterilization capability. In addition to expanding our capability in Ashitaka, we will utilize opensterilization capacity at our Fujinomiya and Vietnam factories. We are also studying the use of third‐
party sterilization facilities. Another action is to transfer production of some products from Ashitaka
Factory to other locations to reduce the overall level of dependence on Ashitaka for sterilization.
In the mid‐term, we have already begun to transfer some products to the Terumo Yamaguchi Factory.
With the occurrence of this challenge, we are looking at the possibility of transferring production toYamaguchi on expedited timelines in order to more quickly respond.
Last, regarding the impact on performance, I will explain for inside and outside Japan, respectively. ForJapan, impact was felt earliest, around June. Restoration began in July and has continued since, andshould be complete in August. Outside Japan, impact was limited up to June, but is expected to fully
hit thereafter, and we expect that the second quarter will be affected.
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Next, regarding revision of our FY2018 guidance.
Taking into account the impact of the Ashitaka Factory situation, we have revised the FY2018 guidanceas follows:
For the first half, we have reduced the revenue guidance by 11 billion yen, both the adjusted operating
profit and operating profit by 6.5 billion yen each, and profit for the year by 5 billion yen.
For the second half, our guidance remains unchanged. Therefore, our guidance for the year is revised
minus 11 billion yen for revenue, minus 6.5 billion yen for both adjusted operating profit andoperating profit, and minus 5 billion yen for profit for the year.
Regarding the thinking behind our guidance revision, we are limiting it primarily to the second quarter,
where most of the Ashitaka impact will occur. As I mentioned, there was some impact on the firstquarter, but results were more or less in line with guidance.
Of course, some impact will appear in the second half; however, we feel that the following factors
allow us to refrain from revising at this time: First, both negative and positive impacts may result fromthe situation. One negative impact is customer loss, which we expect to occur to some degree.
However, it is impossible to accurately predict the scale of that loss. On the other hand, strengths of
the Terumo TIS access products include their high quality and the aspect of training; these will not beaffected by the shipment delays. A positive impact of the situation is inventory restoration. We expectthat after having consumed some of the inventory they were carrying, distributors and hospitals willpurchase more to restore that inventory. It will be difficult to accurately predict what that amount willbe, however.
Therefore, with both negative and positive impacts likely, but an inability to predict either accurately
at this time, we will make our best efforts to achieve the current second‐half guidance, which isoriginally higher than the first half.
Neurovascular remains strong. General Hospital Company and Blood Management have good
momentum. These will also provide support.
In the case that TIS does not grow in subsequent quarters as planned, we will be able to control some
expenses to meet the second half bottom line guidance.
There are some uncertainties in the second half, but for now, we believe its guidance is achievable.

13Next, our regional strategy in China. In August we announced our acquisition ofEssen Technology, a drug‐eluting stent manufacturer in China. In addition, on
Monday of this week, we announced the acquisition of regulatory approval of aperitoneal dialysis solution by Wego Terumo, a joint company of Wego andTerumo Group.
We consider China to be our most important market in the mid‐term, and we aretaking various specific actions to localize there. In addition to these two examples,
we are working on a partnership in neurovascular with a local partner forproduction and sales, as well as local development in renal denervation.
Thank you very much.

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