OLYMPUS Investor Day 2018

Medical Business Strategy
Akihiro Taguchi
Business Management Officer,
Medical Business
Olympus Corporation
September 5, 2018

Disclaimers


The financial forecasts and other material in this document are based on judgements and assumptions derived fromcurrently available information. Actual results may differ significantly from targets, being subject to change due to factors
such as the uncertainties implicit in these judgements and assumptions and due to future changes in business
operations and circumstances inside and outside the company.

Furthermore, this information is subject to change without notice. Accordingly, use of this information and this document
should be at the discretion of the user and done with reference to information obtained by other means.

This document contains information about products that have not yet been approved in some countries including Japan(including products under development). This information is not intended for promotional or medical advice use. Rather,
it is provided to give examples of technology development by Olympus and no guarantees are made about the future
sale of such products.

Olympus accepts no responsibility for any losses that arise from use of the information in this document.

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Directives for Medical Business Strategy(1)Value to Be Provided by Medical BusinessEndoscopes
Early diagnosis
Minimally invasive treatments3

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From Investor day（2016.3.30）

From Investor day（2016.3.30）

Directives for Medical Business Strategy(2)Concentrate investments on 5 BUs and increase sales and income

GIRBU

GSBU

UGBU

ENTBU

MSBU

(Note) GIRBU: Gastrointestinal and Respiratory Business Unit ; GSBU: General Surgery Business Unit; UGBU: Urology / Gynecology Business Unit; ENTBU: Ear,
Nose, and Throat Business Unit; MSBU: Medical Service Business Unit
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Directives for Medical Business Strategy (3): Investment Policies

From Investor day（2016.3.30）【R&D Investments】【Sales Function Investments】

 Advance R&D ventures for developing nextgeneration products and new businesses Strengthen single-use device technologies

 Respond to North American GPOs/IDNs andstrengthen training Bolster sales systems and step up promotion
activities in emerging countries

Growthpotential【QA/RA Investments】

Balance
Efficiency

 Strengthen quality management systems
 Reinforce medical affairs functions

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

SP5236V01【Manufacturing Function
Investments】

Create globally optimized production systems(including repairs) with eye to 10 years from now

Priority Measures (1)From Investor day（2016.3.30）

Expand dominant GI market share and improve profitability
while realizing substantial growth in ET and Surgical business operations
Shift from installation-based medical business model to procedure-based
medical business model→ Expand single-use device operations-- To be the greatest “Business to Specialist” Company -【Sales and Marketing Functions】


Expand procedure shares and strengthen account management
Provide 3 types of value (medical value, economic value and patient value)Accelerate development and strengthen product life cycle management
Develop products that improve efficiency of medical institutions (reduce downtime)

Boost cost competitivenessImprove responsiveness to production fluctuations
Strengthen SCM【R&D Function】【Manufacturing Function】

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Priority Measures (2)From Investor day（2016.3.30）

Expand operations in emerging countries
Countries with sufficient medical infrastructure: Position as growth driverand continue appropriate investment
Countries without sufficient medical infrastructure: Contribute to medical infrastructuredevelopment

Strengthen ability to respond to GPOs/IDNs
Respond to market structure changes exemplified by growing presenceof GPOs/IDNs in North America
Propose value as One Olympus with unified R&D, manufacturing and service functions
Establish processes for acquiring GPO/IDN contracts and strengthen project
management

Strengthen QA/RA functions

Reinforce global quality management systems with eye toward externalrequirements expected 10 years from now
Strengthen global QA and RA systems in consideration of future business development
Reinforce medical affairs functions

Improve productivity
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Improve productivity of all functions (R&D, manufacturing, sales & marketingand service)

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Changes in the Operating Environment (Disparities from Initial 16CSP Outlook)
Macroeconomic Environment
 No major changes in the operating environment trends in comparison with initial 16CSP outlook and in
the rising needs for early diagnosis and minimally invasive therapies.
 On the other hand, changes in the operating environment, such as rising regulatory requirements andmore advanced reprocessing requirements, are progressing faster than anticipated.
 Increasingly more rigorous medical equipment application and registration requirements in EU-MDR*
and other countries’ regulation
 Reprocessing Requirements (cleaning, disinfection, and sterilization) are increasingly more stringent

GIR: Delayed introduction of major new products
Major impact on
the medical
business

Constraints arose on development resources, mainly because existing products were prioritized tomeet emerging regulatory requirements, new reprocessing requirements (cleaning, disinfection,and sterilization), and to meet and exceed quality standards.

GS: Delayed supplies and approval acquisition
Revenue growth has been impacted by delayed supply of new product (VISERA ELITE II) due to
production issues at launch as well as delayed introduction of new products in North America

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Review (3 business fields: Endoscopes, Surgical, EndoTherapy)(¥ Billion)

Revenue

600.0
400.0
200.0
0.0

394.7

87.1

Operating Profit

492.3

608.9

558.3

124.9

112.7

140.2

616.3

570.4

114.7

121.8

634.0

135.0

FY2013

FY2014FY2015FY2016FY2017FY2018FY2019(Results)(Results)(Results)(Results)(Results)(Results)(Forecast)Medium-term Vision
FY2017Growthrate*(Results)

FY2018Growthrate*(Results)

16CSP
CAGR

4%

4%

8%

Gastrointestinal
Endoscopes

4%

2%

6%

Surgical Device

4%

6%

11%

EndoTherapy
Devices

7%

7%

9%

Medical9

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Revenue Other than mainstay gastrointestinal endoscopes being in the laterstages of their product life cycles, changes in the operating
environment have delayed the introduction of new products in
the gastrointestinal endoscopes field and surgical device field,
and quality issues have occurred, reducing growth below
expectations. (EndoTherapy devices are in line with initial target)
Operating Profit
 In addition to reduction in gross profit due to a shortfall in sales, theexpenses of addressing quality issues and other unanticipatedexpenses arising kept the value and margin of operating profit atbroadly the same level as last year

* Growth rates ... After adjustment for foreign exchange influences

Review (5BUs) and CAGR forecast
3 years of the first half

2 years of the second half

5 years

CAGR Results2017.3-2019.3

CAGR Forecast
2020.3-2021.3

16CSP CAGR
Initial target

4%

5%-8%

8%

GIRBU

3%

5%-7%

7%

GSBU

5%

10%-13%

11%

UGBU

5%

5%-8%

8%

ENTBU

12%

10%-13%

13%

MSBU

7%

2%-5%

5%

Medical Business CAGR
※After foreign exchange adjustment

Medical

Achieve high growth over the 2 years of the second half, to recover from delays so far (3 years of the first half)

 GIRBU: Steadily introduce the next-generation endoscopy system and new endoscopes, delayed in the first half GSBU: Launch VISERA ELITE II in North America, Make the most of ISM

 UGBU: Voluntary suspension of shipments of flexible ureteroscopes and recall measures settled, currently returning to

growth trend by introducing new products
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Outlook for the Term to FY2021
Movements in CAGR (revenue)

16CSP (initial target)
16CSP (Adjusted)※After foreign exchange adjustment

1

+8%

1

1

Illustration of FY2024

Revenue : 820 billion yen

2(Initial target
over five years)+6%

FY2021, 2024: Assumed rates
JPY/USD: JPY105, JPY/EUR: JPY130

2(Growth rateover 5 years)+5-8%

Illustration of FY2021

Revenue : 680-720 billion yen(Forecast for the 2 yearsof the second half)+4%(CAGR for the 3 years of
the first half)

FY2016FY2017FY2018FY2019FY2020

FY2021

FY2024

 Revenue growth will be accelerated by the steady development and introduction of new products
and the construction of business model to promote single-use device business
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Issues and Measures
Issues1 Reliable attainment of product development plans (steadily develop the next-generation endoscope systems
and launch in the market). Response to quality issues
2 Issues of endoscope reprocessing (cleaning, disinfection, and sterilization)
3 Accelerate expansion of single-use device business (capturing the largest US market)

4 Improve profitability
Measures
1 Improve the development speed and ensure the quality due to business process reengineering. Further
reinforcement of QA and RA functions
2 New establishment of Medical Reprocessing Strategy Office stronger reprocessing initiatives to ensure the safety of medical devices
 Provide comprehensive solution

3 Construct a business model to expand sales in single-use device
 Building a new business model specialized to single-use device business which has a faster cycle thancapital products Rearrange the value chain to introduce product matched to customer and market needs
4 “Select and concentrate” on investment and development and strengthen monitoring S.G.A. expenses

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Gastrointestinal and Respiratory Business Unit

（GIRBU）

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Strategic Initiatives for Each Business Unit: GIRBUSecure strong market leader position in GI business and improve
profitability through selection and concentration
Expand business in the following fields; respiratory,
endoscopic ultrasound (EUS), Reprocessing* and IT

Realize business growth in emerging markets

Expansion of endotherapy device business (Single-use device)

Endotherapy Devices

Gastrointestinal
Endoscopes

IT

Automated Endoscope Reprocessors
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Bronchoscopes

UltrasoundEndoscopes*Reprocessing: Cleaning, Disinfection and Sterilization

Progress in Addressing Strategic Challenges (Business Strategies) (1/2)
Gastrointestinal endoscopes
Introduction of high-value added attractive products, scheduled for the first half, has been delayed.
Had to comply with newly reinforced relevant regulations (FDA Guidance, EU-MDR, etc.)
Took time to develop internal systems



Restructured organization for the introduction of new products with compliance with various
regulations and reassignment of personnel through business process reengineering.



Five new scope models have been introduced in domestic and overseas markets in the last fiscal
year and the current fiscal year.

New products will be launched steadily in all regions in future

Hi-vision transnasal gastroscope

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Super-zoom gastroscope/colonoscope

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Therapeutic colonoscope
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Duodenoscopes with removable distal end

Motor-driven enteroscopeFuture Actions
Next-generation endoscopy systems*

On-going development towards introduction in the second half of 16CSP Better Population Health:Contribute to early diagnosis and minimally invasive therapy through newobservation technologies and therapeutic devices

 Better Patient Care:

Raise quality of life and reduce patient burdens through early diagnosis andminimally invasive therapy

 Lower Per Capita Cost:

Reduce procedure-related costs with endoscopy systems that improves procedure
workflow efficiency
Research is being conducted through cooperation withseveral domestic and overseas institutions.(Image
provided by Dr. Ryoichi Yamakawa of Kaetsu Hospital)

New technologies to be offered

CAD*
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Wide image
field of depth*

Blood vessel
visualization technology
SP5236V01*Under development and not for sale.

3D*Efforts to mitigate infection risks

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GI&R: Infection risk mitigation in reusable endoscopes
Offering comprehensive risk mitigating measures for our reusable endoscopes

Improve the safety of medical staffs and patients while providing the value unique toreusable endoscopes
Process
Easier cleaning
management
devicesDrying/Storage tool
Process guide tool
Reprocess efficacy
evaluation tool
Improved training
program

Improved cleaning
adaptor/machine
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GI&R: Single-use endoscope
Introduce single-use endoscopes for fields which require high-level infection controlSingle-use endoscopes cannot offer diagnostic & therapeutic performance as well as insertability &maneuverability that reusable endoscopes can offer.
However, we will develop & commercialize our own single-use endoscopes, only for fields with require highlevel infection control, but not high-level specifications on endoscopes, in order to strengthen our portfolio.

Infection
Control Level

Biliary duct.
Urinary duct&
Respiratory

Fields tocompete withreusableendoscopes

Fields with actions
to commercialize
single-use
endoscopes
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Required endoscope
specifications(= benefits of reusable
endoscopes)

GI&R：Olympus’ view on Benefits of Reusable endoscopes
High image quality & Image enhanced
endoscopy with NBI

High insertability* “Passive bending section” +“high force transmission
insertion section”*Narrow Band Imaging

High value-added functions*zoom endoscopes
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A broad lineup to meet diverse needs*ultra-zoom endoscopes（Endocyto）

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Cost benefit

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General Surgery Business Unit (GSBU)

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Strategic Initiatives for Each Business Unit: GSBU

Establish new de facto standard in surgical imaging market

Secure No. 3 position in energy device market and encroach
upon No. 2 and No. 1 positions

Establish single-use device business model

Fully leverage Olympus’ strength in GI field

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Progress in Addressing Strategic Challenges (Business Strategies）
Establish new de facto standard in surgical imaging market
 VISERA ELITE II, our main system for surgical endoscopy,
has been newly introduced in the Europe and Japan market
and is performing well

It is winning high praise as a competitive product that incorporates
many physician's needs to support swift and accurate surgeries by the
IR (infrared) and 3D observation

IR (infrared) observation• July 2018: The application of indocyanine green (ICG) to blood flow assessment inblood vessels and tissues is expanding in Japan

3D observation

 Expand sales of 4K surgical endoscopy systems as strategic
products for converting customers who mainly use
products from competitor companies


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Approximately 70% the sales of our 4K systems have been from
customers converted to Olympus products

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Update from
Olympus30%

Conversion
70％

Progress and Issues in Addressing Strategic Challenges (Business Strategies）
Establish new de facto standard in surgical imaging market
After ISM
acquisition

Gain IP-based image management solutions and systems integration operating foundation

 Systems can be built which convert various medical video signals to IP and network them todepartments and labs inside and outside the hospital Obtain high technology to build robust security, to record and stream video inside and outside
the hospital
Ability to develop systems for any department or
examination facility

Value to be Provided through Acquisition of ISM

Hospitals

Gastrointestinal medicine

MRI facilities

Neurosurgery

CT facilities

General surgery

Operating room

Collaborate with
Outside entities
By the secure connection

Value traditionallyprovided by Olympus
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IP and 4K compatibility for various medical video
signals

Value to be provided throughacquisition of ISM
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Progress and Issues in Addressing Strategic Challenges (Business Strategies）
Establish new de facto standard in surgical imaging market[New Product] Launch of ORBEYE surgical microscope in the USA and Japan (October 2017) World-first 4K3D imaging provides high-resolution images andstereoscopic visual field to support precision surgery
 A 55-inch monitor is used for observation, facilitates team surgery andreducing surgeon fatigue
 Significant size reduction (95% smaller than the conventional model)
Winner of the Edison Award for technicalinnovation in a new product

Conventional surgery
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Surgery using ORBEYE
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ORBEYE surgical microscope

Progress and issues in Addressing Strategic Challenges (Business Strategies）
Establish new de facto standard in surgical imaging market
 Despite delays in new product introduction, and issues with quality and supply etc., surgical imaging isachieving rapid growth (CAGR 8%)
 Accelerate growth by introducing VISERA ELITE II in the US and stepping business with ISM and ORBEYE
Movements in revenue from surgical imaging



VISERA ELITE Ⅱ is scheduled for introduction(JPY-based)

April 2017:
VISERA ELITE Ⅱ introduced in Europe and Japan
June 2017:
Acquired ISM
October 2017:
ORBEYE surgical microscope introduced in Japanand the USA

FY2020～

in the US

October 2018:

4K surgical endoscopy systems scheduled for
introduction in China

CAGR 8%26

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Progress and issues in Addressing Strategic Challenges (Business Strategies）
Secure No. 3 position in energy device market and encroach upon No. 2 and No. 1 positions
 Carry on expanding and enhancing the lineup of the THUNDERBEAT, to achieve double-digit growth insurgical energy (CAGR 14%)
Movements in revenue from surgical energy

 February 2016 -:Three new SONICBEATS April 2016 -:Open Fine Jaw for abdominal surgery
 May 2016 -:Open Extended Jaw for abdominal
surgery

27 2018/9/5(JPY-based) April 2017 -: Japan and Europe
THUNDERBEAT Type-S
Generator function upgrade (ITM*) September 2018: USA
THUNDERBEAT Type-S

US ITM introduction in December 2017

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SP5236V01*ITM: Intelligence Tissue MonitoringFuture direction to archive 16CSP targets

General Surgery Business Unit (GSBU)

Slow progress in the first 2 years of 16CSP due to quality issues, delays
in new product introduction, etc.
The strategy is implemented successfully, continue to strengthen theactivity to achieve the 16CSP target.

Surgical Imaging
Make maximum use of ISM assets, continue to propose large-scale orders
combined 4K/3D systems and multiple operating room integrations

Introduce VISERA ELITE II in the US and the new Flex-3D globally

Strengthen the value proposition for solid sales activities



Introduce 4K in the Chinese market

Energy

Boost the sales by continuing to expand the device portfolio andStrengthening the value proposition

Strengthen the energy sales organizations in China, Asia, and emerging
regions

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Urology/ Gynecology Business Unit(UGBU)

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Strategic Initiatives for Each Business Unit: UGBUSecure dominant shares in markets for flexible endoscopes and TURis productsthat leverage technological prowess of Olympus

Strengthen urinary tract stone management business operations to expand
market share

Increase market share by leveraging existing products and technologies

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Urology/ Gynecology Business Unit: The three fields constituting urology

Flexible endoscopes

Flexible fiber
cystoscope

Flexible video
cystoscope

TURis* electrodes

Prostate enucleationelectrodes

Prostate evaporationelectrodes

Flexible video
uretero-renoscope

Stone treatment devices

Guide wires

BasketUrinary tract
stent

Flexible fiber
uretero-renoscope
Lithotripsy System*TURis: Transurethral Resection in saline
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Access sheath

Laser fiberProgress on Business Issues (Business Strategy)
Flexible endoscopes

Progress of 16CSPNew

Trend of flexible
ureteroscope sales

Trend of flexible
cystoscope sales
Solid sales progressTemporarily slow growth due to shipping hold andrecall of flexible ureteroscopes
URF-V3/V3R
Flexible video uretero-renoscopeNew

2015.3期
FY2016(Results)（実績）

2016.3期
FY2017(Results)（実績）

2017.3期
FY2018(Results)（実績）

2018.3期
FY2019(Forecast)（見通し）
2015.3期
FY2016(Results)（実績）

 Increased market share by utilizing theefficacy of NBI technology in bladdercancer diagnosis and treatment
 NBI is newly listed to EAU* Guidelines

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FY20172016.3期(Results)（実績）

FY20182017.3期(Results)（実績）

FY20192018.3期(Forecast)（見通し）

URF-P7/P7R
Flexible fiber uretero-renoscope Get back on growth track by introducing new flexible
uretero-renoscopes* EAU（European Association of Urology）

Urology/ Gynecology Business Unit
Progress of 16CSP

TURis electrodes
Trend of sales

 Sustained growth in all regions

TUEB* electrodes(for transurethral prostate
enucleation)

TURis electrodes

CAGR11%FY2016FY2016(Results)

FY2017FY2017(Results)

FY2018FY2018(Results)

FY2019FY2019(Forecast)(Forecast)*TUEB：TransUretheral Enuculation with Bipolar

TURis: TransUrethral Resection in saline

Increased market share by strengthening TURis competitivenessand its appealing performance in the market
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Urology/ Gynecology Business Unit
Stone treatment devices

Progress of 16CSP
Expanding the product portfolio and enhancement ofstone management product lineup

Trends of salesContinued double-digit growth
Steady progress towards target share

Release of a laser lithotripsy system（March 2018）
New

CAGR11%Development and manufacturing

Guide wires

BasketUrinary tract stent Laser fiberof lithotripsy systems in-house*

2015.3期
FY2016(Results)（実績）

FY20172016.3期(Results)（実績）

FY20182017.3期(Results)（実績）

2018.3期
FY2019(Forecast)（見通し）

Increase market share and accelerate business growthby expanding product portfolio to enhance product lineup
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Access sheath*Acquire lithotripsy systems from Cybersonics, Inc.(News release in April 2018)

Directives for Medical Business Strategy(1)Value to Be Provided by Medical BusinessEndoscopes
Early diagnosis
Minimally invasive treatments
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From Investor day（2016.3.30）