Medical Business Strategy
Akihiro Taguchi
Business Management Officer,
Medical Business
Olympus Corporation
March 30, 2016

Today’s Agenda
1. Review of Medium-Term Vision (From FY2013) for Medical Business
2. Recognition of Current Conditions
3. Directives for Medical Business Strategy
4. Priority Measures
5. Numerical Indicators

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Today’s Agenda
1. Review of Medium-Term Vision (From FY2013) for Medical Business
2. Recognition of Current Conditions
3. Directives for Medical Business Strategy
4. Priority Measures
5. Numerical Indicators

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Review of Medium-Term Vision for Medical Business: Performance Net sales and operating income targets achieved 1 year in advance 3-year net sales growth of ¥220 billion (1.6 times higher than FY2013) and operating income of¥50 billion (1.6 times higher than FY2013)
FY2013

FY2015FY2016（Billions of yen）

TargetActualTargetActualTargetForecast

Net sales

383.0

394.7

470.0

558.3

520.0

615.0

Operating income

75.0

87.1

97.0

124.9

112.0

137.0

Operating margin

19%

22%

20%

22%

21%

22%

Medium-Term Vision：■Targets

600GI: Gastrointestinal endoscopes
Surgical: Surgical devices
ET: Endotherapy devices■Target ■Actual

Actual：■GI ■Surgical ■ET15040040010020050004

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No data copy / No data transfer permitted* Targets are figures set
when the medium-termvision was announced inJune 2012.

Review of Medium-Term Vision for Medical Business: Overview
 Earnings growth exceeds targets in GI and ET fields, further sales growth and profitability improvement needed in Surgical field Additional upfront investments conducted in manufacturing and repair service functions as well as in sales functions centeredon Surgical and ET fields in North America

Strategies
Reinforcement of GI businessfoundation and securing of
stable earnings (CAGR of 9%)
Significant growth of surgicaldevice field business (CAGR of14%)

Sales increase in emerging
markets (CAGR of 23%)

Measures and Evaluation
 Achieved earnings growth substantially higher than expected (CAGR of 15%)◎  Contributed to increased sales and income for entire Medical Business Launched new mainstay products and realized early-stage replacement after launchConducted additional upfront investments primarily for bolstering sales staff in North
America and expanded business○  Launched new products and expanded sales (mainstay surgical endoscope products,differentiated 3D/4K imaging products and THUNDERBEAT strategic energy device)Improved profitability

Achieved CAGR of 25% in AsiaStrengthened sales systems through strategic investments◎  Established Olympus’ largest training center in China (Guangzhou)(Note) GI: Gastrointestinal endoscopes; ET: EndoTherapy devices; Surgical: Surgical devices
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Today’s Agenda1. Review of Medium-Term Vision (From FY2013) for Medical Business
2. Recognition of Current Conditions
3. Directives for Medical Business Strategy
4. Priority Measures
5. Numerical Indicators

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Operating Environment (1)Megatrends

7Declining birthrates and aging populations

“Great Rebalancing” (growing presence of emerging countries inglobal market)



Economic slowdown and potential of China and other emerging
countriesTechnological advances (ICT, IoT, Industry 4.0, etc.)

Growing pressure to limit medical costsInstitution of more stringent regulations

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Operating Environment (2)Operating Environment for Medical Business8

No rise in number of hospitals (operating rooms and endoscopic
treatment facilities) due to growing pressure to limit medical costs,
but increase in case numbers due to aging population

Accelerated market structure changes exemplified by growing
presence of GPOs/IDNs in North America

Increases in necessary measures, workloads and costs due totechnological advances and institution of more stringent regulations

High potential of Chinese market and other emerging markets, which
will be strategically important drivers of Medical Business growth, butdifferences in medical infrastructure development speed and patterns
between countries

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Today’s Agenda
1. Review of Medium-Term Vision (From FY2013) for Medical Business
2. Recognition of Current Conditions
3. Directives for Medical Business Strategy
4. Priority Measures
5. Numerical Indicators

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No data copy / No data transfer permittedDirectives for Medical Business Strategy(1)Olympus’ Management Vision
Olympus contributes to society
by making people’s lives healthier, safer, and more fulfillingaround the world

Value to Be Provided by Medical BusinessEndoscopes
Early diagnosis
Minimally invasive treatments
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No data copy / No data transfer permitted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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No data copy / No data transfer permittedDirectives for Medical Business Strategy (3): Investment Policies【Sales Function Investments】

 Respond to North American GPOs/IDNs andstrengthen training Bolster sales systems and step up promotion
activities in emerging countries【R&D Investments】

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

Growthpotential【QA/RA Investments】

 Strengthen quality management systems
 Reinforce medical affairs functions

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Balance
Efficiency

【Manufacturing FunctionInvestments】

Create globally optimized production systems(including repairs) with eye to 10 years from nowToday’s Agenda
1. Review of Medium-Term Vision (From FY2013) for Medical Business
2. Recognition of Current Conditions
3. Directives for Medical Business Strategy
4. Priority Measures
5. Numerical Indicators

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Priority Measures (1)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 disposable 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)Expand operations in emerging countries
Countries with sufficient medical infrastructure: Position as growth driver and 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 presence of GPOs/IDNs inNorth 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 external requirements
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 & marketing andservice)

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Strategic Initiatives for Each Business Unit: GIRBUSecure strong market leader position in GI business and improve profitability throughselection and concentration



Expand business in following fields: respiratory, CDS (Cleaning, Disinfection andSterilization), ultrasound endoscopy, capsule endoscope and IT

Realize business growth in emerging markets

Grow endotherapy devices operations*CDS: Cleaning, Disinfection and Sterilization

Bronchoscopes

Endotherapy devices

GI endoscopes

CDS
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IT

Ultrasound endoscopes

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. 1positions

Establish disposable device business model

Fully leverage Olympus’ strength in GI field

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Strategic Initiatives for Each Business Unit: UGBUSecure dominant shares in markets for flexible endoscopes and TURis products thatleverage Olympus’ technological prowessStrengthen urinary tract stone treatment business operations to expand market shareEfficiently increase market share by leveraging existing products and technologies

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Strategic Initiatives for Each Business Unit: ENTBUExpand ENT flexible endoscope operations centered on “videonization”
Acquire endoscopic sinus surgery (ESS) operations


Expand sinus surgery imaging operations centered on 4K systems
Expand sinus surgery product portfolio centered on DIEGO ELITE
Implement measures in preparation for introduction of minimally invasive treatments into
alternate sites of care

Establish global sales systems

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Strategic Initiatives for Each Business Unit: MSBUIntroduce service contracts that realize high levels of customer satisfaction, increase
number of such contracts and improve profitabilityExpand service operations on surgical products

Provide services that improve medical institution efficiency

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Today’s Agenda
1. Review of Medium-Term Vision (From FY2013) for Medical Business
2. Recognition of Current Conditions
3. Directives for Medical Business Strategy
4. Priority Measures
5. Numerical Indicators

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Numerical Indicators: Entire Medical Business【Net sales: CAGR of 8%】
Continually achieve growth of approx. 8% forentire Medical Business through stable growth thatexceeds market growth rates in GI field, andcontinually achieve growth substantially higher thanmarket growth rates in surgical field【Operating income: CAGR of 10%;
operating margin: 3 pt. increase】
 Reduce ratio of SG&A expenses to net sales byimproving efficiency of business operation expenses
related to R&D, manufacturing, supply chain
management and other areas
 Raise operating margin by 3 pts. to approx. 25%
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No data copy / No data transfer permitted【Medical Business Net Sales: CAGR of 8%】（Billions of yen）

1,000
800
600
400200Numerical Indicators: 5 Business Units
FY2016
Net sales

GIRBU(forecast)

FY2021
CAGR(Olympus)

Global share*GI¥337.4 bil

6%More than 70%ET¥72.0 bil

9%

Approx. 20%

GSBU
UGBU

Surgical¥205.6 bil

ENTBU－MSBU＊＊
Medical Total¥615 bil

Key points
・Achieve stable growth exceeding market growth rates
・Expand businesses peripheral to endoscopes andoperations in emerging markets
・Grow ET operations

Imaging:10%Energy：14%

Imaging: 20-25%
Energy：18-20%

・Achieve growth substantially higher than market growthrates
・Establish new de facto standard in surgical imaging
・Establish disposable device business model

8%

Urology: 30%
Gynecology: 10%

・Secure shares in flexible endoscope and TURis markets
・Expand urinary tract stone treatment market share13%

Laryngology: 50-60%
Rhinology: 10-15%
Otology: 40-50%

・Acquire ESS operations
・Establish global sales systems

5%－・Promote spread of service contracts
・Expand service operations on surgical products－Drive growth of entire Medical business with surgical andET field growth¥900 bil
CAGR8%* Source of global share: Olympus** MSBU (Medical Service Business Unit) net sales from FY2016 are included in the figures of ¥337.4 billion for GI and ¥205.6 billion for Surgical

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Medical Business Portfolio and Growth 5 Years from Now
FY2016 Net Sales (Forecast)*

FY2021 Net Sales (Forecast )GI: Gastrointestinal endoscopes
ET: Endotherapy devices

ET：¥72.0 billion
SurgicalDevices：¥205.6 billion

Medical BusinessFY2016¥615 billionGI：¥337.4 billionGIRBU：CAGR 7%ENTBU：CAGR 13%UGBU：
CAGR 8%GSBU：CAGR 11%* Medical service net sales from FY2016 are included in the figures for GI and Surgical devices
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Medical Business
FY2021¥900 billion

Disclaimer

This presentation is for your general knowledge and background only.
Olympus makes no representations warranties or other expressed or
implied warranties or guarantees regarding the accuracy, reliability orcompleteness of the information. Proper attribution should be provided forany use of the information contained in this presentation. Under nocircumstance shall Olympus or its employees, consultants, agents orrepresentatives be liable for any costs (whether direct, indirect, special,incidental, consequential or otherwise) that may arise from or be incurredin connection with the information provided or any use thereof.

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