Financial Results for Fiscal 2016

May 12 , 2017g Inc.
KYORIN Holdings,
President Minoru Hogawa

Outline of Consolidated Financial Results
・Trends of mainstay products

Consolidated Financial Results and Forecast
Status of development pipeline
I iti ti
Initiatives
towardt
d realization
li ti
off
the long-term vision “HOPE 100”・Progress of Medium-Term Business Plan “HOPE 100-Stage 2-”(Fiscal 2016～2019)1

Outline of Consolidated
Financial Results2Outline of Consolidated Financial Results for Fiscal 2016

（unit : ¥billion）

ChangeChange(revised
forecast)(original
forecast)

FY2015FY2016

ChangeChange((%))

Net Sales

119.5

115.4

－4.1

－3.4

＋0.4

－4.6

Operating
Income

19.6

10.4

－9.2

－47.0

＋0.4

－4.1

Ordinary
Income

20.0

10.9

－9.1

－45.6

＋0.5

－4.0

Net Income

13.6

7.3

－6.3

－46.4

＋0.7

－3.4
3

Breakdown of Gain and Loss
（unit : ¥billion）

ChangeChange(revised
forecast)(original
forecast)

FY2015FY2016

ChangeChange
(%)

119.5

115.4

－4.1

－3.4

＋0.4

－4.6

114.0

109.6

－4.4

－3.9

＋0.5

－4.4

98.5

84.5

－14.0

－14.2

－0.4

－7.9

Japan

92.9

83.8

－9.1

－9.8

－0.2

－4.7

Overs
eas

5.6

0.8

－4.8

－86.3

0

－3.0

15.5

25.0

＋9.5

＋61.8

＋0.9

＋3.5

H lth
Healthcare
B
Business
i

55
5.5

58
5.8

＋0.3
03

＋5.4

－0.1
0

－0.2
02

Cost of Sales

47.4

50.8

＋3.4

＋7.4

－

－

SG&A

52 5
52.5

54 1
54.1

＋1 6
＋1.6

＋3 1
＋3.1

－

－

Operating Income

19.6

10.4

－9.2

－47.0

＋0.4

－4.1

Ordinary Income

20 0
20.0

10.9

－9.1
9.1

－45.6
45.6

＋0.5

－4.0
4.0

Net Income

13.6

7.3

－6.3

－46.4

＋0.7

－3.4

Net Sales

Ethical drugs
business

Sales ofnew
ethicaldrugs

Generic drugs

4

Highlights of Business Performance ①（Sales）（ Units: ¥ billion ）

120

119.5

115.4

5.5

58
5.8

15.5
100

【 Net Sales ¥－4.1billion】
Healthcare Business ＋0.3
・Growth of RUBYSTA and Milton

25

5.6

0.8

80

【 Ethical Drugs Sales ¥－4.4billion】
Generic drugs ＋9.5

【 Ethical Drugs】

60【 Ethical Drugs】

114.0

92 9
92.9
40

109.6

83.8

20

・Seles of the MONTELUKAST”AG” for
KIPRES and The other generic drugs
increased.

Ethical drug sales overseas －4.8
・Decrease of upfront payment income for
FPR-agonists(12/2015)

Ethical drug sales in Japan －9.1

0

16年3⽉期
FY2015

17年3⽉期
FY2016

・Increase of the flutiform sales / Launchof the DESALEX・Drug price revisions/Decline inprescriptions of long-listed drugs /Decrease of the Kipres sales

5Highlights of Business Performance ② （Income）【Operating Income ¥－9.2billion】（ Units: ¥ billion ）20

Gross Profit decreased
Net Sales：decreased ¥4.1billion
year on year
g decreased
・Sales of new ethical drugs
・Sales of generic drugs increased

－7
6
－7.6

15

＋0.6
10

Cost of sales ratio :Increased 4.5% year on
year
・Drug price revisions
・Decrease of upfront payment income forin-licensed product overseas

＋1.0

19.6

R&D expenses increased

10.4

5

progress of development project (KRP・progress(KRPAM1977X、KRP-114V)
・¥13.0billion（FY2015)⇒¥13.6billion(FY2016)

SG&A(excluding R&D)
increased・Increase of sales and general costs¥39.5billion(FY2015）⇒¥40.5billion（FY2016）¥40 5billi （FY2016）

Operating Income（FY2015）Gross Profit

R&D

Operating Income(excluding R&D) （FY2016）

SG&A

6

Highlights of Business Performance ③（Changeg : originalg
forecast))（ Units: ¥ billion ）ChangeChange(revised
forecast)(original
forecast)

FY2015FY2016

ChangeChange
(%)

119.5

115.4

－4.1

－3.4

＋0.4

－4.6

114.0

109.6

－4.4

－3.9

＋0.5

－4.4

98 5
98.5

84 5
84.5

－14.0
14 0

－14.2
14 2

－0.4
04

－7.9
79

Japan

92.9

83.8

－9.1

－9.8

－0.2

－4.7

Overs
eas

5.6

0.8

－4.8

－86.3

0

－3.0

15.5

25.0

＋9.5

＋61.8

＋0.9

＋3.5

Healthcare Business

5.5

5.8

＋0.3

＋5.4

－0.1

－0.2

Cost of Sales

47.4

50.8
50
8

＋3.4

＋7.4

－

－

SG&A

52.5

54.1

＋1.6

＋3.1

－

－

Operating Income

19.6

10.4

－9.2

－47.0

＋0.4

－4.1

O di
Ordinary
Income
I

20 0
20.0

10 9
10.9

－9.1

－45.6

＋0.5

－4.0

Net Income

13.6

7.3

－6.3

－46.4

＋0.7

－3.4

Net Sales

Ethical drugs
business

Sales ofnew
ethicaldrugs

Generic drugs【Explanation of Variances（Change：original forecast）】
Net Sales：In new pharmaceutical products in Japan, sales of Flutiform and Mucodyne less than initially forecast and, in new pharmaceuticalproducts overseas, upfront payment income relating to an in-licensed product postponed . Meanwhile, in generic drugs, sales of theAG of Montelukast (KIPRES) are exceeded the initial forecast.
Extraordinary losses：Expenses of around 1,000 million yen related to the settlement of a lawsuit for violation in connection
with an in-licensed product (Gatifloxacin eyedrops) were recorded as an extraordinary loss.

7

Mainstay Product Sales（ Units: ¥ billion ）ChangeChange(revised
forecast)(original
forecast)

FY2015FY2016

ChangeChange(
%)

7.2

10.1

＋2.9

＋39.0

0

－2.8

Uritos

7.5

7.5

0

＋0.1

－0.1

－0.3

Desalex

0

10
1.0

＋1 0
＋1.0

－

－0 9
－0.9

－0 9
－0.9

（LT receptor antagonist）

44.1

32.7

－11.4

－25.9

＋0.8

－0.6

For children

15.4

14.9

－0.5

－3.3

＋0.6

＋0.6

16.1

15.5

－0.6

－3.9

0

－0.3

13.0

9.9

－3.1

－24.1

＋0.2

－0.9

＋8.2

－

＋1.1

＋4.1

Flutiform(Combination drug for asthma treatment)（Overactive bladder)(Antiallergic Agent)

KipresPentasa(Ulcerative colitis and Crohn’s disease
treatment)

Mucodyne（Mucoregulant）.

MONTELUKAST
Tablets“KM”※

0

8.2

8

Trends of mainstay products

9

■New drugs group
Flutiform 【Anti-asthmatic】（ Units: ¥ billion ）14

status of FY2016

12ICS/LABA market ： expand 5.0%

10¥108.2bln（FY2015） ⇒ ¥113.6（FY2016） ※1

share of Fultiform sales8

7.4%（FY2015） ⇒ 9.7%（FY2016） ※2

12.0

6

10.1
4

0

3.6

※1､2（Source：Copyright 2016 IMS JAPAN IMS –JPM. Unauthorized copying prohibited ）

0.6
14/3

effort for FY2017
Emphasize the characteristics of Flutiform(Evidence-based stimulation of prescriptions)・Low spray velocity
・The agent nicely penetrates and reaches theperipheral airways.

7.2

2

price rivision rate ▲0.2％

15/3

16/3

17/3

18/3
forecast

10■New drugs group
Desalex（ Antiallergic Agent）
 Launch : Nov. 2016
 Sales : ¥1.0
¥1 0 billion (FY2016 sales)
 Sales forecast：¥3.5 billion (FY2017 sales)
Promoted co-promotion with Kaken Pharmaceutical Co., Ltd. in dermatology area

Improve the visibility of the product:
Spread the understanding on its effects and usability
・Has a high affinity for histamine H1 receptors and reliably exhibits an effect・Half-life
H lf lif iis llong, andd a single
i l d
daily
il d
dose suppresses symptomstffor a llong titime
・Fit patients’ lifestyles because it is non-drowsy and unaffected by foodIncrease prescriptions

・ Suggest that the drug should be prescribed for patients in whom it could be used forless than the 14-day prescription restriction

Aim for dramatic market penetration after the lifting ofprescription limitations(The prescription restriction will be lifted in December 2017)11■Original products group
Kipres 【Bronchial asthma and allergic rhinitis treatment】（ Units: ¥ billion ）
50.0

40.0

30 0
30.0

368
13 7
13.7

396
14.6

402
14.6

412

status of FY2016441

LT antagonists market ： shrink 14.4%¥ 132.2（FY2015） ⇒ ¥113.2（FY2016） ※1

14.5

15.4

20.0

10.0

38.6%（FY2015） ⇒ 33.9%（FY2016） ※2
price rivision rate ▲8.3％

14.9

23.0

share of Kipres sales

327

25.0

25.6

26.7

28.6
17 7
17.7

210

effort for FY2017Children

11.1

Continuously provide accurate information
to doctors prescribing the drug

Adult

Promote it with drugs such as Flutiform and
Desalex in the category of asthma and rhinitis

9.8※1,2 （ Source：Copyright 2016 IMS JAPAN IMS –JPM. Unauthorized copyingprohibited ）0.0
FY2011FY2012FY2013

FY2014FY2015FY2016FY2017
forecast

12

■Status of Generic Drugs
Kei（ Units: ¥ billion ）

30

28 5
28.5
25.0 Montelukast
AG

25

10 3
10.3
8.2

20

Launch of an authorized generic drug (Sep. 2016)
TurnoverTurnover increase rate, excluding AG : ＋8.5%
8.5%
・Increase of Health insurance pharmacy marketʼs sales,
contract manufacturingʼs sales
・Launched 4 components ,11products in FY2016

effort for FY201715

excluding
AG

10

5

status of FY2016

8.7

10 1
10.1

12.0

15.5

15.5

16.8

18.2

Actions for an authorized generic drug (AG)・Maintain a highg share of Montelukast AG in the GE market
・Consider acquiring new AGs

Expand sales of strategic products andSupplementary Items
・ 2016 June supplementary Item
= Aripiprazole telmisartan etc.

Takaoka Drug Discovery Laboratory（ July of 2017 Start of operations ）0
FY2011FY2012FY2013

FY2014FY2015FY2016FY2017
forecast

・Aim
Ai to
t strengthentth productd t developmentdlt capabilities
biliti andd iincrease ththenumber of product items developed by our company
・ Target ： 20 or more development products per year

13Consolidated Financial Results and Forecast

14Consolidated Financial Results Forecast
for the Year Ending March 31, 2018
（ Units: ¥ billion ）FY2016FY2017（forecast）

Y/Y

ChangeChange(%)

115.4

113.4

－2.0

－1.7

109.6

107.4

－2.2

－2.0

84.5

78.9

－5.6

－6.7

Japan

83.8

75.5

－8.3

－9.9

Overse
as

08
0.8

33
3.3

＋2.5
25

＋331.9
331 9

25.0

28.5

＋3.5

＋13.9

58
5.8

59
5.9

＋0 1
＋0.1

＋1 6
＋1.6

Operating Income

10.4

12.1

＋1.7

＋16.2

OrdinaryOd a y Income
co e

10 9
10.9

12.6

＋1.7

＋15.9

7.3

9.7

＋2.4

＋32.8

Net sales

Ethical drugs
business

Sales ofnew
ethicaldrugs

Generic drugs
Healthcare Business

Net Income【for reference: year on year】① CostC
off sales ratio : decrease a little less than 1 point,② R&D expenses decreased （ forcast for R&D expense in FY2107 : ¥12.6bln）③ SG&A(excluding R&D) decreased（ SG&A ratio(include R&D expense): decreased 0.5% ）※Transfer the stocks of Dr. Program Co., Ltd. (skincare business) to Taisho Pharmaceutical Co., Ltd. in anticipation of extraordinary profit fromthe stock transfer

15Forecast of Mainstay Product Sales（ Units: ¥ billion ）Y/YFY2017FY2016（forecast）

ChangeChange(%)

10.1

12.0

＋1.9

＋19.9

Uritos

7.5

7.6

＋0.1

＋1.8

Desalex

10
1.0

3.5

＋2.5

＋262.3（LT receptor antagonist）

32.7

21.0

－11.7

－35.4

For children

14.9

11.1

－3.8

－25.0

15.5

15.6

＋0.1

＋1.2

9.9

8.3

－1.6

－15.5

.

.

8.2

10.3

＋2.1

＋25.6

Flutiform(Combination drug for asthma treatment)（Overactive bladder)(Antiallergic Agent)

KipresPentasa((Ulcerative colitis and Crohn’s disease treatment))

Mucodyne（Mucoregulant）

MONTELUKAST
Tablets“KM”※

16

Shareholder Returns
Basic Policy- While maintaining the sound financial basebase, adopt the capital policy
ensuring both growth investment and stable return to shareholders.
- In shareholders return
return, aim for stable dividends
dividends.
Dividend per share for fiscal 2017 (estimate): ¥58 (Year-end dividend ¥38)
Dividends

Dividend pershare (Yen)Consolidated
payout ratio(%)

FY2015FY2016 ※FY2017（forecast）

¥58

¥58

¥58

（Year-end（Yearend ¥38）（Year-end（Yearend ¥38）（Year-end（Yearend ¥38）

31.8%

59.3%

44.7%

※ The year-end dividend of 38 yen in the fiscal year ending March 2017 will be decided at the Board Meeting scheduled for May 23.

17

St t off development
Statusdlt pipeline
i li

18

Drug Development Pipeline:
Progress in FY2016, schedule of FY2017
progress in FY16

schedule of FY17

PhⅠ

PhⅢ

application

Approval/ Launch

KRP-AM1977X

End of the Ph3

17/4

FY2018KRP-AM1977Y

16/3

Product & development code

Ad-SGE-REIC

Respiratory

Infections

PhⅡ
15/7

KRP-209

Otolaryngolo
gical

FY201915/8

Desalexl

16/11 launch

KRP-114V

UrologicalEnd of the Ph3

KRP-116D
KRP
116D ※1

Preparing forApplication ※2

FY201817/3※1 Interstitial cystitis treatment: The development of dimethylsulfoxide was decided, an unapproved
and off-label drug that is greatly needed in medical practices (fiscal year ending March 2014).

※2 2017/5【 Licensing development】
開発コード

導出先

開発段階

特徴

FPR2 agonist program

BMS

Preclinical

FPR-2 agonists that mainly inhibit the
migration of neutrophils and exhibit anti-inflammatory action.
Th
Therapyarea：Non-disclosure
N di lKRP-203

Novartis

PhⅠ

Sphingosine-1-Phosphate Receptor Agonist .
Therapy area：GvHD

19

Antibacterial agent｢KRP-AM1977X｣「KRP-AM1977Y」
generic name : Lascufloxacin （LSFX ）Status of develpoment：
KRP-AM1977X (Oral agent)Application(2017/4)

Status of develpoment：
KRP-AM1977Y (Injection)
Clinical trials: Ph3(2016/3 Start)
Study design : Double-blind comparative study in patientswith community acquired pneumonia【 Features】
The drugThdhas
h beenb
shownhto
t haveha goodd clinicalli i l effect
ff t att 75 mg q.d.
d against
i tcommunity-acquired respiratory tract infections and ear/nose/throat infections.
・The drug has strong antibacterial activity against bacteria inducing respiratory tract andear/nose/throat infections as well as against strains resistant to β-lactam
β lactam and macrolide
antibiotics.
・The drug is highly transferable to the lung tissue with a plasma ratio greater than 10.
The drug can be expected to be very safe.
safe
・The drug is very unlikely to induce problems that are typically concerns with
antibacterial agents of the same type, such as abnormal glucose levels, photosensitivity,
joint damage and digestive symptoms
symptoms.

aim to early approval of this drug

20Overactive bladder treatment ｢KRP-114V｣
generic name ： Vibegron
Status of develpomentpPreparing for Application
Clinical Phase III study
Study: A double
double-blind
blind comparative study for verifying the efficacy and safety of the drug in OAB patientsResult: The drug was shown to be superior to a placebo in primary endpoints and all secondary endpoints.

[Primary endpoints] Average frequency of urination per day[[Secondary
y endpoints]] Averageg frequencyqy of urinary
y urgencygyp
per day,y etc.

【 Features 】- Expectation of high compliance in taking medicine with less side effects than theconventional drugs for overactive bladder- Less drug interaction as β3 receptor agonist- β3 agonist including this agonist may constitute the first-line drug for treatment ofoveractive bladderbladder.
・License agreement with Merck & Co., Inc.,(7/2014)
・Co-Development and Co-Marketing Agreement with Kissei Pharmaceutical Co., Ltd. affiliate . (3/2016)
Kyorinyacquiredqlicenses from Merck & Co.,, Inc.,for,Asia ((4/2017))

File an application and obtain approval soon

21

Progress of Medium-Term Business Plan
“HOPE 100
100-StageSt2 ” (Fiscal
2-”(Fi
l 20162016～2019)
2019)

22

Outline of“HOPE 100-Stage 2-”【Four Priority Strategies】
Business Strategy（S）
Strategy①Strengtheninggg of the Ability
y to Discover New Drugs
g②Increase in the Ratio of New Drugs Group③Promotion of Generic Drugs Business by Making
the Most of Its Characteristics④Strengthening of Low Cost

【Development Strategies】

・ Healthcare Business/ Overseas Expansion

Organization Strategy(O)
Organization

・ Best worthwhileness of work
・ Establishment and operation of the system for
management of human resources

Performance Targets （P）
Performance・ Sustainable growth・ Aim to achieve the average annual growth rate of 3% ormore for the consolidated net sales and the consolidated
operating income margin of 15% or more
more.
・ In shareholders return, aim for stable dividends.
23

Priority Strategy"Strengthening of the Ability to Discover New Drugs"

Initiatives for first-in-class new drug discovery【Generation of innovative new drugs】
Drug discovery information

WATARASE Research center
Receptor technology

ActivX Biosciences

Academia、Venture company

Pharmaceutical companies
in japan and overseas

Open innovation

KiNativ technology

New organization:
New president
takes office (April
2017)

O
Open
iinnovationti

Kyoto University
Collaborative
research course(April 2017)

Target novel new drug discovery
Original response

Low moleculellcompoundPeptides,nucleic
acid medicine,gene therapy etc.

PeptiDream Inc.
Collaborative researchand development

Momotaro-Gene Inc.
Gene therapy

24ActivX Biosciences

Hughg Rosen, M.D., Ph.D., President & Chairman[Profile]Born on January 23, 1959 (aged 58)
1982: Graduated from the University of Cape Town
Obtained a medical license the same year1986: Received a Ph.D. from the University of Oxford
1991: Joined Merck2002: Assumed role of Scripps Professor[His relationship with ActivX and Kyorin Pharmaceutical Co., Ltd. so far]・ActivX
ActivX Scientific Advisor since 2002
・Sent Kyorin’s researchers to Scripps’ Rosen Laboratory since 2006
Subsequently, sent six researchers by 2012 and contributed to their developmentyPharmaceutical Co.,, Ltd. since 2012
・Scientific Advisor for Kyorin

25

Open innovation

Collaborative research course with Kyoto University

Objective
With the aim of creating innovative Japanese therapeutic drugs, find new targets for drug discovery by combining Kyoto
University graduate school’s abilities in pathological and basic studies and Kyorin Pharmaceutical’s abilities to develop
drugs, identifying numerous factors that are deeply involved in the pathological causes of respiratory diseases andverifyingif i potential
t ti l ttargets
t for
f drugddiscovery.
diResearch the pathological causes of lung fibrosis and other organ fibrosis processes basedon Kyoto University and Kyorin technologies.
Apply the technical infrastructure using iPS cells and improve the quality of evaluation for
drug discovery.

Information•Location: Graduate School of Medicine, Kyoto University•Course title : Respiratory Disease Drug Discovery Course•Instructors : Shinpei Gotoh, M.D., Ph.D.
(formerly Department of Respiratory Medicine, Graduate School of Medicine, Kyoto University):：Masayasu
MTToyomoto,t Ph.D.
Ph D(formerly Department of Anatomy and Developmental Biology, Graduate School of Medicine, Kyoto University)•Period: April 1, 2017 – March 31, 2020
•Amount of funding:
Approx 50 million yen/year
Approx.
:26

Priority Strategy "Increase in the Ratio of New Drugs Group"

Substantial increase in the ratio of new drugs groupby maximizing spread of new drugs group
 Maximize the spread of Flutiform and Desalex.
 Successfully launch new products so that they will become soon become entrenchedin the market (KRP
(KRP-AM1977X・Y
AM1977X Y and KRP
KRP-114V).
114V).

[The ratio of the new drugs groupshould increase as follows]

FY2019R i off new
Ratio
drugs group:
At least 50%

Towardnew growthth

KRP AM1977Y
KRP-AM1977Y
FY19 Expected Release（Ph3）

KRP-114V
FY18 Expected Release

Ratio ofnewdrugs
group:
Approx.
20%（Preparing for Application）

KRP-AM1977X
FY18 Expected Release（17/4 application ）The patent cliff for Kipres

DesalexFlutiform
FY2016FY2017FY2018FY201927

Priority Strategy"Strengthening of Low Cost“

Change of the cost structure by ensuring optimization
within the Groupp
It has resolved its held on the direction to consolidate production functions ofp into such new subsidiary.
y （2017/5/11）/ /the KYORIN Group【 Image of Consolidation of Group Production Functions】

KYORIN Rimedio

KYORIN Pharmaceutical

Inami Plant / Toyama Pref.

Noshiro Plant / Akita Pref.

KYORIN Pharmaceutical
Facilities

Head office and plant / Shiga Pref.

Consolidation of Group Production Functions

Establish a new manufacturing subsidiary

Akita site

Toyama site

Shiga site

At the leveling of capacity utilization and the efficient use of assets, and thebuilding of a competitive Group production structure for consistently
providing high-quality products at low cost.
28

【Development Strategies】 Healthcare Business

Developing a core and paving the way for a candidate
for the next core

【 About Healthcare Business】
Healthcare Business

Environmental hygiene

OTC drugs, others

Selectbusiness
es andconcentr
ate onthem

Healthcare Business

En ironmental hEnvironmental
hygienegiene【Milton】【RUBYSTA】【Decontamination of hands】

SkincareTransfer the stocks of the skincare
business (Dr. Program Co., Ltd.) to
Taisho Pharmaceutical Co., Ltd. (April
2017)
Conclude a partnership agreementwith Air Liquide Japan Ltd. for thedi t ib ti off hand
distribution
h d hygiene
h iproducts
d t(January 2017).

OTC drugs
drugs, others【Cool one ,etc】

Expand the environmental hygiene businessand grow it into a core business.
29

Important points in facilitating the FY2017
business strategy

Properly react to discontinuous and sudden changes in ourbusiness and achieve sustainable growth over the medium
and long terms.

Increase awarenessabout profitability

BuildB
ild theth basisb i forfcontinued growth30