Financial Results for Fiscal 2019

May 13 , 2020
KYORIN Holdings, Inc.
Representative Director, President and Chief Executive Officer

Yutaka OgiharaOutline of Consolidated Financial Results
・Trends of mainstay products

Consolidated Financial Results and Forecast
Status of R&D PipelineInitiatives toward realization of
the long-term vision “HOPE 100”・Medium-Term Business Plan “HOPE 100-Stage 2-”(Fiscal 2016～2019)
・New Medium-Term Business Plan “HOPE 100-Stage3-”(Fiscal 2020～2023）

2

Outline of Consolidated
Financial Results3Outline of Consolidated Financial Results for Fiscal 2019
(unit : ¥billion)

Change(%)

ChangeFY2018FY2019ChangeNet Sales

113.6

110.0

－3.6

－3.2

＋0.6

Operating
Income

9.0

7.5

－1.5

－16.4

＋1.0

Ordinary
Income

9.4

8.2

－1.2

－13.4

＋1.1

Net Income

6.9

6.1

－0.8

－10.5

＋0.7

(revised
forecast)

4Breakdown of Gain and Loss
(unit : ¥billion)

FY2018FY2019ChangeChange(%)

Change(revised
forecast)

113.6

110.0

－3.6

－3.2

＋0.6

107.9

103.6

－4.3

－3.9

＋0.2

78.5

72.6

－5.9

－7.5

＋0.2

Japan

77.7

71.2

－6.5

－8.4

＋0.2

Overseas

0.8

1.5

＋0.7

＋79.5

＋0.1

29.3

31.0

＋1.7

＋5.5

0

Healthcare Business

5.8

6.4

＋0.6

＋10.8

＋0.5

Cost of Sales

56.2

53.0

－3.2

－5.8

－

48.4
（10.8)

49.5（11.0)

＋1.1

＋2.3

－

Operating Income

9.0

7.5

－1.5

－16.4

＋1.0

Ordinary Income

9.4

8.2

－1.2

－13.4

＋1.1

Net Income

6.9

6.1

－0.8

－10.5

＋0.7

Net Sales

Ethical drugs
business

Sales ofnew
ethicaldrugs

Generic drugs

SG&A

5

Highlights of Business Performance ①（Sales）【 Net Sales ¥－3.6bln】(Units: ¥ billion)

120

113.6

【 Ethical Drugs Sales －¥4.3bln】

110.0

5.8

Ethical drug sales in Japan－¥6.5bln

6.4

・Decreased in prescriptions of long-listed drugs（Nasonex, etc.）.
・Delay of the resumption of supply of
Desalex・Growth in Flutiform and Beova sales
・The release of Lasvic Tablets

100

29.3
80

31.0

0.8
【 Ethical Drugs】

60【 Ethical Drugs】

107.9
40

77.7

Ethical drug sales overseas＋¥0.7bln

1.5

103.6
71.2

20

・Increase in revenue about Gatifloxacin
・Lump-sum revenue of a license
agreement

Generic drugs ＋¥1.7bln
・The release of Mometasone AG

Healthcare Business ＋¥0.6bln
・Growth of Rubysta and Milton

0

19年3月期
FY2018

20年3月期
FY20196

Highlights of Business Performance ②（Income）【Operating Income ¥－1.5bln】(Units: ¥ billion)

Gross Profit decreased
10
Net Sales：
Decreased ¥3.6bln year on year

－0.4

8

Cost of sales ratio :Decreased 1.4% year on year

－0.2

+0.9

・ Impact of NHI price revision due to consumption tax
increase (approximately 3%)
・ Improvement of product mix

6

R&D expenses increased

9.0

7.5

4

¥10.8bln（FY2018）⇒¥11.0bln（FY2019）
・Increase in lump-sum contractual payments paid in
conjunction with the introduction(ATYR1923 : about ¥0.9bln)

SG&A(excluding R&D)
increased2¥37.6bln（FY2018）⇒¥38.5bln（FY2019）
・Increase in patent royalties, etc.

0Operating Income Gross Profit（FY2018）

R&D

Operating Income
SG&A(excluding R&D) （FY2019）7

Highlights of Business Performance ③（Change : revised forecast)(Units: ¥ billion)

FY2018FY2019ChangeChange(%)

Change(revised
forecast)

113.6

110.0

－3.6

－3.2

＋0.6

107.9

103.6

－4.3

－3.9

＋0.2

78.5

72.6

－5.9

－7.5

＋0.2

Japan

77.7

71.2

－6.5

－8.4

＋0.2

Overseas

0.8

1.5

＋0.7

＋79.5

＋0.1

29.3

31.0

＋1.7

＋5.5

0

Healthcare Business

5.8

6.4

＋0.6

＋10.8

＋0.5

Cost of Sales

56.2

53.0

－3.2

－5.8

－

48.4
（10.8)

49.5（11.0)

＋1.1

＋2.3

－
（＋0.4）

Operating Income

9.0

7.5

－1.5

－16.4

＋1.0

Ordinary Income

9.4

8.2

－1.2

－13.4

＋1.1

Net Income

6.9

6.1

－0.8

－10.5

＋0.7

Net Sales

Ethical drugs
business

Sales ofnew
ethicaldrugs

Generic drugs

SG&A【Explanation of Variances（Change：revised forecast）】
Net sales: (New drugs in Japan) Sales of Flutiform and Beova were increase, meanwhile sales of Desalex was lower than the revised forecast.
(Healthcare Business) Sales of the Milton and Rubysta exceeded revised forecast.
Operating Income: Gross profit was better than expected due to overachieved of sales of mainstay products and improved of cost of sales ratio.
Meanwhile, in SG&A, R&D expenses were higher than expected.

8Mainstay Product Sales（ Units: ¥ billion ）ChangeFlutiform(Combination drug for asthma treatment)

Desalex(Antiallergic Agent)

Beova（Kyorin）(β3 adrenergic receptor agonist overactive bladder therapeutics)

FY2018FY2019ChangeChange(％)

13.1

14.6

＋1.5

＋12.2

＋0.5

3.7

2.6

－1.1

－30.1

－2.4

0.7

4.3

＋3.6

＋481.0

＋1.5

1.1

＋1.1

－

＋0.2

6.6

5.8

－0.8

－11.7

－0.1

13.5

13.3

－0.2

－1.5

＋0.6

12.8

6.0

－6.8

－52.8

－0.2

6.2

5.3

－0.9

－15.5

＋0.6

7.6

6.5

－1.1

－14.6

＋0.2

6.8

5.8

－1.0

－14.5

－0.3

11.9

11.5

－0.4

－3.3

０

2.8

＋2.8

－

＋1.0

Lasvic tablets(Oral new quinolone synthetic antibacterial agent)

Uritos（Kyorin）(Therapeutic agent for overactive bladder)

Pentasa(Ulcerative colitis and Crohn’s disease treatment)

Nasonex(Spray type allergic rhinitis remedy)

Kipres for adult(Leukotriene Receptor Antagonist)

Kipres for children(Leukotriene Receptor Antagonist)

Mycodyne(Mucoregulant)

Montelukast tablets “KM”
(Leukotriene Receptor Antagonist)

Mometasone Nasal 50mg “KYORIN”(Spray type allergic rhinitis remedy)(revised
Forecast)

9Trends of mainstay products
and Generic drugs

10

■Mainstay productFlutiform (Combination drug for asthma treatment)(Units: ¥ billion)14
status of FY2019

12◆ ICS/LABA market ： expand 2.4%
¥120.3bln（FY2018） ⇒ ¥123.2（FY2019） ※1

10

share of Fultiform sales
12.2%（FY2018） ⇒ 13.2%（FY2019）※1

8
14.6
6

11.9

15.0

13.1

Effort for FY2020◆Aim to establish a first-line drug position in terms of asthma
treatments.
・Attract attention to the high clinical impact from a patient with symptoms
・The agent nicely penetrates and reaches the peripheral airways.
・Feature the advantages of aerosol-based treatment.
- People with a weak inspiratory capacity can inhale easily.

10.1
4◆Expansion of pediatric indications (KRP-108P)
・Number of target patients: Approximately 1 million patients(Step 3-4 treatment in Japanese pediatric guideline for the treatment andmanagement of asthma 2018)2

・In approximately 30% of children with asthma, the disorder persists
into adulthood.
※1 Copyright© 2020 IQVIA. calculated based on MIDAS Mar 2019 MAT-Mar 2020 MAT Reprinted with permission

0
17/3

18/3

19/3

20/3

21/3
(Forecast)

11

■Mainstay product
Desalex (Antiallergic Agent)(Units: ¥ billion)
200(Units: ¥ billion)

Antihistamine market

188.5
173.5

132.0

56.6

113.1

60.4

178.2
162.1

8
156.2

6

107.1
103.1

71.2

59.0

92.0

about
60％

64.3

0
17/3
18/3
19/3
20/3
long-listed drugs and generics Approx.

4.9

2
0

16/3
New drugs

8.8

4
3.7

1.0
17/3

18/3

19/3

¥162.1bln（FY2018） ⇒ ¥156.2（FY2019） ※1

Overview of Antihistamine market
Percentage of long-listed drugs and generics Approx. : ≈60%
Market of aged 12 or over : 125 billion yen

Share of Desalex sales
3.0%（FY2018) ⇒ 1.7%（FY2019） ※1
Dec 2018 : 6.3%※2 (before suspended supply)
Mar 2020 : 4.2%※2 (after resumed supply)※1 Copyright© 2020 IQVIA. calculated based on MIDAS Mar 2019 MAT-Mar 2020 MAT Reprinted with permission※2 Copyright© 2020 IQVIA. calculated based on MIDAS Dec 2018 Month, Mar 2020 Month Reprinted with permission

20/3

suspended supply:
about 10 month※Copyright© 2020 IQVIA. calculated based on MIDAS Mar 2016 MAT-Mar 2020 MAT Reprinted with permission

Antihistamine market：shrink 3.6%

2.6
21/3
(Forecast)Status of FY2019
Actual sales : 2.6billion yen
Start of voluntary recall
January 7, 2019

Resumption of supply
November 18, 2019

Effort for FY2020● non-drowsy and effects and usability● Realization of prescription acquisition rate No.1 inotolaryngology
 Focus on expanding the number of general internal medicine
clinics prescribe Desalex and acquiring prescriptions

12

■Mainstay product
Beova / Uritos (Therapeutic agent for overactive bladder)(Units: ¥ billion)
100
80(Units: ¥ billion)

OAB market

87.0

90.3

25.3

30.4

91.3

91.0

34.1

38.3

96.3

Uritos / Beova
10.1

10

48.6

60

β3
receptoragonistothers8

7.3

Imidafenacin
AG

4.3

0.7

7.0

6

40

61.7

59.9

56.9

20

53.0

anticholiner
gic agent

47.7

4

7.5

7.2

6.6

Beova

5.8

2

2.7
Uritos

0

0
16/3

17/3

18/3

19/3

20/3

17/3

18/3

OAB market： expand¥87.0bln（FY2015） ⇒ ¥96.3（FY2019） ※1•β3 receptor agonist market :expand

FY2019
share of Beova sales
0.6%（FY2018） ⇒ 5.0%（FY2019）※2

Share of Uritos sales
8.3%（FY2018） ⇒ 7.0%（FY2019）※2

19/3

20/3

21/3
(Forecast)※Copyright© 2020 IQVIA. calculated based on MIDAS Mar 2016 MAT-Mar 2020 MAT Reprinted with permission

Status of FY2019
Signed License Agreement for Vibegron in Korea with JEIL
Acquired of Market Share by Beova and Uritos

Effort of FY2020
Popularize the drug to make sure it is chosen as afirst-line medicine for OAB treatment.
The drug can be prescribed regardless of differences in OAB
symptoms, gender, age and patient background.
◆ Emphasize quick and superior effects as well as safety.
※After the lifting of limits on the prescription period, Beova is beingprescribed to many patients at a much faster pace than initiallyanticipated and the Company is adjusting shipments to distributors.

※1 Copyright© 2020 IQVIA. calculated based on MIDAS Mar 2016 MAT-Mar 2020 MAT Reprinted with permission※2 Copyright© 2020 IQVIA. calculated based on MIDAS Mar 2019 MAT-Mar 2020 MAT Reprinted with permission

Plan to launch Imidafenacin AG (June 2020)13

■Mainstay productLasvic (Oral new quinolone synthetic antibacterial agent)(Units: ¥ billion)(Units: ¥ billion)
5

Antibacterial agent (oral) Market

169.3
4

144.6

150

125.9
105.6

100

3

96.2

4.1

2
About
80％

50

1

1.1
0

0
16/3

New drugs

17/3

18/3

19/3

20/3

long-listed drugs and generics Approx.

20/3
Released Lasvic Tablets
January 2020

21/3
(Forecast)※Copyright© 2020 IQVIA. calculated based on MIDAS Mar 2016 MAT-Mar 2020 MAT Reprinted with permission■ Antibacterial agent (oral) Market¥105.6bln(FY2018)⇒¥96.2bln(FY2019)※1◆Overview of Market● Promotion of appropriate use of antimicrobials in light of AMR● Percentage of long-listed drugs and generics Approx. : ≈80%

※1 Copyright© 2020 IQVIA. calculated based on MIDAS Mar 2019 MAT-Mar 2020 MAT Reprinted with permission

Effort of FY2020◆Focus on promotion of appropriate use andmaximization of product diffusion●Development based on brand new concepts①Focus on strengthening antibacterial activity against target bacteria(especially gram-positive bacteria and anaerobic bacteria)②Increase transitivity to target tissues (lungs and ear, nose and throat)③Has sufficient antibacterial activity in treatment targets even at a low
dose (75 mg), making the emergence of resistant bacteria unlikely◆Aim for approval and launch of injection(KRP-AM1977Y) this fiscal year

14

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

34.9

35
31.0

MOMETASONE
AG

29.3

30

2.8

27.7
25.0

10.7 MONTELUKAST
AG

25
20

3.5

8.2

11.7

11.9

11.5

Status of FY2019
Released of Mometasone AG
Montelukast AG
・Maintain the market share of more than 50% in the GE
market.
・Released in FY2019
Silodosin Tablets/OD, MecobalaminEffort for FY2019
Actions for an authorized generic drug (AG)・Aim to achieve a large market share of more than 50% forMontelukast AG and Mometasone AG in the GE market
・New AGs : plan to launch Imidafenacin AG (June 2020)

15
10

20.7

16.8

16.0

17.4

16.7

17/3

18/3

19/3

20/3

Other GE

Expand sales of strategic products andSupplementary Items
・ Released in June 2020: 7 ingredients, 13 products
Levocetirizine HCL Tabets, DS
Memantine HCL OD , etc.

5
0
21/3
(Forecast)15

■ Diagnosis Business
Microfluidic Real -Time PCR System

Features:◆Compact PCR device which can identify genes rapidly, accurately and simply◆It performs quantitative detection of target genes (around 5~15 minutes) using the
microfluidic thermal cycling technology.
Nov. 11, 2019
Mar. 17, 2020
Mar. 18, 2020
Mar. 31, 2020
Apr. 24, 2020

Released GeneSoC® as laboratory equipment
Concluded a CRO agreement with AMED under the “Development of Medical Devices andSystems for Advanced Medical Services” program
COVID-19 coronavirus detection reagent “SARS-CoV-2 GeneSoC ER Kyorin” covered by
Japan's National Health Insurance
Provided GeneSoC® to 16 medical institutions throughout Japan for demonstration of operability
Released coronavirus detection reagent “SARS-CoV-2 GeneSoC ER Kyorin”[Initiatives in FY2020]●Release of laboratory equipment (respiratory infections and sexually transmitted infections）●Aim to release an automatic pre-treatment system exclusively for GeneSoC●Aim to launch POCT* model GeneSoc mini
[Initiatives in FY2021 onwards]●Commercialization as in-vitro diagnostic*POCT (Point of Care Testing): Testing carried out by healthcare professionals at the patient’s bedside16

Consolidated Financial Results and Forecast

17Consolidated Financial Results Forecast
for the Year Ending March 31, 2021
(Units: ¥ billion)

FY2020FY2019（forecast）

Y/Y
ChangeChange(%)

110.0

115.5

＋5.5

＋5.0

103.6

110.5

＋6.9

＋6.7

72.6

75.6

＋3.0

＋4.1

Japan

71.2

＋3.4

＋4.8

Overseas

1.5

－0.5

－32.9

31.0

74.6
1.0
34.9

＋3.9

＋12.7

6.4

5.0

－1.4

－21.7

Operating Income

7.5

9.7

+2.2

＋29.3

Ordinary Income

8.2

10.2

+2.0

＋24.8

Net Income

6.1

7.6

＋1.5

＋23.6

Net sales

Ethical drugs
business

Sales ofnew
ethicaldrugs

Generic drugs
Healthcare Business

Regarding the impact of the spread of the novel coronavirus disease (COVID-19) on the FY2020 forecasts, we will pay attention to future trends.
If any revisions to the financial forecasts are necessary, we will promptly announce them.
Net Sales: A significant increase in sales of new drugs group (Flutiform, Beova, Desalex, Lasvic) is expected, despite NHI
drug price revision (Kyorin Pharmaceutical 2% range) was implemented.
SG&A(decrease): R&D expenses are expected to decrease 1.4bln yen from the previous year (11,000 million yen→ 9,600 million yen).
(Reference) It is expected cost of sales ratio will up about 1% point, SG&A (excluding R&D) ratio will down about 1% point year on year.

18Forecast of Mainstay Product Sales(Units: ¥ billion)

FY2019Flutiform(Combination drug for asthma treatment)

Desalex(Antiallergic Agent)

Beova（Kyorin）(β3 adrenergic receptor agonist overactive bladder therapeutics)

Lasvic tablets(Oral new quinolone synthetic antibacterial agent)

Uritos（Kyorin）(Therapeutic agent for overactive bladder)

Pentasa(Ulcerative colitis and Crohn’s disease treatment)

Nasonex(Spray type allergic rhinitis remedy)

Kipres for adult(Leukotriene Receptor Antagonist)

Kipres for children(Leukotriene Receptor Antagonist)

Mycodyne(Mucoregulant)

Montelukast tablets “KM”
(Leukotriene Receptor Antagonist)

Mometasone Nasal 50mg “KYORIN”(Spray type allergic rhinitis remedy)

FY2020(Forecast)

Y/Y
ChangeChange(％)

14.6

15.0

＋0.4

＋2.4

2.6

8.8

＋6.2

＋240.2

4.3

7.0

＋2.7

＋62.9

1.1

4.1

＋3.0

＋279.7

5.8

2.7

－3.1

－52.2

13.3

11.7

－1.6

－12.3

6.0

2.6

－3.4

－56.5

5.3

4.2

－1.1

－19.1

6.5

5.3

－1.2

－17.3

5.8

4.9

－0.9

－14.5

11.5

10.7

－0.8

－6.1

2.8

3.5

＋0.7

＋28.1

19

Shareholder Returns
Basic Policy
・While maintaining the sound financial base, we aim to improve the capitalefficiency through growth investment and returns to shareholders.
・We will maintain stable dividends taking DOE (Dividend on Equity ratio) into
account.
Dividend per share for fiscal 2019 (estimate): ¥75 (including interim dividend of ¥30)

Dividends

Dividend pershare (Yen)Consolidated
payoutratio(%)

FY2017FY2018FY2019※FY2020（forecast）

¥58

¥75

¥75

¥75

（Year-end ¥38） （Year-end ¥45） (Year-end ¥45)

65.9%

72.6%

70.9%

(Year-end ¥45)

57.4%

※The year-end dividend of 45 yen in the fiscal year ending March 2020 will be decided at in the Board Meeting Scheduled
for May 21.

20

Status of R&D pipeline21Drug R&D Pipeline:
Progress in FY2019
progress in FY19
development code

PhⅠ

Ad-SGE-REIC

PhⅡ

PhⅢ

application

2017/6

2019/7

Approval/

Launch2019/9January
8, 2020

End of the PhⅠ／PhⅡPhⅡStart 2018/6

Respiratory

KRP-108P
KRP-AM1977X
Infections

KRP-AM1977Y
Urological2019/10

KRP-116D【 Introduced Program 】
Compound/CodeKRP-R120(ATYR1923)

202/3
・MK-7264, a drug for chronic coughing: Merck Phase III (Oversea). Concluded a memorandum of understanding for sales collaboration (5 / 2019).
・ It was decided to discontinue development of "KRP-N118", for it was estimated difficult for realization of pre-configured product profiles (2 / 2020).

LicenseraTyr Pharma, IncStage

PhⅠa / Ⅱb

Features
It is a fusion protein drug having the action to suppress, by binding toneuropilin-2 (NRP2) receptor, the excessive activation of immune cells,
and is a potential first-in-class therapy to treat inflammatory diseases
such as pulmonary sarcoidosis.

【 Licensed Compound / Program 】
Compound/CodeLicenseeStage

Features

FPR2 agonist
programBMS

PhⅠ

FPR-2 agonists that mainly inhibit the
migration of neutrophils and exhibit anti-inflammatory action.
Therapy area：Non-disclosure

KRP-203

Implementing
licensing activities

PhⅠ

Sphingosine-1-Phosphate Receptor Agonist
Therapy area ： GvHD

22

Drug R&D Pipeline:
Progress in FY2020
progress in FY20

PhⅠ

development code

Ad-SGE-REIC

PhⅡ

PhⅢ

application

Approval / Launch

2019/7

Expecting toacquire approval
and release
in FY20

End of the PhⅠ／PhⅡPhⅡStart 2018/6

Respiratory

KRP-108P
KRP-R120Interstitial lung disease(ILD) treatment

Infections

Urological

Expecting toStart clinical
trial in FY20KRPAM1977Y

KRP-116D

2019/10

Expecting toacquire approval
and release
in FY20

2020/3

Expecting toacquire approval
and release
in FY20

・MK-7264, a drug for chronic coughing: Merck Phase III (Oversea). Concluded a memorandum of understanding for sales collaboration (5 / 2019).

【 Licensed Compound / Program 】
Compound/CodeLicenseeStage

Features

FPR2 agonist
programBMS

PhⅠ

FPR-2 agonists that mainly inhibit the
migration of neutrophils and exhibit anti-inflammatory action.
Therapy area：Non-disclosure

KRP-203

Implementing
licensing activities

PhⅠ

Sphingosine-1-Phosphate Receptor Agonist
Therapy area ： GvHD

23

Progress of Medium-Term Business Plan
“HOPE 100-Stage 2-” (Fiscal 2016～2019)24

Structure of Management Planning１）Corporate Philosophy
Kyorin continues to fulfill its mission of cherishing life, and benefiting
society by contributing to better health.
２）Corporate Message
Your Health is Kyorin‘s Mission.

Corporate
Philosophy
Corporate
Message
Long-Term Vision－HOPE 100－

Long-Term Vision－HOPE１００－
Aim for Health Of People and our Enterprises

The future of the Group looking forward to 2023, the 100th
anniversary of the founding of Kyorin＜statement＞
The Kyorin Group will promote diversified business expansion and thedevelopment of the consumer healthcare business, and by 2023, will berecognized within and outside the Group as a company that supports
sound and healthy lifestyles.

Medium-Term Business Plan

-Stage1-Stage2-Stage32010～2015 2016～2019 2020～2023

Medium-Term Business Plan
A comprehensive plan of basic management policies andachievement targets for the medium-term period

25

Overall of Long-Term Vision－HOPE１００－
Long-Term Vision「HOPE100」【Statement】
The Kyorin Group will promote diversified business expansion
and the development of the consumer healthcare business, andby 2023, will be recognized within and outside the Group as acompany that supports sound and healthy lifestyles.

Stage２

Stage１
2010

2015【Statement】

2016

Stage３
2019

2020

2023

【Statement】

Improvement of the ability to realize
reorganization and establish thesystem for promotion of individual
businesses toward achievement of
the long-term vision

Commit to change (reform andrenovation) toward realization of thelong-term vision and maintainsustainable growth

Focus on enhancement of development
pipeline and maximization of diffusion ofcore products.

Focus on four priority strategies in orderto overcome decline in sales associatedwith expiry of patent for Kipres.

The final Stage of
HOPE10026

Review of the Medium-Term Business Plan
“HOPE100 Stage 2”
Strategy【Four Priority
Strategy】

1.Enhancing drug discovery capabilities◆selecting drug discovery programs andfocusing on
・Kinase / Fibrosis◆Open Innovation

・Established the Department of Drug Discovery
Medicine with the Kyoto University
・Started of joint research with Institute of Microbial Chemistry・Started of Collaborate with Hebrew University to Strategic
partnership

3. Promotion of Generic Drugs Business by
Making the Most of Its Characteristics◆ Completed the Takaoka Pharmaceutical
Technology Innovation Center (2017 / 7)

◆Proactively address authorized generics (AG)

2. Increase ratio of new drugs group(new drug group ratio : more than 50%)◆Growth of Flutiform◆Launch four new drugs

・Desalex (2016 / 11)
・Beova (2018 / 11)・Lasvic Tablets (2020 / 1）
Application of KRP-AM1977Y (2019 / 10)

4. Strengthening of Low Cost

◆Consolidation of the Group’s production functions
・Established KYORIN Pharmaceutical Group Facilities Co., Ltd.
（Commences full-scale operation on April 1, 2018）
・ Leveling of the rate of plant operation and efficient use of assets

・Released Montelukast AG (2016 / 9)・Released Mometasone AG (2019 / 8)
・Obtained manufacturing and marketing approval of
Imidafenacin AG (2019 / 8)

【Development
Strategy】◆Strengthening of the environmental hygiene business◆Entry to diagnosis business： Released of Microchannel-based Genetic Measurement Device GeneSoC® (2019 / 11)

Organization

Establishment and operation of the system for management of human resources
for Aim for a cooperation where the employees can feel the best worthwhileness of work27

Performance

Target Value■ the average annual growthrate ：3% or more
⇒ －2.0％■ the consolidated
operating income margin :15% or more⇒

6.8％

● Increase ratio of new drugs
group(More than 50%)
⇒ 34.9％【 Factor】■ Dramatic reform of the NHI drug price scheme
・ Review of the Price Maintenance Premium, etc.

■ New drug business (in Japan)

・Temporary suspension of the supply of Desalex
・Delay in the launch of Lasvic Tablets / AM-1977Y■Business of drug discovery (overseas)・Lower-than-expected income from royalties.

(Discontinuation of the development of KRP-203 on the partof the licensee.)● Launch new drugs⇒Desalex, Beova, Lasvic Tablets

In Stage3, Aim to realization of growth trend by the growth of new drugs
28New Medium-Term Business Plan
“HOPE 100-Stage 3-” (Fiscal 2020～2023)

29

Basic Concept of New Medium-Term Business Plan
“Hope 100-Stage 3”
External Environment
・Further strengthening of health care cost
containment measures
・Increased difficulty of new drug creation
・Application of Drug Sales Promotion Guideline

Internal Environment
・Appearance of new drugs as growth drivers
・Expectation for new business (diagnosis business)

Realize growth trend by pursuing Kyorin’s originality.
Use sustainable revenue growth as basis for accomplishing our goal of creating innovative new drugs【Statement】 “Realization of growth trend through pursuit of originality”（Image）

Realization of growth trend

Diagnosis businessbusiness
Diagnosis

New drugs group
Original drugs group

Stage1

Stage2

Stage330

New Medium-Term Business Plan
“Hope 100-Stage 3”「HOPE100」 Statement
The Kyorin Group will promote diversified business expansion and the developmentof the consumer healthcare business, and by 2023, will be recognized within andoutside the Group as a company that supports sound and healthy lifestyles.
Vision in Stage 3
Aim to become a globally recognized company through the creation of innovative new drugs.
To this end, expand the new drugs business、GE business、infection-related business(prevention, diagnosis and treatment of infections) in an integrated manner to widely support
people’s health.

Become a globally recognizedcompany through the creationof innovative new drugs

GEbusinessNew
drugs
business

Infectionrelated
business

Subcontracted drug manufacturingbusiness

31

Overview of New Medium-Term Business Plan
“HOPE 100-Stage 3-”
・Shift to business based on the proposal of solutions andaccelerate the growth of new drug groups.
・ Enhance pipeline to support medium-term growthBusiness Strategy（S）
Strategy・ Strengthen drug discovery capability to realize the creation of
innovative new drugs.
・ Improve cost competitiveness・ Expand overseas revenue

Organization Strategy (O)Organization

Performance Targets （P）
Performance

・ Aim to be the No. 1 company as Best worthwhilenessplace of work

・Growth potential and profitability
・Capital policy and shareholder returns

32Overview of New Medium-Term Business Plan
“HOPE 100-Stage 3-”Strategy

Shift to business based on the proposal of solutions andaccelerate the growth of new drug groups.
●Shift to business based on the proposal of solutions to problems bycombining ethical drugs business and infection-related business andmake Kyorin’s unique contribution to health care workers.
●Accelerate the growth of new drug groups as much as possible(Flutiform, Desalex, Beova, Lasvic, etc.).

●Streamline the healthcare business into business focused on
infection-related fields.

33

Solution Provision Activities in Infection Domain
Response to changing environment（MR activities/Medical care provision system）
Rebuild sales structure and enhance details

Shift to business based on
proposal of solutions

Treatment

治療

Lasvic Tablets
KRP-AM1977Y

ソリューション

Doctors/Pharmacists/NursesPrevention

ICT/AST*

MiltonRubystaDiagnosis
GeneSoC・GeneSoC

Total Information Provision* ICT: Infection Control Team
AST: Antimicrobial Stewardship Team

Establish a group-wide sales structure to make
Kyorin’s unique contribution to health care workers.

34

Overview of New Medium-Term Business Plan
“HOPE 100-Stage 3-”Strategy

Enhance pipeline to support medium-term growth●Actively invest in enhancements to the pipeline that will contribute to businessperformance in the medium term, with diseases surrounding the three
specialities* of franchise customers, infections, and rare and intractable*Respiratory Medicine, Otolaryngology, Urology
disease as the domains for in-licenshing.

Strengthen drug discovery capability to realize thecreation of innovative new drugs.
●Continue adding new layers to existing priority research domains andtechnologies and taking on new research domains and technologies.
●Pursue R&D based on clarification of healthcare value of new drugcandidates.
●Achieve proof of concept ourselves, as a general rule, and aim forearly global out-licensing.
●Increase diversity by actively acquiring drug discovery seeds.

35Efforts on innovative drug discovery
Cooperation

Watarase Resarch Center

ActivX(USA)Open innovation

Open innovation

Academia, Venture

Pharmaceutical companies inJapan and overseas

Selection and Concentration

Priority study area
Kinase / Fibrogenesis study

Drug discovery
Outside thecompany
Theme(Diversity)

Multi-tiered efforts

Novel drug discovery target

Worldwide (world-class drug discovery)36

Overview of New Medium-Term Business Plan
“HOPE 100-Stage 3-”Strategy

Improve cost competitiveness・Increase cost competitiveness of the GE business by improving theefficiency of the GE sales structure.
・Strengthen the ability to create new generics for listing in JP.
・Establish a manufacturing structure to achieve stable supply and low
cost while also enabling expansion of subcontracted manufacturing.
Improve cost competitiveness at KYORIN Pharmaceutical Group Facilities Co., Ltd
Control outsourcing expenses by equalizing the manufacturing capabilities of each factory.
Facilitate efficient operation through the flexible transfer of employees among factories.
Use existing facilities more effectively.
Examine new production base to expand production capacity (Takaoka, Toyama Prefecture).
Noshiro plant (Akita)

Inami plant (Toyama）

Shiga plant （Shiga）

Expected effects of reorganization: total cost reduction of approximately 1,000 million yen by 2023.

37

Overview of New Medium-Term Business Plan
“HOPE 100-Stage 3-”Strategy

Expand overseas revenue●Expand overseas revenue through the promotion of global
out-licensing.
●Steadily take steps towards direct entry to the Asia market.

38

Overview of New Medium-Term Business Plan
“HOPE 100-Stage 3-”
Organization

Aim to be the No. 1 company as Best worthwhilenessplace of work
・Train and attract human resources to support our development as anext-generation company, aiming to be the No. 1 place to work
Performance

・Numerical targets
Consolidated net sales: CAGR of at least 5%
Consolidated operating income before deduction of R&D expenses:
At least 20% of net sales（Operating income + R&D expenses）

・Capital policy and shareholder returns
While maintaining the sound financial base, we aim to improve the capitalefficiency through growth investment and returns to shareholders.
We will maintain stable dividends taking DOE (Dividend on Equity ratio)
into account.

39