Shareholders’Newsletter
Shin Nippon Biomedical Laboratories (Securities code: 2395)
2022.4.1 — 2022.9.30

The positive eﬀects of the facility expansion
implemented from the previous ﬁscal year tothe ﬁrst half of the current ﬁscal year are
expected to gradually emerge beginning inthe second half of the current ﬁscal year
and into the next ﬁscal year.
Ryoichi Nagata

Representative Chairman, President & CEO

��. Could you explain the ﬁnancial results forthe ﬁrst half of the ﬁscal Year ending
March ��, ����?

In the first half of the fiscal year ending March 31, 2023, ourmainstay CRO business was the driving force behind the achievement of record high revenue for the first half, which increased¥2,380 million (30.0%) year on year to ¥10,340 million and therecord high operating profit, ordinary profit and net profit, as in
the same period of the previous fiscal year.
In the pharmaceutical industry, the trend toward outsourcing
operations to contract research organizations (CROs) continues
to gain momentum, with the expectation that this accelerates research and development and improves cost efficiency. In addition, research and development involving new drug modalities(therapeutic tools) in drug discovery such as nucleic acid medicine and next-generation therapeutic antibodies has been in fullswing. Shin Nippon Biomedical Laboratories, Ltd. ("SNBL" or "theCompany") is highly valued by customers for its establishment ofa stable breeding and supply system for laboratory NHPs, which
are becoming increasingly important in the evaluation of new drug
modalities in drug development, and its establishment of technologies and evaluation systems that are useful in evaluating theefficacy and safety of new modalities in drug development. As
a result, orders received in the nonclinical business increased¥2,160 million (19.3%) year on year, to ¥13,370 million, a record
high for the first half of a fiscal year. Above all, orders received
from overseas customers, where the development of new drug modalities in drug discovery is progressing, increased ¥2,970 million(107.6%) year on year, to ¥5,730 million, and the ratio of overseas
orders received out of total orders received grew significantly year
on year, from 24.6% to 42.9%. Beginning with this announcement,
overseas orders received are converted to yen using the averageexchange rate during the period, and overseas order backlogs areconverted to yen using the exchange rate at the end of the period.
In the first half, we paid dividends of ¥20 per share. Interim dividends were paid for the first time since our listing.

Nonclinical CRO business orders (in yen)��. Could you also explain the strong ﬁnancial
results of equity-method aﬃliate
PPD-SNBL K.K. (“PPD-SNBL”) which
operates a clinical business?

While our main business is nonclinical, which involves contracted nonclinical (or preclinical) studies to investigate theefficacy and safety of drug candidate compounds, we are also
engaged in the clinical business, which is contracted humanclinical studies (therapeutic trials), through PPD-SNBL, a joint
venture with PPD International Holdings, LLC (“PPD”), an international clinical CRO based in the United States. PPD-SNBL’s
mainstay business is the implementation of global studies(studies conducted simultaneously in multiple countries andregions) that are outsourced to PPD in Japan, which has bases
in approximately 50 countries around the world. Although it is a
global company, by incorporating Japanese-style management
elements under which a harmonious working environment that
we have cultivated is valued, PPD-SNBL has achieved a highemployee retention rate and is steadily increasing its businessperformance. As PPD-SNBL is an equity-method affiliate (currently SNBL owns 40% of its equity), it is included in our results of operations as “share of profit of entities accounted forusing equity method” under non-operating income.
Last year, PPD was acquired by Thermo Fisher Scientific, Inc.
in the United States, a leading global medical device company,
and the foundation of PPD’s business has been strengthened
by its becoming a member of the Thermo Fisher ScientificGroup. Backed by more and bigger orders, equity in earnings
from PPD-SNBL totaled ¥980 million for the first half of thecurrent fiscal year, a record high for the first half of a fiscal
year and a ¥580 million increase over the same period lastyear. This is well above our initial forecast and it is one of thedriving forces behind our performance.

Nonclinical CRO business international orders (in US$)

(Unit: 100 million yen)

(Unit: Million dollars)

150

50

Orders received in the first half
Orders received in the second half

Europe and North America

133.7
112.0

116.3

Asia

40

17.8

100

74.7
57.8
50

62.2

71.8

30

75.7 77.9

10.5
5.6

60.0

20

44.9
10

0

Full year(FY2017)

Full year(FY2018)

Full year(FY2019)

Full year(FY2020)

Full year(FY2021)

10,27013,69013,18015,36022, 8300First half of
FY2022

Orderbacklog

7,490

10,82011,47013,66020,970

10.6
19.4

3.2

22.1

24.5

2.7

2.6
3.2

First Second
half
half

First Second
half
half

First Second
half
half

First Second
half
half

First Second
half
half
Full year(FY2021)First half of
FY2022

1.2

3.2

3.4

Full year(FY2017)(million yen)Ordersreceived

3.5

2.0
2.0

2.2

8.3

Full year(FY2018)

6.5

Full year(FY2019)

8.6

7.2

Full year(FY2020)

First
half

13,370Percentage of orders
received fromoverseas customers

10.5%

12.3%

12.9%

20.6%

28.6%

42.9%

33, 670

Orderbacklog$10.0M$19.9M$18.9M$36.0M$65.6M$117.9M

Including Ina Research Inc. from the ﬁrst half of FY����
Overseas orders received are converted to yen using the average exchange rate for the period, and overseas order backlogs
are converted to yen using the year-end exchange rate for the period.

��.

Could you explain the construction of the
new building and research building
announced in March ����?

As we have continued to enjoy high utilization rates of ourfacilities due to strong orders received in recent years, there
have been instances where we have been unable to respondto orders received from our clients. For this reason, we havebeen renovating existing facilities and increasing our businessprocessing capacity by introducing robots and IT-based process
management. However, it became difficult to address thissituation, so we decided to build a new building and a newresearch building on the premises of the Kagoshima Main Branch.
The new buildings are two eight-story reinforced concrete (RC)buildings with a total floor area of 13,022 m². They will housethe bioanalysis research department, the analytical research
department, the IT department, staff office area, conference
rooms, and executive offices. The total construction cost is
expected to be approximately ¥5,400 million, and completion istargeted for June 2024.
Once the series of renovations and new construction projects
is completed, our contract capacity will increase by around 50%
compared to the end of the fiscal year ended March 31, 2022,
and we will be able to handle larger orders. We will hire about 150
new employees next spring and focus on strengthening their coreskills. The construction costs are expected to be funded by cashon hand and borrowings from financial institutions.

��.

Could you explain the forecasts for thesecond half of the ﬁscal year ending
March ��, ���� and future direction of
the Company?

We expect that the environment surrounding our mainstay
nonclinical CRO business will continue to be favorable, withorders received from international markets recognized as a
growth driver. In the first half of the fiscal year ending March 31,
2023, the expansion of the European standard test facility
requested by some of our customers in Europe and the UnitedStates was completed in the second quarter and is alreadyavailable for testing. In addition, new employees hired this spring
will join our team in the second half. Therefore, we believe that
our ability to handle business will steadily improve in the future.
We will continue to expand our facilities and increase the numberof research staff, as well as focus on robotization and DX tomaximize customer profit and provide “time value” to customers
by shortening the lead time from order receipt to the submissionof the final report. In this way, we will work from a global
perspective to become the first choice of our clients as a CRO
second to none.

��.

Is there any progress in the Translational
Research (TR) business?

We think that the second half will be the touchstone for the
future commercialization of the TR business. We are promoting
formulation technology, which we have been working on since1997, by making excellent use of the intranasal drug delivery
technology that we have developed on our own. In the UnitedStates, we plan to announce the top-line results of a large-scale
Phase III clinical efficacy trial of an intranasal migraine drug
(STS101) conducted by Satsuma Pharmaceuticals, a NASDAQlisted drug discovery venture that has been licensed with the underlying technology, by the end of the year. In addition, the Company’s consolidated subsidiary SNLD, Ltd. also plans to announce, by the end of the year, the results of the Phase I clinical
trial of an intranasal drug (TR-012001) for the treatment ofoff-symptoms of Parkinson’s disease in Japan. If SNBL was an
airplane, currently, its profit engine would mainly consist of asingle engine, our CRO business, but I expect the TR business to
become the second engine in the future.

��.

Could you explain your initiatives for the
SDGs/ESG toward the enhancement ofcorporate value?

In October 2022, we published our first integrated report. In
the integrated report, we laid out our 2028 Vision, “Be close to
our stakeholders and promote people’s happiness.” By promoting
sustainability initiatives and creating economic and social value in
an integrated manner through our business activities, we will
promote people’s happiness with our stakeholders around theworld. We are also focused on the happiness of our employees
and have provided all employees with special bonuses to coverrising prices.
During the first half under review, our ongoing initiatives for
the SDGs/ESG have been highly evaluated by various evaluation
agencies, and we were selected to be a constituent of the FTSE
Blossom Japan Sector Relative Index created by global index
provider FTSE Russell in June. In August we were also selected to
be a constituent of the JPX Nikkei Small- and Mid-cap Index,
which is jointly calculated by JPX Research Institute, Inc. and
Nikkei Inc. We will continue to enhance our information disclosure
going forward.

��.

Could you share a message for theshareholders?

In September 2022, SNBL celebrated the 65th anniversary of
its founding. For the past 30 years since I became the President
in 1991, I have been independently developing and implementing
horizontal and vertical business expansion as a growth strategy,
and I am confident that each of the various tactics I have implemented during this period is bearing fruit. I would like to continue
to promote people’s happiness with all of you. We would like toask our shareholders to watch over our sustainable growth andcontinue to support us.

Results for the first half of FY2022
Results forthe first
half ofFY2021(100 million yen)

FY2022
Results
for thefirst half

YoY

Revenue

79.6

103.4

＋23.8

30.0%

Operating profit

19.6

23.1

＋3.5

17.5%

Ordinary profit

25.2

59.2

＋34.0

134.4%

Ordinary profit(Excluding theimpact of foreignexchange losses[gains])

23.7

33.4

＋9.7

40.6%

Profit attributable toowners of the parent

35.0

44.1

＋9.1

26.1%

Full-year earnings forecasts for FY2022(100 million yen)
Full-year
results for
FY2021

FY2022
Revisedforecasts

YoY

Revenue

177.4

240.0

＋62.6

35.2%

Operating profit

41.9

52.6

＋10.7

25.4%

Ordinary profit

70.7

98.0

＋27.3

38.5%

Ordinary profit(Excluding theimpact of foreignexchange losses[gains)])

57.0

72.1

＋15.1

26.4%

Profit attributable toowners of the parent

71.2

70.0

-1.2

-1.8%

Ina Research, a Company in the Same
Industry, Became a Wholly Owned
Subsidiary Through a TOB
On July 20, 2022, we conducted a tender offer ("takeover bid" or "TOB")
for shares of Ina Research Inc. (“Ina Research”), the core business of whichis the CRO business (nonclinical business), which conducts nonclinical studies commissioned by pharmaceutical companies and others.
Ina Research became a wholly owned subsidiary of
the Company, and its financial results were consolidated
into the SNBL Group in July 2022. Ina Research is headquartered in Ina City, Nagano, rich in nature surroundedby the Japanese Chuo and Minami Alps. Since its establishment in July 1974, Ina Research has been refining its
technology and expertise with a commitment to quality
and reliability. It provides full services in the nonclinicalstage of drug development suppor t, and is known
worldwide as a CRO capable of conducting special studies, such as dependency studies for psychotropic drugs,
which require advanced knowledge and technology andcan only be conducted in a few places in the world. In
recent years, the company has acquired customers
globally, with overseas sales expanding at a rate approaching 50% of total sales, and has demonstrated its
strength in East Asia, particularly in the South Korean market.
In terms of contributions to the community and society, it provides part of its headquarters and researchfacilities to the Center for Advanced Research of Gene and Cell Therapy in Shinshu University (CARS) to support the development of gene therapy methods, in which Japan is lagging behind.
The company also has a strong track record in animal welfare initiatives, and in February 2005 became thefirst company in Japan to receive “full accreditation” from the Association for Assessment and Accreditationof Laboratory Animal Care International (AAALAC International), an international animal welfare certification
organization. AAALAC International, headquartered in the United States, is the only international independent
research organization that evaluates laboratory animal facilities from the perspective of promoting thehumane management of animals in science. Facilities
accredited by AAALAC International are re-evaluatedever y three years through facility visits, and Ina
Research has continuously received full accreditation.
As a pioneering effort, the company is working onconversion services for the Standard for Exchange
of Nonclinical Data (SEND), a standard format for
nonclinical trial data for new drug applications,which was introduced by the Food and Drug Administration (FDA) in the United States ahead of other
CROs in the world, and it has one of the best trackrecords among CROs in Japan. The number of domestic and international customers requesting SEND
conversions is steadily increasing, because pharmaceutical companies filing new drug applications with
the FDA will suffer losses of both time and money
due to the sending back (refusal to accept) by FDA
if there is an error in their data submissions based on SEND.
By integrating Ina Research into our business operations, we aim for the following. First, we will diversify
our customer base. Our customers have traditionally been major Japanese pharmaceutical companies as wellas companies mainly in Europe and the United States. Ina Research’s strength lies in its East Asian clientele,
which we expect to be geographically complementary to ours. The effect of scaling up will also allow us torespond flexibly to our customers’ wishes regarding the timing of the start of testing. Furthermore, by
sharing the strengths and know-how of each other’s facilities, we can offer a wider range of test types andprovide higher quality services. In addition, Ina Research is an owner-operated company established in arural area with a corporate culture similar to our own, which has valued people and refined its technology,
and we expect synergistic effects to enhance our corporate value at an early stage.

News from IR & Corporate
Communication Department

IR public relations

Hello, everyone. I am Senior Director Iwata of the IR & Corporate
Communication Department.
One year has passed since the establishment of our Department inJune 2021.
Always keeping in mind our KGI, “Enhance corporate value,” andunder the slogan “Act immediately,” as stated in Article 1 of our Job
Basics, the four members of the department work cheerfully, happily,
with a smile, and with a sense of speed and vigor every day.
Here, we will report our activities to date in the fiscal year ending
March 31, 2023.

1. Publication of the integrated report
On October 6, SNBL prepared and published the 2022
Integr ate Rep or t . T he Integr ated Rep or t integr ates
non-financial information such as SDGs/ESG initiatives with
Integrated reports
financial information such as corporate performance, which
has traditionally been reported in securities reports, to report
the “value creation story” of how corporate strategy, business
Securities reports
Sustainability
and others
Reportsmodel, governance structure, etc. lead to the creation of
Details(Comprehensive coverage) corporate value.
The future that we would like tocreate this tim e ar o un d is s et up in o ur 2028 V isio n “ Be close to o ur
stakeholders and promote people’s happiness.” Overall, the Integrated Reportconsists of three sections: “Value Creation Story,” “Management Strategy,” and“Management Infrastructure Suppor ting Value Creation,” and here are thehighlights of each section.
In the “Value Creation Story,” what SNBL aims for in the medium- to long-term
is described in the CEO’s message. The “Management Strategy” section
includes financial targets for F Y2028, seven years from now, as well as
monitoring indicators we emphasize in non-financial targets. In “Management
Foundations Supporting Value Creation,” we introduce five initiatives in ourhuman resources strategy.
The 40-page report is compact for an integrated report, but we believe it will
help you understand the Company. As it is disclosed in our website, we invite
you to take a look.
Financialinformation

Non-financial
information

Concise(Integration)

https://ssl4.eir-parts.net/doc/2395/ir_material_for_fiscal_ym3/127683/00.pdf

2. Winning of the IR Award
In November, SNBL won the Best IR Award for Encouragement in the 2022 IR Award
sponsored by the Japan Investor Relations Association (JIRA). This award is presented
once a year to companies that have developed outstanding IR activities, and the BestIR Award for Encouragement is the highest award for small and medium-sized companies that are applying for the first time.
Since the establishment of the IR & Corporate Communication Department in June
2021, SNBL has been pursuing a range of initiatives to enhance its corporate value atthe same time with a sense of speed. We are very pleased that these initiatives wererecognized this time. We will continue to provide detailed and meticulous information
about our activities in a detailed and easy-to-understand manner, even in specialized
areas, in an effort to deliver a variety of exciting experiences to our investors.
Number of meetings withinstitutional investors
157

Number of participants infinancial results briefings
93

Briefings for individual
investors
4 times/503 people

IR Blog

Results for 1H, FY2022(Annually 121 in FY2021)

Results for November 2022
(45 people in November 2021)

Results for FY2021 and thereafter

Results for FY2021*We plan to hold company information sessions forindividual investors in all 47 prefectures of Japan.

*Once every three days

121 posts

Corporate Data (As of September 30, 2022)

Shares Status (As of September 30, 2022)

Capital

9,679,070,000 yen

Total Number of Shares Issued

41,632,400 sharesYear ofFoundation

September 1957
(Established: May 1973)

Number of Shareholders

9,641

Number of
Employees

1,219

Headquarters

St. Luke’s Tower 28th floor,
8-1 Akashicho, Chuo-ku, Tokyo,
104-0044(Location of main branch: 2438
Miyanouracho, Kagoshima-shi,
Kagoshima)

Business

CRO business to support thedevelopment of pharmaceuticalproducts

Kagoshima HQ/
Drug Safety ResearchLaboratories

Board of Directors (As of September 30, 2022)
President and Chairman
Executive Vice President

CEO and CHO
Group Corporate
Management and Global
Business

Major Shareholders (Top 10)
Total Number of
Shares Held
Shareholding(thousand shares)
Ratio (%)

Name

Nagata and Company Co., Ltd.

14,69035.28

The Master Trust Bank of Japan, Ltd. (Trust account)

4,426

10.63

Takahisa Nagata

2,080

4.99

Custody Bank of Japan, Ltd. (Trust Account）

1,889

4.53

Medipolis Medical Research Institute

1,474

3.54

Ikue Nagata

1,024

2.45

Ichiro Nagata

1,024

2.45

Rie Umehara

1,024

2.45

The KAGOSHIMA BANK, LTD.

1,000

2.40

ML PRO SEGREGATION ACCOUNT

491

1.17

Distribution of Sharesby Shareholder (as of September 30, 2022)

Ryoichi Nagata
Ken Takanashi

Foreigninvestors

Securities
companies

0.90％
Individuals
and others

14.05％

Managing Director

Corporate Development
and Corporate FinanceShinji Nitanda

Managing Director

Preclinical Company
President and Global
Business Development

Hideshi Tsusaki

Executive Director

Preclinical Company Vice
President, CEO Office Senior
Ichiro Nagata
Director, and Hospitality
Division Senior Director

27.05％

41,632,400
SharesIndependent External Director

Shinichi Fukumoto

Other
Japanesecompanies

Independent External Director

Takashi Yamashita

39.50％

Independent External Director

Tsuyoshi Hanada

Independent External Director

Keiko Toya

Commemoration of the 65th anniversaryof the Company’s founding
SNBL was founded in September 1957 when
its founder Tsugio Nagata established theSouthern Japan Dog Center (including animal
hospital) attached to a livestock hospital.
2022 marked the 65th anniversar y of the
Co m p any ’s fo un ding , an d finan cier s an dmadeleines made with Kagoshima’s Chiran tea
and other ingredients were distributed to all
executives and employees on the anniversaryof the Company ’s founding in September.
These were created by Executive Pastry Chef
Yoichi Kurosa (winner of the 2016 National
S w e e t s C o n t e s t R O L L-1 G r a n d P r i x ) a t
AMAFURU & Co., a healing resort hotel run byo u r G r o u p c o m p a ny i n I b u s u k i C i t y,
Kagoshima, and were also distributed at ourgeneral shareholders meeting held in June
2022. They are original baked goods, which
we very much hope our stakeholders to enjoy.

Financial
institutions

18.50％

Our website

https://www.snbl.co.jp
Shin Nippon Biomedical Laboratories

SearchShin Nippon Biomedical Laboratories, Ltd.
St. Luke’s Tower 28th floor, 8-1 Akashicho, Chuo-ku, Tokyo, 104-0044
Tel (IR/PR): 03-5565-6216
https://www.snbl.co.jp

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