EPS Holdings, Inc.

Financial Results Overviewfor Second Quarter En
ded March 31, 2019

May 20, 2019

EPS Holdings, Inc.
Representative
Director and President
Hisashi Tanaka

Contents

1

FY2019/2Q Financial Results Overview

2

FY2019 Full-Year Targets

3

Initiatives in the Second Half

４

Progress on the Mid-Term Business Plan

５

Stock Information

Copyright © 2019 EPS All rights reserved.

2

1

FY2019/2Q Financial Results Overview

Copyright © 2019 EPS All rights reserved.

3

FY2019/2Q ︓ EPS Group Business Areas*as of May 2019

Domestic Business
Overseas BusinessCRO

EPS, EPS Associate, AC MEDICAL

SMO

EP-SOGOCSO

EP-PharmaLine、ES-Link, AC MEDICALCPOEPI Yamanashi
EP-CRSU 、EP-Techno
3 Chinese data service companies

GlobalResearchEPS International Holdings etc.

China

EPS EKISHIN, EPS (China) etc.

Other oversea operating companies

Chinese CRO

Other Chinese operating companies (excluding Chinese CRO)

OthersEPBiz (Shared Services)

Copyright © 2019 EPS All rights reserved.

Notes:
1. From March 2019, AC MEDICAL has been included in the CRO and CSO segments due to an M&A deal.
2. From FY2019, e-Trial has been reclassified from the CRO to the NRO segment, and was renamed as EP-Techno upon absorbing All Right Technology in April 2019.

4

FY2019/2Q Consolidated Financial Results（￥million）

FY2018/2Q
Results

FY2019/2Q
Percent Percent
FY2019/2Q Change
Change Change
Initialvs PlanResultsvs PlanYoY
Forecast

Net Sales

32,666 33,996 33,501 -495

Operating
Income

3,828

3,069

3,179

（Ratio）(11.7%)(9.0%)(9.5%)

Recurring
Profit

3,891

3,145

3,275

（Ratio）(11.9%)(9.3%)(9.8%)

ProfitAttributabletoOwners of
Parent

2,495

2,265

2,065

（Ratio）(7.6%)(6.7%)(6.2%)

Copyright © 2019 EPS All rights reserved.

-1.5％

2.6%

110

3.6％

-17.0%

1304.1％-15.8%-200-8.8％ -17.2%

・ Profit attributable to non-controlling interests

FY2018¥4 million
FY2019 ¥211 million 5

FY2019/2Q Financial Results by Business Segment（￥million）

201９/9Forecast

CRO
Domestic

SMO
CSO
NRO

Overseas

GR

China

14,76914,043Operating
Income(%)

2,726 (18.5%)

Net Sales

6,850

Operating
Income(%)

670

Net Sales

3,715

Operating
Income(%)

118

Net Sales

2,936Operating
Income(%)

203

Net Sales

2,335Operating
Income(%)

96

Net Sales

5,330

Operating
Income(%)- 35

Net Sales

Copyright © 2019 EPS All rights reserved.

Change Percent Percent
vs Initial Change Change
Forecast vs Plan
YoY

2019/９Results(9.8%)

-726

-4.9％

-2.2%

2,595 (18.5%)

-131

-4.8％

-23.5%

7,123

273

4.0％

1.3%

145

21.6％

62.0%

355

9.6％

4.3%

50

42.4％

-5.1%

93

3.2％

96.1%

152

74.9％

16.4%

-333

-14.3％-24.7%

-192

－

－

455

8.5％

11.6%

175

－

－

815 (11.4%)
4,070(3.2%)

168(4.1%)

3,029(6.9%)

355 (11.7%)
2,002(4.1%)

- 96

(－)

5,785
-

140

(2.4%)* 1. The CRO segment in the earnings report (kessan tanshin) includes the NRO segment.
2. The calculation of segment operating income:(1)Does not include management advisory fees for the holding company(2) Includes amortization of goodwill and outsourcing expenses for shared services

6

FY2019/2Q Financial Results Overview

Overview of Financial Results
Net sales•

Net sales fell short of forecast due to a downturn in CRO and GR•

Net sales increased year on year, as growth in EKISHIN (China)
Business, CSO and SMO outweighed the downturn in CRO and GR

Operating income•

Operating income exceeded forecast, as the downturn in CRO andGR was outweighed by contributions from other segments•

Operating income decreased year on year, as increases in SMO
and EKISHIN (China) Business were unable to offset decreases in
CRO and GR

Copyright © 2019 EPS All rights reserved.

7

FY2019/2Q Summary of Segment Operating Results

CRO

Sales and operating income fell short of forecasts

・ Impact of the loss of a major project, cancellation and suspension ofprospective projects, and delays in starting projects in monitoring services
・ Sluggish orders received for new projects
・ Opportunities lost due to a shortage of resources for contract-based clinicalresearch associates (CRAs)

SMO

Sales and operating income exceeded forecasts

・ Positive contribution from the early inclusion of large projects
・ Solid proposal-based sales activities
・ Enhanced productivity through resource optimization in eachregion and other means

CSO

Sales and operating income exceeded forecasts

・ Call Center Division saw growth in business performance・ Academic materials production and BPO performed steadily
・ Increase in bid projects (such as programs to encourage people toreceive checkups)

Copyright © 2019 EPS All rights reserved.

8

FY2019/2Q Summary of Segment Operating Results

NRO

Sales and operating income surpassed forecasts

・ Additional contract-based services in support of clinical research techniques・ Maintained capacity utilization rates due to steady orders received forinvestigator-initiated clinical trials
・ Firm external sales of electronic data capture (EDC) systems such as e-CatchGR

Sales and operating income fell short of forecasts

・ Intensified competition with global CROs
・ Loss of large projects and delays in development, as well as
difficulties with modified orders
・ Uphill struggle faced by CROs in China

China

Sales and operating income surpassed forecasts

・ Continuously deepened existing markets and cultivated new markets inthe pharmaceutical business・ Concentrated management resources on sales of medical devices

Copyright © 2019 EPS All rights reserved.

9

FY2019/2Q Topics
M＆A••

CRO and CSO

Acquisition of AC MEDICAL INC.
(concluded on February 28, 2019)

For the purpose of expanding the Groupʼs customer base, enhancing
resources, and sharing technological knowledge
Acquisition of AC MEDICAL as a company that provides services with highadded value with the blending of human resources and IT

M＆A

NRO

Acquisition of All Right Technology Inc.
(concluded on November 1, 2018)

Integrated specialized clinical research services and medical IT services tobuild a platform to support next-generation pharmaceutical development

Collaboration

GR

Strategic partnership with George Clinical Pty Ltd (Australia)(April 2019)Concluded a strategic partnership with George Clinical Pty Ltd to pursue
strengthened supply capability and to expand orders in the Asia-Pacific region

Copyright © 2019 EPS All rights reserved.

10

FY2019/2Q Topics
Organization

ＣＲＯ
ＮＲＯ
China

CSR

Expanded reorganization of companies within the Group
Integration of EPS Corporation and EPMate Co., Ltd.
Integration of EP-CRSU and Sogo Rinsho Médéfi
Integration of e-Trial and All Right Technology (renamed as EP-Techno)
Split off EPS EKISHINʼs LSG business and established EP Trading
Obtained certification for special subsidiary

Special subsidiary obtained certification for the purpose of promoting
employment of persons with disabilities and launch of agricultural businessBusinesses

Received the 2019 Best Practices Award

Received the Asia-Pacific CRO Customer Service LeadershipAward from Frost & Sullivan, a major consulting firm in the
United States (headquartered in California)
Copyright © 2019 EPS All rights reserved.

11

2

FY2019 Full-Year Targets

Copyright © 2019 EPS All rights reserved.

12

FY2019 Full-Year Targets Overview(Released November 2018)（ ￥million ）2018/9Results

2019/9Forecast

ChangeYoY

Percent
Change YoY

Net Sales

65,76972,000

6,231

9.5%

Operating
Income7, 193

7,200

0.1％

（Ratio）(10.9%)(10.0%)

7

Recurring
Profit

7,436

7,350

-1.2％

（Ratio）(11.3%)(10.2%)- 86

ProfitAttributable to
Owners of
Parent

4,388

4,700

312

7.1％

（Ratio）(6.7%)(6.5%)

Copyright © 2019 EPS All rights reserved.

13

FY2019 Targets by Segment(Released November 2018)（ ￥million ）2018/9Results

CRO
Domestic

SMO
CSO
NRO

Overseas

GR
China

Operating
Income(%)

28,817
6,338

Net Sales

14,297

Operating
Income(%)

1,269

Net Sales

7,813

Operating
Income(%)

384

Net Sales

2,675

Operating
Income(%)

303

Net Sales

4,942

Operating
Income(%)

13

Net Sales

11,093Operating
Income(%)

121

Net Sales

Copyright © 2019 EPS All rights reserved.

2019/9計画(22.0%)

31,6506,300 (19.9%)(4.9%)

9.8%

-38

-0.6%

3

0.0%

1,450 (10.1%)

181

14.3%

8,500

687

8.8%

22

5.7%

3,325

124.3%

52

17.2%

-442

-8.9%

-3

-23.0％

187

1.7%

9

7.4％

406

(4.8%)

6,000(11.3%)

355(5.9%)

4,500(0.3%)

10(0.2%)

11,280(1.1%)

Percent
Change YoY

2,833

14,300(8.9%)

ChangeYoY

130(1.2%)* 1. The CRO segment in the earnings report (kessan tanshin) includes the NRO segment.
2. The calculation of segment operating income:(1)Does not include management advisory fees for the holding company
14(2) Includes amortization of goodwill and outsourcing expenses for shared services

FY2019 Full-Year Targets Overview(Released November 2018)

1. Outline of Annual Budget

Net sales︓
Create new added value and pursue further M&As, while strengthening themanagement structure and existing businesses
Net sales are projected to increase by 9.5% year on year, led by CRO and CSO
Operating income︓
Introduce efficient business methodologies and rigorously control costs, while
making upfront investments to expand business
Operating income is projected to increase year on year on a consolidated
basis,
despite slightly lower operating income in CRO and GR

2. Outline by Segment

Accelerate new services that will drive sustained growth, with existing

CRO businesses as key pillars
Realize further core growth, leveraging the largest business scale in
SMO the industry
CSO Advance multi-channel detailing services by integrating unique services
Target next-generation pharmaceutical development by integrating
NRO specialized services and pharmaceutical IT services
GR Build a solid platform spanning Japan, Asia and China
Upgrade and expand the business platform for the products business

China and the specialized services business
Copyright © 2019 EPS All rights reserved.

15

4

Initiatives in the Second Half

Copyright © 2019 EPS All rights reserved.

16

Key Initiatives for Group Management
1. Evolve to autonomous business management forsustaining businesses (CRO, SMO, CSO, NRO)
2. Strategically promote expanding businesses(GR, China)
3. Promote the development of new products• Improve products at the frontlines• Build a framework for promoting product development activities• Develop strategic new products

4. Promote the development of new businesses• Realignment of existing businesses (business models)• Push ahead with M&A activity• Promote investment and related management system

5. Build a group management structure

・ Cultivation of human resources

Copyright © 2019 EPS All rights reserved.

17

Drug & Medical Device Development of EPS Group
Time to Placing on the Market:
9~17 years
Basic

NonclinicalResearchStudy

2-3 years

3-5 years※placing on the market

ApplicationforApproval

Clinical Trial
3-7 years

Post-Marketing
Surveillance

1-2years

4-10years

CRO Business
NRO Business
GR Business
SMO Business

SMO Business
CSO Business

Copyright © 2019 EPS All rights reserved.

18

Business Conditions in the CRO Market
Proportion of global studies
in the pharmaceutical fieldof the CRO market

Proportion of Japanese CROs andglobal CROs in Japan
Billion

100%

250.0
80%

42.7%
59.7%

43.4%

43.3%

57.2%

171.5

60%
150.0
40%

48.0

100.0
57.3%

20%

203.0

200.0

40.3%

56.6%

82.1

56.7%

42.8%

187.2
54.5

89.1

61.0

95.4

50.0
41.4

43.6

46.5

2015

2016

2017

0.0

0%
2013

2014
Global studies

2015

2016

Local studies

2017■Global CROs ■Japanese CROs ■Other*Source: Materials published by MIC
Research Institute Ltd. (2017)

Copyright © 2019 EPS All rights reserved.

19

CRO Business
Market & Share

Expert Staff

CRA
EPS Group

17%
※

¥

203.0
billion*Source: Estimated by EPS Holdings based onmaterials published by MIC Research InstituteLtd. (2017) and the Japan CRO Association*Including the NRO Business

Copyright © 2019 EPS All rights reserved.

(Clinical Research Associates)

Approx.

1,020

Key Initiatives
1.Expand orders withbolstered sales capabilities
・Expand orders withstrengthened operations (GR par tnership)
・Collaborate with global CROs
・Cultivate new customers withbiotech ventures, etc.
2.Expand orders for new ser vices
・Research and sur veys for
medical information databases
・Risk Management Plan (RMP)・PMS monitors (SUZUKEN CO., LTD.
collaborative model)
3. RPA (Robotic Process Automation)
Enhance productivity with RPA
20

Status of the SMO Market
Net Sales by Scale (SMO Business only) 31 companies

Number ofcompanies affiliatedwith JASMO

2007

2,000–3,000
million yen
9.7%(3/31 companies)

Over 3,000
million yen
9.7% (3/31 companies)

61

companies

Below 100 million yen
29.0%(9/31 companies)

1,000–2,000
million yen
9.7%(3/31 companies)

Below 100 million yen
100–300 million yen
300–500 million yen
500–1,000 million yen

500–1,000
million yen
6.5%(2/31 companies)

300–500
million yen
9.7%(3/31 companies)

1,000–2,000 million yen

100–300
million yen
25.8%(8/31 companies)

2,000–3,000 million yen
Over 3,000 million yen

2018

31

companies（－30companies）

Source: Japan Association ofSite Management
Organizations data for 2017
(implemented April 2018)

Copyright © 2019 EPS All rights reserved.

21

Initiatives in the SMO Business
Market & ShareEPS Group

36%
39.5
395
億円
billion¥Expert Staff

CRC(Clinical Research Coordinator)

Approx.

1,000

Key Initiatives
1.Expand orders with bolsteredsales capabilities
・Promote par tnership contracts with clients・Develop strengths in many different fields, such asdermatology, etc., in addition to oncology fields

2. Expand orders for new services

Source: Estimated by EPS Holdings based on materials
from the Japan Association of Site Management
Organizations

Copyright © 2019 EPS All rights reserved.

・Cultivate Hybrid-CRC
・Pioneer psychological assessment ser vices for new
activity fields
・Search for a new approach to IT and new business22

Initiatives in the CSO Business
Market & ShareEPS Group

13%
72.6
726
億円
billion¥Expert Staff

420
Pharmacists Approx.500
CMR

Approx.

Key Initiatives
1.Expand orders that utilize newservices and productdevelopment

・Multichannel detailing centered on ES Navi・Expand services
・Develop ser vices for field engineers
・Enhance the product lineup related to compliance*Source: Estimated by EPS Holdings based on materials
published by MIC Research Institute Ltd. (2017)

2. Further improve productivity

・Move towards full outsourcing system for the callcenter business

Copyright © 2019 EPS All rights reserved.

23

Market Conditions for the NRO Business:
Impact of the Clinical Research Act
2017
4/14

Clinical Research Act announced

2018
2/28

Ministerial ordinance (Regulations on Clinical Research) Clinical trial standards
 Certified review board
 Public disclosure of fund provisions

3/30

Notification of certified review boards(49 facilities certified initially)

4/1

Implementation of clinical research

4/3

Launch of new database (jRCT) for
clinical research registration
operations

1 year2019
3/31

Ongoing specified
clinical research

Examination of
documents withresearch content
depending onphase

New specified
clinicalresearch
Inquiries
about clinicalresearch cases
drasticallydeclined

Inquiries
move towards
recoveryTransition period concluded
More than 1000 casesof clinical researchregistered on jRCT

Copyright © 2019 EPS All rights reserved.

24Initiatives in the NRO Business
Service
Pharmaceuticalcompanies

Key Initiatives
Universities andmedical institutions

Researchers

1.Reform structure andorganization

NRO Business・Complete integration of 2 clinical researchcompanies and 2 IT companies

Clinical researchIT

Nearshore andoffshore

EP-CRSU

EP-Techno

EP Yamanashi

・Clinical
research・Investigatorinitiated clinical
trialsCSO Business

3 Chinese data service
companies(EPT Suzhou, EPT
Nantong, EPT Jiaxing)・IT solutions
・Big data EDC

・An effective supply
system・Data center for
global and Chinese
CRO businesses

SMO Business

CRO Business

Copyright © 2019 EPS All rights reserved.

2.Evolve and integrate
specialized andpharmaceutical IT services

・Development towards utilization of e-CatchPMS and big data
・Investigate next-generation technologicalresearch, such as AI, RPA, etc., and its
commercialization
・Suppor t maintenance for research bases for
medical institutions and research groups

3.Collaborate with academia
to strengthen the clinicalresearch business25

Initiatives in the GR Business
Key Initiatives
1.

Strengthen the management structure and brush up theorganization• Establish a regional management structure (Japan, Asia and China) toimplement global clinical trials• Strengthen system that manages quality control• Improve structure of Chinese CRO

2.

Aim to be a leading CRO company in the Asia-Pacific region• Strive to win contracts in Asia-Pacific by strengthening sales activities• Supply the high-quality products (services) required by global clinical
trials• Further strengthen foundation through partnership with George Clinical
Pty Ltd3.

Create new added value• Create businesses by strategically approaching the Chinese pipeline• Create services in the CRO, NRO, and EKISHIN (China) businesses
through collaboration• Create new services through business alliances

Copyright © 2019 EPS All rights reserved.

26

Strategic Partnership in the Asia-Pacific Region

Copyright © 2019 EPS All rights reserved.

27

China business Business composition
ESP Holdings, Inc.

SUZUKEN Co., Ltd.

65%

35%

EKISHIN GroupEPS EKISHIN (Tokyo)
EKISHI (China)(Suzhou)

Products business(Pharmaceuticals andmedical devices)

Specialized
services

International
tradingbusiness

SupportSupportSupportSupport business
Management of companyOwned buildings, etc.

Copyright © 2019 EPS All rights reserved.

EKISHIN Vocational Training
SchoolTshinghua Health Fund

28

Key Initiatives in the EKISHIN (China) Business
Key Initiatives
1.

Strengthen the management structure and brush up theorganization• Advance the Matrix Management Structure (vertical and horizontal
dimensions)Strengthen system that manages quality control• Create a corporate culture through a fusion of Japanese and Chinese
cultures• Improve Identify and nurture the next generation of human resources

2.

Bolster and expand existing business platforms• Conduct stable management of the existing products business(Interferons, X-ray film)• Improve core businesses (products, specialized services, international
trade)

3.

Create new added value• Develop business primarily through the introduction of new products,
harnessing resources within the Group and partner companies• Establish a collaborative R&D center• M&A

Copyright © 2019 EPS All rights reserved.

29

4

Progress on the Mid-Term Business Plan

Copyright © 2019 EPS All rights reserved.

30

Mid-Term Business Plan̶Progress（ ¥ ｍillion）

First year

Second year

Third year

Fifth year

FY2017FY2018FY2019FY2021Results

Results

Forecast for
2019/9Initial forecast

Net sale

60,482

65,76972,000100,000

Operatingincome

7,591

7,193

7,200

12,500OperatingMargin

12.6％

10.9％

10.0％

12.5％

Copyright © 2019 EPS All rights reserved.

31

Trend in Net Sales (from FY2007 to FY2021)
100.0(¥ billion)

100.0

90.0
80.0

72.0

70.0

60.4

60.0

52.7

50.0
40.0
30.0
20.0

657

17.9

21.1 23.5

29.4

32.0

35.2 37.5

41.8

45.2

10.0
0.0
2007/9 2008/9 2009/9 2010/9 2011/9 2012/9 2013/9 2014/9 2015/9 2016/9 2017/9 2018/9 2019/9 2020/9 2021/9

Copyright © 2019 EPS All rights reserved.

32

Trend in Operating Income and Operating Margin(from FY2007 to FY2021)

Operating
営業利益
income(¥ billion)
140

Operating
営業利益率
margin125 20%

120
15%

100
80
60
40

29

34

48 51
44
40

34

44

54

62

75 71 72
10%

5%

20
0

2007/9 2008/9 2009/9 2010/9 2011/9 2012/9 2013/9 2014/9 2015/9 2016/9 2017/9 2018/9 2019/9 2020/9 2021/9

Copyright © 2019 EPS All rights reserved.

0%33

Objectives of Vision30
1. Establish a position as a Solutions Provider in the
Healthcare Industry (Solutions provided as infrastructure)
2. Build up business scale to compete effectively with the
major global players and strengthen global businessexpansion
3. Extend independent and autonomous business
management and promote Group management
4. Make the EPS Way transparent and instill it in theorganization(build a corporate culture)
5. Nurture the next generation of management leaders

Copyright © 2019 EPS All rights reserved.

34

5

Stock Information

Copyright © 2019 EPS All rights reserved.

35

Dividend Per ShareTerm End Dividend

Mid-term Dividend

Payout Ratio

¥50

¥40

40%

31.0%

29.7%
27.0%

10.0
8.0

¥0

2015/9

記念
配当
2円

15.0
10.0

20.0

SpecialDividend ¥4

¥10

18.0

SpecialCommemorative
Dividend ¥5 Dividend ¥2

¥20

25.0

SpecialDividend ¥8

¥30

30.0

30.3%
29.0

30%

27.3%

28.0 (Plan)

20%

17.0

15.0
10%

10.0

12.0

13.0
0%

2016/9Copyright © 2019 EPS All rights reserved.

2017/92018/92019/936

Thank you for your attention.
Please direct inquiries to Investor Relations, Corporate Communication
Department, EPS Holdings, Inc.
Phone: +81-3-5684-7873 ／ Email︓ir@eps.co.jp

EPS Holdings, Inc.

Copyright © 2019 EPS All rights reserved.

37

Disclaimer

The earnings forecasts and future predictions described in the document are made by ourcompany based on the available information at the time of the creation of the document,
and contain potential risks and uncertainties. Therefore, due to various factors such aschanges in the business environment, it is possible that actual earnings results may differ
greatly from the future outlook mentioned or described herein.
We have approached the creation of this document with caution, to ensure correctness.
However, it is not a guarantee of completeness. Our company cannot be held liable forany problems or damages arising as a result of the information in this document. We
appreciate your understanding.

■For inquiries about this document
Investor Relations, Corporate Communication
Department, EPS Holdings, Inc.
Phone: +81-3-5684-7873
e-mail: ir@eps.co.jp

Copyright © 2019 EPS All rights reserved.

38