[Terumo Corporation] Financial Results for the First Three Quarters of the Fiscal Year Ending March 31, 2014: Reference

Financial Results for the First Three Quarters of the Fiscal Year Ending March 31, 2014:
Reference
Analysis of Business Performance
1. Overview of Financial Results for the First Three Quarters of the Fiscal Year EndingMarch 31, 2014
(1) Overview of Consolidated Business Results
In the first three quarters of the current fiscal year (from April 1 to December 31, 2013), various
circumstances affected the healthcare market. In the United States, individual enrollment in thegovernment’s new healthcare insurance system began in January 2014 in accordance with theAffordable Care Act. According to estimates by the Congressional Budget Office (CBO), more than
50 million people in the country were without any health insurance in fiscal 2013. If the number of
insurance holders’ increases, the number of people seeking medical care will also eventually rise.
This is expected to have a major impact on the medical devices industry.
In Japan, a revised version of the Pharmaceutical Affairs Law was enacted by the government inNovember 2013. A newly established section in the law treats medical devices separately frompharmaceutical products, and the name of the law was changed from the Pharmaceutical Affairs
Law to the “Act on Assurance of Quality, Effectiveness and Safety of Drugs and Medical Devices,etc.” Designed to promote early utilization of medical devices, the revised law sets forth measures
for speeding up the review of medical devices by broadening the range of devices subject tocertification by third-party organizations in the private sector, and designating certain highlysophisticated medical devices (classified as Class III according to criteria set by the Minister ofHealth, Labour and Welfare) subject to certification by third-party organizations. The revised law isscheduled to go into effect in the autumn of 2014.
Under these circumstances, Terumo is presently carrying out its four-year mid-term management
plan, which started this fiscal year, with the goal of becoming a company with a global presence.
In the first three quarters of the fiscal year under review, sales and profit increased year on year as
the Group’s businesses outside Japan continued to benefit from favorable exchange rates. In theCardiac & Vascular Business segment, sales were strong in the Interventional Systems business,
especially for peripheral and Neuroendovascular intervention products in Japan. Sales remained
firm outside Japan, particularly in North America, but slightly slowed in Europe. Meanwhile, theBlood Management Business segment maintained steady results despite challenging market
conditions in Europe and the U.S. The General Hospital Business segment, however, saw sales
decelerate in Japan and recorded negative results mainly owing to the effects of selling off hometherapy businesses in the previous fiscal year. Outside Japan, however, sales remained steady inAsia.
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Other major achievements were as follows:●In the Cardiac & Vascular Business, in November Terumo launched the Hiryu Plus in Japan asa pipeline product under its mid-term management plan. The Hiryu Plus is a percutaneoustransluminal coronary angioplasty (PTCA) dilation catheter used for non-compliant balloon.
For this product, Terumo employed a three-layer structure of balloon materials to enable higher
pressure resistance while achieving excellent flexibility of the balloon section, and reinforced
the shaft section of the deliverly catheter, thereby improving the maneuverability of the overallsystem. After a drug-eluting stent has been placed inside the body, a non-compliant balloon iscommonly used for pressing the stent firmly against the blood vessel wall. The importance of
these balloons is growing along with the widespread usage of drug-eluting stents.

●In the Blood Management Business, Terumo made steady progress in integrating its global
production operations by boosting production at existing factories in India and building a new
production factory in the southern part of Vietnam.

●In the General Hospital Business, in November Terumo launched its “acelio Intravenous
Injection 1,000mg” as the first intravenous injectable acetaminophen antipyretic analgesic in
Japan. Acetaminophen is the most commonly used antipyretic analgesic in the world, and isrecognized as a basic medicine for managing cancer pain according to methods of the World
Health Organization. It is expected to enable appropriate pain management for patients who
have undergone surgery and for cancer patients who have difficulty using suppositories ortaking medicine orally due to physical symptoms.

Owing to the factors above, Terumo’s consolidated financial results in the first three quarters of thecurrent fiscal year were as follows.

Net sales
Net sales totaled 345.3 billion yen, an increase of 16.7% compared to the same period of theprevious fiscal year.
In Japan, net sales totaled 142.1 billion yen, a slight increase compared to the same period of theprevious fiscal year, mainly owing to strong results in the Cardiac & Vascular Business segment,
despite unfavorable results in the General Hospital Business segment. In contrast, although sales
slowed slightly in Europe, net sales rose markedly outside Japan, climbing 32.2% to 203.2 billion
yen as a result of the positive impact of the depreciating yen and ongoing robust sales in theInterventional Systems Business, especially in North America.
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Gross profit
Gross profit rose 16.4% to 178.7 billion yen compared to the same period of the previous fiscal year.
This was mainly due to Terumo’s successful shift to highly profitable products along with theimpact of favorable exchange rates, despite the negative effects of inventory valuation.
Operating income
Operating income came to 48.3 billion yen, up 13.2% year on year. This was mainly the result ofeffectively controlling selling, general and administrative expenses as well as research anddevelopment expenses according to management plans.
Ordinary income
Ordinary income increased 23.4% to 49.9 billion yen year on year, primarily owing to favorable
exchange rates resulting from the depreciating yen.
Net income
Net income jumped 49.3% year on year to 36.9 billion yen, mainly due to extraordinary income
from a settlement received amounting to 6.0 billion yen.

Net sales results by business segment are as follows.
General Hospital Business
In Japan, declining sales, along with the impact of selling off home therapy businesses in theprevious fiscal year, resulted in a fall in sales compared to the same period of the previous fiscalyear. Outside Japan, however, overall sales increased year on year on a local currency basis due tosales growth in Asia. This was despite decreasing sales on a local currency basis in North Americaand Europe, where Terumo is taking steps to improve profitability. As a result of these factors, netsales in the General Hospital Business segment amounted to 123.9 billion yen, up 3.4% year onyear.
Cardiac & Vascular Business
Robust sales in Japan were driven by Misago, a stent for treating peripheral artery disease, andScepter occlusion balloon catheters, a new product for the Neuroendovascular intervention market.
Outside Japan, although sales growth slightly slowed down in Europe on a local currency basis, theInterventional Systems business performed strongly, especially in North America. Sales ofTRI-related product lineups in particular continued to expand in North America, reflecting thegrowing popularity of this treatment there. In addition, sales of Terumo’s new occlusion balloon
catheters and stents grew markedly in the Neuroendovascular intervention market. As a result of the-3-

[Terumo Corporation] Financial Results for the First Three Quarters of the Fiscal Year Ending March 31, 2014: Reference

above, net sales in the Cardiac & Vascular Business segment amounted to 153.9 billion yen, up
25.8% compared to the same period of the previous fiscal year.

Blood Management Business
Sales in Japan increased year on year on the back of strong sales of therapeutic apheresis systems.
Outside Japan, results remained steady despite challenging market conditions in Europe and theUnited States. Owing to these factors, net sales in the Blood Management Business segment
increased 25.8% year on year to 67.5 billion yen.

(2) Overview of Consolidated Balance Sheets
Assets
As of December 31, 2013, total assets amounted to 863.3 billion yen, an increase of 92.3 billion yen
compared to March 31, 2013. Of this amount, current assets increased 32.3 billion yen to 319.2
billion yen, primarily due to the effect of exchange rates, along with increases in accounts
receivable trade and the value of inventories accompanying the increase in net sales. Meanwhile,
noncurrent assets rose 59.3 billion yen to 543.1 billion yen, mainly owing to the effect of exchange
rates and increased investments intended to foster business growth. Property, plant and equipment
rose 23.2 billion yen, primarily as a result of investment in Terumo Yamaguchi. Intangible assets
were up 25.7 billion yen while investments and other assets increased 10.5 billion yen.
Total LiabilitiesTotal liabilities increased 18.8 billion yen to 351.9 billion yen. Of this amount, current liabilities
amounted to 126.1 billion yen, an increase of 10.2 billion yen primarily owing to an increase inincome taxes payable. Noncurrent liabilities totaled 225.8 billion yen, up 8.6 billion yen year on
year, mainly due to an increase in long-term debt resulting from the impact of exchange rates.
Net Assets
Net assets totaled 511.4 billion yen, an increase of 73.5 billion yen. Consequently, the shareholders’equity ratio was 59.2%, up 2.5 percentage points compared to March 31, 2013.
(3) Forecast of Consolidated Financial Results for the Fiscal Year Ending March 31, 2014
As Terumo’s operating environment continues to be uncertain due to changing conditions
surrounding the medical device market and other factors, the Company made no revisions to its
consolidated financial forecasts for the current fiscal year. Nevertheless, the assumed exchange rates
for the fiscal year have been revised from 95 yen to the U.S. dollar and 123 yen to the euro, asinitially assumed, to 100 yen to the U.S. dollar and 134 yen to the euro, respectively.

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Amidst challenging business conditions, the Terumo Group is working to achieve its targets bylaunching high-value-added products that improve medical cost efficiency, as well as implementing
measures to reduce manufacturing costs, and strictly and efficiently managing selling, general andadministrative expenses.

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