[Terumo Corporation] Financial Results for the First Three Quarters of the Fiscal Year Ending March 31, 2017: Reference

Financial Results for the First Three Quarters of the Fiscal Year Ending March 31, 2017:
Reference
Analysis of Business Performance
1. Financial Results for the First Three Quarters of the Fiscal Year Ending March 31, 2017:
Reference(1) Overview of Consolidated Business Results
In the first three quarters of the current fiscal year (from April 1 to December 31, 2016), trends in the global
healthcare industry were as follows. In the healthcare industry overseas, there were reorganization trends,
including the sale and acquisition of businesses by major medical device companies, mainly in the UnitedStates. In Japan, NHI reimbursement prices were revised in April 2016. There is growing demand for
improved medical cost efficiency, including the trial introduction of a cost benefit analysis to determine thefocus and efficient allocation of fiscal resources.
Amid this environment, in December 2016, the Terumo Group established a five-year Mid- to Long-term
Growth Strategy, starting from April 2017, with ten-year perspective. In addition, the company announced
the launch of a new Boardroom from April 1, 2017, to reinforce the implementation of the Mid- to Longterm Growth Strategy. Under the leadership of a new Chairman and President and CEO, we aim to achieve
profitable and sustainable growth as a global corporation with Japanese origins.
The following are highlights of performance at each company during the first three quarters of the current fiscalyear.

In the Cardiac and Vascular Company, access device sales in the Terumo Interventional Systems (TIS) businesstrended briskly. In the current fiscal year, Terumo added on sales regions for the “Ultimaster,” a drug-eluting
stent, launching sales in France, Brazil, and South Korea. In Japan, Terumo poured energies into increasing
sales of a 4mm diameter stent that it introduced to its product lineup in August 2016. On December 7, 2016,
Terumo signed contracts with St. Jude Medical, Inc. and Abbott Laboratories, both of the United States, toacquire a vascular closure device business.

In the General Hospital Company, sales in Japan trended briskly for infusion line products, including theneedleless infusion system. Meanwhile, in Asia sales momentum was strong for IV catheters.

In the Blood Management Company, sales were down year on year reflecting price revisions for products for
US blood centers implemented in the second half of the fiscal year ended March 31, 2016, and also due tonegative impact from appreciation in the yen’s value against major currencies.

-1-[Terumo Corporation] Financial Results for the First Three Quarters of the Fiscal Year Ending March 31, 2017: Reference

Financial results for the first three quarters of the fiscal year ending March 31, 2017 are as follows:

Net sales
Net sales totaled 374.4 billion yen, a decrease of 5.5% compared with the same period in the previous fiscalyear.
(million yen)

Net sales
Gross profit
Operatingincome
Ordinary
incomeProfit
attributable toowners ofparent

Q1-Q3

Q1-Q3

FYE3/2016

FYE3/2017395,991
214,648
64,115374,394
205,283
58,904

(5.5)
(4.4)
(8.1)

3.8
6.2
4.3

60,97752,204(14.4)-

43,484

31,822(26.8)-

Growth (%)

Growth excluding impactof forex translations (%)(million yen)
Regional sales

Q1-Q3

Q1-Q3

FYE3/2016

FYE3/2017

Japan140,433

139,591

(0.6)

(0.6)

Europe76,420

68,327(10.6)

3.3

Americas108,732

98,934(9.0)

4.7

Asia etc.

70,40467,541(4.1)

11.6

Overseas total

255,558

234,803(8.1)

6.2

Total

395,991

374,394(5.5)

3.8Growth (%)

Growth excluding impactof forex translations (%)

In Japan, sales decreased year on year due to the wind down of sales contribution from the Ultimaster, which waslaunched in October 2015, and impact from the transfer of contrast agent sales to Fuji Pharma Co., Ltd. in thesame month. Sales overseas also declined. Although sales trended briskly in the TIS business and neurovascularintervention business, performance was hindered by the yen’s appreciation in value against major currencies.
Gross profit
Gross profit totaled 205.3 billion yen, a fall of 4.4% year on year. However, the decline in sales due to the yen’s
appreciation in value was only partially offset by an improvement in production costs.
Operating income
Operating income stood at 58.9 billion yen, a decrease of 8.1% year on year. SG&A expenses were down but did
not compensate for the fall in gross profit.
-2-[Terumo Corporation] Financial Results for the First Three Quarters of the Fiscal Year Ending March 31, 2017: Reference

Ordinary income
Ordinary income totaled 52.2 billion yen, a decline of 14.4% versus a year earlier, owing to an increase in foreignexchange rate translation loss.
Profit attributable to owners of parent
Profit attributable to owners of parent came to 31.8 billion yen, a fall of 26.8% year on year. Terumo posted an
extraordinary loss of 7.0 billion yen owing to the termination of a contract for the joint development of abioresorbable scaffold with Arterial Remodeling Technologies (ART) of France in Q3. In addition, the decline wasin reaction to extraordinary income of 4.4 billion yen posted in tandem with the sale of land in the first half of theprevious fiscal year.
Net sales results by company are as follows:(million yen)Segment

Q1-Q3

Q1-Q3

FYE3/2016

FYE3/2017

Growth excluding
Growth (%)

impact of forex
translations (%)

Cardiac andNet sales

193,241

186,570

(3.5)

8.4

Vascular Company(Japan)37,76537,345

(1.1)

(1.1)

(Overseas)

155,476

149,225

(4.0)

10.8

General Hospital

Net sales

122,777

118,979(3.1)

0.0Company(Japan)

94,25793,515

(0.8)

(0.8)

(Overseas)

28,52025,464(10.7)

2.6

BloodNet sales

79,972

68,692(14.1)(1.9)

Management(Japan)

8,410

8,577

2.0

2.0Company(Overseas)

71,561

60,114(16.0)(2.4)

Cardiac and Vascular Company
In Japan, access device sales trended briskly in the TIS business. However, sales in Japan were pushed down by awind down in contribution from Ultimaster sales, which were launched in October 2015, and negative impact
from revisions to NHI reimbursement prices. Meanwhile, overseas sales also declined. Although access device
and Ultimaster sales trended solidly in the TIS business, sales in the neurovascular intervention business also rose,
this did not offset the negative impact from a rise in the yen’s value against major currencies.
Consequently, net sales in the Cardiac and Vascular Company totaled 186.6 billion yen, a decrease of 3.5% year
on year.
General Hospital Company
In Japan, sales declined in comparison with the same period a year earlier. Although sales were strong for infusion-3-[Terumo Corporation] Financial Results for the First Three Quarters of the Fiscal Year Ending March 31, 2017: Referenceline products, including needleless infusion systems, sales in Japan were weighed down by negative impact fromthe transfer of contrast agent sales to Fuji Pharma Co., Ltd. in October 2015, and from revision to NHI drug
reimbursement prices. Overseas, sales also fell. Although sales momentum was strong for IV catheter in Asia,
performance was hindered by downsizing low-profit businesses mainly in Europe and Latin America and negative
impact from a rise in the yen’s value against major currencies.
In light of this, net sales in the General Hospital Company came to 119.0 billion yen, a drop of 3.1% year on year.
Blood Management Company
In Japan, sales increased in comparison with the same period in the previous year. Sales momentum was initiallysomewhat weak for products shipped to blood centers due to a change in delivery times by customers, but picked
up in Q2 onward. Overseas sales fell. This was due to negative impact from revisions to selling prices on products
shipped to blood centers in the United States implemented in the second half of the previous fiscal year, and also
reflecting a rise in the yen’s value against major currencies in various regions.
Accordingly, net sales in the Blood Management Company were 68.7 billion yen, a decrease of 14.1% year onyear.
(2) Overview of Consolidated Balance Sheets
Assets
As of December 31, 2016, total assets stood at 1,063.8 billion yen, an increase of 162.1 billion yen compared withMarch 31, 2016.
Current assets were 499.9 billion yen, a rise of 125.2 billion yen owing in part to an increase in cash and deposits.
Non-current assets were 559.4 billion yen, a rise of 37.8 billion yen. Property, plant and equipment increased 4.6
billion yen, intangible assets increased 39.4 billion yen, and investments and other assets shrank 6.3 billion yen.
Total Liabilities
Total liabilities stood at 522.9 billion yen, an increase of 132.7 billion yen, owing in part to an increase in shortterm loans payable and the issuance of unsecured bonds.
Total Net Assets
Net assets totaled 540.9 billion yen, an increase of 29.4 billion yen.
Consequently, Terumo’s equity ratio stood at 50.8%, down 5.9 percentage points compared with March 31, 2016.

(3) Forecast of Consolidated Financial Results for the Fiscal Year Ending March 31, 2017
Earnings performance is trending steadily, mainly in the Cardiac and Vascular Company. However, given thenegative impact from an appreciation in the yen’s value against major currencies in the first half and other factors,-4-

[Terumo Corporation] Financial Results for the First Three Quarters of the Fiscal Year Ending March 31, 2017: Reference

sales are trending slightly below our initial forecast. On top of this, we anticipate one-off costs in Q4 for theacquisition of the vascular closure device business and other assets from St. Jude Medical, Inc. and Abbott
Laboratories. Reflecting these factors, we downwardly revised our net sales, operating income and ordinary
income forecasts released on November 10, 2016 to the figures in the table below.
Note that in Q3 we posted an extraordinary loss of 7.0 billion yen owing to the termination of a contract for thejoint development of a bioresorbable scaffold with Arterial Remodeling Technologies (ART). As mentioned in ourpress release on “Notice Concerning Sale of Shares Held by Terumo Corporation” dated February 9, 2017, we
expect to post extraordinary income in Q4 on the sale of equity in Olympus Corporation. Taking these factors intoaccount, we are sticking with our earlier forecast for profit attributable to owners of parent. (Foreign exchange
rate assumptions for Q4 are ¥110/USD1 and ¥120/EUR1 and for the full fiscal year are ¥107/USD1 and¥118/EUR1.)

Operating

OrdinaryProfit attributable

Net income

incomeincometo owners of parent

per share

Million yen

Million yen

Million yen

517,000

75,00065,00047,500130.87

Revised forecast (B)510,000

71,00062,00047,500130.86

Change (B – A)

(7,000)(4,000)(3,000)

--

(1.4)

(5.3)

(4.6)

--

525,026

81,70373,09050,676135.14

Net sales

Prior forecast (A)Change (%)(Ref.) Results forMillion yen

Yenprior fiscal year

2. Summary Information (Notes)(1) Change in major subsidiaries in the first nine months of the fiscal year ending March 31, 2017
Newly-established Terumo Capital Management Pte. Ltd. was added to the scope of consolidation from Q2.
Owing to capital increases carried out in stages, the company was designated a specified subsidiary fromthe start of Q3.
(2) Adoption of accounting procedures uniquely specific to the preparation of quarterly financial statements
Not applicable(3) Changes in accounting policies and changes or restatement of accounting estimates
Not applicable-5-