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The main point of the first half results is that we achieved approximately the level of theguidance we revised when announcing results for the first quarter. This page is a year‐
on‐year comparison, and the next page will show a comparison versus guidance.
First, the year‐on‐year comparison: Revenue and gross profit were about the same as
the previous year. Operating profit and adjusted operating profit decreased, but this was
the result of increased expenses centered in R&D, which grew greatly year‐on‐year asplanned. With profit before taxes, the main negative factor was FX loss from the firstquarter, leading to a larger profit decrease. Profit for the period was also down 16%
year‐on‐year.

2Here is the comparison with first‐half guidance. Revenue was 3 billion yen higher. Thiswas influenced by dollar appreciation and yen depreciation, and correcting for that, thegap was 1.2 billion yen higher. Operating profit and adjusted operating profit results
were more or less in line with guidance. FX rates saw depreciation of the euro against
the dollar, and emerging‐market currencies depreciating, which had a downward impact
on revenue.
When correcting for this FX effect, our adjusted operating profit and results were justabove guidance. Since we approximately met guidance, we do not plan to revise oursecond‐half guidance.
I will now discuss the status of Ashitaka Factory. Regarding capacity, as we explained in
the last earnings announcement, production capacity has recovered to its previous levels,
and we are working to expand capacity even further. As the detail initiatives, we areutilizing sterilization capacity at a factory in Vietnam and a next‐door Fujinomiya factory.
Again, sterilization capacity has recovered to its previous levels.
Regarding shipments, we explained at the last announcement that it would take time tobegin shipping again after sterilization resumption, with recovery taking until after
September to reach pre‐stoppage levels; In fact, there were changes to some operations,
resulting in some minor efficiency challenges in September. As a result, our shipments
for some weeks were lower volume than anticipated, and we were not in a state ofcomplete recovery at this time.
Since October, we have seen the situation stabilize due to increases in personnel andother measures. The shipping has recovered to its pre‐stoppage level.

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Now, I would like to explain about adjustment items for adjusted operating profit. Mostof the adjustment is due to amortization of intangible assets, amounting to 7.5 billion
yen.
Temporary gain and loss amount to only 200 million yen, but within that number wereactually large amounts that netted out to a small amount. Regarding the neurovascular
WEB product, we determined that regulatory approval would be earlier than expected.
As a result, we made an allowance of 1.7 billion yen for the milestone payment.
We also received settlement money in a litigation matter. This was of a one‐time natureand is not something that we are able to discuss in detail due to legal agreements.
The third item is our receipt of money from insurance claims in conjunction with thePuerto Rico factory, which was impacted by the hurricane last year.
This is 1.1 billion yen.
Lastly in this item, there is disposal of venture development investments. As you know,
Terumo has made many acquisitions over the years, and has been investing in ventures
for several years now. This is an activity that we undertake as part of our new productdevelopment, but of course all ventures do not necessarily bear fruit, and some of theless successful ventures are being disposed of in this item, with negative impact. There
are, on the other hand, ventures which are successful, in which case they affect thesenumbers negatively. We will continue to incorporate these effects into our number going
forward.
This period, we experienced this larger impact, but on the whole, the numbers mostly
cancelled out to a small net impact of 200 million yen.

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Next is the adjusted operating profit variance analysis. I will explain from the left to the right of the slide.
The first increment in gross profit is the result of increased revenue. This was 2.5 billion yen higher year‐
on‐year in the first quarter, but lower year‐on‐year in the first half. Therefore, the second quarter had anegative impact, so the first half total was 1.4 billion yen.
Next is gross margin on sales. Because sales was lower from the high‐margin TIS business, we saw anegative impact in the second quarter after having had 1.9‐billion‐yen increase in the first; the higher
negative amount from the second quarter resulted in a first half result of negative 700 million yen.
Regarding price, the impact from the reimbursement price revision was approximately as expected.
We expect 5 billion yen in annual impact from this, meaning 2.5 billion yen per half. With decreased TIS
sales, also, we feel that 1.9 billion yen is within our expectation.
On the other hand, the impact of price change was actually positive in this case. There are various factors
behind this, chief of which is that Cardiac & Vascular products were the largest factor in the expected
price change impact.
The overseas Cardiac & Vascular portion is large, but because sales were reduced from that business, wedid not sell at the lower prices. However, we did sell product at higher prices, meaning that the expected
portion of decline in sales was actually not realized in Cardiac & Vascular. Blood Management also showed
positively here; as you know, blood bag prices were reduced drastically in 2015 and 2016, but now thisdecline has stopped. For certain products, higher paying customers bought more within the regional mix,
so that the Blood Management price overall turned out positively.
Next is SG&A and R&D spending. This is similar to the first quarter; as I explained at the beginning of thisperiod, our plan was to increase spending, with SG&A increasing along with our launches of new products
such as WEB and Relay, due to the acquisition and personnel costs that attend those. For R&D spending,beyond products, we sustain costs through the conduct of trials, etc., and the outlook we explained at thebeginning of the year included a large increase in these costs. We also had the Ashitaka Factory issues,
which were of a one‐time nature, but R&D spending continued as planned. In SG&A, we were able tocontrol some expenses in TIS during the second quarter, but at the same time we increased the number ofpersonnel. Most other portions were small amounts.

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Revenue by region, as you have already seen, included in Japan good growth bybusinesses other than Cardiac & Vascular; General Hospital grew 4% and BloodManagement grew 8%. However, the Cardiac & Vascular negative impact was large,
leading to an overall negative 2% result. There was impact from Cardiac & Vascular
overseas as well, so while the result was positive growth, the degree of positive growth
was much lower.

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Results by company are as you have seen, and I will go into detail regarding those later.

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In Cardiac & Vascular, TIS was approximately as anticipated. Other areas maintained
their good performance.
Neurovascular in particular continued to show double‐digit growth, with its hydro coilproduct growing especially well.
Further, WEB also grew well, especially in Europe. SOFIA, the aspiration catheter also
saw good growth, and these together combined for an overall double‐digit growth resultin neurovascular.
Across the Cardiac & Vascular business, there were unique factors last fiscal year,including acquisitions, consent decree completion, and others, leading to this period
showing a year‐on‐year increase. The true nature of this quarter was steady, goodgrowth. One thing to mention is that the Vascular Graft business showed an overall 100‐
million‐yen positive result; this was due to the scheduled commencement next year of
direct sales in Japan, which required purchasing of inventory and the building of reserve
stock. As a result, Japan was negative, and outside Japan was a positive 8% year‐on‐year.
All told, the Vascular Graft business is growing well.
As you see here, adjusted operating profit decreased in the first half as TIS revenue
declined, R&D spending proceeded as planned, and though some SG&A was controlled,there was still spending.

8I think we can say that General Hospital had the best results of the three companies. Asis written here, we saw healthy increases in both revenue and profit. First, in revenue,
the Alliance Business in particular: Both Japan and outside Japan showed growth
exceeding 20%. This is very high growth.
In pharmaceuticals, our pain management and adhesion barrier product AdSpray bothgrew well, driving overall growth in pharmaceuticals. All this led to 5% overall revenue
growth in General Hospital.
Adjusted operating profit shows a small increase, and this is the result of our planned
increase in R&D spending in the General Hospital company, somewhat absorbed by alsoachieving revenue growth, leading to increased profit.

9Blood Management grew 1.3 billion yen, with blood center revenue growth a majordriver. As we have previously mentioned, therapeutic apheresis saw special demands for
new console in last fiscal year, and this year we see the return back from that which
resulted in a year‐on‐year decrease.
Regarding adjusted operating profit, revenue and gross profit increased year‐on‐year, but
SG&A and R&D spending increased more, resulting in decreased adjusted operating
profit. The biggest factor behind SG&A was the Lakewood site, near Denver. Someproducts produced at the Lakewood Factory are being transferred to the Vietnam
Factory.
In conjunction with that, a project is underway to increase efficiency at the Lakewood
Factory. As a result, the first half included consulting fees and other long‐terminvestments, making expenses grow significantly. However, this is also expected to leadto cost improvements from the second half onward.
In addition, R&D spending included increased government‐related expenditures in thefirst half. This will return in the form of grants in the second half, so it can be expectedthat the overall effect will even out over the course of the year.
We can say that Blood Management revenue and gross profit are growing well.

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Next is other topics, but in the interest of time I will not go into these. However, in thebusiness area, Sato also mentioned that we had General Hospital investment, andapprovals of products, etc.

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The pipeline is as you see here.

12Finally, I want to explain a little bit about our convertible bonds. Three months ago, theamount of shares issued for conversion was 31.6 billion yen. However, in the threemonths since then, the amount of shares issued for conversion has increased
approximately by 40 billion yen. This seems to be the result of the Terumo stock priceincreasing significantly during that period, leading to the parity higher than CB price.
The result of this is that almost all‐‐96.6% of the 5‐year bond that ends December 2019‐‐
has completed conversion. Also, the 7‐year bond, to conclude December 2021, hasconverted about halfway.
With that, in this 2nd quarter, the convertible bond progressed significantly. The latest
status is that Terumo stock price has high volatility; this resulted in the CB price also
rising, and when the CB price rises above parity, and with the remaining amount being
mostly in the 7‐year bond, which has three more years, the last three or four weeks haveseen things calm down. That is the convertible bond situation. This concludes myexplanation. Thank you.

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