Financial Results for the Third Quarter ofFiscal Year Ending March 31, 2020 (FY2019)

Terumo Corporation
Chief Accounting and Financial Officer

Naoki Muto
February 6, 2020

Highest-ever Q3YTD Revenue and Adjusted Operating Profit(billion JPY)

FY18 Q3YTDFY19 Q3YTD

YoY%

YoY%
(FXN)

443.6

470.1

+6%

+9%

242.2 (54.6%)

258.6 (55.0%)+7%+11%

SG&A Expenses

132.0 (29.8%)

136.8 (29.1%)+4%+7%

R&D Expenses

36.0 ( 8.1%)

37.0 ( 7.9%)

+3%

+5%

Other Income and Expenses

4.41.5--Operating Profit

78.5 (17.7%)

86.3 (18.3%)

+10%

+18%

Adjusted Operating Profit

91.2 (20.6%)

98.4 (20.9%)

+8%

+17%

Profit before Tax
Profit for the Year75.0 (16.9%)

85.5 (18.2%)+14%

56.5 (12.7%)

66.9 (14.2%)+18%Revenue
Gross Profit

Average Exchange Rates

USDEUR

111 JPY
129 JPY

109 JPY
121 JPY Revenue: Continued positive growth in all companies. Driven by continuous double digit growth in TIS and
Neurovascular business.
 Adjusted Operating Profit: Continued double digit growth on the basis of FX neutral Profit before Tax: FX loss decreased from 3.2 B JPY in FY18 Q3YTD to 0.8 B JPY in FY19 Q3YTD
2/22

Adjusted Operating Profit Variance Analysis(billion JPY)
3.9
1.9
Price
Gross
MDR
-2.7
margin-1.0
JPIT
Reimburseinvestment
ment
-1.2
-0.9
6.0

25.0

12.7
91.2

G/P
incrementby salesincrease

7.3
SG&A
increase

3.8

0.6

R&D
increase

Others

6.4
FX
12.1

98.4

86.3

78.5

FY18 Q3YTD FY18 Q3YTD
Operating
Adjusted
ProfitOperating
Profit

FY19 Q3YTD FY19 Q3YTD
Adjusted Operating
Operating
ProfitProfit3/22

FX Impact on Adjusted Operating Profit Variance Analysis
Q3YTD FX impact -6.4 B JPY : -2.3 B JPY (1H) plus -4.1 B JPY (Q3)
<Details of -4.1 B JPY>
 -2.3 B JPY from flow : Impact of JPY appreciated against EUR and currencies in emerging
countries compared with FY18 Q3(JPY)

Rate comparison

FY18 Q3 average

FY19 Q3 average

Variance

EUR

129120-9

CNY

16.6

15.6-1 -1.8 B JPY from stock : FX impact on unrealized profit in inventories Negative impact due to rapid depreciation of JPY at the end of Dec, FY19 Huge negative year-on-year variance due to positive impact in FY18 Q3
Rate comparison(JPY)

FY18 Q3
average

At the endof Dec, FY18Variance

USD

113

111+2EUR

129127+2(JPY)FY19 Q3
average

At the endof Dec, FY19Variance

USD

109

110-1

EUR

120

123-3
4/22

Revenue by Region
FY19 Q3YTDFY18 Q3YTDRevenueYear-on-Year Revenue Comparison
billion JPY

100% = 470.1 B JPY

31%

147.8

Japan

142.2

19%

30%
China

8%
12%

Asia andOthers( ) FXN

Japan : Steady high single digit growth inCardiac and Vascular. Solid momentum inline with the guidance for General Hospital,
as well as Blood Management Company+4%(+7%)
141.6
129.7

AmericasComments+1%

88.7
88.2

EuropeYoY%+9%(+13%)

Europe : Huge negative FX impact. Driven by
double digit growth in Cardiac and VascularCompany, excluding the FX impact
Americas : Driven by Cardiac and Vascular
centered on TIS and Neurovascular businesswith double digit growth, covering negative
growth in General Hospital Company

37.0+13%32.8(+19%)

China : Double digit growth driven bycontinuous 20%+ growth in TIS business+8%

Asia and Others : Double digit growth inCardiac and Vascular, as well as BloodManagement Company

55.0
50.8(+12%)

5/22

Revenue by Business Segment
FY19 Q3YTDFY18 Q3YTDRevenueYear-on-Year Revenue Comparison
billion JPY

100% = 470.1 B JPY

YoY%Comments( ) FXN

56%

CardiacandVascularGeneral
Hospital

263.5
241.0+9%(+14%)

127.8+2%

125.9(+2%)

Continuous double digit growth inAlliance business. Maintained solid
growth as the whole

78.7+3%76.6(+7%)

Driven by software update for theautomated blood collection system

27%17%

BloodManagement

Driven by continuous double digit
growth in TIS and Neurovascularbusiness. The momentum of CV
business improved

6/22

Cardiac and : Positive Growth in All Businesses.
VascularContinued Double Digit Growth in Profit(billion JPY)

FY18
Q3YTD

FY19
Q3YTD

YoY%

Major Topics

Impact( ) FXN

241.0

263.5

TIS：Continued double digit growth overseas+15.6

Neurovascular : Continuous double digit growth+9%

Revenue(+14%)

driven by globally strong momentum in “WEB”

and stroke devices+5.1

CV : Improved momentum driven by oxygenators+1.2

Vascular Graft : Smooth progress in stent graft direct
sales transition in JP and overseas reorganization

AdjustedOperatingProfit(%)

58.0

68.8

+0.6

+18%

Driven by sales increase in TIS and Neurovascular business.

(+28%)

Some expenses behind plan due to strong momentum inoverall TIS products and “WEB” in Neurovascular
(24%)

(26%)
7/22

GeneralHospital : Revenue and Profit in Line with the Guidance(billion JPY)
FY18
Q3YTD

FY19
Q3YTD

YoY%

Major Topics

Impact( ) FXN

General hospital products : Impact of the financial

125.9127.8Revenue

challenge in Indonesian national health insurance,+2%etc.

(+2%)

Pharmaceutical and nutrition : Continued double-0.7

digit growth in pain management products and22.3
Adjusted
Operating
Profit(%)+1.1

Alliance : In line with the guidance

+1.5

19.8

-11%
(-9%)
(18%)

adhesion barrier

In line with the guidance

(16%)
8/22

BloodManagement : Solid Momentum Excluding FX Impact(billion JPY)
FY18
Q3YTD

FY19
Q3YTD

Major Topics

YoY%

Impact( ) FXN

Blood center products : Driven by software

76.6

78.7

Revenue

update for the automated blood collection+3%system(+7%)

Therapeutic apheresis : Recoil of replacement+2.1

with the latest version of consoles in developed
countries. Double digit growth in Asia and Latin
America

Adjusted
OperatingProfit
(%)

10.9

(14%)

+0.2

10.4-4%Huge negative impact of FX.

(+11%)

In line with the guidance

(13%)
9/22

Reiterate the FY19 Guidance
EUR : -0.7
CNY : -0.4
Emerging countries : -0.6
Flow total : -1.7
Stock total : -0.8

Price erosion lessthan expected
FX (1H)

0.50.5GP
increase

00SG&A

R&D(billion JPY)

The impact ofthe novel
coronavirus
outbreak

2.5FX (2H)

+7.0

+7.5
+5.0

1H FY19 OP variancefrom the guidance

FY19 OP forecast variancefrom the guidance excl. FX

FY19 OP forecast variancefrom the guidance incl. FX

Exchange Rates for Q4 : 1 USD=109 JPY, 1 EUR=120 JPY
for FY19 : 1 USD=109 JPY, 1 EUR=121 JPY

10/22

Major Topics in FY19 Q3
Has received “GOOD DESIGN AWARD” for twenty four consecutive years (Oct)Corporate

Donated through Japanese Red Cross
for the relief of Typhoon Hagibis in JP (Oct) Condenced liquid nutrition Closed hazardous drug
“Terumeal Uplead-mini”

Established “Terumo Group Human Rights Policy” (Dec)

infusion system“ChemoSafe Lock”

Pulsed xenon UV
germ-zapping robot“LIGHTSTRIKE”

Launched a small size of adhesion barrier gel “AdSpray” (Oct)BusinessLaunched fill and finish system for cell therapy processing
Fill and finish system“FINIA” (Oct)“FINIA”
Acquired U.S.-based Aortica Corporation, owning automated case planningsoftware technologies for personalized stent grafts (Nov)Asahi Kasei Pharma Corporation launched a new formulation to treat
osteoporosis pre-filled in “PLAJEX” (Dec)“Teribone 28.2 µg subcutaneous autoinjector”

Gained US-FDA premarket approval of
the flow diverter “FRED” for treatment of brain aneurysms (Dec)Gained manufacturing and marketing approval of theintrasaccular aneurysm treatment device “WEB” in JP (Dec)

Intrasaccular aneurysm
treatment device
“WEB”

11/22

New Products Pipeline in FY19
Category
AccessCoronary

Products
Closure device for distal
radial approach

JPPTCA balloon

EU,Asia

Launched

JP, USGeneral
hospital

ProductsRegion Launch
JPQ4

Narcotic analgesic for
postoperative pain management(Fentanyl injection)JP

Launched

Launched

Adhesion barrier (AdSpray mini)JP

Launched

US

Launched

Continuous glucose monitoringsystem

JP

Launched

EU, US

Launched

Blood glucose monitoring system

JP

Q4(Sofia EX)

Mini balloon

EU, US

Launched

JP

Launched

Aspiration catheter

JP

Launched

JP

Launched

StentrieverJP

Launched

JP

Q4

Intrasaccular aneurysm treatment
device (WEB)Distal access catheter

FY20

Next generation of oxygenator

JP

FY20

Heart lung machine (re-launch)

JPFY20Large-bore vascular graft(Triplex Advanced)

JPQ4CV

Vasculargraft

Category

Next generation of syringe pump

Peripheral Stent (TRI)

NeuroRegion Launch

PharmaceuticalDM andconsumer Insulin patch pump
healthcare
Next version of blood pressure
monitorNext version of thermometer
Blood
Management

Fill and finish system for cell therapy
processing (FINIA)

Global Launched

12/22

Reference

13/22

FY19 Q3YTD Revenue and Growth by Region(billion JPY)

BusinessSegment

Japan

Cardiac andVascularOverseas
SubtotalEurope

Americas

ChinaAsia

GrandTotal

38.2

225.3

64.1

103.1

30.9

27.2

263.5

(+8%)

(+15%)(+10%)(+15%)(+22%)(+15%)(+14%)

28.5

185.4

52.2

81.8

28.9

22.5

213.9

(+7%)

(+16%)(+11%)(+18%)(+23%)(+14%)(+15%)

GeneralHospital

100.5

27.3

6.6

6.1

1.9

12.8

127.8

(+3%)

(+0%)

(-0%)

(+2%)

(+6%)

(-1%)

(+2%)

BloodManagement

9.0

69.7

18.1

32.4

4.2

15.0

78.7

(+1%)

(+8%)

(+2%)

(+7%)

(+7%)

(+20%)

(+7%)

147.8

322.3

88.7

141.6

37.0

55.0

470.1

(+4%)

(+12%)(+7%)(+13%)(+19%)(+12%)(+9%)

Out of C&V
Interventional
Systems*

Grand Total*Including Neurovascular business(YoY%): FXN
14/22Operating Expenses(billion JPY)

FY18 Q3YTDFY19 Q3YTD

YoY

YoY%

YoY%

Salaries & Wages

65.5

66.6+1.1+2%+5%Sales Promotion

13.3

14.6+1.3+10%+13%

Logistical Costs

10.1

10.3

+0.3

+3%+5%

Depreciation &Amortization

10.4

13.9*

+3.5+34%+37%

Others

32.7
132.0

31.4*
136.8

-1.3

-4%-2%(29.8%)(29.1%)+4.8+4%+7%

36.0

37.0(8.1%)(7.9%)+1.0+3%+5%

168.0

173.8

(37.9%)(37.0%)+5.8+3%+6%

SG&A Expenses Total
R&D Expenses
Operating Expenses
Total(FXN)*Reclassification between Depreciation & Amortization and Others due to IFRS 16 (Lease Accounting)

15/22

Quarterly Results(billion JPY)

FY18 Q3(Oct-Dec)

Q4(Jan-Mar)

FY19 Q1(Apr-Jun)

Q2(Jul-Sep)

Q3(Oct-Dec)

Revenue

158.6

155.9

152.5

154.8

162.9

Gross Profit

87.6

84.3

85.2

86.3

87.2

(55.2%)(54.1%)(55.8%)(55.8%)(53.5%)

45.0

46.7

44.5

45.1

47.2

(28.4%)(29.9%)(29.2%)(29.1%)(29.0%)

R&D Expenses

12.3

11.6

11.8

12.5

12.7

(7.7%)(7.5%)(7.8%)(8.1%)(7.8%)

Other Incomeand Expenses

0.6

2.1

0.4

1.3-0.2

Operating Profit

30.9

28.2

29.2

30.0

27.1

(19.5%)(18.1%)(19.1%)(19.4%)(16.6%)

35.9

30.9

33.9

33.1

31.4

(22.6%)(19.9%)(22.3%)(21.4%)(19.3%)USD

113 JPY

110 JPY

110 JPY

107 JPY

109 JPY

EUR

129 JPY

125 JPY

123 JPY

119 JPY

120 JPY

SG&A Expenses

Adjusted
Operating Profit
Average
ExchangeRates

16/22

Adjusted Operating Profit : Adjustments(billion JPY)

FY18 Q3YTDFY19 Q3YTD

Operating profit

78.5

86.3

Adjustment 1. Amortization of acquired
intangible assets+11.0+11.9

Adjustment 2. Non-recurring profit or loss

+1.7+0.3*

Adjusted operating profit

91.2

98.4

<General examples of adjustment items>
 Acquisition related cost  Nonlife insuranceincome Lawsuit settlement
 Loss on disaster Impairment loss Other one-time Restructuring loss
profits & losses* FY19 Q3YTD main items inAdjustment 2. Non-recurring profit or loss

AmountBusiness reorganization cost

+1.1

Disaster insurance income for Puerto Ricofactory-1.2

Others

+0.4

17/22

CAPEX and R&D Expenses
Amortization ofacquired
intangible assets
and goodwill
45.4
39.1

Amortizationof acquired
intangible
60.8
assets43.6 42.0

63.1

44.0
34.9

20.8

14.5

24.6

27.6

14.6
11.8

CAPEX
29.4

CAPEX = C.i.P. record basis

Depreciation
33.6

23.1

(billion JPY)  Expand investment in
75.0
production capacity andspace as well as IT in FY19
 Under IFRS since FY17
 Depreciation includes
49.0
amortization of nonacquired intangible
14.7
assets & depreciation ofcapitalized R&Dexpenses
 Lease depreciation(IFRS16) is not included in34.3
FY19 result / guidance

41.3

50.0

47.7
37.0

R&DExpenses
FY16

FY17

FY18

FY19 Q3YTDFY19Guidance

JGAAP <- -> IFRS Further promote R&D
activities mainly for TIS,
Neurovascular and BloodManagement Company
 Capitalized R&D expenses
are included in CAPEX
FY18: 2.4
FY19 Q3YTD : 3.4
FY19 guidance : 4.5
18/22

Cash Flows
Operating CF+73.3

Investing & Financing CF-83.3(billion JPY)

22.7
38.2
Incometaxes
Depreciationandamortization

85.5

27.7
Working
capitalincrease

63.1CAPEX

123.0

Cash at theend of FY18

Profitbeforetax

20.5
Dividends

CAPEX = C.i.P. record basis
Cash at the end of each period is equal to “cash and cash equivalents” on B/S

Others0.3

113.0

Cash at theend of FY19 Q3
19/22

Foreign Exchange Sensitivity
Annual impact of 1 JPY depreciation(billion JPY)

USD

EUR

CNY

Revenue

1.7

0.8

2.4

Adjusted Operating
Profit

0.0

0.5

1.3

<Reference> Impact when JPY is depreciated by 10%North
Latin
America America

AdjustedOperating
Profit-0.1

1.0

EMEA

Asia

EUR

OthersCNY

Others

6.5

1.3

2.0

3.6

20/22

The Status of Convertible Bonds
 Detail of the bonds (issued in Dec. 2014)*After two-for-one stock split implemented in Apr. 2019

Maturity

Aggregateprincipal amount(billion JPY)

Dec. 2019

50.0

0.0%

1,919

2,495

approx. 26 M sharesDec. 2021

50.0

0.0%

1,919

2,495

approx. 26 M shares

Total

100.0

CouponConversion price(JPY)

Contingent
conversion trigger
price (JPY)

Number of sharesrequired to be issued
for conversion

approx. 52 M shares Status of conversion (as of Jan. 31, 2020)
Bonds

Amount of shares issued for conversion

Number of shares issued for conversion(% against the total amount of bond)(% against total number of issued shares)

Convertible Bonds
due Dec. 201950.0 B JPY (100.0%)

26 M shares (3.4%)

Convertible Bonds
due Dec. 2021

42.5 B JPY (85.0%)

22 M shares (2.9%)

Total

92.5 B JPY (92.5%)

48 M shares (6.3%)

Allocated treasury shares to the shares issued for conversion•Status of treasury shares: 7 M shares(at the end of Jan. 2020, treasury stock cost per share : 1,949 JPY, % against total number of issued shares : 1.0%)

21/22

IR ContactTerumo Corporation
Corporate Communication (IR) Dept.

E-mail: kouhou_terumo01@terumo.co.jp

Among the information that Terumo discloses, the forward-looking statements including financial
projections are based upon our assumptions using information available to us at the time and are notintended to be guarantees of future events or performance. Accordingly, it should be noted that actual
results may differ from those forecasts on projections due to various factors. Factors affecting to actualresults include, but are not limited to, changes in economic conditions surrounding Terumo, fluctuationsof foreign exchange rates, and state of competition.
The market share information in this presentation is partly derived from our own independent research.

22/22