(English Translation)
Consolidated Financial Results
for the Second Quarter of the Fiscal Year Ending March 31, 2023 (IFRS)

Company name: Nichi-Iko Pharmaceutical Co., Ltd.

November 14, 2022
Stock exchange listings:
Tokyo Stock Exchange(URL https://www.nichiiko.co.jp/)

Securities code: 4541
Representative: Yuichi Tamura
President and CEO
Contact:
Shuji Ishida
Tel: 076-432-2121
Board Member, Executive Vice
President
Scheduled date of filing of quarterly report:
November 14, 2022
Scheduled date of commencement of dividend payment:
Presentation of supplementary materials on quarterly financial results: Yes
Holding of quarterly financial presentation meeting:No(Note that all amounts have been rounded down to the nearest one million yen.)
1. Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending March 31,
2023 (From April 1, 2022 to September 30, 2022)(1)

Consolidated Results of Operations (cumulative)(Percentage figures represent changes from the same period of the previous fiscal year)
ProfitCore
Operating Profit before
attributable
Revenue
operating
Profitprofittax
to owners of
profitparentSecond quarter¥91,250-¥8,238-¥57,844-¥54,882-¥55,180-¥54,817
of fiscal year
millionmillionmillionmillionmillionmillionending March(6.2%)
(-%)
(-%)
(-%)
(-%)
(-%)
31, 2023
Second quarter¥85,931-¥8,790-¥14,026-¥13,626-¥14,760-¥14,593
of fiscal year
millionmillionmillionmillionmillionmillionended March 31,(-4.1%)
(-%)
(-%)
(-%)
(-%)
(-%)
2022
Total
Basic earnings
comprehensive
per share
incomeSecond quarterof fiscal year
ending March
31, 2023
Second quarterof fiscal year
ended March 31,
2022

Dilutedearnings per
share-¥49,179
million(-%)-¥778.12-¥778.12-¥14,006
million(-%)-¥224.30-¥224.30

(Note)Core operating profit is calculated by deducting gains and losses caused by extraordinary factors(extraordinary items) from operating profit.
(2)

Consolidated Financial Position
Ratio of total
equityEquity attributable
attributableto owners ofto owners ofparent per share
the parent tototal assets

Total assets

Total equity

Equityattributable toowners ofparent¥246,558
million-¥35,626
million-¥35,682
million-14.5%-¥506.38¥260,559
million¥13,773
million¥13,394
million

5.1%¥190.17

Second quarterof fiscal year
ending March
31, 2023
Fiscal year
ended March 31,
2022
2. Dividends

Annual dividends per share

Fiscal year ended
March 31, 2022
Fiscal year ending
March 31, 2023
Fiscal year ending
March 31, 2023
(forecast)First quarter

Second quarter

Third quarter

Year-end

Total

¥-

¥0.00

¥-

¥0.00

¥0.00

¥-

¥0.00
¥-

¥0.00

¥0.00

(Note)
Revisions to recently announced dividends forecast: None
3. Forecast of Consolidated Financial Results for the Fiscal Year Ending March 31, 2023 (FromApril 1, 2022 to March 31, 2023)
On May 13, 2022, the Company formally applied for a specified certified dispute resolution procedure(the “Business Turnaround ADR”) under the Act on Strengthening Industrial Competitiveness, and thiswas accepted on the same day. In the course of the procedure, we are proceeding with consultations
with the relevant companies. Therefore, the consolidated earnings forecast for the fiscal year ending
March 31, 2023 is yet to be determined.

*Notes(1) Changes in significant subsidiaries during the consolidated cumulative quarter under review(changes in specified subsidiaries resulting in change in scope of consolidation): No(2) Changes in accounting policies and changes in accounting estimates(i)

Changes in accounting policies required by IFRS:

No

(ii)

Changes in accounting policies due to other reasons:No(iii) Changes in accounting estimates:

No(3) Total number of issued shares (common stock)(i)

Total number of issued shares as of the end of the period (including treasury shares):
As of September 30, 2022
71,382,652 shares
As of March 31, 2022
71,382,652 shares(ii)

Number of treasury shares as of the end of the period:
As of September 30, 2022
916,293 shares
As of March 31, 2022
948,131 shares(iii) Average number of shares during the period (cumulative quarter):
Second quarter of fiscal year ending March 31, 2023
70,449,168 shares
Second quarter of fiscal year ended March 31, 2022
65,061,333 shares* Quarterly financial results reports are exempt from quarterly reviews conducted by certified
public accountants or an audit corporation.
* Explanation on the appropriate usage of forecast of financial results, and other specific matters(Considerations on forward-looking statements)
The forward-looking statements including forecast of financial results contained in these materials
are based on the information currently available to the Company and certain assumptions which are
regarded as legitimate. As such, they do not constitute the Company’s guarantee that such results
would be achieved. Actual business and other results may differ substantially from the forecasts
provided in these materials as a result of various factors.
(How to obtain supplementary materials for financial results)
Supplementary materials for financial results will be provided on the website of the Company on
Monday, November 14, 2022.

Attachment – Contents
1. Qualitative Information on Financial Results for the Quarter under Review ........................................ 2(1) Explanation on Operating Results ................................................................................................... 2(2) Explanation on Financial Position ................................................................................................... 4(3) Explanation of Forecast of Consolidated Financial Results and Other Forward-looking
Statements ........................................................................................................................................ 5
2. Condensed Quarterly Consolidated Financial Statements and Primary Notes ...................................... 6(1) Condensed Quarterly Consolidated Statement of Financial Position .............................................. 6(2) Condensed Quarterly Consolidated Statement of Income and Condensed Quarterly
Consolidated Statement of Comprehensive Income ........................................................................ 8(3) Condensed Quarterly Consolidated Statement of Changes in Equity ........................................... 10(4) Condensed Quarterly Consolidated Statement of Cash Flows ...................................................... 14(5) Notes to Condensed Quarterly Consolidated Financial Statements .............................................. 16(Notes on premise of going concern) ........................................................................................... 16(Segment information).................................................................................................................. 18
3. Other..................................................................................................................................................... 23

-1-

1.

Qualitative Information on Financial Results for the Quarter under Review(1)

Explanation on Operating Results
In the cumulative second quarter under review, the Japanese economy progressed towardnormalization of economic activity as COVID-19 settled overall despite the expansion of theseventh wave, but the outlook is uncertain due to the prolongation of the Ukraine situation and the
upward pressure on prices caused by the rapid devaluation of the yen.
In the generic drug industry, in addition to the NHI drug price revision at the start of the fiscal year,
further enhancement of steps to address issues in quality and stable supply continues to be required,
and there is also a strong need to strengthen profitability and also strengthen the safe, secure andstable production and supply system.
As stated in the press release entitled “Notice Regarding Recording of Impairment Loss” dated
November 8, 2022 and the press release entitled “(Progress of Disclosed Matter) Notice Regarding
Recording of Impairment Loss” dated November 14, 2022, the Company had liability in excess ofassets at the end of the second quarter of the current fiscal year, but in addition to steadily taking
steps aimed at improvement of performance, the Company is proceeding to hold discussions with
relevant companies with the aim of formulating a business turnaround plan in an effort to achievea business turnaround, continue business and improve the financial position under the businessturnaround utilizing the specified certified dispute resolution procedure (the “Business Turnaround
ADR”) under the Act on Strengthening Industrial Competitiveness, for which a formal application
was filed in May 13, 2022.

A. Results by segment(in millions of yen)

RevenueCore operating profit

Nichi-Iko Group
SecondSecondquarter ofquarter offiscal year
fiscal year
ended March ending March
31, 2022
31, 2023
65,61469,548-8,137-4,841

Change+3,934+3,296

Sagent Group
SecondSecondquarter ofquarter offiscal year
fiscal year
ended March ending March
31, 2022
31, 2023
20,316
21,755-652-3,397

Change+1,438-2,745(Notes)1.
The two segments are the “Nichi-Iko Group” and the “Sagent Group,” with the “Sagent
Group” being made up of Sagent Pharmaceuticals, Inc. and its consolidated subsidiaries,
and the “Nichi-Iko Group” being made up of companies excluding the “Sagent Group.”2.
The Group has adopted “core operating profit” as an indicator representing ordinary
profitability, and has also adopted “core operating profit” for segment profit. “Coreoperating profit” is calculated by deducting gains and losses caused by extraordinary factors
from operating profit, and extraordinary factors are also excluded from revenue.
(i) Nichi-Iko GroupIn the Nichi-Iko Group, efforts are being made to improve and enhance manufacturing and quality
control systems, in addition to increasing the production volume and shipment quantity while
ensuring quality at Toyama Plant 1, and although it is taking longer than originally expected toresume some shipments mainly due to the stringent quality checks and other measures, we aremaking company-wide efforts to expand these shipments as quickly as possible.
-2-

Results in the Nichi-Iko Group during the cumulative second quarter of the current fiscal year
showed revenue of 69,548 million yen (an increase of 3,934 million yen year-on-year) and segment
loss of 4,841 million yen, an improvement of 3,296 million yen year-on-year, due in part to anincrease in sales volume and the effects of measures ensuring appropriate inventories and use of
expenses despite a fall in sale prices caused by the drug price revision.
(ii) Sagent GroupIn Sagent Group, as a result of impairment testing performed based on the decline in businessconditions during the cumulative second quarter of the current fiscal year and future business
operations in the US market, we recorded significant impairment loss of 47,417 million yen during
the cumulative second quarter of the current fiscal year on fixed assets including goodwill held by
Sagent Group.
Results in Sagent Group during the cumulative second quarter of the current fiscal year showedrevenue of 21,755 million yen (an increase of 1,438 million yen year-on-year) due to a significant
weakening of the yen, but a segment loss of 3,397 million yen (a deterioration of 2,745 million yen
year-on-year) due mainly to the delay in resumption from suspension of plant operation amid thereview of production facilities at SterRx, production volume being lower than anticipated at theRaleigh Plant and the delay of deliveries from manufacturing subcontractors.
B. Group Results(in millions of yen)
RevenueCore operating profit
Operating profit
Profit before tax
Profit attributable to owners of parent
Diluted earnings per share

Second quarter offiscal year ended
March 31, 2022
85,931- 8,790-14,026-13,626-14,593-¥224.30

Second quarter offiscal year ending
March 31, 2023
91,250-8,238-57,844-54,882-54,817-¥778.12

Change+5,319+551-43,818-41,256-40,224-¥553.82(Note)The Group has adopted “core operating profit” as an indicator representing ordinary profitability.
“Core operating profit” is calculated by deducting gains and losses caused by extraordinary
factors from operating profit.
Revenue increased by 5,319 million yen year-on-year due mainly to an increase in the sales volumeof the Nichi-Iko Group and the impact of the weak yen in the Sagent Group.
Core operating profit improved by 551 million yen year-on-year due to improvement in the NichiIko Group despite a deterioration in the Sagent Group.
Operating profit deteriorated by 43,818 million yen due to the recording of impairment loss on
fixed assets including goodwill in the Sagent Group, and the recording of 1,239 million yen in
impairment loss on development costs and 823 million yen in business restructuring expenses in
the Nichi-Iko Group.
Profit before tax deteriorated by 41,256 million yen year-on-year and profit attributable to ownersof parent deteriorated by 40,224 million yen year-on-year due to factors such as the recording of
foreign exchange gains resulting from the depreciation of the yen.
-3-

(Impact from COVID-19)
The Group is endeavoring to prevent the spread of COVID-19 among all employees throughmeasures such as working at home, staggered working hours and dispersing of work areas per eachdepartment.
With regard to the impact on results, although there were some negative impacts on sales due torestraint on examinations, selective surgeries and restrictions on business activities, there were also
positive aspects such as increase in sales of products related to COVID-19. As such, there has beenno significant impact on results to date.
(2)

Explanation on Financial Position(i) Assets, Liabilities and Equity
Assets on a consolidated basis at the end of the second quarter of the current fiscal year decreasedby 14,001 million yen from the previous fiscal year-end to 246,558 million yen. The main factors
were as follows.

Trade and other receivables
Inventories
Goodwill
Intangible assets

Increase (decrease)
Main factors(in millions of yen)
+31,732
Decrease in liquidation of receivables
Review of inventories to an appropriate-8,618level-18,479
Recording of impairment loss
-17,442
Recording of impairment loss

Liabilities on a consolidated basis at the end of the second quarter of the current fiscal year
increased by 35,398 million yen from the previous fiscal year-end to 282,184 million yen. The
main factors were as follows.
Increase (decrease)(in millions of yen)
Trade and other payables-7,472

Borrowings
Other financial liabilities+38,314+5,549Main factors
Decrease in trade payables associatedwith review of inventories to an
appropriate level
Procurement of working capital
Increase in lease liabilities

Equity on a consolidated basis at the end of the second quarter of the current fiscal year decreasedby 49,400 million yen from the previous fiscal year-end to -35,626 million yen. The main factors
were as follows.

Retained earnings
Other components of equity

Increase (decrease)
Main factors(in millions of yen)
-55,058
Recording of loss
Increase in exchange differences ontranslation of foreign operations due to+5,909yen depreciation and fair value
adjustments of shareholdings-4-

(ii) Consolidated Cash FlowsAt the end of the second quarter of the current fiscal year, cash and cash equivalents on aconsolidated basis decreased by 2,316 million yen from the previous fiscal year-end to 12,989
million yen.
Details of cash flows from each of the three activities for the cumulative second quarter of thecurrent fiscal year are described below.
(Cash flows from operating activities)
Net cash used in operating activities during the cumulative second quarter of the current fiscal year
amounted to 34,624 million yen mainly due to a decrease in trade receivables caused by a decreasein liquidation of receivables. The main factors were as follows.
Increase (decrease)(in millions of yen)
-54,882
48,702
10,956-31,230-8,481

Details
Recording of loss before tax
Recording of impairment loss
Decrease in inventories
Increase in trade and other receivables
Decrease in trade and other payables(Cash flows from investing activities)
Net cash used in investing activities during the cumulative second quarter of the current fiscal year
amounted to 2,439 million yen. The main factors were as follows.
Details
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from settlement of contingent considerations

Increase (decrease)(in millions of yen)
-1,843-1,957
1,053(Cash flows from financing activities)
Net cash provided by financing activities during the cumulative second quarter of the current fiscal
year amounted to 34,099 million yen. The main factor was as follows.
Increase (decrease)(in millions of yen)
35,724

Details
Net increase in borrowings(3)

Explanation of Forecast of Consolidated Financial Results and Other Forward-looking
Statements
On May 13, 2022, the Company formally applied for a specified certified dispute resolution
procedure (the “Business Turnaround ADR”) under the Act on Strengthening Industrial
Competitiveness, and this was accepted on the same day. In the course of the procedure, we areproceeding with consultations with the relevant companies. Therefore, the consolidated earnings
forecast for the fiscal year ending March 31, 2023 is yet to be determined.

-5-

2.

Condensed Quarterly Consolidated Financial Statements and Primary Notes(1)

Condensed Quarterly Consolidated Statement of Financial Position

Fiscal year ended
March 31, 2022
(as of March 31, 2022)
AssetsCurrent assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other current assets
Subtotal
Assets held for sale
Total current assets
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments accounted for using equity method
Other financial assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets-6-(in millions of yen)
Second quarter offiscal year ending
March 31, 2023
(as of September 30,
2022)

15,30538,60595,745425
5,309
155,391
155,391

12,98970,33887,127355
4,031
174,841
2,283
177,124

39,28918,47939,609
68
7,465
9
246
105,167
260,559

35,894
22,16768
11,067
6229
69,433
246,558

Fiscal year ended
March 31, 2022
(as of March 31, 2022)
Liabilities and equity
Liabilities
Current liabilities
Trade and other payables
Borrowings
Other financial liabilities
Income taxes payable
Refund liabilities
Contract liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Borrowings
Other financial liabilities
Retirement benefit liability
Provisions
Refund liabilities
Contract liabilities
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
EquityShare capital
Capital surplus
Other equity instruments
Treasury shares
Retained earnings
Other components of equity
Total equity attributable to owners of parent
Non-controlling interests
Total equity
Total liabilities and equity-7-(in millions of yen)
Second quarter offiscal year ending
March 31, 2023
(as of September 30,
2022)

48,12385,529
2,095
480
2,349
209
8,683
147,471

40,650129,138
2,629
1,241
2,311
213
6,372
182,556

77,102
8,396
1,190
79
58
1,363
10,160964
99,314
246,785

71,80813,411
1,223
61
59
1,283
10,685
1,093
99,627282,184

25,97524,511
9,918(2,124)(55,657)
10,77013,394379
13,773
260,559

25,97524,511
9,918(2,053)(110,715)
16,679(35,682)56(35,626)
246,558(2)Condensed Quarterly Consolidated Statement of Income and Condensed Quarterly Consolidated
Statement of Comprehensive Income(Condensed Quarterly Consolidated Statement of Income)(in millions of yen)
Second quarter ofprevious fiscal year
(from April 1, 2021 toSeptember 30, 2021)

Second quarter ofcurrent fiscal year
(from April 1, 2022 toSeptember 30, 2022)

85,931
85,07991,25099,078851(7,828)Selling, general and administrative expenses
Research and development expenses
Other operating income
Other operating expenses

13,483
1,819
751
327

13,7292,226
467
34,528Operating profit (loss)(14,026)(57,844)

628
427

4,371
1,409

199

-

Profit (loss) before tax
Income tax expense(13,626)
1,134(54,882)
297

Profit (loss)(14,760)(55,180)

Profit attributable to:
Owners of parent
Non-controlling interests(14,593)(167)(54,817)(362)(14,760)(55,180)(224.30)(224.30)(778.12)(778.12)

Revenue
Cost of sales
Gross profit (loss)

Finance income
Finance costs
Share of profit (loss) of investments accounted for using
equity method

Profit (loss)
Earnings per share
Basic earnings (loss) per share (Yen)
Diluted earnings (loss) per share (Yen)-8-

(Condensed Quarterly Consolidated Statement of Comprehensive Income)(in millions of yen)
Second quarter ofprevious fiscal year
(from April 1, 2021 toSeptember 30, 2021)

Second quarter ofcurrent fiscal year
(from April 1, 2022 toSeptember 30, 2022)(14,760)(55,180)

97

3,462

97

3,462

656

2,538

656

2,538

753

6,000

Comprehensive income(14,006)(49,179)

Comprehensive income attributable to:
Owners of parent
Non-controlling interests(13,848)(158)(48,856)(322)(14,006)(49,179)

Profit (loss)
Other comprehensive income
Items that will not be reclassified to profit or loss
Financial assets measured at fair value through othercomprehensive income
Total of items that will not be reclassified to profit orloss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Total of items that may be reclassified to profit or loss
Other comprehensive income (net of tax)

Comprehensive income

-9-

(3)

Condensed Quarterly Consolidated Statement of Changes in Equity
Second Quarter of Previous Fiscal Year (from April 1, 2021 to September 30, 2021)(in millions of yen)
Equity attributable to owners of parent
Other components ofequityBalance as of April 1,
2021
Profit (loss)
Other comprehensive
incomeTotal comprehensive
incomeIssuance of new shares
Direct issuance
expenses due toissuance of new shares
Distributions to ownersof other equity
instruments
Purchase of treasury
shares
Disposal of treasury
sharesTransfer of loss on
disposal of treasury
sharesExercise of shareacquisition rights
Forfeiture of shareacquisition rights
Dividends (Note)
Equity transactions
with non-controllinginterests and otherTransfer to capitalsurplus from retained
earnings
Transfer from othercomponents of equity
Total transactions
with owners
Balance as of
September 30, 2021

SharecapitalCapitalsurplus

Other
equityinstruments

TreasurysharesRetainedearnings

23,36021,896

9,918(2,267)50,822Financial
Exchange
assetsdifferences measured atonfair valuetranslation
throughof foreignotheroperations comprehensive income

6,526

669

648

97

648

97

(14,593)

-

-

2,615

2,615

-

-

(14,593)

(23)

(220)
(0)
(58)

133

58

(58)

(3)

8
39
(641)

(236)

263

(263)
1

(1)

2,615

2,615

-

142

(1,143)-(1)

25,97524,511

9,918(2,124)35,0847,174765- 10 -

Equity attributable to owners of parent
Other components ofequityTotal
Others
Total
Balance as of April 1,
2021
Profit (loss)
Other comprehensive
incomeTotal comprehensive
incomeIssuance of new shares
Direct issuance
expenses due toissuance of new shares
Distributions to ownersof other equity
instruments
Purchase of treasury
shares
Disposal of treasury
sharesTransfer of loss on
disposal of treasury
sharesExercise of shareacquisition rights
Forfeiture of shareacquisition rights

Dividends (Note)
Equity transactions
with non-controllinginterests and otherTransfer to capitalsurplus from retained
earnings
Transfer from othercomponents of equity
Total transactions
with owners
Balance as of
September 30, 2021

240

Noncontrollinginterests

Total

7,437

111,167

1,268

112,435-(14,593)(167)(14,760)

745

745

8

753

745

(13,848)(158)(14,006)

-

5,231

5,231

-

(23)

(23)

-

(220)

(220)

-

(0)

(0)

-

74

-

-

-

(5)

(5)

0

0

(39)

(39)

-

-

-

(641)

(641)

-

(236)

-

-

-

(1)

-

-

(44)

(46)

4,183

(274)

3,909

195

8,136

101,502835

102,337

-

74

(274)

(510)

(Note)
The amount of dividends does not include the amount of dividends to the Employee Shareholding
Incentive Plan.

- 11 -

Second Quarter of Current Fiscal Year (from April 1, 2022 to September 30, 2022)(in millions of yen)
Equity attributable to owners of parent
Other components ofequityBalance as of April 1,
2022
Profit (loss)
Other comprehensive
incomeTotal comprehensive
incomeDistributions to ownersof other equity
instruments
Purchase of treasury
sharesTransfer of loss on
disposal of treasury
sharesExercise of shareacquisition rights
Total transactions
with owners
Balance as of
September 30, 2022

SharecapitalCapitalsurplus

Other
equityinstruments

25,97524,511

9,918

TreasurysharesRetainedearnings(2,124)(55,657)

Financial
Exchange
assetsdifferences measured atonfair valuetranslation
throughof foreignotheroperations comprehensive income

11,714(1,139)

2,498

3,462

2,498

3,462

(54,817)

-

-

-

-

(54,817)
(220)

(0)
20

(20)

(20)

71

-

-

-

71

(240)

-

-

25,97524,511

9,918(2,053)(110,715)

14,212

2,322- 12 -

Equity attributable to owners of parent
Other components ofequityTotal
Others
Total
Balance as of April 1,
2022
Profit (loss)
Other comprehensive
incomeTotal comprehensive
incomeDistributions to ownersof other equity
instruments
Purchase of treasury
sharesTransfer of loss on
disposal of treasury
sharesExercise of shareacquisition rights
Total transactions
with owners
Balance as of
September 30, 2022

195

Noncontrollinginterests

Total

10,77013,394379

13,773-(54,817)(362)(55,180)

5,960

5,960

39

6,000

5,960

(48,856)(322)(49,179)

-

(220)

(220)

-

(0)

(0)

-

-

-

(51)

(51)

0

0

(51)

(51)

(220)

-

(220)

144

16,679(35,682)56(35,626)-- 13 -

(4)Condensed Quarterly Consolidated Statement of Cash Flows(in millions of yen)
Second quarter ofprevious fiscal year
(from April 1, 2021 toSeptember 30, 2021)

Second quarter ofcurrent fiscal year
(from April 1, 2022 toSeptember 30, 2022)(13,626)
6,171
212
(144)
301

(54,882)
5,138
48,702
(136)
928

(199)

-

(363)
6
2,425
(4,508)(8,796)(639)(1,060)600(3,556)(31,230)
10,956(8,481)(37)(1,529)717

Dividends received
Interest received
Interest paid
Income taxes paid
Income taxes refund(19,619)
76
1
(331)
(140)
154

(33,411)
46
1
(883)
(398)
20

Net cash provided by (used in) operating activities(19,859)(34,624)(2,090)(7,937)(1,843)(1,957)

2,500

-

(152)
(7,680)1,053
307(2,439)Cash flows from operating activities
Profit (loss) before tax
Depreciation and amortization
Impairment loss
Interest and dividend income
Interest expenses
Share of loss (profit) of investments accounted for using
equity method
Loss (gain) on sale of investments in associates
Foreign exchange losses (gains)
Decrease (increase) in trade and other receivables
Decrease (increase) in inventories
Increase (decrease) in trade and other payables
Increase (decrease) in refund liabilities
Increase (decrease) in deposits received
Other
Subtotal

Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from sale of investments accounted for using
equity method
Proceeds from settlement of contingent considerations
Other
Net cash provided by (used in) investing activities- 14 -

(in millions of yen)
Second quarter ofprevious fiscal year
(from April 1, 2021 toSeptember 30, 2021)

Second quarter ofcurrent fiscal year
(from April 1, 2022 toSeptember 30, 2022)

Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds from issuance of common shares
Proceeds from sale and leaseback transactions
Repayments of lease liabilities
Dividends paid
Distributions to owners of other equity instruments
Other

5,669
14,170(5,276)
5,207
5,641(1,106)
(641)
(220)
74

35,836(112)(1,268)
(2)
(220)
(133)

Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

23,517(154)

34,099648

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period(4,177)
29,142(2,316)15,305

Cash and cash equivalents at end of period

24,965

12,989- 15 -

(5)Notes to Condensed Quarterly Consolidated Financial Statements(Notes on premise of going concern)
Since April 2021, the Group has gradually resumed production and shipment while conducting
stringent quality control checks such as FMEA (Note) at Toyama Plant 1, but the plant has not yet
resumed shipments of some of the items scheduled for production. In addition, product sales havedeclined due to lower drug prices resulting from the drug price revisions and the stoppage of
production and shipments at manufacturing subcontractors. In order to improve this situation, we
have implemented various efforts in relation to products manufactured at Toyama Plant 1, theGroup’s main plant, with the aim of ensuring an appropriate production system and scale
optimization. These efforts include identifying products that are expected to take more time than
anticipated to resume manufacturing, integrating products into formulations with compounds ofthe same type and same effect, and reorganizing products for which improvement measures can be
implemented. As a result, we recorded a valuation loss on raw materials and work in progress, etc.
likely to be disposed of in the future. Furthermore, in the previous fiscal year we recorded an
operating loss of 110,051 million yen and a loss attributable to owners of parent of 104,984 million
yen. This was primarily due to factors such as the reconsideration of development investments thathave been underway up to now and the resulting impairment of goodwill at overseas subsidiaries
and impairment loss on domestic fixed assets due to the decline in earnings conditions in Japan.
In the cumulative second quarter of the current fiscal year, operating loss was 57,844 million yen
and loss attributable to owners of parent was 54,817 million yen due mainly to the fall in sale prices
resulting from the drug price revisions, the recording of impairment on development costs for
products that ceased to be developed, impairment of fixed assets including goodwill in the Sagent
Group associated with the review of future business operations in the US market, delays in theresumption of product shipments manufactured at Toyama Plant 1, and the impact of the suspensionof plant operation amid the review of production facilities at SterRx, resulting on liability in excess
of assets totaling 35,626 million yen at the end of the second quarter of the current fiscal year.
As a result of the above, there have been ongoing operating losses and losses attributable to ownersof parent leading to liability in excess of assets at the end of the second quarter of the current fiscal
year, and there are events or circumstances causing significant doubts about the premise of going
concern.
In order to resolve this situation, the Group will continue to gradually resume production andshipment of products manufactured at Toyama Plant 1, and continue its efforts to improve
profitability by promoting initiatives aimed at optimization of the production system throughout
the entire Group. In addition, we are taking steps to improve cash flow by reducing expenses,
curbing logistics costs and thoroughly implementing inventory and purchasing management on acompany-wide level. Furthermore, we are working to accelerate structural reforms with a view torecovering business performance after the current fiscal year, including reducing costs byimproving the efficiency of plant operations through optimization of manufacturing plants in Japanand overseas.
On the financial side, on May 13, 2022 the Company submitted a formal application for a Business
Turnaround ADR, which was accepted on the same day. In the first meeting of creditors held on
May 26, 2022 consent for temporary suspension was obtained from all financial institutions, andapproval was also received for the execution of financing based on the credit line established by
Sumitomo Mitsui Banking Corporation, which is the Company’s main bank. For this reason, thenecessary financial arrangements have been made. We will continue with discussions with therelevant companies concerning sponsor selection in the Business Turnaround ADR.

- 16 -

In light of these circumstances, we are currently in the process of implementing response measures
to resolve material doubts regarding the premise of going concern. We recognize that there arematerial uncertainties regarding the premise of going concern given that the Company’s cash flow
may be impacted significantly depending on future business progress, discussions with the above
financial institutions and related companies, etc., and the status of financing, etc.
Note that since the condensed quarterly consolidated financial statements are prepared based on
the premise of going concern, the impact of such material uncertainties on the premise of going
concern is not reflected in the condensed quarterly consolidated financial statements.
(Note)FMEA (Failure Mode and Effect Analysis) is a technique for assessing the risks inherent inproducts and processes primarily in the product design phase and the process design phase, andeliminating or mitigating such risks as much as possible. It is also recommended as a risk
evaluation method in ICHQ9, and is widely used in risk assessments of pharmaceuticalcompanies.

- 17 -

(Segment information)(1)

Reportable segments
The Group’s reportable segments are components of the business units of the Group forwhich discrete financial statements are available and evaluated regularly by the Board of
Directors in determining the allocation of management resources and assessing the segment’s
performance.
The Company’s pharmaceutical business is made up of two segments: the “Nichi-Iko Group“and the “Sagent Group.” The “Sagent Group” is made up of Sagent Pharmaceuticals, Inc.
and its consolidated subsidiaries. The “Nichi-Iko Group” is made up of companies excluding
the “Sagent Group.”
Revenue and segment profit of the reportable segments are as follows.

Second Quarter of Previous Fiscal Year (from April 1, 2021 to September 30, 2021)(in millions of yen)
Reportable segments
Nichi-IkoGroup
Revenue
External revenue
Inter-segment revenue
Total
Segment profit (loss)(Core operating profit)(Note)

SagentGroup

Adjustment

Consolidated

Total

65,61465,614

20,31618
20,33485,93018
85,948(18)(18)

85,93085,930(8,137)(652)(8,790)-(8,790)(Note)
Core operating profit excludes profits and losses caused by extraordinary factors from operating
profit, and extraordinary factors are also excluded from revenue.

Second Quarter of Current Fiscal Year (from April 1, 2022 to September 30, 2022)(in millions of yen)
Reportable segments
Nichi-IkoGroup
Revenue
External revenue
Inter-segment revenue
Total
Segment profit (loss)(Core operating profit)(Note)

SagentGroup

Adjustment

Consolidated

Total

69,54869,54821,75537
21,79291,30337
91,340(37)(37)

91,30391,303(4,841)(3,397)(8,238)-(8,238)(Note)
Core operating profit excludes profits and losses caused by extraordinary factors from operating
profit, and extraordinary factors are also excluded from revenue.

- 18 -

The difference between the total amounts for the reportable segments and the amount reported on
the condensed quarterly consolidated financial statements has been adjusted as follows.
(in millions of yen)

Total revenue
Provisions for returns in voluntary recall
Revenue on condensed quarterly consolidated financial
statements

Second quarter ofprevious fiscal year
(from April 1, 2021 toSeptember 30, 2021)
85,930(1)

Second quarter ofcurrent fiscal year
(from April 1, 2022 toSeptember 30, 2022)
91,30353

85,931

91,250(in millions of yen)Segment profit (loss)
Impairment loss on development costs
Goodwill impairment loss
Impairment loss on fixed assets
Loss on valuation of Infliximab(Reversal of) loss on valuation of inventory (Note)
Integration-related expenses
Voluntary recall expenses
Business restructuring expenses
Operating profit (loss)
Finance income
Finance costs
Share of profit (loss) of investments accounted forusing equity method
Profit (loss) before tax

Second quarter ofprevious fiscal year
(from April 1, 2021 toSeptember 30, 2021)(8,790)
212
4,837
24
161
(14,026)
628
427

Second quarter ofcurrent fiscal year
(from April 1, 2022 toSeptember 30, 2022)(8,238)
19,134
20,269
9,297
219
(459)
292
851
(57,844)
4,371
1,409

199

-

(13,626)(54,882)(Note)We recorded a valuation loss on raw materials and work in progress likely to be disposed of andits gain on reversal in future at Toyama Plant 1.

- 19 -

(2)Information about products and services
Revenue from each product and service is as follows.

Second Quarter of Previous Fiscal Year (from April 1, 2021 to September 30, 2021)(in millions of yen)
Nichi-Iko Group
Sales of merchandise and products
Treatments for paramedics
Treatments for circulatory system
Antibiotics
Treatments for blood and body fluid
Treatments for nervous system
Treatments for digestive system
Treatments for external use
Other metabolic pharmaceuticals
Other
Total

10,154
4,202
9,807
7,353
7,026
5,185
4,880
17,00465,614

Reportable segments
Sagent Group
9,658
5,544
5,113
20,316

Total
9,658
10,154
9,746
9,807
7,353
7,026
5,185
4,880
22,11885,930(Note)In the same manner as “core operating profit,” extraordinary factors are also excluded fromrevenue.
Second Quarter of Current Fiscal Year (from April 1, 2022 to September 30, 2022)(in millions of yen)
Nichi-Iko Group
Sales of merchandise and products
Treatments for paramedics
Treatments for circulatory system
Antibiotics
Treatments for blood and body fluid
Treatments for nervous system
Treatments for digestive system
Treatments for external use
Other metabolic pharmaceuticals
Other
Total

11,250
4,984
9,624
8,638
7,252
5,379
5,257
17,16069,548

Reportable segments
Sagent Group
12,8105,160
3,784
21,755

Total
12,810
11,25010,144
9,624
8,638
7,252
5,379
5,257
20,94491,303(Note)In the same manner as “core operating profit,” extraordinary factors are also excluded fromrevenue.

- 20 -

Second Quarter of Previous Fiscal Year (from April 1, 2021 to September 30, 2021)(in millions of yen)

Sales of merchandise and products
License agreement on sales of products, etc.
Total

Nichi-Iko Group
65,55459
65,614

Reportable segments
Sagent Group
20,316
20,316

Total
85,87059
85,930(Note)In the same manner as “core operating profit,” extraordinary factors are also excluded fromrevenue.
Second Quarter of Current Fiscal Year (from April 1, 2022 to September 30, 2022)(in millions of yen)

Sales of merchandise and products
License agreement on sales of products, etc.
Total

Nichi-Iko Group
69,438
109
69,548

Reportable segments
Sagent Group
21,75521,755

Total
91,193
109
91,303(Note)In the same manner as “core operating profit,” extraordinary factors are also excluded fromrevenue.

(3)

Information by geographical area
Revenue by geographical area is shown below.

Second Quarter of Previous Fiscal Year (from April 1, 2021 to September 30, 2021)(in millions of yen)Japan
United States
Other
Total

Nichi-Iko Group
65,453160
65,614

Reportable segments
Sagent Group
17,1893,126
20,316

Total
65,453
17,1893,287
85,930(Notes)1.
Revenue is based on the location of the destination of sales.
2.
In the same manner as “core operating profit,” extraordinary factors are also excluded fromrevenue.

- 21 -

Second Quarter of Current Fiscal Year (from April 1, 2022 to September 30, 2022)(in millions of yen)Japan
United States
Other
Total

Nichi-Iko Group
69,371
176
69,548

Reportable segments
Sagent Group
18,5503,204
21,755

Total
69,371
18,5503,380
91,303(Notes)1.
Revenue is based on the location of the destination of sales.
2.
In the same manner as “core operating profit,” extraordinary factors are also excluded fromrevenue.

- 22 -

3.

Other
Significant matters regarding the premise of going concern
Since April 2021, the Group has gradually resumed production and shipment while conducting
stringent quality control checks such as FMEA at Toyama Plant 1, but the plant has not yet
resumed shipments of some of the items scheduled for production. In addition, product sales havedeclined due to lower drug prices resulting from the drug price revisions and the stoppage of
production and shipments at manufacturing subcontractors. In order to improve this situation, we
have implemented various efforts in relation to products manufactured at Toyama Plant 1, theGroup’s main plant, with the aim of ensuring an appropriate production system and scale
optimization. These efforts include identifying products that are expected to take more time than
anticipated to resume manufacturing, integrating products into formulations with compounds ofthe same type and same effect, and reorganizing products for which improvement measures canbe implemented. As a result, we recorded a valuation loss on raw materials and work in progress,
etc. likely to be disposed of in the future. Furthermore, in the previous fiscal year we recorded an
operating loss of 110,051 million yen and a loss attributable to owners of parent of 104,984
million yen. This was primarily due to factors such as the reconsideration of development
investments that have been underway up to now and the resulting impairment of goodwill atoverseas subsidiaries and impairment loss on domestic fixed assets due to the decline in earnings
conditions in Japan.
In the cumulative second quarter of the current fiscal year, operating loss was 57,844 million yen
and loss attributable to owners of parent was 54,817 million yen due mainly to the fall in saleprices resulting from the drug price revisions, the recording of impairment on development costs
for products that ceased to be developed, impairment of fixed assets including goodwill in the
Sagent Group associated with the review of future business operations in the US market, delaysin the resumption of product shipments manufactured at Toyama Plant 1, and the impact of thesuspension of plant operation amid the review of production facilities at SterRx, resulting on
liability in excess of assets totaling 35,626 million yen at the end of the second quarter of thecurrent fiscal year.
As a result of the above, there have been ongoing operating losses and losses attributable toowners of parent leading to liability in excess of assets at the end of the second quarter of thecurrent fiscal year, and there are events or circumstances causing significant doubts about thepremise of going concern.
In order to resolve this situation, the Group will continue to gradually resume production andshipment of products manufactured at Toyama Plant 1, and continue its efforts to improve
profitability by promoting initiatives aimed at optimization of the production system throughout
the entire Group. In addition, we are taking steps to improve cash flow by reducing expenses,
curbing logistics costs and thoroughly implementing inventory and purchasing management on acompany-wide level. Furthermore, we are working to accelerate structural reforms with a view torecovering business performance after the current fiscal year, including reducing costs byimproving the efficiency of plant operations through optimization of manufacturing plants inJapan and overseas.
On the financial side, on May 13, 2022 the Company submitted a formal application for a
Business Turnaround ADR, which was accepted on the same day. In the first meeting of creditors
held on May 26, 2022 consent for temporary suspension was obtained from all financial
institutions, and approval was also received for the execution of financing based on the credit line
established by Sumitomo Mitsui Banking Corporation, which is the Company’s main bank. For
this reason, the necessary financial arrangements have been made. We will continue with- 23 -

discussions with the relevant companies concerning sponsor selection in the Business Turnaround
ADR.
In light of these circumstances, we are currently in the process of implementing response
measures to resolve material doubts regarding the premise of going concern. We recognize that
there are material uncertainties regarding the premise of going concern given that the Company’s
cash flow may be impacted significantly depending on future business progress, discussions withthe above financial institutions and related companies, etc., and the status of financing, etc.

- 24 -