fy2017, ending march 2018, h1...

November, 2017

FY2017, ending March 2018,

H1 Presentation

2019

FY2017 H1 Overview

Copyright 2016 Nichi-Iko Pharmaceutical Co., Ltd. P,1

Sales

Operating Profit

Quarterly Net Profit

94.2 4.9 2.4

(+) Contribution of Sagent’s performance (-) Slow down in domestic GE market growth (-) Decrease in revenue from long listed products and others

(+) Sagent’s highly profitable products contribution (+) Progress of the Profit Management Plan (-) Impact of a slow down in domestic market

(-) 2.9 billion yen of impairment loss related to intangible assets of Sagent

19 consecutive FYs of increase in revenues for each H1 (The largest increase achieved this year)

Despite a slow down in Japanese market growth, Sagent sustained a stable result from Q1

（the same pd. last year : 75.1 bn yen）

（the same pd. last year : 2.1 bn yen）

（the same pd. last year : 4 bn yen）

FY2017 Financial Results by Segments


Japan （MM yen）

Consolidated （MM yen）

Overseas （MM yen）

Adjustment （MM yen）

FY2016 H1

FY2017 H1 YOY FY2016

H1 FY2017

H1 YOY FY2016 H1

FY2017 H1

FY2017 H1 YOY

Sales 75,151 75,424 100.4% - 18,873 - - 75,151 94,297 125.5%

COGS 47,870 48,922 102.2% - 13,298 - - 47,870 62,221 130.0%vs Sales 63.7% 64.9% 70.5% 63.7% 66.0%

Gross Profit 27,289 26,340 96.5% - 5,574 - - 27,289 31,914 116.9%vs Sales 36.3% 34.9% 29.5% 36.3% 33.8%

SG&A 23,249 22,905 98.5% - 4,092 -

△

6 23,249 26,992 116.1%vs Sales 30.9% 30.4% 21.7% 30.9% 28.6%

R&D expense 3,516 3,008 85.6% - 858 - - 3,516 3,866 110.0%

Sales Promotion 10,008 10,460 104.5% - 179 - - 10,008 10,639 106.3%

Lobor expense 3,137 3,235 103.1% - 1,910 - - 3,137 5,145 164.0%

Depreciation 486 579 119.1% - 207 - - 486 786 161.7%

Amortization 86 1,076 1251.2% - 0 - - 86 1,076 1251.2%

Other 6,016 4,547 75.6% - 938 -

△

6 6,016 5,480 91.1%

Operating Profit 4,039 3,434 85.0% - 1,481 - 6 4,039 4,922 121.9%vs Sales 5.4% 4.6% 7.8% 5.4% 5.2%

Revenue change and impact factors analysis

Copyright 2016 Nichi-Iko Pharmaceutical Co., Ltd.

75,151

94,297

（Unit：MM yen）

P,3

FY2016 H1

FY2017 H1

Sagent

Other (Japan)

LLP

GE

△722

+18,873

+1,635

△640

Operating Income change and impact factors analysis

Copyright 2016 Nichi-Iko Pharmaceutical Co., Ltd.

△350

+367

4,039

4,922

+4,625

（Unit：MM yen）

P,4

△1,120

△2,008

FY2016 H1

Gross Profit increase

Labor expense increase

Sales promotion increase

R&D expense increase

Sagent Depreciation & Amortization FY2017 H1

Other SG&A

△631

Market Conditions and Progress of Pipeline Developments


FY2017 FY2018 FY2019 Total # of Launches *parenthesis: # of launched products

14 (8)* 17 12 43

FDA Accelerating

Approvals

Market attracting

more competitors

GPO

consolidation

• In 2016, ANDA approvals increased by 35% vs 2015

• FDA accelerating approvals of products with limited

competition

• Low cost Indian companies are building commercial

capabilities

• Greater number of competitors in 1 product

• 4 players control market access

• Greater number of products contracted on “private

label”

1. Existing GE market facing greater

price declines

2. Erosion on products losing exclusivity

occurring more quickly

3. Low cost players erode price

U.S. Injectable Market

To survive the competitive market, even stronger pipeline profile is needed

The Market becoming even more competitive

To achieve faster and earlier approvals & cost efficiency in the developments, considering to relocate the development projects to Omega, our Canadian subsidiary

Extraordinary Loss △2.9bn yen

Reversal of Deferred +0.8bn yenImpact to Net profit △2.1bn yendue to impairment

Sagent Goodwill and Intangible Assets Impairment Test


In the 2Q of FY ending March 2018, Sagent was subject to goodwill and intangible assets impairment tests according to the US GAAP

Goodwill

Intangible assets

No impairment

IPR&D ¥2.9bn impairment

Deferred Tax Liabilities

¥0.8bn reversal due to decrease in fair value of

intangible assets

Net Income reduced by 2.1 bn yen attributable to the impairment

• Delayed approvals attributable to suppliers/partners

• Less bullish sales compared to the initial forecast. Intensifying competition.

• Patent related issues • Delayed responses to FDA

Factors for the impairment loss

Impacts on Net Income

（△$26.8m）

（+$7.2m）

（△$19.6m）

Fair Value reduced to 0 3 products $2.2m

Fair Value reduced partially 19 products $24.6m

Total 22 products $26.8m

Reversal of deferred tax liabilities

Trade Name under

Manufacturing and Marketing Authorization Holder Marketing and Distribution by

Nichi-Iko

Ayumi Yakuhan Pharmaceutical Co., Ltd.


Infliximab Biosimilar(BS) September 27, 2017

Approvals for Infliximab BS for I.V. 100mg “Nichi-Iko” and “Ayumi” (2 trade names)

（A Wholly-Owned subsidiary by Nichi-Iko）

Planned Launches in late Nov, 2017 Tagged with the partner having strength in Specialty area to maximize the sales opportunity


Progress of Biosimilar Development

Infliximab (Remicade®)

Currently in Phase3 aiming to obtain an Interchangeability approval, the first in the US market

Trastuzumab (Herceptin®)

FY2018/3：Planned to begin Phase1 in the US

FY2020/3：Planned to begin Phase 3 at global sites, which would be Japan, the US and Europe

Considering additional BS development partnering with Aprogen and/or other new partners

2021/3 Approval

(plan)

2019 application

Trastuzumab (Herceptin®) 2022/3

Approval (plan)

Infliximab (Remicade®)

Launch in 2017

JPN

USA

JPN

USA In 2020/3,

Commence the global Phase3

Phase3 In progress

Europe

Investment to SterRx


Company Name：SterRx, LLC Address：Plattsburgh NY, USA Area of Business：FDA compliant 503B Compound Drug manufacturing

September 2017 Sagent invested SterRx to become a 25％ share holder, making SterRx an equity method affiliate company

Compound Drug (CD) CDs are the drugs dispensed by pharmacists with

changes to the preparations such as drugs concentrations adjustments, exclusion of additives, and changes in formulation in order to meet special needs by individual patients. Current compounding practices in the US are generally limited to drugs for patients with difficulties pertaining to the formulation or other characteristics of marketed products. CD do not require a FDA approval for each product.

FDA regulation 503B

503B stipulates rules for CD manufacturers in order to run a mass production in FDA registered strictly cGMP compliant facilities and market as such produced CDs WITHOUT prescriptions to particular patients. The 503B compliant facilities can also produce shortage list drugs.

Market for the CD Current market size is approx. 3 to 4 bn USD

From 2015, the market’s annual grown rate has been 5.7％

The growth estimated to reach the size of 4.8 bn USD by 2021

Current competitors are mostly family owned size local companies

SterRx Strengths Acquired Wyeth（Current Pfizer）facility in 2013

Fully automated line, sterile environment secured Capability of vial, ophthalmic solution, bag, syringe

productions The largest capability among the US competitors（1.5 MM units/year）


Market in South East Asia

（出典）Business Monitor International Aug.2014

Total of the ASEAN 5 countries （Thailand, Vietnam, Philippine, Malaysia, Singapore)

Originator market size 483 bn yen

GE market size 724.5 bn yen

Nichi-Iko’s Approved products in the SEA market 6 products

Products Developments in place 60 products


Yield Rates improvement Reduction of lead time

Enhance procurement management

Optimize inventory management

Improved profitability by approx. 1.5 bn yen in H1 2018/3

Cost of Production

Productivity

‘Work Style’ reforms

Revisit operation processes

No overtime work

IT solution

The result exceeded the initial H1 target

Profit Management Plan 2019

Production Facilities（Automated Manufacturing System）


“Premium Quality” path for an Automated Manufacturing

Cost reduction Premium Quality

Stable supply

Changes in business environment

Concerns of securing human resources in

future Next Step

Challenges

Automation AI implementation

Strategy

21 bn Premium Quality tablets supply

(Planned to achieve the above production capability by FY2021/3）

Expected Results

Outsourcing

Shizuoka Plant Toyama Plant

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Consolidated Overseas Consolidated Overseas Consolidated Overseas

Sales 163,372 12,148 94,297 18,873 200,000 43,800 122.4%

Gross Profit 56,741 2,839 31,914 5,574 66,000 11,500 116.3%

SG&A 48,186 2,789 26,992 4,092 57,000 9,600 118.3%

Operating Profit 8,554 50 4,922 1,481 9,000 1,900 105.2%

Ordinary Profit 8,411 5,103 8,600 102.2%

Attributable to Parent 114.9%Quarterly Net Profit

4,788 2,449 5,500

FY2016 FY2017Full Year Actual H1 Actual Full Year Forecast

YOY

FY ending March 2018 Full Year Forecast


（Unit：MM yen）

No change to Net Income forecast

Annual Dividend (tentative)

30.0yen

CAPEX 11 bn yen

R&D 10 bn yen

D&A(incl. goodwill)

10.5 bn yen（initial plan） 10.6 bn yen（initial plan） 10.9 bn yen（initial plan）

11 bn yen

The information contained in this document is not intended as solicitation material for buying or

selling the company’s shares.

Earnings forecasts and other future forecasts contained herein have been made by the

company based on information available at the time the material was compiled and encompass

potential risks and uncertainties.

Accordingly, actual results may differ from forecasts for a variety of reasons.

The company and any other information sources for this document bear no responsibility for

damages or losses resulting from the use of this information.

Forward-Looking Statements

Contact information for any questions: Nichi-Iko Pharmaceutical Co., Ltd. Corporate Planning Office Phone: +81-76-442-7026 E-mail: [email protected]

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