Presentation of Fiscal 2006 First Half Results. Akira Uehara, President Taisho Pharmaceutical November 10, 2006

Size: px
Start display at page:

Download "Presentation of Fiscal 2006 First Half Results. Akira Uehara, President Taisho Pharmaceutical November 10, 2006"

Transcription

1 Presentation of Fiscal 2006 First Half Results Akira Uehara, President Taisho Pharmaceutical November 10, 2006

2 Background to Downward Revision in October 2006 The business environment surrounding OTC drugs has worsened further Many specialist OTC drug manufacturers and major drugstores are struggling Mainstay brands are struggling Lipovitan series Sales of drinks overall slumped due to inclement weather Intensification of price competition, and time required for clearance of distributors inventories, especially in food-oriented channels Intensification of competition with functional drinks and other products RiUP series Lateness in developing new users Intensification of price competition Taisho s marketing organization was restructured in April 2006, but it took more time than initially assumed to get the new organization underway

3 Summary of FY2006 First Half Results (consolidated) (Billions of yen) 1H/FY06 results YOY growth Vs. forecast* Net sales % -7.5 Operating income Recurring income % % -5.6 Net income % -3.2 EPS (Yen) (*previous forecast announced in July)

4 Factors Driving Net Sales Growth and Decline Product/Brand Lipovitan series Pabron series RiUP series YOY ( bn) -8.0 Inclement weather, market contraction, distributors inventories 0 Summer colds (hay fever-related colds impacted negatively) -1.6 Failed to develop new users Other OTC drugs -0.1 Healthy sales of Colac and other products Livita series +0.1 Taisho Toyama % due to drug price revisions; contribution of 0.2 billion from Clarith Royalty -1.7 Expiration of clarithromycin patent in the U.S. Intermediate products, etc Decline in pharmaceutical intermediates for Abbott Japan

5 Factors of Profit Change YOY ( bn) Sales Self-Medication -9.2 CoGS ratio rose due to sales of mainstay Self-Medication products slumped, royalty income declined and drug price revisions Rx Pharmaceutical -3.2 CoGS -0.7 SG&A expenses -0.8 Operating income R&D expenses: up 0.7bn Sales promotion: up 0.9bn (Brought forward Taisho Toyama s sales promotion expenses) Advertising expenses: down 0.7bn Personnel expenses: down 0.4bn Non-operating items: Slight improvement Extraordinary items: Profit on sales of fixed assets of 4.2 billion

6 FY2006 Full-Year Forecasts (consolidated) (Billions of yen) FY2006E YOY change (%) Sales % Self-Medication % Rx pharmaceutical % Operating income % Recurring income % Net income % Sales of Taisho Toyama %

7 Self-Medication: New Products Contribution of new products to first-half businesses results was small, but products launched in 2nd quarter will contribute to second-half results Aojiru (green juice) sold only by mail order are off to a steady start <1 st quarter> Naron Ace Plus DENTWELL III [medicated] VC Nourish BB Drink (mail order) <3 rd quarter> Livita Q10 cream/tablets ZENA series Pabron (rhinitis) and others <2 nd quarter> Lipovitan D Maxio (CVS) Karada Kankyo Aojiru (green juice; mail order) VICKS Medicated Drops - plum flavor Pabron 365 (hand jell and throat spray) Lipovitan 11 NEW <4 th quarter> Livita (soy sauce for reduced-sodium diets, Naturalcare drink type) Lipovitan series (a few items) IRIS (eye drops) and others

8 Prescription Pharmaceutical Business: R&D New Drug Pipeline Licensing-in from other companies proceeding: pipeline being strengthened Chugai Pharmaceutical: CT-064 (Antiresorptive bisphosphonate) Tokuhon Corporation: TT-063 (Anti-inflammatory analgesic patch containing S-flurbiprofen) Development of Taisho original products progressing as planned (No changes from previous announcements) R&D expenses: Forecasts were raised because number of licensed products has increased (Increase of 4.0 billion for total with Self-Medication products: fiscal 2006 full-year forecast is 27.5 billion, comprising 11% of net sales)

9 Trend of R&D Expenses (include Self-Medication Business) R&D expenses are increasing due to increase in licensed products and ongoing development of Taisho original products Current level will continue in next fiscal period ( bn) E 2007E (Fiscal year)

10 Prescription Pharmaceutical: New Drug Pipeline New Drug Pipeline (As of November 9, 2006) Stage Name Formulation Application Development with Originator Remarks Filed T-3811 Oral New-type quinolone antibacterial agent Toyama Chemical Toyama Chemical Clarith Oral H. pylori eradication in combination with Eisai, Taisho Change of dosage rabeprazole and amoxycillin Abbott Japan, etc. and administration Phase 2/3 CT-064 Injection Osteoporosis Chugai Pharmaceutical Roche Phase 2 NT-702 Oral Intermittent claudication Nissan Chemical Nissan Chemical caused by ASO*, SCS* (NM-702) (Oral) (Intermittent claudication (Nissan Chemical) (Nissan Chemical) (Overseas) caused by ASO*) TT-063 Topical Osteoarthritis, scapulohumeral periarthritis, Tokuhon Tokuhon myalgia and other conditions CT-064 Oral Osteoporosis Chugai Pharmaceutical Roche NT-702 Oral Asthma Nissan Chemical Nissan Chemical TS-033 Oral Type 1&2 diabetes In-house Taisho In Japan and Overseas TS-022 Topical Atopic dermatitis In-house Taisho Palux Injection Intermittent claudication In-house Taisho/Mitsubishi Pharma Additional indication caused by SCS* Phase 1 TS-041 Oral Depression and Anxiety Janssen Taisho Overseas TS-011 Injection Cerebral infarction (acute) In-house Taisho Overseas TS-021 Oral Type 2 diabetes In-house Taisho In Japan and Overseas * ASO: Arteriosclerosis obliterans * SCS: Spinal canal stenosis

11 Returning Profits to Shareholders Taisho will repurchase up to 8,500,000 shares of treasury stock by May 2007 Repurchased 2,034,000 shares of treasury stock on the open market in October 2006 Dividends Guideline for dividend payout ratio is 30% (non-consolidated results: excluding extraordinary gain) For the current fiscal year, Taisho plans to pay dividends of 27 per share Dividends per share E (Fiscal year)

12 Medium-term Business Targets

13 Medium-term Business Targets For the next few years, net sales are projected to decline slightly or remain level, and then rise. Taisho aims to achieve record net sales for fiscal 2012, the 100th anniversary of Taisho's founding. Taisho anticipates an upturn in recurring income in line with the projected rise in net sales, although some decreases may ensue over the next several fiscal periods due to R&D expenses for the licensing-in of products and other purposes. ( Bn) 100th anniversary Over 290bn *Historical high 286.4bn(FY03) Net sales 100 About 15% of net sales E Recurring income 2012E (Fiscal year)

14 Self-Medication Business: Market Environment Causes of worsening market environment: Overall sluggishness in drink product sales due to inclement weather Increasing burden being placed on manufacturers due to intensifying retail price competition OTC drugs for better health conditions (i.e. vitamins) are losing out in the market to functional foods

15 Self-Medication Business: Mid-term Target ( bn) RiUP series Pabron series 100th anniversary Over 180bn New categories Mail order business 100 Lipovitan series 50 Other OTC drugs E 2009 Revision of OTC drug sales system 2012E (Fiscal year)

16 Self-Medication Business Overview Existing categories (OTC drugs and quasi-drugs): Market will maintain current level or contract OTC drugs/quasi-drugs for healthcare (nutrient drinks): Development also being eyed for functional drinks OTC drugs for treatment (existing brands): Expand market share by licensing active ingredients for RX-to-OTC switching, leading to slight increase in sales size New categories and new businesses: Expand sales Development of materials Switch-OTC drugs, Western herbs, etc. Functional foods, Foods for Specified Health Use, etc. Development of new efficacies For metabolic syndrome, anti-aging, etc. Development and acquisition development of preventive and healthcare efficacies Open up new sales channels Mail order sales, Internet sales, etc. Develop sales channels other than pharmacies and drugstores Information of OTC drugs for consumers: easy-to-understand expressions that describe effectiveness, etc. i.e. Easing of advertising standards for OTC drugs

17 Self-Medication Business: Mid-term Plans Increase factors Promotion of new businesses New brands of Foods for Specified Health Use and other health food products Drinks, supplements, etc. Mail order business (direct sales) Green juices, new products targeting metabolic syndrome Expansion of new efficacy domains Switch-OTC drugs (drugs to aid smoking cessation, etc.), Western herbs Existing fields New organizational unit for promotion: Self-Medication New Business Development Section established (November 9, 2006) Pabron: Slight increase by introducing new Rx-to-OTC switch active ingredients, etc. RiUP: Slight increase by introducing combination/high-concentration products, etc. Decrease factors, etc. Lipovitan series: The series will level out as the problem of food-distribution inventories has been cleared up Increase efficiency by focusing on existing products (currently around 500 items) R&D Strengthen Health & Beauty research functions <Note: Market changes accompanying the reform of OTC drug distribution routes have not been included>

18 Prescription Pharmaceutical Business: Mid-term Target For the next few years, net sales are projected to continue to decline. However, sales are projected to rise from fiscal 2009 because new drugs come onto the market; T-3811, licensed products, and products developed by Taisho and Toyama. 100th anniversary ( Bn) Over 110bn New drugs from Taisho Sales of Taisho Toyama 80.0 Existing products (Taisho) Licensed products New drugs from Toyama T-3811 Existing products (Toyama) E Taisho (intermediate products, etc.) 2012E (Fiscal year)

19 Prescription Pharmaceutical Business: Mid-term Target Increase factors Products jointly developed by Taisho and Toyama Chemical--- 1 T-3811 (new type quinolone synthetic antibacterial agent): filed for NDA Products developed by Toyama Chemical--- 2 T-614 (antirheumatic agent): filed for NDA YP-18 (beta-lactamase inhibitor combination antibiotic): filing scheduled for fiscal 2007 Taisho-licensed products--- 3 <Drugs in orthopedic therapeutic area> CT-064 (osteoporosis drugs): Phase 2/3 (9/2006 contract) TT-063 (anti-inflammatory analgesic patch): Phase 2 (9/2006 contract) <Drugs to strengthen current sales domain of Palux> NT-702 (arteriosclerosis obliterans drugs): Phase 2 (9/2002 contract) Taisho-developed products--- 4 TS-033 (diabetes drug): Phase 2

20 Prescription Pharmaceutical Business: Mid-term Target Decrease factors Drug price revisions for existing products Extend the life cycles of mainstay products (Clarith decrease is only due to drug price revision) Taisho's R&D Increase in R&D costs due to one-off payments for licensed product contracts and joint development expenses Focus on progress to clinical stage of proprietary materials

21 Where Taisho is Headed Self-Medication and prescription drugs as two businesses that work in tandem to drive growth Self-Medication Operation Group Prescription Pharmaceutical Operation Group Taisho Toyama Pharmaceutical Health promotion Disease prevention Treatment Taisho is a pharmaceutical company capable of total coveragefrom health promotion and disease prevention through to treatment