Terumo Corp
TSE:4543
Terumo Corp
In the bustling corridors of Tokyo, Terumo Corporation stands as a testament to Japan's prowess in medical innovation, deeply rooted in a legacy that began over 90 years ago. Born from the vision of a group of scientists aiming to improve Japan’s healthcare system, Terumo embarked on its journey by developing high-quality thermometers. This modest start set the stage for what would become a global leader in medical technology. Anchored by its commitment to enhancing patient care and healthcare practices, Terumo carved out a significant niche by focusing on cardiovascular systems, blood transfusion, and cell therapy technologies. As the company grew, it systematically increased its range, moving into areas such as vascular intervention and diabetes care, aligning with evolving medical needs around the globe.
Today, Terumo generates its revenue through a multi-faceted business model that thrives on innovation and globalization. It operates through several segments: Cardiovascular, General Hospital, and Blood Management. The Cardiovascular division, a major revenue driver, offers products ranging from stents to heart-lung machines used in cardiac surgeries. Meanwhile, the General Hospital unit provides hospital equipment like infusion pumps and syringe systems, while the Blood Management segment is renowned for its blood and cell processing systems. Terumo’s ability to innovate within these domains enhances its competitive edge by delivering cutting-edge medical solutions. By balancing its expansive product portfolio with a strong focus on research and development, the company not only sustains but frequently advances the standards of modern healthcare, ensuring its continued success in diverse international markets.
Earnings Calls
In Q3 of fiscal 2025, Terumo reported record revenues of JPY 772.2 billion, a 13% increase driven by strong demand, especially in the U.S. Operating income surged to JPY 133.5 billion, outpacing revenue growth due to effective pricing policies. The company recognized a one-time restructuring cost of JPY 3 billion but expects these extraordinary costs to be one-off. Looking ahead, Terumo aims for steady progress with anticipated operational stability for its plasma collection device, Rika, by 2026, as it continues to enhance profitability and navigate macroeconomic challenges.
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Good afternoon, everybody, and thank you very much for attending Terumo's 2025 Third Quarter Presentation. I would like to just give you some housekeeping. And I would like to ask Mr. Hagimoto, the Chief CFO, to give us the presentation, followed by questions and answers. This will be a 45-minute session. Thank you very much.
This webinar has simultaneous interpretation options. You may listen in English or Japanese. Please choose from the interpretation button at the bottom of the screen for English or Japanese. The materials on screen will be English only. If you'd like to see the English materials, please see our homepage. The materials on the screen will be Japanese only.
So when -- before we commence today's presentation, we would ask to give you a disclosure that all of these -- today's information are of the current juncture. And there are some risks and uncertainty inherent in these results, so there may be some different discrepancies with the actual results to those given in this presentation.
Please, we ask for your -- so I'd like to hand over to Mr. Hagimoto, please to take us through the presentation. Hagimoto-san, over to you.
Thank you for your kind introduction. I'm Hagimoto, Terumo's CFO. This presentation provides an overview of Terumo's financial results for the third quarter of the fiscal year ending March 31, 2025.
So here are the highlights of this financial statement. In the third quarter, we achieved all-time highs for revenue, operating income, adjusted operating income and net income, both for the quarter and for the cumulative period up to the end of Q3. Revenue growth was 13% compared to the previous year, driven by the U.S. and continued global demand growth with foreign exchange effects also contributing. Profit growth exceeded sales growth due in part to the effects of our pricing policy and ongoing efforts to improve profitability.
Next slide, please. These are our P&L results. Revenues reached, as I have said at the outset, a record high of JPY 772.2 billion in the cumulative period up to the end of Q3. In addition to continued demand growth in a generally favorable business environment, foreign exchange effects also contributed. So operating income and adjusted operating income also grew significantly faster than sales growth, reaching record highs of JPY 133.5 billion and JPY 159.3 billion, respectively.
Improvement in profit margins was achieved through steadily progressing pricing policies and profit improvement measures. On the other hand, we will continue to closely monitor changes in the macro environment, such as surging raw material prices and trends in U.S. tariff policies.
In addition, a onetime cost of JPY 3 billion was recorded in the third quarter. This includes costs associated with the portfolio review that has been underway since the start of the current fiscal year, but we will continue our efforts to review and optimize our business structure. So we are certainly going to take actions to achieve GS26.
This is an analysis of changes in profit for the third quarter compared to the same period of the previous year. First, the increase in gross profit from higher sales and driven by TIS and blood center business. Gross margin effect benefited from the effects of profit improvement measures as well as onetime expenses recorded in the previous year.
Turning to price. Price decline due to China VBP were offset by the effects of price increases overseas. The reimbursement price revision this fiscal year in Japan is also having a positive effect. Increased SG&A expenses and R&D expenses is due to additional provisions for houses for bonuses resulting from higher-than-expected sales. Foreign exchange effects saw JPY 4.4 billion increase for flow and minus JPY 2.5 billion decrease for stock.
So following the analysis of profit increase, a decrease for the cumulative period up to the end of Q3. Overall, the increase in sales was largely due to continued growth in demand. The trend is similar to what I explained earlier as a factor affecting Q3, but the cardiovascular company, especially TIS, is making a growing contribution to sales. SG&A expenses increased in line with business expansion, but remained in line with plans for cumulative Q3 period, and the ratio to sales also improved.
Foreign exchange effects saw a JPY 10.4 billion increase in flows and a JPY 3 billion increase as well. Here, we can see revenue by region and steady progress is being made in all regions, particularly in the U.S. and Europe. The U.S., in particular, saw the highest growth rate among all regions with all companies posting double-digit growth even in local currency terms.
And at the Cardiac and Vascular Company, TIS, which experienced supply problems with some access products in the same period of the previous year, this recovered while Neuro saw strong sales. Meanwhile, in the Blood and Cell Technologies, growth was driven by the plasma innovation business, which is included under blood center business.
In Japan, meanwhile, growth was led by Medical Care Solutions. This was largely due to the effect of pricing measures in Hospital Care. In Europe, meanwhile, sales were strong as demand continued to grow across the Cardiac and Vascular Company, where growth was driven by Pharmaceutical at TMCS and apheresis therapeutics in Blood and Cell Technologies.
Turning to China. TIS rebounded from the price decline caused by VBP with an increase in volume, while Neuro also continued to grow substantially. In emerging markets such as Asia and the Middle East, the blood center business, which had been strong in the same period of the previous year saw a decline in sales. But Cardiac and Vascular sales were led by Neuro and Medical Care Solutions by Pharmaceutical, which both grew by double digits on a local currency basis.
Next slide, please. I'll now review our business performance by company. First is the Cardiac and Vascular Company. Sales and revenue grew by 8% on a local currency basis and was strong globally, especially in the U.S. Neuro and Aortic led the way in terms of business growth. Neuro had continued to see strong growth in demand globally, most notably in the U.S. and China. Profits increased significantly due to higher revenues and the effect of profit improvement measures as well as foreign exchange effects.
Next slide, please. Turning to TMCS Medical Care Solutions. Revenue was driven by Hospital Care Solutions and Pharmaceutical Solutions. Meanwhile, in Hospital Care Solutions, the main contributors were the effect of domestic pricing measures and strong sales of infusion sets. Demand in the U.S. is also increasing.
In Pharmaceuticals, despite some delays in the CDMO business, progress was generally in line with plans. Overseas, meanwhile, PLAJEX performed well in Europe, the U.S. and Asia. Profits increased due to the effect of pricing measures and steady progress in controlling SG&A expenses.
Next slide, please. Finally, we have TBCT, Terumo Blood and Cell Technologies. Revenue was driven by the plasma innovation business, which is included under the blood center business. As of the end of January this year, Rika had been installed in approximately 70% of plasma collection centers and is steadily being rolled out.
In the core blood center business, sales of whole blood collection systems and component blood collection-related products were strong in Europe and the U.S. Apheresis therapy also grew steadily with expanding demand for cell collection for cell and gene therapies, especially in the U.S. and Europe.
Profits were boosted by higher sales in the core business and improved profitability accompanying the rollout of Rika. Nonetheless, the impairment loss on some equipment associated with the start-up of a new production line in the third quarter of the previous fiscal year also contributed to the insignificant increase in profit this fiscal year.
This includes the financial summary. Thank you for your time.
[Operator Instructions] And Hagimoto; and from IR office, Miyoshi would like to respond to your questions.
SMBC Nikko Securities, Mr. Tokumoto, please.
So this is a robust numbers. So some of the extraordinary factors, which I would like you to clarify. So for the cost following the Q2, JPY 1.3 billion for restructure and also CDMO and impairment loss, so can you explain more in detail about these 2 points?
So first and foremost, so with the pharmaceutical company, this was the project. We have suspended the project due to that reason, the investment, which was ongoing have been recognized as impairment loss. So this -- with the pharmaceutical company in their relations, and I will not be able to explain in detail. However, those projects underperforming, while not contributing to our growth, we are going to have a good focus.
And for other areas, as I have said at the beginning of this year, under the auspices of Mr. Samejima, we have been reviewing the portfolio, so within our company, and we -- for those necessary structural reform and such improvement initiatives, we are going to continue with such initiatives.
So due to the underperforming situation for this project?
Yes. And we do have such relations with the pharmaceutical company. So I cannot really generalize that, but we have decided unanimously to suspend the project.
The second point is that -- I know that this time, as the new Mr. Samejima, CEO, and going through the cost review and the restructuring, there are such intermittent initiatives that has been taken on. So I'm ahead of the times. But looking ahead for the next term, so it's very favorable numbers are here to stay. So within this prime timing, you would like to exercise the expenses so that to have the restructuring, so going toward next year, such extraordinary factors and this type of the exercising of the expense, is it here to stay? Or is it going to run its course during this year? Can you give us your flavor on this stake?
This isn't something to be continued internally. So we hope that this will run its course by the end of this year to take measures. This is our way of thinking. This extraordinary expense is not going to be recognized for next year.
I'd like to move to the next question from Citigroup Securities, Yamaguchi-san, please.
This is Yamaguchi from Citigroup Securities. Can you hear me?
Yamaguchi-san, yes, we can hear you.
So you spoke at the beginning about the -- I think you touched on the numbers, so I just like -- I might have missed it, but you said JPY 8 billion for a business restructuring, I think you were referring to. But in the quarter 3 -- third and fourth quarters, could you tell us a bit more about those numbers, please?
Well, for -- it's JPY 3 billion for quarter 3 was what I said for the restructuring costs. And for the full year outlook, I think we're looking -- we are still scrutinizing this, so I won't disclose that at this juncture. However, as much as we can, as I just said, we will be trying to take all necessary measures on that front.
So in '82, there was a...
Yes, I'm not giving a full year disclosure at the moment.
Okay. Sorry to ask again, but for quarter 3, for the JPY 3 billion you were talking about, you did a large restructuring. So in quarter 4, you're not sure when that might be doing any more restructuring? Or do you think the JPY 5 billion is included in the sort of restructuring that you're describing?
Well, for the fourth quarter, then I'm not saying that it won't occur at all. But as much as possible within the current fiscal year, we would like to make any necessary restructuring. And depending on the situation in the fourth quarter, we may continue to do some similar restructuring.
And also for the overall -- your overall forecast has changed significantly, but I think you are well on course in terms of progress towards the numbers you -- could you tell us a bit more about the progress by segment? You mentioned double-digit growth across the board, but I think CV, Cardiac and Vascular business, could you give us a bit more...
Yes. Well, for the full year, I think for the whole company is very much on a steady trajectory in terms of our numbers that we have announced. But for the 3 companies, the foreign exchange is having a major effect across the board. So depending on the foreign exchange fluctuations, that will be a major influencing factor, but I haven't changed the overall forecast for the full year.
So by segment, there will be no particular differences?
Well, CV is very much on a good juncture, on a good even keel. And there is some seasonality within the business, but I think we -- and also for the Blood and Cell Technologies as well, Rika is progressing extremely favorably. So I think with Rika going steadily well, that will continue to contribute to steady progress in the Cell and Blood Technologies business.
So next, from Mizuho Securities, Mr. Kohtani, please.
This is Kohtani. Can you hear my voice?
Yes, we can hear you well.
To be honest, it was not surprising. So I was not surprised by this favorable performance. So I'm not sure if you can respond to my question. So hemolytics with Takeda and Grifols contract entered into extension of the contract. So 5 to 6 or 7 years is a long-term contract, and they are going to take the share. So with the best -- can you talk about whether you are part of that bidding process?
And also Rika's strength. So 35 million in nomogram and yield increase in the new nomogram and yield improved 200 milliliter. So with this -- so NexSys PCS or XI, so we have such a favorable situation. So that is one. Can you elaborate more in detail?
So for this, as you have understood, so as a device and the favorability, superiority, it is. In addition, for this Rika, connected to the network. And so you may wonder what are the differentiator points. So the fact that the device is connected to the network, and we would certainly like to leverage that.
So with regard to the supply chain, anything to do with the operation, manual operation is what we would certainly like to support. And also the way to utilize the device and also the service and defect ratio. So what are -- what kind of maintenance work that may need to be provided. By providing such data, we would like to leverage the network. So hardware and the network and connectivity and the functionality, so we will be able to provide such value add.
And coming back to your question, the bidding process, well, for us, CSL, other than CSL, we wanted to extend that rollout. But for additional detail, I will not be able to disclose.
I see. So you were referring to [ Kinari ] and Miyata, so any software so-called ecosystem to Rika?
Yes.
So I would like you to accentuate and highlight those explanation. So on Slide 10, you talk about this apheresis on the rise. So I have not been looking at this for a long time. So I believe this has been done in autoimmune deficiency. What ever happened to that side of the disease?
CAR-T apheresis and the white blood cells, collection apheresis has been in use. I believe it is the situation.
For such purpose, CAR-T has more demand there?
Yes, or process for the cells and apheresis CAR-T therapy, as you have put it, yes. And so currently, for other companies through the collaborative effort, we are proactively looking into the apheresis, and we wanted to explore more opportunities for apheresis and the cell processes. So currently, this is something that we are -- we would like to certainly extend this all the more.
So CAR-Ts, such clinical studies outcome has been published. If this all goes well, apheresis business size, how big do you expect it to be?
In terms of the business size perspective, the detailed numbers, we will not be able to provide to you. But we assume that there are much opportunities in this space.
So I'd like to go to the next question, please, from Morgan Stanley, MUFG Securities. Hayashi-san, please.
This is Hayashi from Morgan Stanley Securities. Can you hear me?
Yes, we can hear you.
So I just have -- sorry to revisit this question again, but looking about the costs for restructuring the business in the current period in your guidance out of November, you mentioned that the operating income and post-adjustment profit, there is a gap in between those. I mean, I think there is taking away -- there's JPY 8 billion for the full period after taking away depreciation costs. So I think someone was just referring to that JPY 8 billion just now, JPY 8 billion for that.
But from the first to the third quarter, the cumulative, if we look at the impairment loss, including the sales from -- in the -- it looks to me like it's JPY 9.7 billion from the first to third quarter. So I think that in the guidance, the numbers -- is already beyond the guidance, the numbers in the guidance. So it may occur again in the fourth quarter. So I'd just like to ask about this amount. How much will it end up at for the whole year -- for the whole fiscal year?
And if we look at the breakdown for that, JPY 8 billion for the reorganization realignment of the company and then the actual impairment loss from that, how much -- how many billion will be that? So could you give us some more idea of how that will end up for the full year?
Well, thank you for your question. So at the current juncture, we are now revising this number. So how it will end up being at the end of the year is hard to give a very clear answer. So -- but if we look in the entirety for -- in our guidance, how much the overall cost will be for the entire period, I would look at -- I don't think it will be very different from the original guidance. So you can see that it's not being significantly different to that described in the full year guidance.
Okay. So if it's -- let's say it will be over JPY 10 billion for the whole period -- for the whole year, then next year, can we say that there will -- this will be increased incomes for the next year?
Yes. As much -- there will be -- we would like to finish this in as short a period as possible. So in any loss in the current period due to restructuring will be -- I don't think it will reoccur in the next fiscal year. Yes. So I think it's a one-off cost. We would like to reassure you that it's a one-off cost.
My second question involves the -- your cost -- your price increases. And I think on Page 5 and 6 of your presentation materials, when I compare those 2 pages, the actual prices, the plus effect of raising prices, your prices, in the third quarter, there was this JPY 900 million number. If I compare those numbers, it seems to be rather small to me.
In the first -- in the beginning of the period, I think there was a rather significant price increase. But then later on, the -- it was difficult for you to raise prices in the second half of the fiscal year. Is that correct?
Yes. Well, last year, in the end of last year, domestically, we did implement some cost increases and restructured our prices. So I think it was -- it will not be such a big contributing factor to increased incomes in the second half of the fiscal year compared to the first half.
So next, UBS Securities, Mr. Yoshihara, please.
UBS Securities, my name is Yoshihara. So first is the U.S. tariff question. So what are the impact from the U.S. tariffs? So if you can quantify that against the U.S. total sales, what are the ratio for production? And if possible, if you can quantify that qualitatively as well.
And basically, when it comes to the U.S. tariff situation, we have not incorporated into our forecast and the U.S. total revenue, the local production within the Americas. So more than 50% in addition, so what kind of tariff that may be exercised that may give us such implications. But the majority of that is close to local production, local procurement. So therefore, we do not expect a huge negative impact.
I see. Understood. So in addition, more than 50%, part of that from Japan and Vietnam, you export from Japan and Vietnam. So Vietnam and Japan, if there are such tariffs exercised, then is it realistically possible to pass through the cost?
Well, as you have put it, other than Americas, Asia, including Japan, we do have export/import. And of course, whether we can have the cost pass-through, of course, we will continue to pay close attention to the market situation. But our assumption is not a discussion where we were not going to have the cost pass-through at all.
So in terms of the OP margin, gross profit margin, so 3Q, so 54.7%, I believe that this has implication to the ForEx exchange rate, excluding for Q3 alone, 55%. So say ForEx, if trends in the flat basis, the Rika minus will be offset, so 55%? Or is it going to exceed 55%? Is it possible within the 2 to 3 years' time? If you can give us a flavor about the management policy.
At this point, I will not be able to disclose specific numbers but GS26, 20% of the -- and also the cost and control, and we would like to improve such pricing as well. So this is not the cap that we currently have.
So I'd like to next go to Nomura Shoken, Mori from Nomura Shoken, please.
This is Mori from Nomura Securities. Can you hear me? I have 2 questions. First of all, for the MCS, you have had very favorable -- the BGM for diabetes is not performing well. But what is the -- I would just like you to give us any changes in the outlook for the diabetes treatment business.
Well, compared to the beginning of the year, there are no particular changes to the guidance given at the beginning of the year but there are some other causes -- some other factors to the main cause, but I think we are pretty much in line with the original plan with regard to the...
So in line with the original plan. So in other words, you're saying -- are you implementing measures to offset any minus in the diabetes treatment business? Or what exactly do you mean by that?
Well, yes, how we deal with that in the future, we have to focus on that strategically as we move forward. We are aware of this as an issue. But for the fiscal '24, the -- we know it's not particularly a favorable situation. There is a difficult situation continuing for the diabetes treatment business overall.
And my second question is stopping projects with pharmaceutical companies and some impairment loss. So is there -- was it that you were in the process of making something and then stopped midway?
Well, these -- we are -- we did sort of stop manufacturing something midway, yes.
Yes. So what you were trying to do didn't have any marketability or the cost -- didn't meet the cost? Could you tell me a little bit more about what you ceased midway for this pharmaceutical business? And are we looking at any similar developments ahead?
Well, between us and pharmaceutical companies, we are -- this is all in line with our contracts with pharmaceutical companies. So it's not just something that we stopped on our convenience. It was following significant debate between us and those pharmaceutical companies. So these projects that we stopped midway, rather than us stopping it on our side, it was the pharmaceutical companies that pulled out of the project, I would say, is more accurate than -- rather than it being something that we initiated from our side.
So next, JPMorgan Securities, Ms. Saito, please.
JPMorgan Securities. My name is Saito. Can you hear my voice okay? So this innovation business for plasma. So AOI, I know that -- has been very high. So as you said, so Rika has already introduced, installed over 70%, so at the blood center. And then per center sales becomes full capacity, becomes steady state. So for blood center, how long does it take to ramp up to the full capacity, is my question?
Yes, this one. So of course, it's up to the -- depending on the size of the blood center, and there are such dependency there. In addition -- and the blood centers operability as well. So after a few months, this becomes a full operation. It is difficult to say so.
Having said that, starting from this year and next summer, so number of the blood center, we are going to be in line with the plan, which we find to be very important to do so. Furthermore -- in the production site, it needs to become steady state. So 2025 to 2026, Rika's production facilities and the steady state is what we would like to foresee.
If that is the case, all of the blood centers' full operation will run its course within 2026, is it safe to say so?
In terms of the installation, it will conclude by the end of summer in 2025 at which given time. So between 2025 and 2026, that is our assumption.
Are there any other questions at this stage?
I don't see any questions. So I would like to conclude the question-and-answer portion of this session. That concludes the 2025 presentation from Terumo. Thank you very much for your presentation and for your participation, everybody.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]