Sawai Group Holdings Co Ltd

TSE:4887

Earnings Call Transcript 2019-Q3

[Kenzo Sawai, executive]

Now allow me to explain about the financial results of Sawai Pharmaceutical for third quarter of fiscal year 2018. Let me start from Page 1, overview of the results. In Japan, we were affected by NHI price revision in last April. However, with increased volume, thanks to the promotional measures of generic drugs, our sales in the quarter increased year-on-year. Products listed in and after 2017 mainly showed strong sales growth. In United States, major products continued to have strong growth, and our total net sales grew by 8.5% year-on-year to record JPY 137.997 billion. Core operating profit also increased by 9.0% year-on-year to JPY 28.907 billion, and profit attributable to owners of parent was JPY 16.804 billion that was 7.4% up from last year. Page 2 is analysis of factors causing changes in operating income. Operating profit in Japan dropped by JPY 1.6 billion due to the reasons such as decline of gross profit caused by NHI price revisions. On the other hand, sales in the U.S. remained strong, and we started to consolidate the U.S. business full year from this fiscal year. So our operating income rose by JPY 3.1 billion before amortization and impairment of intangible assets. Negative factor was an increase of depreciation or amortization of intangible assets by JPY 0.5 billion from last year. As a result, U.S. operating profit rose by JPY 2.6 billion, and total increase of Sawai's consolidated operating income was JPY 1.0 billion. Page 3 is about adjustment of our third quarter results from full basis to core basis. Due to the cost of sales adjustment, with the inventory step-up with Upsher-Smith acquisition and amortization and impairment of intangible asset of products or pipeline, we have adjusted JPY 7.0 billion in total. Page 4 is sales per medical institution types. This is about our nonconsolidated sales of products delivered to medical institutions. Even though there are overall impacts by the NHI price revisions, promotional measures of generic drug use were helping us well, especially in dispensing pharmacy markets, and sales continued to grow in third quarter again. As a result, total sales growth was about 2%. Page 5 is sales by listed year of drugs in Japan. Sales of products listed in 2016 or later showed steady growth, and our new product launched this year, such as Oseltamivir, were also showing better-than-expected progress. Page 6 is sales breakdown by therapeutic category in the United States. Cardiovascular agents and central nervous system drugs accounts for about 85% of total. Progress of sales of new products launched this year have been slower than our plan. However, core products are continuously strong. Page 7 is our forecast for fiscal year ending March 2019. Progress against full year forecast have been steady so far in both Japan and the United States. From Page 8, please refer to additional information such as sales trend by distribution channels, by therapeutic categories and financial data and so on. That's all for my presentation about our third quarter of FY 2018.