Terumo Corp

Everybody, thank you very much for taking the time to attend Terimo's financial results presentation for the fourth quarter of 2021. So today, Mr. Hagimoto, Terimo's CFO, will be beginning today's explanation, followed by CEO and G26 plan, after which we will have time for questions and answers. It's six hours allocated overall. We have simultaneous interpreting available, so please do make use of either English or Japanese on the Zoom function. The material shared will be Japanese only today. If you require reference to English materials, please refer to our homepage. If there are any problems with the transmission, we will inform you by email. And before we begin today's session, I would just like to give the disclosure. The explanation that is about to be given is based on current predictions and forecasts. This includes some element of risk and uncertainty. So please do understand in advance that there may be some discrepancies with the actual results to the forecast. Thank you. Now I'd like to hand over to Mr. Hagimoto for today's financial results meeting. Mr. Hagimoto, please. I'm CFO Hagimoto. Thank you for your time to listen to our financial results meeting. First of all, I'd like to provide an overview of the end of year financial results for the fiscal year ending March 31st, 2025. First of all, as was announced in the press release, as of April this year, we've changed some business names and disclosed segments. So please do note that today's explanation uses these changed names and segments. Continuing on, now here are the highlights of the financial results. In fiscal 24, sales revenues have passed 1 trillion yen for the first time. Revenue growth was 12% over the previous year due to continued demand growth globally, especially in the U.S., as well as the trend toward a weaker yen. The operating profit, in addition to this 12% revenue growth, operating profit recorded a one-time expense of 24.2 billion yen, but achieved a record high profit for the fourth consecutive year due to growth exceeding that amount. Net income and free cash flow also reached record highs, respectively. Now, for the 25 guidance, we expect continued growth on a global basis with revenue growth of plus 7% on a local currency basis. Operating profit is expected to increase by plus 32% on a local currency basis due to business expansion and the absence of one-time expenses in the previous year. Next slide, please. These are the PL results. As mentioned at the beginning of this report, sales revenue reached a record high of 1,036.2 billion yen for the full year due to increased demand amid a generally favorable business environment. Operating profit and adjusted operating profit also reached record highs of 157.7 billion yen and 203.4 billion yen respectively through pricing measures, improved manufacturing costs and expense controls. In particular, in addition to an increase in the amount of profit, adjusted operating profit as a percentage of sales showed a significant 2.6 point improvement. Free cash flow also increased significantly from the previous fiscal year due to the expansion of operating cash flow. And for the first time, the company was able to generate cash at a scale exceeding 100 billion yen. Next slide, please. The following are highlights of profit changes in the fourth quarter compared to the same period of the previous year. First of all, the increase in gross profit due to higher sales was mainly driven by blood solutions in BCT. The negative gross margin effect was due to the loss on write-down of old products in preparation for the expansion of new products. General and administrative expenses meanwhile increased due to additional provision for bonuses, which were added as a result of higher-than-expected sales, as well as one-time litigation expenses. Next slide, please. Turning now to an analysis of profit changes for the full year. Overall, the increase in sales was largely due to continued demand growth. In addition to blood solutions, the cardiovascular company led by TAS was a key driver of this continued demand growth. The gross margin effect increased significantly due to the effect of profit improvement measures. and easing inflation as well as an improved mix due to the resolution of supply issues in the last fiscal year and the expiry of one-time expenses. Turning to price, price declines due to the China value-based purchasing were offset by the effect of price increases in Japan and overseas. The reimbursement rate revision is also having a positive effect. Under increased general administrative expenses, we have improved the ratio of general administrative expenses to sales for the full year. And a breakdown of the impact of exchange rates shows that both flow and stock contribute to increased profits. Next slide, please. I'd now like to explain the breakdown of one-time expenses of 24.2 billion yen recorded for the full year of 24. This year, looking ahead to the final year of GS26, we conducted an aggressive business review resolving to do what we can do now. And specifically, portfolio optimization and restructuring, which are positioned as investments for the future, were the main elements of this aggressive business review. Regarding the TIS impairment charge recorded in the fourth quarter, the discontinuation of the project to develop a large diameter hemostatic device and the termination of sales of radiation emitting beads were decided strategically based on profitability and the balance with other projects. And so we will continue to operate and rebuild our production facilities in China. But the as if but we will continue to look closely at the impairment charge recorded in the fourth quarter and the restructuring of the European TIS business. This was also a reallocation of resources to further improve the profitability of the TIS business. We closed some plants as we optimized production items with consideration for profitability. And, again, in the European TIS business, at the same time, we're preparing to reuse resources in business areas that we'll focus on more going forward. We will report back to you at the appropriate time on our specific resource reutilization policy. One-time expenses amounted to 24.2 billion yen, but from a cash flow perspective, a cash decrease occurred only in restructuring. So as per the chart, it was owning in restructuring where cash decrease occurred. Next slide, please. Now turning to our free cash flow results. This increased 63.5 billion yen over the same period last year, reaching a record high. And the increase in profits due to business scale expansion contribute to a significant improvement in free cash flow. Next slide, please. Next, turning to revenue by region. Steady progress was made in all regions, particularly in the Americas and Europe. In the Americas, all companies posted double-digit growth even in local currency terms, the highest growth rate among all regions. In China, meanwhile, TIS rebounded from price declines due to the value-based purchasing with increased volumes, while euro growth substantially due to increased demand. Next slide, please. Now turning to business performance by company separately. First is the cardiovascular company. Sales revenue grew by 8% on a local currency basis and was strong globally, especially in the U.S. In terms of growth rate by business segment, Euro and Arctic led the way. Profits also increased significantly due to increased revenues and various other measures. Next slide, please. Turning next is TMCS, Terramo Medical Care Solutions. Revenue was driven by the effects of domestic pricing measures in hospital care and strong performance of Plagex overseas in pharmaceuticals. Profits increased due to the effects of pricing measures as well as control of general and administrative expenses. Next slide, please. Lastly is TBCT, pteromote blood and cell technology. The plasma innovations business included under Blood Solutions made a large contribution to revenues. As of today, RICA has been installed in approximately 90% of plasma collection centers. And profit has increased significantly due to higher sales in core businesses and improved profitability at RICA. Next slide, please. Now I'd like to turn to guidance for fiscal 25. Revenue growth of plus 7% on a local currency basis is expected with continued company-wide growth centered on blood and cell technologies. Operating profit is expected to grow by 32%, significantly outpacing sales growth, which is due in part to the absence of one-time expenses from the previous year. We aim to improve the operating margin by 3.3 percentage points to 18.5% by continuing to focus on company-wide profit improvement measures and cost control. while ensuring the growth of high-profit growth drivers in each company. So we aim to improve the operating margin from 3.3 percentage points to 18.5%. We will continue our efforts to improve capital efficiency. Furthermore, the impact of the U.S. reciprocal tariffs, which is highly uncertain, has not been fully incorporated into this guidance, but we will explain the impact of these reciprocal tariffs separately. Next slide, please. Here we have factors for affecting profit in our guidance for fiscal 25. Increased gross profit from higher sales is expected to be driven by higher sales in all companies led by blood and cell technologies. The gross margin effect in the previous year was significantly higher due to easing inflation and the removal of the one-time recall impairment charge the year before last, but is expected to return to normalised speed in the current fiscal year. The effects of continued profit improvement measures are expected to be partially offset by worsening inflation. And the fact that depreciation on the new Corfu building, which is scheduled for completion this year, that depreciation will begin prior to the accrual of sales revenue, and that will also be detrimental to the current year's mix. Under price, meanwhile, we will continue our domestic and international pricing measures. We've also factored in price declines due to China's VBP. General and administrative expenses are expected to grow at a healthy rate in line with business expansion. Next slide, please. I'll now turn to an outlook on the impact of the US reciprocal tariffs. A simple calculation on the impact of tariffs announced at this stage indicates that the maximum impact for the current fiscal year is approximately 17 billion yen. This estimate is based on the assumption that most of our sales to the US, other than those produced in the Americas, are imported from Japan, and that less than 5% of our sales in China are imported from North America. So those are the assumptions for this estimate of approximately 17 billion yen. And since we already have inventory on site, we assume that the economic impact will be felt from the second quarter onwards. But, however, since this situation remains slightly fluid, we have not factored it into our fiscal 25 guidance, but we will closely monitor the trend and minimize the impact by passing on price increases. So the situation does remain fluid, but we will closely monitor this trend and minimize the impact. So the next slide, please. This is now GS26, has two years left to go. Here I'll just explain some of our key measures and product and regional development strategies for 2025 and beyond. So the cardiac and vascular company will continue to expand its therapeutic business and promote radial procedures. Therapeutic devices will strategically put more focus in growth segments. Medical care solutions will expand its preoperative solutions with smart pumps with digital IC tag reading capabilities. We will also promote overseas expansion by matching our strengths with regional needs. Meanwhile, in blood and cell technology, we launched Revios last year, an automated blood product system using automated whole blood processing in the last U.S. fiscal year. So this fiscal year, we will accelerate our global expansion. And at the same time, we will be expanding our software and service businesses to ensure competitive advantage and differentiation. Next slide, please. This is my last slide. So our dividend policy remains unchanged. with stable dividend increases going forward. The annual dividend for 24 is expected to be 26 yen per share with a payout ratio of 33% for fiscal 24. For fiscal 25, we expect to increase the dividend by 4 yen to 30 yen per share for a payout ratio of 31%. We will continue to give priority to investment in growth, and we will consider targeting a total return of 50%, depending on the state of acquisitions and other capital needs during the GS26 period. So over the next two years, we will continue to give priority to investment in growth. That concludes my explanation. Thank you very much for your time. Moving on now, I would like to hand over to Terimo's CEO, Mr. Samejima. Mr. Samejima, the floor is yours. I am Samejima, Terimo's CEO, and this year sees us into the final two-year sprint to the end of GS26, Terimo's five-year growth strategy. So GS26 has three main financial goals, and I believe that while there have been some fluctuations, we have generally made good progress in terms of sales, profits, and capital efficiency. The 15.2% operating margin includes restructuring charges, which are positioned as investments for the future. Impairment costs are also a result of aggressive portfolio optimization, so excluding these one-time expenses, operating margin for 24 was 17.5%. Our business fundamentals remain strong, and we will continue to build on this momentum to produce steady results for 26.

As you can see, immediately after the GS26 announcement, profit margin implemented in response to rapid changes in the external environment, including the COVID-19 pandemic, inflation, and exchange rate instability. Since then, however, the company has forged ahead with the pricing measure, cost reduction measures, and product mix improvements to improve profit margin. Our 17.5% profit margin for FY24, excluding one-time cost, shows the strength of the current business. Heading into FY26, we will further accelerate our efforts in plasma innovation and expanding our CDMO business as well as profit improvement measures. From this point on, I will look back on the results of the past three years, both company-wide and by company. Progresses on a company-wide sales and profit target is as I explained earlier. In the past fiscal year, our innovation strategy was essential for future growth to go off in a big way. First, we took inventory of all the hundreds of R&D teams and WA first globally reviewed resource allocations based on the comprehensive assessment of scale of development, timeline, and categorization as innovation or iteration to align management strategy with innovation strategy. This visualization has enabled us to draw a more concrete strategy, a concrete picture of a growth strategy, which itself is a major achievement. We also established D-Tech, a U.S.-based for corporate R&D. In the U.S., the largest market for medical devices and center of innovation, we will push ahead with exploring new technology and creating cutting-edge products. In corporate venture capital, we have completed a full Additional commitments and are steadily expanding the scope of our investments. Next, in the cardiac and vascular company, both sales and profit targets are solid, and we are already seeing the achievement of GS26 targets. In the treatment business, we new products have launched as planned, mainly in the neurovascular and aortic areas as initially envisioned. Driving the expansion of the treatment business, we aim to gain further market share with these product lines. Transfer of production to Costa Rica has also progressed smoothly. Although the large-scale transfer is already done, going forward, we will continue to transfer production while carefully choosing target products. Smart factories reforms are also underway at Ashitaka plant in Japan. Uptake of radial access has been generally very favorable, especially in the coronary and cerebrovascular fields. Next is TSMC medical care solution. Challenges in the external environment such as inflation and weak yen had the most pronounced negative effect on TMCS. However, by taking prompt actions, we have achieved a B-shaped recovery in profitability. We are one step away from the GS26 target, but we expect to turn around both sales and profits with the launch of combination product for Alzheimer's disease. We also worked to provide solutions that go beyond providing value at the individual product levels, including contribution to minimally invasive surgery in the area of cancer. women's healthcare and supporting operational efficiency in medical field through the use of digital technology. We also actively moved ahead with portfolio reviews. While withdrawing from certain businesses or product each year, we have entered into capital partnership with new external partners and begun joint development to promote officially in medical settings. Lastly is TBCT, blood and cell technology. While sales growth has already met the GTS26 target, profit margin continually needs to catch up. The main reason for this being that the start of the plasma innovation business rollout of RICA was pushed back by the COVID-19 pandemic. The weak yen has also negatively affected TBCT's profit merging. As you can see, when based on actual value excluding exchange rate effects, that profit merging is quite close to 20%. Although the development of Ricca has been delayed somewhat from the original plan, we plan to revamp by acquiring new customers. After CSL, we signed an exclusive agreement with Joint Parachute. In terms of optimizing product sites, we have successfully curved logistics costs by opening sites in Costa Rica and China, and by restructuring logistics. As a future area of focus, Terumo will differentiate itself through software solutions that help customers improve their operating efficiency. Turning to the regional development of our businesses, we have also established an important foothold for future expansion in emerging markets, especially in Africa. GS26 is a 5-year growth strategy that keeps the subsequent 10 years in mind. Even as we keep the goal of GS26 in mind, FI26 is just a checkpoint for us, and looking even further ahead, our goals are even higher. We have set forth the 3Ds, delivery, digital, and device-critical as our vision for the mid to long-term term. From device to solution. This is a statement of Terumo's determination to provide not only products and services, but also bringing innovative and comprehensive solutions to medical issues. Today, I'd like to reiterate the strength and the further prospect of device theoretical, also known as Terumo's CDO businesses to you all. Generally speaking, CDMOs for pharmaceutical products are based on divisions of labor by processes. Despite the fact that drug substance and device manufacturing processes, as well as the combination of these into formulation and fillings, feelings are essentially linked to a series of processes. Financial companies are required to sign individual contracts with companies responsible for each process. And the reality is that there are inevitably limits to cooperation across the fragmented processes. Here, Telmo can come in as a one-stop-shop CDMO solution. In order to develop devices that combine the right material technology with the right drugs, Telmo usually initiates alliances with pharmaceutical companies earlier in the drug development process. This is a unique position in the CDMO market. So what is the Telmo CDMO's greatest strength? is the capability to develop innovative drug delivery devices. As you all know, Terumo has more than a century, a 100-year long history as a medical device manufacturer. We take pride in our knowledge of devices, including development, manufacturing, and quality control. Terumo also has more than 50 years of experiences in handling pharmaceutical products, having launched its first pharmaceutical product in 1969. The development of innovative administration devices suited to drug characteristics made possible precisely because of Terumo's expertise in both medical devices and pharmaceuticals. That is the wellspring of Terumo's competitive advantage. By combining one-stop services with Terumo's development capabilities, Terumo CDMO has created a very unique differentiated business model that is without rival in the industry. Terumo CDMO is not something that you can create overnight. Even if a company were to acquire the individual basic technologies that Terumo prides itself on, such as plastic modeling and aseptic filling technology, it would be impossible for them to replicate our CDMO. As you can see, Terumo's CDMO business is built on a combination of technologies we have developed over many years. The goal of Thermo-CDMO is the creation of new value sought by participants and medical communities. As healthcare needs and trends change, our CDMO is working with a sense of mission toward its goal of contribution to the development track administration methods. and ultimately maximizing the value of pharmaceuticals to support, for example, the uptake of home care and consistency with chronic diseases. One example of the embodiment of device medical in the CDMO business is the on-body injection. This is one of the solutions Terimo has arrived at in solving issues such as the burden places upon patients having to go through the hospital process for the drug administration when they are feeling unwell, and the shortages of healthcare professionals. While it was also an option to provide only a partial solution to these major challenges, our solution created new comprehensive value propositions, reliable, automated drug administration in home care setting, This on-body injector is truly a feat of technology. The primary device, especially shaped projects, is incorporated into this drive unit, a precision instrument which utilizes the technology cultivated through our pump equipment, while the needle itself is based on needle technology developed by Cifalo. The CDMO market is very attractive. with high growth potential among injectable drugs, which account for a large proportion of pharmaceutical. Self-administrative drugs, in particular, are growing twice as fast as in-hospital administration drugs. The key to self-administrative drugs lies in how innovative administration devices can be created. And this is precisely Terumo's area of expertise. Since the official launch of a CDMO business in FY17, Terumo has achieved market-beating business growth. We are now preparing to make further strides as we move toward 2030s. The CDMO market is attractive, but there's also a lot of competition. Chaomo's winning edge is its one-stop service and development capability. I think I've already gone long enough about this topic. There's also planned expansion of production capability. Terumo Yamaguchi has expanded its production line over the last two-year period starting from 2021. A new building at the Kofu plant, as Hagimoto-san has earlier said, is scheduled for completion in September of this year. Production capacity has expanded to appropriately 2.5 times bigger compared with the FY15 levels as of FY24. And it will be expanding to more than four times compared to FY15 level by 2030. 100 billion in revenue is already in sight at last. But to Terumo, this is only a stepping stone along the way. I hope you will have a chance to read the release concerning the acquisition of European base for the CDMO business announced today. Terumo has fully launched its entry into the global CDMO market. Europe, with its concentration of world-class pharmaceutical companies, is one of the most important markets for pharmaceuticals. Thermo Europe in Belgium already plays a major role as a device development and manufacturing center, and together with the newly acquired drug-fulfilling plants in Germany, will establish a strong footprint in Europe. Terumo began its overseas approach around two years ago as we looked to expand our CDMO business globally. We saw a tremendous positive response during the direct talks with a number of company customers. In fact, we were able to sign our first contract with our overseas pharmaceutical company last year. We are confident in our one-stop CDMO model and our development capabilities. We are confident enough to compete in Europe. We have now simultaneously acquired cutting-edge assets and excellent professional human talent all at the same time. Compared to setting up our own business organically by ourselves, we have saved a lot of time by having this transaction. Given the instances where we have received the positive feedback but have not been able to agree contract due to geographical distance, establishing this base in Europe is a very important first step. Beginning from Europe and Japan, we are already looking to the US and Asia markets as well as next regions in steps. As long as we are termal, We will continue to pursue not only the expansion of our locations and businesses, but also further technologically innovate. Terumo is dramatically taking on challenges, becoming a leading CDMO company. Thank you very much. We would like to take questions. Today is a hybrid event. Today is a hybrid, both for real and virtual. Raise your hand physically if you are in this room. If you are joining on Zoom, use the raise hand mode on Zoom. If you want to cancel, lower the hand. You can click on the hand button once again to cancel the raise hand. But we want to take as many people to ask questions. We'd like to limit only two questions per person. Miyoshi-san from IR is also joining compared with the CEO and CFO. We can now start taking questions. So Yamaguchi-san from City Securities, please. Hello, can you hear me? Yes, Yamaguchi-san. Hello, good afternoon. I can hear you. Thank you. My first question is about one-time cost, 12.9 billion yen. At the beginning, I remember, if I'm not mistaken, 8.9 billion. But one-time cost has expanded quite big because you try to cover a lot of things all at once. But I guess for this kind of thing, do you think you already bled it everything taken care of everything do you not expect something like that to happen not again anything is like that this is much bigger than previously so what drove that change

So I will reply to your question. Thank you very much. So regarding the 8.4 billion was the amount reported previously, but within that, GS26, as we move towards the first year, we wanted to remove any negative influence as soon as possible as we get towards the last year of GS26. Okay, sorry. And this time we had many – we had a considerable review of our portfolio. So many – we had a pretty comprehensive review of our calculations. So as we move towards the end of GS26 and further on beyond there and implement some strategic investment beyond GS26, we will continue to thoroughly look back on past investments. So I think this kind, it is not the case that there will be several similar developments as this, but We will reflect carefully on strategic investment from the past when preparing decisions for our future strategic investment. Thank you very much. That's all from me. So is that correct to say that in some sense you try to revise as much as possible at this juncture and to restructure and reallocate the strategic investment? Yes, that is correct. My second question is regarding the CDMO. Thank you very much for explaining CDMO. I think in particular this time in China. Wushu, the filling factory, you've bought this new factory in Europe for filling in China and in Belgium. So I think, you know, Asia and America were both referred to in your presentation. But these bases overseas, you will increase M&A through these and increase the global footprint. Is that really the – was that why you have really – Spread out into Europe. Is that the first step of a major rollout into other global bases to increase the footprint? Yes. Basically, CDMO will go into full tilt from now. We will go into full overseas in a full tilt fashion from now on. And we would need. We have spoken to several pharmaceutical manufacturers within Japan, but we would like to have capacity near to the market as possible. That is one keen index. So first of all, in Europe, where it's a very important market for us to get our footprint there, to establish that footprint. In future, you know, in terms of what kind of negotiations we have with which pharmaceutical makers, in future that will implement where our next global footprint expands. Thank you. What about the sort of concrete pipeline for that? If you could have any – if you've decided about how that pipeline will work? I mean, the pipeline, I understand, is increased. Is that true? Well, pharmaceutical manufacturers – you know, that also concerns them as well. So it's hard for me to be, you know, more specific about the pipeline. But, you know, there are we are in discussions with multiple pharmaceutical manufacturers at the moment. So that's what I can say at this point. Thank you very much. Very good. Moving on. So I'd now like to take our next question, please. Macquarie Capital, Tony Rain, please.

Hi, can you guys hear me?

Yes, Tony, thank you for joining. Yes, we can hear you. We'll try to answer in English this time.

Sure, yeah, thank you very much. So my first time asking questions live, so thank you for the opportunity. I want to go back to the acquisition of the Wuxi Biologics factory in Germany again. I happen to cover Wuxi Biologics, and I recall right around 2020, they bought two factories from Bayer in Germany. One is One is about filling. It's a filling facility. And you guys did mention in your press release today about vial products there. So I just want to see if that's the one you bought. I also recall they bought another one from Bayer that was making, if I recall, recombinant factor A that was in quite serious decline. It was a drug substance factory that was making recombinant factor A. So I just want to hear a little bit from you guys on that. You guys obviously have the LACAMBI, your partner ASA has LACAMBI approved in Europe in April. I want to see if you would use the filling facility there to fill LACAMBI. My second question is about tariff impact. You guys guided about, in my calculation, roughly 8% impact on your operating profit margin. Yesterday, your peer, Olympus, also guided roughly about 3%. So yours is a little bit higher. Just want to see what was going into your calculation. Yeah, thank you.

Well, let me take on a first question. Well, I mean, I'm very impressed with your good memory. I'm not really sure if I'm allowed to disclose fully in detail about the asset we bought. But, yes, it's one of these two assets you've just mentioned. The second question probably I'll turn over to Gene.

So thank you for the question. In regards to the tariffs impact that we have calculated, the chart that we are showing is just the rough calculations of how we've derived to that impact. So obviously depending on how much inventory is already in the U.S. market, that will have a dependency on how much the impact will be on the overall operating profit situation. So what we have factored in is all the known aspects that we are aware of as of today and sort of did a straightforward calculation of the maximized impact. But obviously what we will do is to make sure that we can pass on the price increases where kind of feasible to the market. We will also look into a supply chain situation to see if there are any steps that we can take to avoid any kind of tariffs going into, landing into the U.S. market. So all of these situations we will need to consider, but right now I think it would be fair to say that we've done a maximized calculation of how much the impact would be, or could be, is probably the correct way to phrase. So I hope that answers your question.

Yes. You know, if I may, just a couple of quick follow up. So on the Wuxi German factories, you guys obviously mentioned vial products in your press release. So I assume it is fill finish. So just want to confirm that. And also you mentioned trying to pass the cost tariff impact on to our customers. Just want to confirm that you can actually do that because most of the at least the drug companies, and including Olympus yesterday, they said they do not think they can pass on the call. So I just want to hear a little bit from you, a little bit more clarification on that. Yeah, thank you.

Okay, Tony, so let me follow up on the Wuxi side. So, yes, indeed, in our press release, we did mention that we did purchase the DP side of the factories. So one of them of Wuxi, which is in Germany. So just for your clarification, yes, that is correct. And then regarding the tariffs? Yes.

So in terms of the cost, sort of the increase, or passing on the pricing to the market, obviously we do have contracts, long-term contracts that has been signed. So it's not that we will be able to immediately pass on the impact to the market. But depending on the business situations, depending on where our competitors are kind of situated, we do believe that there is an effort that we should be taking to make sure that we can pass on the market. So the intention is that we will try to pass on whatever impact is into the market as much as possible, but that will depend on timing or that will depend on the business situation if we can actually pass on the full impact towards the market.

Understood. Yeah, thank you very much.

Thank you, Tony.

Thank you very much.

So I'd like to move to Morgan Stanley, MUFG. Hayashi-san, please. Thank you very much. This is Hayashi participating remotely from Morgan Stanley Securities. Can you hear me? Hello, Hayashi-san. Nice to speak to you. Thank you. So I have two questions. The first is looking at yesterday, the first quarter that finished yesterday, term of BCT, the effects of the effects on last year. It was 27 percent up in terms of the effects last. I think this is probably the global blood solutions company that has, I think, sales are very much up in the GBS. But in terms of these, are these the regular blood? Is that where exactly is growing? Is it due to RICA? Is the RICA related earnings weighing on this? Could you just give us a little more color about GBS and the growth there? Well, I think as was anticipated in the fourth quarter, we saw an expansion in net sales as was predicted, as was expected. But I think about half of that, the impact about half of that is due to RICA compared to last year. It has gone on a very favorable trend. trajectory. But the other half of that, of the positive impact, I think is probably what we consider to be the core blood and cell innovation business. So I think about half RICA and half non-RICA would be contributing to this, to the increased incomes. So for this TBCT, it looks like there's a 15% – the plan looks for a 15% in revenues. And is this, again, half due to RICA and half due to core products? Would you say that split will continue? Well, yes. I think in the fourth quarter – if we compare it to the fourth quarter of the last year, RICA had just been launched at that stage. And so I think – You know, a year on, it won't be half of the impact, I don't think. Understood. And the second question here is, today you released the Ushi, purchase of the Ushi factory. in Germany. I think this is a plant that has vial production, and I feel there may be already some sales accrual in place. I just wanted to ask about the current state of revenue accrual, and And how much do you see that revenue increasing in future? I think for Terramo you have the technology and the know-how that will be transplanted into Germany. That will take time for that to come online and for the CDMO business as well. It will take time to really establish relationships with customers, as you explained, which is how I appraise the situation as well. But from this plant, the accrual of revenue from anything emanating from this plant, how long will it take? Four or five years will it take for revenue to start accruing, or do you see it happening expediting over one or two years? I'd like to hear more about this prospects for revenue accrual for this factory you purchased in Germany. Thank you very much for your question. Well, in terms of the net sales and specific forecasts, I'd like to – I won't discuss specific forecasts, but in terms of the prospect for growth from now on, in terms of the time span, I think for us – Really, as soon as possible, we would like to enter multiple new contracts and to start contributing to revenues. That is our primary aim. And that is why we will be implementing injecting extremely – we can acquire extremely talented personnel from this factory. That was one of the main reasons for acquiring this factory. Okay, so from the know-how and transferring know-how from Japan over to Germany. Is that one or two years, or is that something that takes much longer? Is it actually pretty simple to transplant that know-how from Japan? Well, you know, without being too objective about this, we will be sending over human resources from Japan and be looking for a synergy with the local technologies, and we're aiming for a very smooth entry into Germany. Thank you. Thank you very much. That's all from me. Thank you for your answers. I very much appreciate your questions. Very good. Moving on to the next question. UBS Securities, Yoshihara-san, please. This is Yoshihara from UBS Securities. Thank you for the opportunity. Hello, Yoshihiro-san. One question is regarding the tariffs. Sorry to go back to the tariffs again, but I was late at the beginning of this explanation, so I might have missed your explanation regarding this. But the premise of this are the, for example, if Japan might be 10 percent or, you know, I think. In the U.S., the RICA, I believe you're producing RICA equipment in the USA. What about if you are putting parts in from China into the USA? How will that affect the tariffs? And if that did, in fact, transpire, then I think... there would be some overall... Could you just give me a big picture on the tariffs between the US and China? Thank you. I will explain that. I think... What we are anticipating at the moment is an importing into northern Europe. Most of that is from Japan. So, you know, first of all, I think it was 10 percent. But from April onwards, that from Japan to Europe, we are expecting to go up to about 20 percent. But from importing into America from China, We don't believe it's such a large amount for us, so the impact will be limited. Meanwhile, from the US to China, I think that 10% is the base figure at the moment, and I think it may go up to 100-something percent 90 days. So some retaliatory tariffs will come into effect 90 days from now. So that would be 120%. So those are the general calculations we have made for the current period. And regarding parts, I think from China, as I explained just now, we are partially, we are not exporting significantly from China to the United States.

I have a additional follow-up question on tariffs. You talked about, you know, transfer the prices or the impacts to market. So 114 billion yen, like how much can you think pass it on to the market? Nobody knows what the final types are going to be. You may do a perfect calculation. You may change tomorrow. But when we cover, when we project your performances, what would be your goal or what kind of a target that you want to achieve at? Now, let's say the revenue with the existing contract is something different, right? If you look at that, the renegotiation because how it happened is going to be very difficult for the existing contracts to be signed already. Can we, how much can we pass it on on the FI25? That requires a little more work on our end. So I would say I cannot give you a specific number at this point in time. But Our intention, since you asked, is to weather management of business portfolio and how the situation may develop. But we want to pass on as much as possible in running different programs by us. Okay, that's fair enough. Thank you very much. Question. I just wanted to hear the updates about M&A. So Ushi transaction update, I think that was a very nice transaction. But in the past, you have a CIV device. You had M&A strategy that you previously have discussed. Can you share your perspective about any changes or approach or philosophy? Or are you looking at, you know, it's been one year since then from last year. Do you have any updates on those potential MRDs? Well, thank you. Over the last one year, since you asked, R&A, M&A was the core of our strategy. In that sense, cardiovascular or CDMO are the potential companies, other personal targets, as I've been saying in different occasions. That particular framework has not been changed. So now, as we have announced a press release today, we are always having the multiple different candidates in our list and validating which one makes more sense. This is a continuous basis. We are continuing. No change in that sense from the past to now. For ID, And maybe you cannot probably disclose that. So putting that aside, but you have the, there's no change in business plan, I guess, is that for IVs? And there were multiple different devices for venous blood, intravenous injection, right? So we are currently planning to launch a new product about that device. And how can we strengthen that as a franchise to make sure we are expanding intravenous business as a whole? That would be our first step. Okay. Thank you very much. Okay, thank you very much Yoshida-san. So next, I'd like to ask Kotani-san from Mizuho Securities to ask. Yes, my name is Kotani from Mizukuni Security. Can you hear me? Yes, good afternoon, Kotani-san. I can hear you. Since presidents are here, I just wanted to ask, to your CMS, you know, I was looking at this slide talking about the future rollout of products, and now CDMO factories, you just bought this company. So rather than glass file, you are interested in more plastic products. That's the strength that you want to demonstrate, and that's why you want to drive more growth. But you couldn't really go overseas because it's made in Japan. Supply was the difficulties. I think that was the nuances that you have presented in the past. But I just wanted to clarify my understanding correctly. And now in Europe, so filter, injection needle with filter, right, for pharmas. But a particular matter is a huge problem right now. Your technology can be a great differentiation. By doing this transaction, you know, you are talking about how shipping from Japan to the global, it was difficult. But now can we expect we are going to be having a huge step? Project is very well known, right? Can I assume it's going to be much easier to expand globally? Well, thank you for your question. As you have implied, and you have suggested, we are called Core Strength, which is projects and polymer injectable. That's the world in which we want to spread globally. That's the access core of how we would like to approach. In Central Europe, we have made some track records, but with this transaction, we will be able to roll out more technology from Japan, and having an established footprint in Europe. And that's what we want to do. Okay, fine. And second and last question is on cost. I think it was about 7 billion yen. I want to try to break down the cost. COGS improvement, I think it was the COGS percentage revenue. So you have like an inflation impact and a depression is accounted for with the market pass. Can you break them down? 7 billion, 70 billion. Can you break down with more details inside of that 70? Oh, within the 70 or 7.1 billion yen. So price is about 6.5 trillion yen is coming from price. BBP minus impact is something that we have accounted for. But for other businesses, other businesses, the price increases, price policy, price initiatives are just that. And also, and also the the official regulated price change is working positively for us as well. And inflation, labor costs increase are actually incorporated with these impacts and, uh, So those are the negative impacts. And we are also running, for those negative effects, we will be offsetting them with the cost reduction initiatives across the company. Can I just one comment? 6.5 billion is inclusive BPP? So BPP, inclusive BPP, yes, as a whole. So negative BPP is included in that. BPP in negative was 4 billion, but it's now smaller, a bit smaller this year. This year is about the same. We are assuming it to be about the same. Oh, so you are assuming to roll them out to other provinces, is that correct? That's right. Okay, thank you. Thank you, Kote-san. Thank you very much for the question. Does anyone else have a question? Please raise your hand if you do. Anyone in the room who may have questions? Kotani-sama from Mizuho Security. It's your turn next. Sorry, me again. Can you hear me? Yes, I can hear you. Since giving the opportunity, I'm looking at a slide about a blood stoppage device. This is like you don't have access. Park loads is dominating, right? This market does dominate by them. So I was just surprised that you have to cancel this project. But you're running multiple different projects of such, right? So the large diameter... blood study, is there any other project that can potentially contribute to revenue? Let me just take that. Yes, I cannot give you the details of the pipeline. Let me just refrain from that. But I was impressed that you just have an eye to it. But for access products, for Telmo, we want to maintain and strengthen number one strategy position. Very important for strategy, whether closure devices, right? So black closure device is something that we would like to make a very big commitment to. our, your own product or other somebody else's product. So it's a partnership with the third party. This one, this one that you were mentioning is the project we're working with another company. Okay, thank you.

Well, thank you.

Thank you very much. I'd like to ask Mori-san from Nomura Securities to go next. Yes, this is Mori speaking. I just went outside of the room for the time being. I apologize if it's already been asked as a question. I don't have it. My first question is, was she bought in 2020? And that was like when the COVID was happening. Bio demand was going up. That's where they captured. But that demand came out shortly after that. Vial suppliers, I was listening to those different companies, but Vial's demand was quite weak. So what are the reasons why they decided to give that business away, and how would you turn that business around? Thank you for the question. We actually briefly talked in other questions. Now, the biggest reasons for buying this asset is PledgeX as a key polymer injectable, right? That's our strength. We want to roll that out in overseas, particularly in Europe. So viral line is, yes, available in that facility, but that's not really the core. Our traditional approach, as we've been doing with Japanese pharmas, Plagix, again, Plagix, polymer injects is, you know, that is the leverage that we want to demonstrate with this acquisition. Okay, thank you. My second question. A year ago, Samizuma-san, you talked about transformational business portfolio. You want to focus more on Travis Glenn MAA. That was the journey for the last one year. Can you look back for one last year? Do you think your output is as expected? Or how would you score yourself for the one last year? Well, thank you. So, self-daring for myself, right? But that's questionable. But we've been having many intensive discussions and we have one concrete result this time. But there were other opportunities. Some of them are going positive, some are maybe negative, but we have many other opportunities. So at high level, we are making very good progress in our internal discussions as we have committed one year ago. Okay, thank you. Thank you very much. Okay, thank you very much. We are just about to finish. We would like to therefore close Q&A session for today. We could not, you know, take all the questions. Please contact our person for your additional question. With that, we would like to close GADA financial announcement for Telmo March 2026, 2025. Thank you very much for your attendance.