Kyowa Kirin Co., Ltd. · TSE:4151

Kyowa Kirin — Kyowa Hakko Kirin — FY2017 Earnings Presentation

54 slides from Kyowa Kirin's earnings presentation, 2018

  1. Slide 1: Result Presentation Fiscal 2017

    Result Presentation Fiscal 2017 Kyowa Hakko Kirin Co., Ltd. © Kyowa Hakko Kirin Co., Ltd.

  2. Slide 2: Agenda

    Agenda Progress with Mid‐term Business Plan Nobuo Hanai, Ph.D President & CEO FY2017 Summary [IFRS] Nobuo Hanai, Ph.D President & CEO Financial Review & FY2018 Forecast [IFRS] Kazuyoshi Tachibana Director, Managing Executive Officer R&D Review Nobuo Hanai, Ph.D President & CEO Business Topics Nobuo

  3. Slide 3: Forward-looking statements

    Forward‐looking statements This document contains certain forward‐looking statements relating to such items as the company’s (including its domestic and overseas subsidiaries) forecasts, targets and plans. These forward‐looking statements are based upon information available to the company at the pr

  4. Slide 4: Progress with Mid-term Business Plan

    Progress with Mid-term Business Plan © Kyowa Hakko Kirin Co., Ltd. 4

  5. Slide 5: Status of Progress - 4 strategic pillars

    Status of Progress ‐ 4 strategic pillars Improvement of Global Competitiveness Creating Innovation  Big step towards obtaining approval: KRN23, KW‐  Advanced development pipeline: KHK4083, 0761, KHK7580 KHK2455  Launch new products onto the market: Lumicef,  Progress in the cancer immunotherapy

  6. Slide 6: Changes in the Environment and what to do in 2018

    Changes in the Environment and what to do in 2018 ● Japan/ Significant changes in the environment surrounding drug price Changes in system External Environment ● Japan/ Accelerating promotion of generic drug use ● Fierce competition in the cancer domain (in particular, immuno‐oncology) What to do in

  7. Slide 7: FY2017 Summary

    FY2017 Summary © Kyowa Hakko Kirin Co., Ltd. 7

  8. Slide 8: FY2017 Consolidated Results (vs. 2016) IFRS

    FY2017 Consolidated Results (vs.2016) IFRS 2016Q4 2017Q4 Change Results Results • Benralizumab‐related Revenue 348.0 353.4 +5.4 licensing revenue (↑) (+2%) • Drug price revision and generics penetration (↓) Core Operating Profit 39.1 57.7 +18.6 • Improvement in *FKB’s loss [11%] [16%] (+48%) [Equity

  9. Slide 9: FY2017 Consolidated Results (vs. Plan) IFRS

    FY2017 Consolidated Results (vs.Plan) IFRS 2017Q4 2017Q4 Change Plan* Results • Increase in domestic drug Revenue 348.0 353.4 +5.4 revenue (↑) (+2%) • Change in accounting for milestone revenue (↑) Core Operating Profit 51.0 57.7 +6.7 • SG&A underspent (↑) [15%] [16%] (+13%) [Margin] Profit 35.0 42.

  10. Slide 10: Financial Review

    Financial Review © Kyowa Hakko Kirin Co., Ltd. 10

  11. Slide 11: Consolidated: YoY Analysis - Profit

    Consolidated：YoY Analysis ‐Profit‐ IFRS Profit +12.4 billion yen Decrease in impairment losses (¥Bn) Pharmaceuticals +1.4 Bio‐Chemicals ‐0.4 Impairment losses ‐7.0 Gain on sale of fixed assets ‐2.4 Pharmaceuticals +7.8 Gain on transfer of a business Bio‐Chemicals +2.0 unit +5.2 © Kyowa Hakko

  12. Slide 12: FY2017 Results by Segment IFRS

    FY2017 Results by Segment IFRS  Pharmaceuticals’ operating profit increased due to the rise in overseas sales & licensing revenue, despite a drop in domestic revenue  Bio‐Chemicals’ operating profit increased with improved profitability 2016Q4 2017Q4 2017Q4 Change Change Results Results Plan Reven

  13. Slide 13: Pharmaceuticals: YoY Analysis - Revenue

    Pharmaceuticals: YoY Analysis ‐Revenue‐ IFRS  Domestic Drug ‐4.0 +5.7 billion yen • Our key product REGPARA decreased due to the emergence of a competing product. (incl. forex effect ‐0.2) • Long‐listed products including ALLELOCK and Coniel also decreased due to the market penetration of generic d

  14. Slide 14: Pharmaceuticals: YoY Analysis - Core Operating Profit

    Pharmaceuticals: YoY Analysis ‐Core Operating Profit‐ IFRS +17.0 billion yen  Gross Profit +7.8 (incl. forex effect +0.0) • Mainly due to the increase in technology licensing (incl. forex effect +0.6) revenue. (¥Bn)  SG&A ‐2.2 (incl. forex effect +0.7) • Increased mainly due to promotional activit

  15. Slide 15: Pharmaceuticals: Revenue of Major Items

    Pharmaceuticals: Revenue of Major Items IFRS 2016Q4 2017Q4 2017Q4 Progress* Item Results Results Change Reason Plan NESP 56.4 56.3 -0.1 56.4 100% JP (-0%) REGPARA 20.0 18.5 -1.4 Market penetration 18.3 101% JP (-7%) of competitors Market penetration ALLELOCK 18.2 15.9 -2.3 of generics & Drug 15.4 10

  16. Slide 16: Bio-Chemicals: YoY Analysis - Revenue

    Bio‐Chemicals: YoY Analysis ‐Revenue‐ IFRS ‐0.7 billion yen  Overseas ‐0.2 (incl. forex effect +1.1) (incl. forex effect +1.1) • Americas ‐0.0 (incl. forex effect +0.3): Decreased in health‐food materials and amino acids for cell culture mediums. • Europe +0.6 (incl. forex effect +0.6) (¥Bn) • Asia

  17. Slide 17: Bio-Chemicals: YoY Analysis - Core Operating Profit

    Bio‐Chemicals: YoY Analysis ‐Core Operating Profit‐ IFRS +1.6 billion yen (incl. forex effect +0.6) (¥Bn)  Gross Profit +2.0 (incl. forex effect +0.7) • Steady growth in the domestic business. • Cost reduction by Thai plant’s scale‐up operation. • No big impact arising from the fall in Kyowa Engine

  18. Slide 18: FY2018 Forecast [IFRS]

    FY2018 Forecast [IFRS] © Kyowa Hakko Kirin Co., Ltd. 18

  19. Slide 19: FY2018 Consolidated Plan IFRS

    FY2018 Consolidated Plan IFRS 2017Q4 2018Q4 Change Results Plan • Deconsolidation of Kyowa Medex (↓) Revenue 353.4 335.0 ‐18.4 • Drug price revision (↓) (‐5%) • Growth of overseas drug business (↑) Core Operating • Increase in SG&A (↓) Profit 57.7 51.0 ‐6.7 • Improvement in *FKB’s loss [16%] [15%] (

  20. Slide 20: Pharmaceuticals: FY2018 Plan

    Pharmaceuticals: FY2018 Plan IFRS 2017Q4 2018Q4 Results Plan Change Revenue 275.8 262.0 ‐13.8 (‐5%) Pharma‐ ceuticals Core OP 50.5 43.0 [Margin] [18%] [16%] ‐7.5 (‐15%) ( Billion Yen / Rounded ) (¥Bn)  Revenue ‐13.8  Gross Profit ‐4.7 • Decrease due to drug price revision • Decrease due to deconso

  21. Slide 21: Bio-Chemicals: FY2018 Plan

    Bio‐Chemicals: FY2018 Plan IFRS 2017Q4 2018Q4 Results Plan Change Revenue 81.1 76.0 ‐5.1 (‐6%) Bio‐ Chemicals Core OP 7.2 8.0 [Margin] [9%] [11%] +0.8 (+11%) ( Billion Yen / Rounded ) (¥Bn)  Net Sales ‐5.1 • Decrease by focus on high‐profitability items • Decrease due to transfer of a business unit

  22. Slide 22: Shareholder returns

    Shareholder returns  The dividend for FY2017 was increased by 2 yen to 27 yen.  The dividend for FY2018 is planned to be further increased by 3 yen to 30 yen. Fiscal Dividend (yen) Payout ROE* Year ratio Interim Year‐end 2016 12.50 12.50 25.00 44.9% 5.3% 2017 12.50 (予想) 14.50 (予想) 27.00 34.4% 7.2%

  23. Slide 23: R&D Review

    R&D Review © Kyowa Hakko Kirin Co., Ltd. 23

  24. Slide 24: Key development events in 2017 - Domestic

    Key development events in 2017 Domestic:  Announcement of top‐line results of phase 3 clinical study of evocalcet (KHK7580) for the treatment of secondary hyperparathyroidism (January) and application for approval (April)  Application for approval of benralizumab (KHK4563) for the treatment of ast

  25. Slide 25: Key development events in 2017 - Domestic (cont.)

    Key development events in 2017 Domestic (cont.):  Announcement of positive results of phase 3 clinical study of evocalcet (KHK7580) for the treatment of secondary hyperparathyroidism (November at ASN)  Announcement of positive results of phase 2 clinical study of bardoxolone methyl (RTA 402) for t

  26. Slide 26: Key development events in 2017 - Overseas

    Key development events in 2017 Overseas:  Approval received for darbepoetin alfa (KRN321) for the treatment of anemia with myelodysplastic syndrome (February in Singapore and May in Malaysia)  Application for approval of brodalumab (KHK4827) for the treatment of psoriasis (February in Taiwan, June

  27. Slide 27: Key development events in 2017 - Overseas (cont.)

    Key development events in 2017 Overseas (cont.):  Announcement of positive results of phase 3 clinical study of burosumab (KRN23) for the treatment of adult X‐linked hypophosphatemia (April in the U.S., Europe, Canada, Japan, and Korea)  Initiation of phase 3 clinical study of brodalumab (KHK4827)

  28. Slide 28: Key development events in 2017 - Overseas (cont.)

    Key development events in 2017 Overseas (cont.):  Acceptance of application and priority review designation for burosumab (KRN23) granted by the U.S. Food and Drug Administration for the treatment of X‐linked hypophosphatemia (October in the U.S.)  Acceptance of application (October in Europe), ac

  29. Slide 29: Key global development updates (1) mogamulizumab/KW-0761

    Key global development updates (1) mogamulizumab/KW‐0761 (hematological cancer) 1 Development stage Country/ (Scheduled trial completion date) Estimated Indication region enrollment Phase 2 Phase 3 Application Relapsed/ 3 ATL U.S., Europe, others (2018/1) 71 refractory Relapsed/ 4 CTCL U.S., Europe,

  30. Slide 30: Key global development updates (2) mogamulizumab/KW-0761 (solid tumor)

    Key global development updates (2) mogamulizumab/KW‐0761 (solid tumor) Development stage Country/ Concomitant (Scheduled trial completion date) Estimated Indication Partner region Drug enrollment Phase 1 durvalumab 1 U.S. (2018/5) AstraZeneca 64 or tremelimumab 2 U.S. PF‐05082566 (2017/10) Pfizer 70

  31. Slide 31: Key global development updates (3) burosumab/KRN23

    Key global development updates (3) burosumab/KRN23 Development stage (Scheduled trial completion date) Estimated Indication Country/region Partner enrollment Phase 2 Phase 3 2 U.S., Europe (2018/12) 50 3 Pediatric U.S. (2019/10) 13 N.A., Europe, Japan, Ultragenyx 4 (2018/10) 60 Korea, Australia Phar

  32. Slide 32: Key global development updates (4) burosumab/KRN23

    Key global development updates (4) burosumab/KRN23 Development stage (Scheduled trial completion date) Estimated Indication Country/region Partner enrollment Phase 2 Phase 3 U.S. (2019/5) Ultragenyx 17 3 Pharmaceutical TIO/ENS (North America, 4 Japan, Korea (2019/6) Europe) 6 Estimated no. of patien

  33. Slide 33: Business Topics

    Business Topics © Kyowa Hakko Kirin Co., Ltd. 33

  34. Slide 34: License Agreement: Tenapanor

    License Agreement: Tenapanor In order to strengthen our core marketing area, renal domain, as well as contribute to a therapeutic area of chronic kidney disease in Japan, we have concluded a license agreement with Ardelyx regarding tenapanor Tenapanor:  Selective inhibitor of the intestinal tract N

  35. Slide 35: License Agreement: Characteristic of Tenapanor

    License Agreement: Characteristic of Tenapanor Mechanism of action (theory)  The primary uptake route of phosphorous is passive transport between cell membranes  Tenapanor inhibits NHE3 and thereby inhibits the uptake of sodium (Na+)  At the same time, the concentration of protons (H+) in the cel

  36. Slide 36: Appendix

    Appendix © Kyowa Hakko Kirin Co., Ltd. 36

  37. Slide 37: FOREX Information

    FOREX Information IFRS Average FOREX Rate [¥] 2016Q4 2017Q4 2018Q4 Currency Change Result Result Plan USD/JPY 109 112 +3 110 EUR/JPY 121 126 +5 130 GBP/JPY 150 144 ‐6 150 Q1‐Q4 FOREX Effect (YoY) [ ¥Bn ] Segment Currency Revenue Core Operating Profit USD +0.41 +0.02 Pharmaceuticals EUR +0.08 +0.07 B

  38. Slide 38: FOREX Information: Currency Fluctuation Sensitivity

    FOREX Information IFRS Currency Fluctuation Sensitivity for FY2018 Pro forma impact in case of 1yen appreciation from the plan Impact on Core Currency Impact on Revenue Operating Profit USD ‐0.26 billion yen ‐0.17 billion yen EUR ‐0.12 billion yen ‐0.06 billion yen GBP ‐0.29 billion yen +0.01 billio

  39. Slide 39: FY2017 GAP Analysis between J-GAAP and IFRS

    FY2017 GAP Analysis between J‐GAAP and IFRS J‐GAAP IFRS Revenue ¥350.7bn Revenue ¥353.4bn Impact on Revenue +2.7 Cost of Sales Cost of Sales • Deferment of licensing revenue +4.3 Gross Profit 220.1 Gross Profit 224.3 • Netting of liquor taxes etc ‐1.5 SG&A and R&D SG&A and R&D （ex‐Goodwill Amortizat

  40. Slide 40: FY2016 GAP Analysis between J-GAAP and IFRS

    FY2016 GAP Analysis between J‐GAAP and IFRS J‐GAAP IFRS Revenue ¥343.0bn Revenue ¥348.0bn Impact on Revenue +4.9 Cost of Sales Cost of Sales • Deferment of licensing revenue +6.5 Gross Profit 208.5 Gross Profit 214.6 • Netting of liquor taxes etc ‐1.5 SG&A and R&D SG&A and R&D （ex‐Goodwill Amortizat

  41. Slide 41: FY2017 Consolidated Results (vs. 2016) J-GAAP

    FY2017 Consolidated Results (vs.2016) J-GAAP 2016Q4 2017Q4 Change Results Results • Benralizumab‐related +7.7 licensing revenue (↑) Revenue 343.0 350.7 (+2%) • Drug price revision and generics penetration (↓) Operating • Benralizumab‐related Profit 31.6 40.6 +9.0 licensing revenue (↑) [9%] [12%] (+2

  42. Slide 42: FY2017 Consolidated Results (vs. Plan) J-GAAP

    FY2017 Consolidated Results (vs.Plan) J-GAAP 2017Q4 2017Q4 Change Plan Results Revenue 347.0 350.7 +3.7 • Domestic drug business (↑) (+1%) • FOREX impact (↑) Operating Profit 39.0 40.6 +1.6 • In‐license of tenapanor (↓) [11%] [12%] (+4%) • SG&A underspent (↑) [Margin] Ordinary 35.0 35.6 +0.6 • FOREX

  43. Slide 43: Consolidated: YoY Analysis - Profit J-GAAP

    Consolidated：YoY Analysis ‐Profit‐ J-GAAP Profit (Jan‐Dec) +7.7 billion yen Pharmaceuticals +9.8 Pharmaceuticals ‐2.4 (¥Bn) Bio‐Chemicals +1.8 Bio‐Chemicals ‐0.3 Impairment losses ‐4.7 Gain on sale of fixed assets ‐2.5 Gain on forgiveness of debts ‐1.3 Gain on transfer of a business unit +5.

  44. Slide 44: FY2017 Results by Segment J-GAAP

    FY2017 Results by Segment J-GAAP  Pharmaceuticals’ operating profit increased due to the rise in overseas sales & licensing revenue, despite a drop in domestic revenue  Bio‐Chemicals’ operating profit increased with improved profitability 2016Q4 2017Q4 2017Q4 Change Change Results Results Plan Rev

  45. Slide 45: Pharmaceuticals: YoY Analysis - Revenue J-GAAP

    Pharmaceuticals: YoY Analysis ‐Revenue‐ J-GAAP  Domestic Drug (KHK*) ‐4.0 +8.1 billion yen • Our key product REGPARA decreased due to the emergence of a competing product. (incl. forex effect ‐0.4) • Long‐listed products such as ALLELOCK and Coniel also decreased due to the market penetration of (¥

  46. Slide 46: Pharmaceuticals: YoY Analysis - Operating Profit J-GAAP

    Pharmaceuticals: YoY Analysis ‐Operating Profit‐ J-GAAP +7.5 billion yen (incl. forex effect +0.7)  Gross Profit +9.8 (incl. forex effect ‐0.1) • Mainly due to the increase in technology licensing revenue. (¥Bn)  SG&A ‐2.4 (incl. forex effect +1.0) • Increased mainly due to promotional activities

  47. Slide 47: Pharmaceuticals: KHK's Sales by Product J-GAAP

    Pharmaceuticals: KHK’s Sales by Product J-GAAP  Domestic drug business decreased due to penetration of competitor drugs and generic drugs  Technology out‐licensing revenue came mainly from benralizumab Product 2016Q4 2017Q4 Change Reason 2017Q4 Progress* Results Results Forecast NESP 56.4 56.3 ‐0.

  48. Slide 48: Bio-Chemicals: YoY Analysis - Revenue J-GAAP

    Bio‐Chemicals: YoY Analysis ‐Revenue‐ J-GAAP ‐0.8 billion yen  Overseas ‐0.2 (incl. forex effect +1.1) (incl. forex effect +1.0) • Americas ‐0.0 (incl. forex effect +0.3): Decreased in health‐food materials and amino acids (¥Bn) for cell culture mediums. • Europe +0.6 (incl. forex effect +0.6) • As

  49. Slide 49: Bio-Chemicals: YoY Analysis - Operating Profit J-GAAP

    Bio‐Chemicals: YoY Analysis ‐Operating Profit‐ J-GAAP +1.5 billion yen (incl. forex effect +0.5) (¥Bn)  Gross Profit +1.8 (incl. forex effect +0.6) • Steady growth in the domestic business. • Cost reduction by Thai plant’s scale‐up operation. • No big impact arising from the fall in Kyowa Engineeri

  50. Slide 50: Burosumab: Collaboration with Ultragenyx (summary)

    Burosumab： Collaboration with Ultragenyx (summary) KHK group Ultragenyx  Splits profits in half with KHK  Books sales for first 5 years U.S.A  Splits profits in half with Ultragenyx for first 5 years  After 5 years, receives mid to Canada  After 5 years, pays mid to high 20% range sales royalty

  51. Slide 51: Development schedule of major late-stage pipeline

    Development schedule of major late‐stage pipeline * ：NDA holder is AstraZeneca + ：Estimated time of regulatory decisions Generic name Country/ Indication 2017 2018 2019~ Code region bardoxolone methyl diabetic kidney Japan Phase 2 Phase 3 RTA 402 disease U.S. approved* asthma Europe +* benralizumab

  52. Slide 52: Biosimilar products development

    Biosimilar products development Development Reference bio medical product Development stage Country/region code Generic name Brand name Phase 2 Phase 3 Application FKB327 adalimumab HUMIRA U.S., others 1 FKB238 bevacizumab Avastin U.S., Europe, others Not Not Not Not disclosed disclosed disclosed di

  53. Slide 53: List of acronyms

    List of acronyms ATL Adult T‐cell Leukemia/Lymphoma COPD Chronic Obstructive Pulmonary Disease CTCL Cutaneous T‐Cell Lymphoma ENS Epidermal Nevus Syndrome HTLV‐1 Human T‐cell Leukemia Virus Type 1 ITP Idiopathic (immune) Thrombocytopenic Purpura TIO Tumor Induced Osteomalacia XLH X‐linked Hypophosph

  54. Slide 54: Kyowa Hakko Kirin Group mission and contact

    The Kyowa Hakko Kirin Group companies strive to contribute to the health and well‐being of people around the world by creating new value through the pursuit of advances in life sciences and technologies. Kyowa Hakko Kirin Co Ltd Corporate Communications Dept Tel: +81‐3‐5205‐7206 © Kyowa Hakko Kirin

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