Kissei Pharmaceutical : Supplementary Explanatory Materials on Financial Results for the Three Months ended June 30, 2022

Stock exchange listing: Tokyo Stock Exchange

Stock code: 4547

Supplementary

Explanatory Materials on

Financial Results for

the Three Months ended

June 30, 2022

August 1, 2022

Table of Contents

[Excerpts from "Explanation of Operating Results" of the Quarterly Financial Results]

I. Consolidated Statements of Income

1. Trends in Main Product Sales III. R&D Pipeline (In-house)
   IV. R&D Pipeline (Out-licensing)

……………… P 1

……………… P 2

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……………… P 4

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Notes:

• The forward-looking statements herein are based on the information available and the Company's analysis of various trends as of August 2022. Actual results may differ greatly from these statements due to business risks and uncertainties.

[Excerpts from "Explanation of Operating Results" of the Quarterly Financial Results]

• Net sales

Net sales of the Pharmaceutical Business were ¥13,915 million, a decrease of 0.1% year on year. In the midst of COVID-19 pandemic, we promoted a hybrid type of pharmaceutical information activities that effectively utilized various digital contents in addition to the traditional physical interviews. While sales of Beova® Tablets, an overactive bladder treatment, and Darbepoetin Alfa BS Injection [JCR] for the treatment of renal anemia increased, net sales decreased mainly because of the impact of the NHI drug price revision implemented in April 2022 and a decrease in export sales. CAROGRA® Tablets, a treatment for ulcerative colitis, which EA Pharma Co., Ltd. and the Company have jointly developed, was launched in May 2022 and TAVNEOS® Capsules for the treatment of microscopic polyangiitis and granulomatosis with polyangiitis was launched in June 2022.

Net sales of the Information Services Business were ¥1,582 million, a decrease of 15.3% year on year, net sales of the Construction Business were ¥612 million, a decrease of 11.5% year on year, and net sales of the Merchandising Business were ¥175 million, an increase of 16.8% year on year.

• Profit

Despite an improvement in the cost of sales ratio, operating profit decreased due to a decrease in net sales and an increase in selling, general and administrative expenses centering on R&D expenses. On the other hand, ordinary profit increased, and profit attributable to owners of parent decreased despite a gain on sale of investment securities.

• R&D

Regarding fostamatinib (generic name, development code: R788), a treatment for chronic idiopathic thrombocytopenic purpura, which was in-licensed from U.S.-based Rigel Pharmaceuticals, Inc., the Company submitted a New Drug Application (NDA) in Japan in April 2022. Regarding linzagolix (generic name, development code: KLH-2109), a treatment for uterine fibroids and endometriosis, which is a drug discovered by the Company, Phase III clinical trials have been initiated for the indication of uterine fibroids in Japan.

Overseas, ObsEva SA (Switzerland), which has exclusive development and commercialization rights worldwide, except certain Asian countries including Japan, to linzagolix, has announced that they have decided to commence composition proceedings. ObsEva has obtained marketing authorization from the European Commission for linzagolix in June this year. ObsEva has also contracted a sublicense agreement with Theramex (U.K.) to commercialize linzagolix in all countries except for North America and Asia. Under the terms of the license agreement of the Company and ObsEva, the Company terminates this agreement and obtains the assignment of sublicense agreement of Theramex and ObsEva. The Company will now lead the way to target the launch in Europe in the first quarter of 2023, and continue to move forward the global expansion of linzagolix.

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Ⅰ. Consolidated Statements of Income

							(Million yen)
Fiscal year	Fiscal year ended March 31, 2022		Fiscal year ending March 31, 2023
Item	1st quarter	Full year	1st quarter	YoY	Full year	1st half
(forecast)	(forecast)
Net sales	16,635	65,381	16,285	(2.1)%	68,000	31,000
Pharmaceutical Business	13,924	54,147	13,915	(0.1)%	57,000	25,500
Pharmaceuticals	12,010	45,792	11,800	(1.7)%	44,700	21,000
Therapeutic and Care Foods	874	3,568	862	(1.4)%	3,600	1,800
Technical Fees*1	74	518	106	43.4%	4,200	300
Other*2	965	4,268	1,146	18.8%	4,500	2,400
Information Services Business	1,869	7,742	1,582	(15.3)%	7,200	3,700
Construction Business	691	2,948	612	(11.5)%	3,300	1,500
Merchandising Business	150	543	175	16.8%	500	300
[Export sales included in net sales]	[1,086]	[3,713]	[825]	[(24.0)	%]	[7,500]	[1,700]
Cost of sales	8,769	34,143	8,135	(7.2)%	33,700	16,100
[Cost of sales ratio]	[52.7]	[52.2]	[50.0]			[49.6]	[51.9]
Gross profit	7,866	31,238	8,150	3.6%	34,300	14,900
Selling, general and administrative	7,573	32,640	8,019	5.9%	31,500	16,200
expenses
R&D expenses	2,189	10,363	2,425	10.8%	9,000	5,000
[Ratio to net sales]	[13.2]	[15.9]	[14.9]			[13.2]	[16.1]
Operating profit (loss)	293	(1,402)	130	(55.4)%	2,800	(1,300)
Non-operating income	645	2,092	699	8.5%	1,700	850
Interest and dividend income	585	1,586	591	1.1%
Other	59	506	108	81.0%
Non-operating expenses	174	127	23	(86.4)%	100	50
Interest expenses	5	23	5	(7.9)%
Other	168	104	18	(89.1)%
Ordinary profit (loss)	764	562	806	5.6%	4,400	(500)
Extraordinary income	3,531	16,601	1,334	(62.2)%	9,000	4,500
Extraordinary losses	22	656	0	(99.9)%	－	－
Profit before income taxes	4,273	16,507	2,141	(49.9)%	13,400	4,000
Income taxes - current	1,180	4,017	366	(69.0)%	2,800	800
Income taxes - deferred	(579)	(542)	119		－	500	150
Profit attributable to non-controlling	28	110	20	(26.6)%	100	50
interests
Profit attributable to owners of parent	3,644	12,921	1,635	(55.1)%	10,000	3,000
Comprehensive income	(1,373)		1,890		－

*1: Includes revenue contracting fees related to out-licensing, milestone payments, and running royalties.

*2: Includes revenue from supply to domestic sales partners and revenue from co-promotion fees.

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Ⅱ. Trends in Main Product Sales

(Million yen)

Fiscal year	Fiscal year ended March 31, 2022		Fiscal year ending March 31, 2023
	1st quarter	Full year	1st quarter	YoY	Full year	1st half
Product name	(forecast)	(forecast)
Overactive Bladder Treatment
Beova®	2,047	8,141	2,798	36.7%	11,000	4,600
DESMOPRESSIN Formulations
MINIRIN MELT®, etc.*1	1,068	3,965	1,028	(3.8)%	3,900	1,900
Dysuria Treatment
URIEF®	777	2,878	631	(18.8)%	2,200	1,100
Hyperphosphatemia Treatment
P-TOL®	1,502	5,784	1,513	0.7%	6,300	3,100
Treatment for Renal Anemia
Darbepoetin Alfa BS Injection [JCR]	912	3,730	1,088	19.3%	3,600	1,700
Treatment for Renal Anemia
Epoetin Alfa BS Injection [JCR]	1,070	3,834	859	(19.7)%	2,200	1,200
Treatment for Diabetes
GLUBES®	1,030	3,838	830	(19.4)%	3,400	1,700
Treatment for Diabetes
GLUFAST®	270	1,151	295	9.3%	1,000	500
Treatment for Diabetes
MARIZEV®	358	1,234	294	(17.9)%	1,200	600
Treatment for MPA*2 and GPA*3
TAVNEOS®	－	－	30	－	700	200
Treatment for Ulcerative Colitis
CAROGRA®	－	－	86	－	350	150
Treatment of Dry Mouth Symptoms
SALAGEN®	386	1,412	297	(23.0)%	1,100	550

*1: MINIRIN MELT®, DESMOPRESSIN Intranasal, DESMOPRESSIN Nasal Spray, and DESMOPRESSIN I.V. Injection

*2: Microscopic polyangiitis

*3: Granulomatosis with polyangiitis

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