Kissei Pharmaceutical : Consolidated Financial Results for the Three Months Ended June 30, 2022

Disclaimer: This document is an English translation of the original document in Japanese and has been prepared solely for reference purposes. In the event of any discrepancy between this English translation and the original in Japanese, the original shall prevail in all respects.

Consolidated Financial Results

for the Three Months Ended June 30, 2022

[Japanese GAAP]

August 1, 2022

Company name: KISSEI PHARMACEUTICAL CO., LTD.

Stock exchange listing: Tokyo Stock Exchange

Stock code: 4547

URL: https://www.kissei.co.jp/

Representative: Mutsuo Kanzawa, Chairman and CEO

Contact: Takahide Kitahara, Managing Director, Department Manager of Corporate Finance and Management Department

Phone: [phone]

Scheduled date of filing quarterly securities report: August 12, 2022

Scheduled date of commencing dividend payments: -

Availability of supplementary explanatory materials on quarterly financial results: Available

Schedule of quarterly financial results briefing session: Not scheduled

(Amounts of less than one million yen are rounded down.)

1. Consolidated Financial Results for the Three Months Ended June 30, 2022 (April 1, 2022 - June 30, 2022)

(1) Consolidated Operating Results				(% indicates changes from the previous corresponding period.)
			Net sales			Operating profit			Ordinary profit		Profit attributable to
									owners of parent
	Three months ended	Million yen	%	Million yen	%		Million yen	%			Million yen	%
	June 30, 2022	16,285	(2.1)		130	(55.4)		806	5.6		1,635	(55.1)
	June 30, 2021	16,635	3.6		293	(82.1)		764	(64.8)		3,644	111.2
	(Note) Comprehensive income: Three months ended June 30, 2022: ¥1,890 million [-%]
			Three months ended June 30, 2021: ¥(1,373) million [-%]
		Basic earnings		Diluted
			earnings
		per share
				per share
	Three months ended		Yen			Yen
	June 30, 2022	35.47			-
	June 30, 2021	79.02			-
(2) Consolidated Financial Position
			Total assets		Net assets		Equity ratio		Net assets per share
	As of			Million yen		Million yen			%			Yen
	June 30, 2022			235,346		202,779			85.8			4,379.43
	March 31, 2022			238,087		202,180			84.6			4,366.96

(Reference) Equity: As of June 30, 2022: ¥201,961 million As of March 31, 2022: ¥201,385 million

2. Dividends

				Annual dividends
		1st quarter-end	2nd quarter-end		3rd quarter-end	Year-end	Total
		Yen	Yen		Yen	Yen	Yen
Fiscal year ended		-	28.00		-	28.00	56.00
March 31, 2022
Fiscal year ending		-
March 31, 2023
Fiscal year ending
March 31, 2023			40.00		-	40.00	80.00
(Forecast)

(Note) Revision to the forecast for dividends announced most recently: None

3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2023 (April 1, 2022 - March 31, 2023)

				(% indicates changes from the previous corresponding period.)
							Profit attributable	Basic
	Net sales		Operating profit	Ordinary profit	earnings
		to owners of parent
							per share
	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
First half	31,000	(4.3)	(1,300)	-	(500)	-	3,000	(47.1)	65.05
Full year	68,000	4.0	2,800	-	4,400	682.1	10,000	(22.6)	216.85

(Note) Revision to the financial results forecast announced most recently: None

* Notes:

1. Changes in significant subsidiaries during the period under review (changes in specified subsidiaries resulting in change in scope of consolidation): None
2. Accounting methods adopted particularly for the preparation of quarterly consolidated financial statements: None
3. Changes in accounting policies, changes in accounting estimates and retrospective restatement
4. 1. Changes in accounting policies due to the revision of accounting standards: Yes
   2. Changes in accounting policies other than 1) above: None
   3. Changes in accounting estimates: None
   4. Retrospective restatement: None
5. Total number of issued shares (common shares)
6. 1. Total number of issued shares at the end of the period (including treasury shares):

June 30, 2022:	51,811,185 shares
March 31, 2022:	51,811,185 shares
2) Total number of treasury shares at the end of the period:
June 30, 2022:	5,695,353 shares
March 31, 2022:	5,695,353 shares
3) Average number of shares during the period:
Three months ended June 30, 2022:	46,115,832 shares
Three months ended June 30, 2021:	46,115,917 shares

• These quarterly consolidated financial results are outside the scope of quarterly review by certified public accountants or an audit firm.
• Explanation of the proper use of financial results forecast and other notes

(Cautionary note on forward-looking statements)

The financial forecasts and other forward-looking statements herein are based on information available to the Company as of the date of publication of this document and certain assumptions as of the date of publication of this document on uncertainties that may have an impact on future financial results and the Company does not in any way guarantee their achievement. Actual results may differ greatly from these forecasts due to a variety of factors.

Please refer to "1. Qualitative Information on Quarterly Financial Results (3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information" on page 3 of the Attachments for preconditions underlying the financial forecasts and other matters.

(How to obtain supplementary explanatory materials on quarterly financial results)

The supplementary explanatory materials on quarterly financial results are posted on the Company's website together with the consolidated financial results.

Table of Contents - Attachments
1. Qualitative Information on Quarterly Financial Results .....................................................................	2
(1)	Explanation of Operating Results ...................................................................................................	2
(2)	Explanation of Financial Position ...................................................................................................	3
(3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information . 3
2. Quarterly Consolidated Financial Statements and Principal Notes .....................................................	4
(1)	Quarterly Consolidated Balance Sheets ..........................................................................................	4
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income ..................................	6
	Quarterly Consolidated Statements of Income
	Three Months Ended June 30, 2022 ........................................................................................	6
	Quarterly Consolidated Statements of Comprehensive Income
	Three Months Ended June 30, 2022 ........................................................................................	7
(3)	Notes to Quarterly Consolidated Financial Statements ...................................................................	8
	(Notes on going concern assumption) ........................................................................................	8
	(Notes in case of significant changes in shareholders' equity) ...................................................	8
	(Changes in accounting policies) ................................................................................................	8
	(Segment information, etc.) ........................................................................................................	9
	(Revenue recognition) ..............................................................................................................	10
3. Other .................................................................................................................................................	11
(1)	Sales Results....................................................................................................................................	11

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1. Qualitative Information on Quarterly Financial Results

1. Explanation of Operating Results
   In the three months ended June 30, 2022, the pharmaceutical industry continued to experience harsh business conditions. As one of the measures to curb medical costs, including the reform of the National Health Insurance (NHI) drug pricing system, a drug price revision was implemented in April 2022, following the mid-year revision of drug prices in April 2021. Although the additional requirements for promoting new drug discovery and eliminating off-label drug use have been expanded, the replacement rate of drugs by generic versions meant more drastic price cuts for drugs that have been listed in the NHI Drug Price Standard for a long period of time. Although strong ICT demand continued in the information services industry, and there were signs of a recovery in capital investment in the construction and merchandising industries, personal consumption had not yet reached a recovery trend, and the competitive environment remained fierce.
   In these circumstances, the Company's financial results for the three months ended June 30, 2022 were as stated below.

			(Million yen)
	Three months ended	Three months ended	Change (%)
	June 30, 2021	June 30, 2022
Net sales	16,635	16,285	(2.1)
Operating profit	293	130	(55.4)
Ordinary profit	764	806	5.6
Profit attributable to	3,644	1,635	(55.1)
owners of parent

• 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

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