Otsuka : Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending December 31, 2022

Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending December 31, 2022 [IFRS]

July 29, 2022

Company name

Stock exchange listing

Code number

URL

Representative

Contact

Scheduled date of quarterly securities report submission Scheduled date of dividend payment commencement Supplementary materials for quarterly financial results Earnings announcement for quarterly financial results

• Otsuka Holdings Co., Ltd.
• Tokyo Stock Exchange
• 4578
• https://www.otsuka.com/en/
• Tatsuo Higuchi

President and Representative Director, CEO

: Yuji Kogure

Director, Investor Relations Department

Telephone: [phone]

• August 3, 2022
• September 5, 2022
• Yes
• Yes (for institutional investors, analysts and the press)

(Figures are rounded down to the nearest million unless otherwise stated)

1. Consolidated Financial Results for the Second Quarter of the Year Ending December 31, 2022 (January 1, 2022 to June 30, 2022)

1. Consolidated Operating Results (cumulative)

(% indicates percentage of change from the same period of the previous fiscal year)

							Profit			Profit attributable	Total comprehensive
	Revenue		Business profit	Operating profit			to owners of the	income for the
		for the period
							Company			period
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	(	%	Millions of yen	(	%	Millions of yen	69	%
FY2022 Q2	814,307	13.3	78,126	25.1)	67,146	39.6)	71,508	23.7)	69,753	23.7)	244,712	.2
FY2021 Q2	718,815	3.4	104,271	(	111,169	(	93,700	5.9	91,407	5.3	144,610
	(8.5)	(5.8)					113.9

• Business profit is an indicator of ordinary earnings power calculated as follows:
  Revenue - Cost of sales - Selling, general and administrative expenses - Research and development expenses + Share of profit of investments accounted for using the equity method

	Basic earnings	Diluted earnings
	per share	per share
	Yen	Yen
FY2022 Q2	128.58	128.54
FY2021 Q2	168.53	167.68

1. Consolidated Financial Position

Equity attributable

Ratio of equity

Equity attributable

attributable to owners

Total assets

Total equity

to owners of the

to owners of the

of the Company to

Company

Company per share

total assets

As of

Millions of

yen

Millions of yen

Millions of yen

%

Yen

3,101,281

2,261,750

2,225,225

71.8

4,100.78

June 30, 2022

As of

2,820,915

2,045,189

2,010,994

71.3

3,707.64

December 31, 2021

2.

Dividends

Annual dividend per share

First

Second

Third

Year-end

Total

Quarter

end

Quarter end

Quarter end

Yen

Yen

Yen

Yen

Yen

FY2021

-

50.00

-

50.00

100.00

FY2022

-

50.00

FY2022 (forecast)

-

50.00

100.00

* Revisions to dividends forecast most recently announced: None

3. Forecast of Consolidated Operating Results for the Year Ending December 31, 2022 (January 1, 2022 to December 31, 2022)

						(% indicates	percentage of	change from the previous fiscal year)
							Profit for the		Profit attributable	Basic earnings
	Revenue		Business profit	Operating profit		to owners of the
			year		per share
									Company
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions	of yen	%	Millions of yen	%	Yen
FY2022	1,670,000	11.5	160,000	1.8	152,000	(1.6)	138,000	6.8	135,000	7.6	248.82

* Revisions to financial forecast most recently announced: Yes

4. Others

1. Changes in significant subsidiaries during the six-month period ended June 30, 2022 (changes in specified subsidiaries resulting in a change in scope of consolidation): None
2. Changes in accounting policies and changes in accounting estimates
3. 1. Changes in accounting policies required by IFRS: None
   2. Changes in accounting policies due to other reasons: None
   3. Changes in accounting estimates: None
4. Number of shares issued and outstanding (common stock)
5. 1. Number of shares issued and outstanding as of the end of the reporting period (including treasury shares):

June 30, 2022	557,835,617 shares
December 31, 2021	557,835,617 shares

1. Number of shares of treasury shares as of the end of the reporting period:

June 30, 2022	15,201,896 shares
December 31, 2021	15,443,722 shares

1. Average number of shares outstanding during the reporting period:

Six-month period ended June 30, 2022	542,477,429 shares
Six-month period ended June 30, 2021	542,357,387 shares

• This report is out of scope of reviews by the external auditor.
• Note to ensure appropriate use of forecasts, and other comments in particular

Forecasts and other forward-looking statements included in this report are based on information currently available and certain assumptions that Otsuka Holdings Co., Ltd. (hereinafter referred to as the "Company") deems reasonable. Actual performance and other results may differ significantly due to various factors. Please refer to "1. Qualitative Information (3) Forecast for Consolidated Operating Results" on page 9 for details with regard to the assumptions and other matters concerning the financial forecast.

The Company plans to hold an earnings release conference call for institutional investors, analysts and the press on July 29, 2022. Presentation materials and the webcast of the call will be available on the Company's website promptly after the call.

Attachment Index
1.	Qualitative Information ...................................................................................................................................................	2
	(1)	Consolidated Operating Results ................................................................................................................................	2
	(2)	Consolidated Financial Position................................................................................................................................	8
	(3)	Forecast for Consolidated Operating Results ............................................................................................................	9
2.	Condensed Interim Consolidated Financial Statements and Major Notes ................................................................	10
	(1)	Condensed Interim Consolidated Statements of Financial Position ........................................................................	10
	(2)	Condensed Interim Consolidated Statements of Income .........................................................................................	12
	(3)	Condensed Interim Consolidated Statements of Comprehensive Income ...............................................................	13
	(4)	Condensed Interim Consolidated Statements of Changes in Equity........................................................................	14
	(5)	Condensed Interim Consolidated Statements of Cash Flows ..................................................................................	16
	(6)	Notes to Condensed Interim Consolidated Financial Statements ............................................................................	17
		Note to Going Concern Assumptions......................................................................................................................	17
		Operating Segments ................................................................................................................................................	17
		Impairment of Assets ..............................................................................................................................................	18
		Acquisition of Full Ownership of Cullinan Pearl Corp. and Asset Acquisition of TAS6417..................................	18

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1. Qualitative Information

(1) Consolidated Operating Results

The forward-looking statements in this report were prepared based on information available as of June 30, 2022.

Summary of consolidated operating results for the six-month period ended June 30, 2022

The Company and its subsidiaries (hereinafter referred to as the "Group") adopted "Business profit" as an indicator of ordinary earnings power, which is calculated as follows:

Revenue - Cost of sales - Selling, general and administrative expenses - Research and development expenses + Share of profit of investments accounted for using the equity method

(Millions of yen)

	Six-month period	Six-month period	Change	% Change
	ended June 30, 2021	ended June 30, 2022
Revenue	718,815	814,307	95,491	13.3	%
Business profit before research and	207,191	203,334	(3,856)	(1.9)	%
development expenses
Business profit	104,271	78,126	26,145)	(25.1)	%
Operating profit	111,169	67,146	(44,022)	(39.6)	%
Profit before tax	119,207	92,788	(26,418)	(22.2)	%
Profit for the period	93,700	71,508	(22,192)	(23.7)	%
Profit attributable to owners of the	91,407	69,753	(	(23.7)	%
Company			(21,653)
Research and development expenses	102,919	125,208	22,288	21.7	%
Impairment losses	309	24,356	24,046	-

Based on the concept of total health care, the Group has been promoting corporate activities to maintain and promote health and to diagnose and treat disease. To respond to social issues brought about by a highly uncertain world amid a changing social environment due to the impact of the spread of COVID-19, geopolitical risks, etc., the Group will incorporate new technologies and needs arising from changes in the environment and harness the opportunities presented by a growing awareness of health in order to demonstrate the Group's true value as a total healthcare company, especially now, and continue to move toward the realization of sustainable growth.

For the six-month period ended June 30, 2022, the Group recorded consolidated revenue of ¥814,307 million (up 13.3% over the same period of the previous fiscal year) as revenue grew steadily mainly for the four global products (the long acting antipsychotic agent ABILIFY MAINTENA, the antipsychotic agent REXULTI/RXULTI, the V2-receptor antagonist JYNARQUE and the anti-cancer agent LONSURF). Even after excluding the impact from exchange rate fluctuations, this was a considerable growth in revenue. In the pharmaceutical business, business performance was driven by sales growth of the four global products and clinical nutrition. In the nutraceutical business, sales of POCARI SWEAT recovered, and sales of Nature Made, etc. grew in line with a rising awareness toward self-management of health. Moreover, consolidated revenue in the other businesses increased due to brisk sales of specialty chemical products and fine chemicals.

However, as a result of an increase in cost of sales due to the impact of exchange rate fluctuations on the elimination of unrealized gains on inventories in the pharmaceutical business, an increase in operating expenses due to resumption of operating activities, an increase in co- promotion expenses accompanying sales growth of ABILIFY MAINTENA and REXULTI/RXULTI, an increase in selling, general and administrative expenses due to the impact of exchange rate fluctuations, etc., and a decrease in share of profit of investments accounted for using the equity method, business profit before research and development expenses declined slightly to ¥203,334 million (down 1.9%).

Moreover, mainly due to an increase in development expenses based on a collaboration and license agreement executed with Sumitomo Pharma Co., Ltd. and Sunovion Pharmaceuticals Inc. for joint development and commercialization related to antipsychotic agent with a novel mechanism of action, an increase in development expenses for centanafadine under development for the treatment of attention-deficit hyperactivity disorder (ADHD) in pediatric patients and binge-eating disorder, and an increase in development expenses for sibeprenlimab/VIS649 under development for the treatment of IgA nephropathy, as well as the impact of exchange rate fluctuations, research and development expenses totaled ¥125,208 million (up 21.7%). As a result, business profit was ¥78,126 million (down 25.1%).

The Group recorded impairment losses of ¥24,356 million related to vadadustat and others, and it also recorded a gain on valuation of its existing shareholding of Cullinan Pearl Corp. (hereinafter referred to as "Cullinan Pearl") as a result of making Cullinan Pearl, which had been an equity-method affiliate of the Company, a wholly owned subsidiary. As a result, the Group recorded operating profit of ¥67,146 million (down 39.6%), profit for the period of ¥71,508 million (down 23.7%), and profit attributable to owners of the Company of ¥69,753 million (down 23.7%).

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Revenue and business profit by business segment during FY2022 Q2

						(Millions of yen)
	Pharmaceuticals	Nutraceuticals	Consumer	Others	Adjustments	Total
	products
Revenue	529,294	205,770	16,669	82,668	20,095)	814,307
Business profit	65,023	28,132		6,093	(22,878)	78,126
			1,754		(
Reference (FY2021 Q2)			(Millions of yen)
	Pharmaceuticals	Nutraceuticals	Consumer	Others	Adjustments	Total
	products
Revenue	472,467	175,311	15,211	73,893	(18,068)	718,815
Business profit	88,086	26,683	3,307	8,136	(21,941)	104,271

1. Pharmaceuticals

Although revenue for the six-month period ended June 30, 2022 totaled ¥529,294 million (up 12.0%), business profit was ¥65,023 million (down 26.2%) mainly due to the impact of exchange rate fluctuations on the elimination of unrealized gains on inventories and an increase in research and development expenses.

Main products

• Four global products

The Group positions the long acting antipsychotic agent ABILIFY MAINTENA, the antipsychotic agent REXULTI*1/RXULTI*2, the V2- receptor antagonist Samsca/JINARC*3/JYNARQUE*4 and the anti-cancer agent LONSURF as its four global products. Sales of those products totaled ¥291,165 million (up 23.4%).

*1: Brand name for the antipsychotic agent outside Japan and Europe

*2: Brand name for the antipsychotic agent in Europe

*3: Brand name for autosomal dominant polycystic kidney disease ("ADPKD") treatment in multiple regions outside Japan

*4: Brand name for ADPKD treatment in the U.S.

• Long acting antipsychotic agent ABILIFY MAINTENA

In the U.S., sales increased atop growth in prescriptions, mainly due to promoting the efficacy of the product for bipolar disorder and schizophrenia patients, who have problems adhering to drug regimens, as well as an increase in face-to-face detailing activities. In Japan, sales were solid mainly due to the addition of an indication for the suppression of recurrence and relapse of mood episodes in bipolar I disorder in September 2020. Also in Europe, sales increased, particularly in major markets. As a result, sales of ABILIFY MAINTENA totaled ¥76,334 million (up 20.0%).

• Antipsychotic agent REXULTI/RXULTI

In the U.S., where antipsychotic agent REXULTI is sold as adjunctive therapy in major depressive disorder and a treatment for schizophrenia, prescriptions grew and sales increased, mainly due to the use of direct-to-consumer advertising, and an increase in face-to- face detailing activities. In Japan, sales were solid with the launch of orally disintegrating tablets in November 2021, increasing convenience, and stronger information provision activities. As a result, sales of REXULTI/RXULTI totaled ¥75,612 million (up 30.5%).

• V2-receptor antagonist Samsca

In Japan, where the drug is sold as treatment for fluid retention in patients with heart failure and hepatic cirrhosis, ADPKD and another condition, sales increased due to online detailing activities such as web seminars. In the U.S., where the drug is sold as a treatment for hyponatremia, and in Europe, where the drug is sold as a treatment for hyponatremia caused by syndrome of inappropriate antidiuretic hormone secretion (SIADH), generics were launched after the expiry of the exclusive sales period. As a result, sales of Samsca totaled ¥48,210 million (up 10.4%).

• V2-receptor antagonist JINARC/JYNARQUE

In the U.S., the number of prescriptions for ADPKD increased mainly due to continued efforts to raise awareness of the disease and provide information about clinical data. As a result, sales of JINARC/JYNARQUE totaled ¥64,088 million (up 33.4%).

• Anti-canceragent LONSURF

In the U.S., sales increased since the use of oral anti-cancer agents is recommended due to the spread of COVID-19*5,6. Prescriptions continued to be robust in Japan and Europe. As a result, sales of LONSURF totaled ¥26,919 million (up 18.6%).

*5: Pelin Cinar et al., Safety at the Time of the COVID-19 Pandemic: How to Keep our Oncology Patients and Healthcare Workers Safe. J Natl Compr Canc Netw, 2020 Apr 15;1-6.

*6: ASCO. COVID-19 Patient Care Information, Cancer Treatment and Supportive Care. https://www.asco.org/covid-resources/patient-care-info/cancer-treatment-supportive-careUpdated 17 September 2021, Accessed 19 July 2022.

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