Seikagaku : Financial Results for the Second Quarter of Fiscal Year 2023

Exploring the Innovative

Promise of Glycoscience

Financial Results

for the 2nd Quarter of

Fiscal Year 2023

（TSE：4548）

Contents

2Q Results	P3
Net Sales	P4-6
Income	P7

Revised Forecasts in FY2023 P8-9

Trend in R&D Expenses	P10
Sales by Business Segment
Domestic Pharmaceuticals	P11-12
Overseas Pharmaceuticals	P13-14
LAL	15

< Cautionary Notes >

Exploring the Innovative

Promise of Glycoscience

Research and Development	P16
SI-6603	P17
(Lumbar disc herniation)
SI-614	(Dry Eye)	P18
SI-722		P19
(Interstitial cystitis and bladder pain syndrome)
SI-449	(Adhesion Barrier)	P20

Basic Policy on Profit Distribution P21

AppendixP22

This material contains forward-looking statements regarding future management strategies or performance forecasts. These statements are based on judgments derived from information that is currently available to Seikagaku and are subject to risk and uncertainty. Actual results and developments may differ significantly from these forward-looking statements due to various factors.

Information about pharmaceutical products or medical devices (including products currently in development) included in this material is not intended to constitute an advertisement or medical advice.

2

Overview for 2Q of FY 2023

Exploring the Innovative Promise of Glycoscience

	2Q FY2023	Year-on-Year	(Reference)
	FY2023 Full Year Forecasts
	Results	Change	% of Change	FY 2023	Degree of
(Millions of Yen)		Forecasts	Progress
Net sales	18,061	+803	+4.7%	36,100	50.0%
Operating	1,482	-1,128	-43.2%	1,300	114.0%
Income
Ordinary	2,327	-1,273	-35.4%	2,250	103.4%
Income
Net Income	2,102	-1,039	-33.1%	2,600	80.9%
R&D Expenses	3,410	+3	+0.1%	7,550	45.2%
(Ratio to net sales
excluding royalty income)	(19.6%)			(21.3%)
Rate (1US$)	¥141.00	+¥7.02		¥145.00
Average Exchange
		2Q FY2023	2Q FY2022	(Reference)
		Results	Results	FY2023 Forecasts
Net Income per Share	¥38.54	¥56.32	¥47.66

3

Net sales by Business Segment (2Q of FY2023)

Exploring the Innovative Promise of Glycoscience

	2Q FY2023	Year-on-	% of
(Millions of Yen)	Results	Year	Change
Net sales	18,061	+803	+4.7%
Pharmaceuticals	13,091	+1,399	+12.0%
Domestic	6,402	+594	+10.2%
Pharmaceuticals
Overseas
4,367	-17	-0.4%
Pharmaceuticals
Bulk Products	1,622	+124	+8.3%
/CDMO
Royalty Income	699	+697	ー
LAL Business	4,970	-595	-10.7%
(Overseas sales)	10,628	+274	+2.7%

• Foreign exchange impact on overall net sales ： approx. +760million yen

Domestic Pharmaceuticals

• ARTZ（Joint-function improving agent）

• Sales up due to an increase in deliveries to medical institutions, which offset NHI drug price reductions

• JOYCLU（Joint-function improving agent）

• Sales down because of a shipping schedule adjustment

• OPEGAN series（Ophthalmic viscoelastic devices）

• Sales up due to market growth and
  higher shipment volume, despite the impact of NHI drug price reductions

• MucoUp

（Submucosal injection agent for endoscopic surgery）

• Sales up, reflecting a sales partner inventory adjustment

• HERNICORE (Treatment for lumbar disc herniation)

• Sales down due to a decrease in deliveries to medical institutions

4

Net sales by Business Segment (2Q of FY2023)

Exploring the Innovative Promise of Glycoscience

	2Q FY2023	Year-on- % of
(Millions of Yen)	Results	Year	Change
Net sales	18,061	+803	+4.7%
Pharmaceuticals	13,091	+1,399	+12.0%
Domestic	6,402	+594	+10.2%
Pharmaceuticals
Overseas
4,367	-17	-0.4%
Pharmaceuticals
Bulk Products
1,622	+124	+8.3%
/CDMO
Royalty Income	699	+697	ー
LAL Business	4,970	-595	-10.7%
(Overseas sales)	10,628	+274	+2.7%

• Foreign exchange impact on overall net sales ： approx. +760million yen

Overseas Pharmaceuticals

*Foreign exchange impact on Overseas Pharmaceuticals: approx. +320million yen

• Gel-Onein the U.S. (Single injection)
• Sales down due to the impact of an insurance reimbursement system change

Gel-One:Single-injection joint function improving agent

• SUPARTZ FX in the U.S. (Multiple injection）
• • Sales up on higher local sales volumes, reflecting a changing market environment associated with the insurance reimbursement system change, coupled with yen depreciation
• ARTZ in China (Multiple injection)
• • Sales up sharply on higher local sales volumes due to a rebound in the patient consultation rate following a decline in 1H FY2022 as well as a complete absence of shipments in 1Q FY2022

5

Net sales by Business Segment (2Q of FY2023)

Exploring the Innovative Promise of Glycoscience

	2Q FY2023	Year-on- % of
(Millions of Yen)	Results	Year	Change
Net sales	18,061	+803	+4.7%
Pharmaceuticals	13,091	+1,399	+12.0%
Domestic	6,402	+594	+10.2%
Pharmaceuticals
Overseas	4,367	-17	-0.4%
Pharmaceuticals
Bulk Products	1,622	+124	+8.3%
/CDMO
Royalty Income	699	+697	ー
LAL Business	4,970	-595-10.7%
(Overseas sales)	10,628	+274	+2.7%

• Foreign exchange impact on overall net sales ： approx. +760million yen

Bulk Products / CDMO

• Sales up on bulk products growth and the positive impact of yen depreciation on Dalton's contract development, manufacturing and other

services

	*Foreign exchange impact on Bulk Products/CDMO:
		approx. +40million yen
Royalty Income

• Royalty income up

LAL Business

• Sales down on lower sales in Japan and
  the subsiding of COVID-related special demand at ACC

*Foreign exchange impact on LAL Business: approx. 400 million yen

Overseas Sales Ratio(excluding royalty income)

Domestic

42.8%Year-on-Year

Overseas -2.8pt

57.2%

Overseas LA，Bulk/CDMO Overseas Pharmaceuticals Domestic sales

6

Income for 2Q of FY2023(Year-on-Year)

Exploring the Innovative Promise of Glycoscience

	2Q FY2023	Year-on- % of
(Millions of Yen)	Results	Year	Change
Net sales	18,061	+803	+4.7%
Cost of Sales	8,869	1,442	+19.4%
(excluding royalty
income)	(51.1%)	(+8.1pt)
SGA expenses	7,709	+489	+6.8%
R&D Expenses	3,410	+3	+0.1%
(excluding royalty
(19.6%)	(-0.1pt)
income)	-43.2%
Operating Income	1,482	-1,128
(to Net sales ratio)	(8.2%)	(-6.9pt)
Ordinary Income	2,327	-1,273	-35.4%
Net Income	2,102	-1,039	-33.1%
Depreciation	771	+161	+26.4%

Operating Income

1,482 (-1,128)

Cost of sales ratio（+8.1pt）

• Cost of sales ratio up because of change in the sales mix and soaring fuel costs

SGA Expenses（+489）

• Higher expenses at overseas subsidiaries, including foreign currency translation

Ordinary Income

2,327(-1,273)

Non-operating Income / Expenses（-145）

• Decrease in foreign exchange gain (-191)

7

Revised Forecasts in FY2023

Exploring the Innovative Promise of Glycoscience

	FY2023	Initial Forecasts	FY2022 Results	(Reference)
	Revised	Change	% of	Change	% of Change	Degree of
(Millions of Yen)	Forecasts	Change	2Q Progress
Net sales	36,100	+3,550	+10.9%	+2,643	+7.9%	50.0%
Operating	1,300	+1,200	ー	-814	-38.5%	114.0%
Income
Ordinary	2,250	+700	+45.2%	-819	-26.7%	103.4%
Income
Net Income	2,600	+1,150	+79.3%	+363	+16.2%	80.9%
R&D Expenses	7,550	+350	+4.9%	-401	-5.1%	45.2%
(Ratio to net sales
excluding royalty income)	(21.3%)	(-1.3pt)		(-2.5pt)
Average Exchange	3Q forecast	＋¥15.00
¥145.00		ー
Rate (1US$)

	FY2023 Revised	FY2023 Initial	FY2022 Results
	Forecasts	Forecasts
Net Income per share	¥47.66	¥26.59	¥40.49
Dividend per share	¥26.00	¥26.00	¥26.00
Dividend Payout ratio	54.6%	97.8%	64.2%

Exchange Rate Sensitivity

(Impact of a change of ¥1 against the US$)

Net sales	Approx. ¥55 million
(second half)
Operating income	Approx. ¥25 million
(second half)

8

Revised Net Sales in FY2023

(Comparison with the initial forecast)

Exploring the Innovative Promise of Glycoscience

	FY2023	Initial Forecasts
	Revised		% of Change
(Millions of Yen)	Forecasts	Change
Net sales	36,100	+3,550	+10.9%
-Pharmaceuticals	25,800	+3,250	+14.4%
-LAL Business	10,300	+300	+3.0%
OperatingIncome	1,300	+1,200	ー
(Ratio to net sales)	(3.6%)	(+3.3pt)
Ordinary Income	2,250	+700	+45.2%
Net Income	2,600	+1,150	+79.3%
Cost of Sales ratio	51.6%	-0.6pt
R&D Expenses	7,550	+350	+4.9%
(Ratio to net sales
excluding royalty income)	(21.3％)	(-1.3pt)
Depreciation	1,750	+50	+2.9%

Net sales and income forecasts revised upward due to higher revenue from the pharmaceuticals business and yen depreciation

Net sales

+3,550

Greater-than-expected growth from ARTZ in China and domestic pharmaceuticals and the impact of yen depreciation

• Foreign exchange impact on overall net sales ： approx. 1,430million yen

Operating Income

+1,200

Revenue increase to meet rising SGA expenses, including higher expenses at overseas subsidiaries due to yen appreciation

Ordinary Income

+700

Increase in foreign exchange gain and a review of gain on sales of investment securities

Income+1,150

Decrease in income taxes due to lower profits at overseas subsidiaries

9

Trend in R&D Expenses

Exploring the Innovative Promise of Glycoscience

Continuing to focus on drug discovery specializing in Glycoscience

Undertaking improvement in R&D efficiency

R&D Expenses

Ratio to Net sales

● Ratio to Net sales(excluding royalty income)

(Millions of Yen)	30.0%	28.3%	29.7%	26.7%		26.7%	29.2%
			25.2%
					23.8%
8,000								21.3%
		8,408
6,000	8,649	7,834	7,148	6,877	7,209	9,005	7,951	7,550
4,000
2,000
0	'16.3	'17.3	'18.3	'19.3	'20.3	'21.3	'22.3	'23.3	'24.3
									(Forecast)

10