JPMA Member Companies: Financial Summary for the First Half of FY2005 and Prospects for FY2005

During the first half of fiscal 2005, brisk exports led the growth of the overall sales, while the domestic sales grew sluggishly. With the improvement in the cost to sales ratio due to business restructuring effects, profitability advanced amidst increasing R&D expenses. As a result, all of operating income, ordinary income and net income for the first half of fiscal 2005 steadily grew. However, operating results of individual companies varied.

1. Sales
   1. Overall sales increased 3.4% compared with the same period of the preceding year. (Number of companies on the upturn: 22, that of companies on the downturn: 8)
   2. The domestic sales slightly increased by 1.7% on a year-on-year basis. Amidst severe environments of reduced NHI drug prices, the domestic pharmaceutical market saw positive factors continuing from the previous year including effects from massive pollen dispersal and the prevalence of influenza, a substantial sales growth of medicines for lifestyle-related diseases, and progress of corporate acquisition. However, there were negative factors such as the transfer of distributorship of some medicines resulting from business restructuring, spread of the policy to reduce NHI drugs prices, and increasing severe competition between pharmaceutical companies.
   3. As for overseas sales, sales from certain large projects mainly in the US and Europe continued to be on the upward trend. All of the top sales companies expanded their overseas sales. Overall overseas sales increased 65.7 billion yen (up by 8.1%) on a year-on-year basis to 877.5 billion yen, and the overseas sales ratio was 28.5%, a 1.2% year-on-year increase.
2. Gross income increased by 5.8% compared with the first half of fiscal 2004, thanks to an improvement in the cost to sales ratio by 1.6% to 31.0% resulted from management efforts including business restructuring.
3. Selling, general and administrative expenses increased 4.9% compared with the previous year due to an increase in R&D expenses and selling expenses in overseas. In addition, R&D expenses for the first half of fiscal 2005 expanded by 33 billion yen (an increase by 8.5%) compared with the previous year to 422 billion yen.
4. As a result, operating income grew by 7.8% year-on-year (number of companies on the upturn: 21, that of companies on the downturn: 9). Ordinary income grew by 9.2% year-on-year in the interim period (number of companies on the upturn: 21, that of companies of downturn: 9). However, operating results for individual companies varied depending on factors such as overseas developments.
5. Net income for the first half of FY2005 improved by 12.8% year-on-year, despite the application of accounting for the impairment of assets, due to reduction of extraordinary loss brought by a decrease in business restructuring-related expenses, and expansion of extraordinary gains. The rate of improvement of the net income was larger than that of ordinary income. (Number of companies on the upturn: 20, that of companies on the downturn: 9, and that of companies of leveling off: 1)

1. Data in FY2004 (Adjusted) include those of the former Yamanouchi Pharmaceutical and the former Fujisawa Pharmaceutical. Calculations were made by adding the amount in the operating results of the former Sumitomo Pharmaceutical for the second half of FY2004, half amount of the operating results of the former Grelan Pharmaceutical for FY2004, and 11/12 of the operating results of the pharmaceutical divisions of SSP Co. (Sales ratio of mediacal/non-pharmaceutical divisions within member companies)
2. Data in Fiscal 2005 (Adjusted Prospect) include prospects of Sankyo and Daiichi Pharmaceutical which were delisted in September 2005 due to the establishment of the joint holding company and the prospect of Mitsubishi Pharma Corporation, which was delisted owing to the affiliation to Mitsubishi Chemical Holdings Corp. in October 2005.