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

Although the domestic sales of the pharmaceutical industry during the first half of fiscal 2005 saw slight increase, exports grew substantially and pushed up the rate of increase of the overall sales. With the improved cost to sales ratio due to business restructuring effects, operating income, ordinary income and net income for the first half of fiscal 2005 steadily grew, despite an increase in R&D expenses. However, operating results of individual companies varied.

1. Sales
   1. Overall sales increased 1.7% compared with the same period of the preceding year. (Number of companies on the upturn: 21, that of companies on the downturn: 9)
   2. The domestic sales slightly increased by 1.0% 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. Exports increased 19.1 billion yen (up by 5.2%) from the same period last year to 389.2 billion yen, due primarily to overseas sales of in-house products mainly in the USA and Europe and growth of licensing-out products. The export ratio in the first half of FY2005 was 16.5%.
2. Gross income increased by 2.9% compared with the first half of fiscal 2004, thanks to an improvement in the cost to sales ratio by 0.7% to 32.8% resulted from management efforts including business restructuring.
3. Selling, general and administrative expenses only rose slightly by 1.2% compared with the previous term, due to control of the expenses other than R&D expenses, which increased significantly by 22.3 billion yen (up by 6.4%) on a year-on-year basis to 368.3 billion yen.
4. As a result, operating income grew by 5.8% year-on-year (number of companies on the upturn: 20, that of companies on the downturn: 10). Ordinary income grew by 2.7% year-on-year in the interim period (number of companies on the upturn: 20, that of companies of downturn: 10). However, operating results for individual companies varied depending on factors such as overseas developments.
5. Net income increased by 2.6% year-on-year, helped by the improvement in the extraordinary gain and loss due to a decrease in business restructuring-related expenses and an increase in the extraordinary gains, despite the application of accounting for the impairment of assets. (Number of companies on the upturn: 17, that of companies on the downturn: 13)

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.