Kyowa Hakko Kirin Third Quarter Results; Revision of Full Year Forecasts; Planned Change of Fiscal Year End

Fri Jan 30, 2009 1:00am EST

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TOKYO--(Business Wire)--
Kyowa Hakko Kirin Co., Ltd. (Kyowa Hakko Kirin) (TOKYO:4151) today announced its
consolidated financial results for the third quarter of fiscal 2008 (the
nine-month period ended December 31, 2008). 

Partly as a result of the new consolidation of Kirin Pharma from April 2008,
Kyowa Hakko Kirin consolidated net sales for the nine-month period were JPY
362.2 billion, 21.7% higher than in the same period of the previous fiscal year.
Consolidated operating income was JPY 42.6 billion (up 31.8%), recurring income
was JPY 43.2 billion (up 32.1%), and net income was JPY 10.4 billion (down
56.5%). Net income was affected by the recording of extraordinary losses of JPY
13.9 billion, including losses on revaluation of investments in securities and
integration related expenses, as well as increased corporate tax adjustments. In
addition, full year forecasts for sales and operating income were revised
downward, by 6.7% and 7.0% respectively, reflecting the deteriorating global
economic environment. 

Separately, Kyowa Hakko Kirin also announced a proposed change in its fiscal
year end from March 31 to December 31, subject to approval by the general
meeting of shareholders planned for June 2009, and also published forecasts for
the nine-month period from April 2009 to December 2009. 

Commenting on the results, Yuzuru Matsuda, President and CEO of Kyowa Hakko
Kirin said, "Our reported results were affected significantly by the
consolidation of Kirin Pharma and the environment for some of our businesses is
being severely affected by the ongoing global recession, highly volatile
commodity prices and large currency movements. Despite these negative factors
our core Pharmaceutical business continues to perform well and we are moving
rapidly ahead with our initiatives to enhance competitiveness and management
efficiency, maximize synergies, and improve corporate value through further
development. As part of our integration initiatives we plan to change the year
end of Kyowa Hakko Kirin and its consolidated subsidiaries."

Summary of operating results for the nine-month period ended December 31, 2008

                         (Amounts less than JPY 1 million have been ignored)                 
                         Billions of yen                                           %       
                         Consolidated results for    Consolidated results for    Change  
                         the period ended            the period ended                    
                         December 31, 2008           December 31, 2007                   
 Net sales               362,278                     297,681                     +21.7%  
 Operating income        42,696                      32,405                      +31.8%  
 Recurring income        43,265                      32,750                      +32.1%  
 Net income              10,483                      24,084                      -56.5%  
 Net income per share    18.26                       60.55                       -69.8%  

Segmental Performance

In the Pharmaceuticals business, sales increased substantially to JPY 161.3
billion (up 52.1%) and operating income increased to JPY 29.6 billion (up
71.0%). Despite reductions in National Health reimbursement prices, sales of
ethical pharmaceutical products in Japan were significantly higher due to the
new consolidation of Kirin Pharma, and other factors. 

As regards sales by product, sales of Durotep, an analgesic for persistent
cancer pain declined, due to the ending of a joint sales contract, but strong
sales were maintained by Allelock, an antiallergic agent, Patanol, an
antiallergic ophthalmic solution and others, while sales of Coversyl, an ACE
inhibitor for treatment of hypertension, that commenced in April, 2008, also
performed well and contributed to growth in sales. We are actively supplying
information to medical practitioners on NESP and ESPO, the core anemia products
of Kirin Pharma, which merged with Kyowa Hakko in October 2008, which has been
an effective approach enabling us to achieve a steady increase in the combined
market share of these products. 

In the licensing-out of pharmaceutical products, a large one-off contract
payment for the outlicensing to Amgen of anti-CCR4 humanized monoclonal antibody
KW-0761 was recorded. In addition we in-licensed an RNAi therapeutic product,
and also acquired a license for collaborative research and development of an
antibody pharmaceutical product and a license for the collaborative sales of an
analgesic for persistent cancer pain. 

In the Bio-Chemicals business, sales increased 2.1% to JPY 67.5 billion, while
operating income increased 11.7% to JPY 7.4 billion. In pharmaceutical and
industrial use raw materials, mainly amino acids, nucleic acids, and related
compounds, there was strong demand, primarily in overseas markets for amino
acids for intravenous liquids and pharmaceutical use raw materials, but sales
growth was limited partly due to the rapid appreciation of the yen. In addition
sales at Daiichi Fine Chemical declined, affected by a softening vitamin market.

In healthcare products, sales were strong, driven by increasing mail-order sales
of the Remake series. 

In the Chemicals business net sales decreased 3.5%, to JPY 77.3 billion and
operating income declined by 42.0%, to JPY 3.5 billion. 

Sales in the first half of the fiscal year were strong as a significant rise in
market prices of naphtha and crude oil led to higher raw material prices and
revisions of core product prices were implemented, while stable operations of
production facilities continued. However, since the beginning of Autumn 2008 the
worldwide economic downturn has led to a rapid decline in demand in Japan and
overseas, and sharp falls in the prices of crude oil and naphtha have led to a
drastic worsening of product markets. As a result, segmental sales and sales
volumes for the period under review were lower than in the first nine months of
the previous fiscal year. 

In the Food business, sales decreased 1.3%, to JPY 32.8 billion, while operating
income decreased 26.2%, to JPY 0.9 billion. In seasonings, sales increased due
to an increase in sales of Umami seasonings despite ongoing difficult market
conditions for our core natural seasonings, which were affected by sluggish
consumer spending and higher raw material prices. In bakery products and
ingredients, sales declined partly due to our decision to halt sales of certain
processed milk products due to the rapid rise in raw material prices, and
despite growth in flavor enhancers and baking improvers. Sales of processed food
products also declined. 

In the Other business segment, sales increased 44.8%, to JPY 54.5 billion, while
operating income increased by 39.2% to JPY 1.0 billion. 

Forecasts for the fiscal year ending March 31, 2009

Although the Pharmaceuticals business has performed well and broadly in line
with plans, our results for the first nine months of the fiscal year were
considerably lower than planned due to a deteriorating market for the Chemicals
business against a backdrop of a global economic slowdown and rapid falls in the
prices of crude oil and naphtha. As regards the outlook we have revised down our
forecast for full year results as we expect a continued difficult earnings
environment for the Chemicals business and we also expect that the Bio-Chemicals
business will perform below plan due to the effects of a strong yen against a
weak euro, and other factors. In addition, we have revised down our forecast for
net income after recording a JPY 5.0 billion loss on revaluation of investments
in securities as of the end of the third quarter. 

Revisions to the consolidated forecasts announced on October 30, 2008 and
differences with the previously announced forecasts are as follows:

                                                                       Millions of yen             
                                Net sales    Operating    Recurring    Net income    Income per  
                                             income       income                     share       
 Previously announced           490,000      50,000       50,000       17,000        JPY 29.60   
 forecast (A)                                                                                    
 Revised forecast (B)           457,000      46,500       47,000       13,000        JPY 22.64   
 Amount change (B - A)          (33,000)     (3,500)      (3,000)      (4,000)       --          
 Percentage change              (6.7)%       (7.0)%       (6.0)%       (23.5)%       --          
 Results for the fiscal year    392,119      39,390       37,996       23,477        JPY 59.03   
 ended March 31, 2008                                                                            

Change of fiscal year end

At a meeting of the Board of Directors held on January 30, 2009 it was decided
to present a resolution at the 86th Regular Shareholders` Meeting scheduled for
June 2009 to change the fiscal year end of Kyowa Hakko Kirin from March 31 to
December 31 in order to improve the efficiency of business administration by
matching our fiscal year to that of our parent company Kirin Holdings. As a
result, the fiscal year of Kyowa Hakko Kirin would be from January 1 to December
31. It is also planned to change the fiscal year end of all consolidated
subsidiaries of Kyowa Hakko Kirin to December 31. 

As a result of this planned change the period from April 1, 2009 to December 31.
2009 will be a transitional nine-month period and our consolidated forecasts for
business results for that period are as follows:

                                                              Millions of yen            
                                    Net sales    Operating    Recurring    Net income  
                                                 income       income                   
 Forecast results for the fiscal    310,000      27,000       27,000       13,000      
 period from April 1, 2009 to                                                          
 December 31, 2009                                                                     

For further information please access:

This document is an English translation of parts of the Japanese-language
original. All financial information has been prepared in accordance with
generally accepted accounting principles in Japan. It contains forward-looking
statements based on a number of assumptions and beliefs made by management in
light of information currently available. Actual financial results may differ
materially depending on a number of factors, including fluctuations in exchange
rates, changing economic conditions, legislative and regulatory developments,
delays in new product launches, and pricing and product initiatives of

Kyowa Hakko Kirin Co., Ltd.
Mr. Kenshiro Honda, +81-3-3282-0969
Corporate Communications Department

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