Kyowa Hakko Kirin Fiscal 2008 Sales up 17.4%, Operating Income up 15.2%

Mon Apr 27, 2009 11:07pm EDT

* Reuters is not responsible for the content in this press release.

TOKYO--(Business Wire)--
Kyowa Hakko Kirin Co., Ltd. (Kyowa Hakko Kirin) today announced its consolidated
financial results for the year ended March 31, 2009 (Fiscal 2008). Consolidated
net sales were JPY460.1 billion, up 17.4% and consolidated operating income was
JPY45.3 billion, an increase of 15.2% compared to fiscal 2007. Recurring income
increased 22.2% to JPY46.4 billion. Net income decreased by 50% to JPY11.7
billion, as extraordinary losses of JPY21.5 billion were recorded due to
valuation losses on investment securities, impairment losses and other factors. 

Operating income in the Pharmaceuticals segment grew by 74.5%, supported by the
consolidation of Kirin Pharma in April 2008, while in the Bio-Chemicals segment,
operating income was affected by the strong yen and decreased 13.9%. In the
Chemicals segment operating income declined to zero as demand fell rapidly due
to the worldwide decline in economic growth against a background of large
fluctuations in crude oil and naphtha prices, resulting in a major deterioration
in product markets. In the Food segment operating income decreased by 31.1% in
an increasingly severe business environment, affected by the high prices of raw
materials, sluggish consumer demand, and other factors. 

As Kyowa Hakko Kirin plans to change its fiscal year end to December, our
business forecasts are for the nine-month period ending December 31, 2009.
Accordingly, the following percentage changes are as compared to the nine-month
period ended December 31, 2008. 

For the nine-month period ending December 31, 2009 (fiscal 2009) Kyowa Hakko
Kirin forecasts a 17.2% decrease in net sales, a 36.8% decrease in operating
income and a 36.4% decrease in recurring income, while net income is forecast to
grow by 24.0%. 

For the nine-month period ending December 31, 2009 Kyowa Hakko Kirin forecasts a
dividend per share of JPY15 (interim dividend JPY10, final dividend JPY5) as
compared to the dividend per share for the twelve-month period ending March 31,
2009 of JPY20 (interim dividend JPY10, final dividend JPY10). 

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, one-off licensing payments, the global recession
and other factors. We expect that the environment for some of our businesses
will continue to be severely affected by the ongoing global recession, highly
volatile commodity prices, and currency movements. Nevertheless Kyowa Hakko
Kirin has secure and strong financial foundations and we expect that core
products in the Pharmaceutical and Bio-Chemicals businesses will continue to
perform well. We are moving rapidly ahead with our initiatives to enhance
competitiveness and management efficiency, maximize synergies, and further
develop our position as a world-leading in antibody pharmaceuticals and other
core biotechnologies."

I. Fiscal 2008 Results(Amounts less than JPY1 million have been ignored)

 Results for the fiscal year ended March 31, 2009                                               
                     (Billions of Yen)                                                        
                     FY ended                  FY ended                  YOY              
                     March 31, 2009            March 31, 2008            Change (%)       
 Net sales           460.1                    392.1                    +17.4%          
 Operating income    45.3                     39.3                     +15.2%          
 Recurring income    46.4                     37.9                     +22.2%          
 Net income          11.7                     23.4                     -50.0%          


Segmental results for the fiscal year ended March 31, 2009

 Sales              (Billions of Yen)                                                        
                    FY ended                  FY ended                  YOY              
                    March 31, 2009            March 31, 2008            Change (%)       
 Pharmaceuticals    210.4                    138.3                    +52.1%          
 Bio-Chemicals      88.4                     86.8                     +1.9%           
 Chemicals          89.2                     108.0                    -17.4%          
 Food               42.4                     43.3                     -2.0%           
 Other              68.7                     48.9                     +40.3%          


 Operating Income    (Billions of Yen)                                                        
                     FY ended                  FY ended                  YOY              
                     March 31, 2009            March 31, 2008            Change (%)       
 Pharmaceuticals     34.8                     19.9                     +74.5%          
 Bio-Chemicals       8.3                      9.6                      -13.9%          
 Chemicals           (0.0)                    7.1                      --              
 Food                1.0                      1.5                      -31.1%          
 Other               1.0                      0.8                      +30.5%          
                                                                                       


Segmental performance

In the Pharmaceuticals business, consolidated net sales increased 52.1% to
JPY210.4 billion and operating income increased 74.5% to JPY34.8 billion. Sales
of pharmaceutical products in Japan were significantly higher compared to the
previous fiscal year due to the consolidation of Kirin Pharma from April 2008
and despite the effect of reductions in National Health reimbursement prices. 

As regards products, despite a decline in sales of Durotep, an analgesic for
persistent cancer pain due to the ending of a joint sales contract, strong sales
were maintained by Allelock, an antiallergic agent, Depakene, an anti-epileptic
agent, and Patanol, an antiallergic ophthalmic solution, 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.In addition,
the combined market share of Kirin Pharma's two core anemia products, NESP and
ESPO, increased steadily following integration with Kirin Pharma in October
2008. Meanwhile, REGPARA Tablets, a treatment for secondary hyperthyroidism
during dialysis therapy, are achieving steady market penetration. 

In the licensing-out of technologies and export of pharmaceutical products a
large one-off contract payment for the outlicensing to Amgen of anti-CCR4
humanized monoclonal antibody KW-0761 was recorded, resulting in a large
increase in sales. At subsidiary Kyowa Medex, which is responsible for the
manufacture and sale of diagnostic reagents, sales of both clinical chemistry
reagents and immunological reagents increased, and its sales grew compared to
the previous fiscal year. 

In new drug development in Japan,applications in respect of anemia treatment
NESP weremade for additional indications for anemia for cancer chemotherapy in
November 2008 and for additional indications for pre-dialysis renal anemia in
December 2008. Phase III clinical trials are progressing for KW-2246, an
analgesic for cancer pain and Phase II clinical trials are being carried out on
KRN125 a treatment for neutropenia, KW-6002, an anti-Parkinson`s disease
treatment, KW-6500, also an anti-Parkinson`s disease treatment, and KW-7158, a
candidate treatment for irritable bowel syndrome. KW-0761, a blood cancer
treatment (an antibody pharmaceutical), KW-3357, an agent for inhibiting blood
coagulation, and ARQ 197, an anticancer agent, are in Phase I clinical trials. 

Overseas, in the U.S. Phase I trials are progressing for anticancer agents
KRN330 (an antibody pharmaceutical) and KW-2449, while Phase I trials for
hypophosphatemic treatment KRN-23 (an antibody pharmaceutical), organ transplant
immunological rejection depression treatment ASKP 1240 (an antibody
pharmaceutical) and anticancer agent BIW-8962 (an antibody pharmaceutical) have
begun. In Europe, Phase I trials are progressing for anticancer agent KW-2478.
In Australia, joint Phase I trials with ARCA biopharma, Inc. (formerly Nuvelo,
Inc.) of the U.S., for inflammatory bowel disease treatment NU-206 have begun,
while in China we received approval in September 2008 for the additional
indication of angina pectoris for Coniel, and filed applications for approval of
hyperphosphatemia treatment Phosblock in June 2008, and for Allelock, an
antiallergic agent, in July 2008. 

In the Bio-Chemicals business, net sales increased 1.9% to JPY88.4 billion,
while operating income decreased 13.9% to JPY8.3 billion. Sales volumes of
pharmaceutical and industrial use raw materials, particularly amino acids,
nucleic acids and related compounds continued to grow steadily, but sales
declined slightly due to the stronger yen in the second half of the fiscal year.


In healthcare products, revenues increased over the previous consolidated fiscal
year due to firm growth of sales of dietary supplement amino acids overseas and
steady growth in mail-order sales of the Remake series. In agrochemicals and
products for the livestock and fisheries industry, sales decreased due to
intensifying competition in agrochemicals in overseas markets and sluggish sales
in the livestock and fisheries industries due to a rapid appreciation of the
price of feed and raw materials and fuel. In alcohol, revenues were lower than
in the previous year despite efforts to expand sales primarily in industrial use
alcohol. 

In R&D, we focused on R&D of new products and continued to pursue efficiencies
for research in fermentation production technology aimed at reducing the
production cost of amino acids, nucleic acids and related compounds. Further, we
continued to focus on synthesis process research at Daiichi Fine Chemical, and
on the discovery of functionalities and the development of applications for a
wide-range of amino acids and other compounds at the Healthcare Products
Development Center. 

In the Chemicals business, net sales decreased 17.4% to JPY89.2 billion, while
operating income was JPY0.0 billion (operating income for the previous fiscal
year was JPY7.1 billion). In the first half of the year product prices were
adjusted in response to higher raw materials and fuel prices and there was
steady growth in functional environmental products such as refrigerant oil raw
materials and high-purity solvents for electronic materials. In the second half
of the fiscal year, both domestic and overseas sales volumes decreased
significantly as demand rapidly dropped against a backdrop of global recession
stemming from the financial crisis in the U.S. In addition, a sharp drop in
sales resulting from a major downturn in the product market due to a rapid fall
in the price of raw materials and fuel, including naphtha and crude oil, caused
an extremely severe operating environment. 

In the Food business, sales decreased 2.0% to ¥42.4 billion, while operating
income decreased 31.1% to ¥1.0 billion. In seasonings, sales of natural
seasonings declined due to a rise in the price of raw materials and sluggish
consumer spending, but growth in sales of Umami seasonings led to an increase in
sales. 

In bakery products and ingredients, sales were lower than in the previous year
as a result of factors such as the suspension of product sales due to high raw
material prices for processed dairy foods and others, and despite growth in
sales of core products including yeast and flavor enhancers. In processed foods
sales were lower than the previous year due to a decrease in instant noodle
ingredients and others. 

In the Other business segment, due partly to the new consolidation of Kashiwagi
Corporation, sales increased 40.3% to JPY68.7 billion, while operating income
increased 30.5% to JPY1.0 billion. 

II. Forecasts for the fiscal period ending December 31, 2009

                                 Billions of Yen          %                            
                                FORECAST                    Change compared to       
                                Nine-months to              nine-months to           
                                
December 31, 2009          December 31, 2008        
 Net sales                      300.0                      -17.2%                  
 Operating income               27.0                       -36.8%                  
 Recurring income               27.5                       -36.4%                  
 Net income                     13.0                       +24.0%                  
 Net income per share (JPY)     JPY22.65                   +24.0%                  


1. These forecasts assume average exchange rates for fiscal 2009 of JPY90/US$
and JPY120/euro. 

2. Kyowa Kirin plans to change its fiscal year end from March 31 to December 31.
As a result of this change, the forecasts for the next fiscal period (ending
December 2009) are the consolidated results forecasts for an irregular period of
9-months (April 1, 2009 to December 31, 2009). The percentage changes above are
as compared to the financial results for the nine-month period ended December
31, 2008 (April 1, 2008 to December 1, 2008). 

In the nine-month period of fiscal 2009 we expect the domestic economy to
continue to worsen. Furthermore, concerns that the global financial crisis may
worsen and the global economy may perform below current expectations, as well as
the effects of volatility on the equity and foreign exchange markets, etc., mean
that there remains the risk of further downward pressure on the economy, and the
outlook remains very uncertain. 

In this environment, the Kyowa Hakko Kirin Group will undertake business reform
initiatives to enhance competitiveness and strengthen operations, enhance R&D
efficiencies while proactively investing business resources in our core
Pharmaceuticals and Bio-Chemicals businesses and aiming for further growth to
strengthen revenues. 

Our consolidated financial results forecasts for the next term (the nine-month
period from April 1, 2009 to December 31, 2009) are for net sales of JPY300.0
billion, a decrease of 17.2%, operating income of JPY27.0 billion, a decrease of
36.8% and recurring income of JPY27.5 billion, a decrease of 36.4%. As
extraordinary losses are expected to decline significantly, net income is
forecast to increase 24.0% to JPY13.0 billion. 

In the Pharmaceuticals business, we forecast a decrease in both sales and
profits compared to the previous fiscal period. We forecast an increase in sales
of domestic pharmaceutical products over the previous year due to growth of core
products such as anemia products NESP and ESPO, REGPARA Tablets, a treatment for
secondary hyperthyroidism during dialysis therapy, Allelock, an antiallergic
agent, and Patanol, an antiallergic ophthalmic solution. However, regarding the
export of pharmaceutical products and licensing out of technology, the absence
of a large one-off contract payment from a licensing contract with Amgen that
was recorded under sales in the previous fiscal period, will have a significant
impact, as will the expected decrease in revenues from the effects of a strong
yen. 

In the Bio-Chemicals business, we are forecasting growth in domestic and
overseas sales volumes of core amino acids, nucleic acids and related compounds,
however due to expected downward pressure on revenues from a strong yen and
other factors, we expect revenues to be higher but profits to be lower than in
the previous period. In addition, following the planned change of the Kyowa
Hakko Kirin fiscal year end, there will no longer be a three-month disparity in
consolidation of overseas subsidiaries with a December year end. As a result,
financial results of the corresponding overseas subsidiaries for the 12-month
period (January 1, 2009 to December 31, 2009) will be consolidated in the fiscal
period ending December 2009. 

In the Chemicals business we are forecasting a continued difficult operating
environment, as demand remains depressed due to the global economic downturn. As
regards product prices, compared to the previous period when price revisions
were implemented following a steep rise of crude oil and naphtha prices, we
expect lower price levels, so we are forecasting a significant decrease in sales
and operating income compared to the previous nine-month period. 

In the Food business, following the sale of a portion of the shares held by
Kyowa Hakko Kirin in Kyowa Hakko Foods on March 31, 2009, Kyowa Hakko Foods and
three of its consolidated subsidiaries are no longer consolidated subsidiaries
of Kyowa Hakko Kirin and are now affiliated companies accounted for using the
equity method. As a result, net sales and operating income for the Food business
will not be reported for the nine-month period ending December 31, 2009. For the
nine-month period ended December 31, 2008 net sales for the Food business was
JPY32.8 billion and operating income was JPY0.9 billion. 

*The above forecasts are based on information available and assumptions made at
the time of release of this document about a number of uncertain factors that
can affect results in the future. It is possible that actual results are
materially different for a wide variety of reasons.

For further information please access:
http://www.kyowa-kirin.co.jp/english/index.html

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
competitors.



Kyowa Hakko Kirin Co., Ltd.
Kenshiro Honda, 81 3 3282 0969
Corporate Communications Department
kenshiro.honda@kyowa-kirin.co.jp



Copyright Business Wire 2009

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