7
October 1, 2015 to September 30, 2016 Business Report 26th
October 1, 2015 to September 30, 2016
Business Report26th
Business Operations in Japan
Business Operations Outside Japan
Outlook for the Fiscal Year Ending September 2017
Performance Overview
Record Highs in Both Net Sales and Earnings
In the forthcoming fiscal year ending September 2017, we will continue with efforts to maximize the benefits of the holding-company-based form of corporate organization,and strengthen our group management capabilities whilepromoting autonomy in each of our business segments. In
In the CRO Business (Japan), strict cost management, resource optimization in the monitoring operations, and strengthening of ties with Group companies in the data management operations contributed to increases in sales and earnings.
The SMO Business (Japan) has experienced a significant increase in sales following the merger with Sogo Rinsho Holdings Co., Ltd. Earnings; however, this than declined due to upfront expenses and an increase in goodwill amortization.
The CSO Business (Japan), meanwhile, recorded higher sales as strong results in MR Direct Services (phone-based detailing operations) and other operations added up to substantial growth in call center services for pharmaceutical companies. This growth more than offset a lackluster performance in the CMR (Contract Medical Representative) services, which also service pharmaceutical companies.
In the Global Research Business (EPS International), vigorous sales activity resulted in an increase of new project commissions that, in combination with steady progress in ongoing projects, added up to a large year-on-year increase in sales and, for the first time, this business has been able to report positive operating income.
The EKISHIN (China) Business experienced steady sales of digital x-ray equipment, film, and other medical devices and products handled by ET Medical Technology (Suzhou) Co., Ltd. Nevertheless, the impact of an appreciating yen prevented the recording of a sales increase on a yen basis, and resulted in an operating loss.
Aiming for Another Record Year of Sales and Operating Incometerms of consolidated results, we are expecting to achieveNet Sales of ¥58,000 million and Operating Income of¥6,500 million - record highs in both cases - and NetIncome Attributable to Parent Company Shareholders of¥3,500 million.
The outsourcing market for pharmaceutical and medical device development is growing both inside and outside Japan. Outsourcing needs remain at robust levels at both pharmaceutical and medical device companies, both of which are constantly seeking services offering higher levels of quality and efficiency.
Against this backdrop, the EPS Group’s consolidated results for the fiscal year ended September 30, 2016 totaled Net Sales of ¥52,703 million (up 16.6% year on year), with Operating Income of ¥6,224 million (up 13.5%), Ordinary Income of ¥6,589 million (up 22.9%), and Net
Income Attributable to our Parent Company Shareholders of ¥3,966 million (up 83.4%). Each of these figures reflects performance beyond Plan objectives and are historic high for the EPS Group.
Contributing to these results were factors such as; significant growth in the SMO Business (Japan) and the Global Research Business; greater profitability in the CRO Business (Japan); and achievement of profitability for the first time in our Global Research Business. (EPS International).
Regarding Shareholder ReturnsEPS Holdings’ basic policy regarding the allocation of earnings is to continuously strive to enhance shareholder returns, whilst also securing internal reserves needed for strengthening our operations in light of future business development endeavors and expectations for earnings growth.
In line with this policy, and in consideration of our performance for the fiscal year just ended, we have declared a year-end dividend of ¥15 per share (a special dividend of ¥5 per share, plus an ordinary dividend of ¥10 per share), a ¥5 per share increase from the same period in the previous fiscal year. Together with the interim dividend of ¥10 per share, which started and paid, dividends for the fiscal year came to a total of ¥25 per share.
25th TermFY9/15
26th TermFY9/16
(yen) Interim Year-End
10
8
15
10
30
25
20
15
10
5
0
18
25
Net Sales(Millions of yen)
25th TermFY9/15
26th TermFY9/16
27th TermFY9/17
(Forecast)
25th TermFY9/15
26th TermFY9/16
27th TermFY9/17
(Forecast)
25th TermFY9/15
26th TermFY9/16
27th TermFY9/17
(Forecast)
Operating Income(Millions of yen)
Net Income Attributable to Parent Company Shareholders(Millions of yen)
8,000
6,000
4,000
2,000
0
5,000
4,000
3,000
2,000
1,000
0
45,202
5,4826,224 6,500
2,163
3,966
52,70358,000
Net Sales(Millions of yen)
25th TermFY9/15
26th TermFY9/16
60,000
40,000
20,000
0
Operating Income(Millions of yen)
25th TermFY9/15
26th TermFY9/16
8,000
6,000
4,000
2,000
0
CRO 6,099
SMO 610
Net Sales(Millions of yen)
25th TermFY9/15
26th TermFY9/16
Operating Income(Millions of yen)
8,000
6,000
4,000
2,000
0 25th TermFY9/15
26th TermFY9/16
200
100
0
-100
-200
CRO 5,491
SMO 691
CRO 26,895
SMO 10,961
CSO 7,509
EKISHIN (China) 3,957
EKISHIN (China) 4,274
Global Research 4,060
EKISHIN (China) -31
Global Research 183
Global Research 2,773
EKISHIN (China) 30
Global Research -31
CSO 383
CRO 25,219
SMO 6,486
CSO 6,788
3,500
80,000
60,000
40,000
20,000
0
CSO 426
1 2
Business Operations in Japan
Business Operations Outside Japan
Outlook for the Fiscal Year Ending September 2017
Performance Overview
Record Highs in Both Net Sales and Earnings
In the forthcoming fiscal year ending September 2017, we will continue with efforts to maximize the benefits of the holding-company-based form of corporate organization,and strengthen our group management capabilities whilepromoting autonomy in each of our business segments. In
In the CRO Business (Japan), strict cost management, resource optimization in the monitoring operations, and strengthening of ties with Group companies in the data management operations contributed to increases in sales and earnings.
The SMO Business (Japan) has experienced a significant increase in sales following the merger with Sogo Rinsho Holdings Co., Ltd. Earnings; however, this than declined due to upfront expenses and an increase in goodwill amortization.
The CSO Business (Japan), meanwhile, recorded higher sales as strong results in MR Direct Services (phone-based detailing operations) and other operations added up to substantial growth in call center services for pharmaceutical companies. This growth more than offset a lackluster performance in the CMR (Contract Medical Representative) services, which also service pharmaceutical companies.
In the Global Research Business (EPS International), vigorous sales activity resulted in an increase of new project commissions that, in combination with steady progress in ongoing projects, added up to a large year-on-year increase in sales and, for the first time, this business has been able to report positive operating income.
The EKISHIN (China) Business experienced steady sales of digital x-ray equipment, film, and other medical devices and products handled by ET Medical Technology (Suzhou) Co., Ltd. Nevertheless, the impact of an appreciating yen prevented the recording of a sales increase on a yen basis, and resulted in an operating loss.
Aiming for Another Record Year of Sales and Operating Incometerms of consolidated results, we are expecting to achieveNet Sales of ¥58,000 million and Operating Income of¥6,500 million - record highs in both cases - and NetIncome Attributable to Parent Company Shareholders of¥3,500 million.
The outsourcing market for pharmaceutical and medical device development is growing both inside and outside Japan. Outsourcing needs remain at robust levels at both pharmaceutical and medical device companies, both of which are constantly seeking services offering higher levels of quality and efficiency.
Against this backdrop, the EPS Group’s consolidated results for the fiscal year ended September 30, 2016 totaled Net Sales of ¥52,703 million (up 16.6% year on year), with Operating Income of ¥6,224 million (up 13.5%), Ordinary Income of ¥6,589 million (up 22.9%), and Net
Income Attributable to our Parent Company Shareholders of ¥3,966 million (up 83.4%). Each of these figures reflects performance beyond Plan objectives and are historic high for the EPS Group.
Contributing to these results were factors such as; significant growth in the SMO Business (Japan) and the Global Research Business; greater profitability in the CRO Business (Japan); and achievement of profitability for the first time in our Global Research Business. (EPS International).
Regarding Shareholder ReturnsEPS Holdings’ basic policy regarding the allocation of earnings is to continuously strive to enhance shareholder returns, whilst also securing internal reserves needed for strengthening our operations in light of future business development endeavors and expectations for earnings growth.
In line with this policy, and in consideration of our performance for the fiscal year just ended, we have declared a year-end dividend of ¥15 per share (a special dividend of ¥5 per share, plus an ordinary dividend of ¥10 per share), a ¥5 per share increase from the same period in the previous fiscal year. Together with the interim dividend of ¥10 per share, which started and paid, dividends for the fiscal year came to a total of ¥25 per share.
25th TermFY9/15
26th TermFY9/16
(yen) Interim Year-End
10
8
15
10
30
25
20
15
10
5
0
18
25
Net Sales(Millions of yen)
25th TermFY9/15
26th TermFY9/16
27th TermFY9/17
(Forecast)
25th TermFY9/15
26th TermFY9/16
27th TermFY9/17
(Forecast)
25th TermFY9/15
26th TermFY9/16
27th TermFY9/17
(Forecast)
Operating Income(Millions of yen)
Net Income Attributable to Parent Company Shareholders(Millions of yen)
8,000
6,000
4,000
2,000
0
5,000
4,000
3,000
2,000
1,000
0
45,202
5,4826,224 6,500
2,163
3,966
52,70358,000
Net Sales(Millions of yen)
25th TermFY9/15
26th TermFY9/16
60,000
40,000
20,000
0
Operating Income(Millions of yen)
25th TermFY9/15
26th TermFY9/16
8,000
6,000
4,000
2,000
0
CRO 6,099
SMO 610
Net Sales(Millions of yen)
25th TermFY9/15
26th TermFY9/16
Operating Income(Millions of yen)
8,000
6,000
4,000
2,000
0 25th TermFY9/15
26th TermFY9/16
200
100
0
-100
-200
CRO 5,491
SMO 691
CRO 26,895
SMO 10,961
CSO 7,509
EKISHIN (China) 3,957
EKISHIN (China) 4,274
Global Research 4,060
EKISHIN (China) -31
Global Research 183
Global Research 2,773
EKISHIN (China) 30
Global Research -31
CSO 383
CRO 25,219
SMO 6,486
CSO 6,788
3,500
80,000
60,000
40,000
20,000
0
CSO 426
1 2
150
120
90
60
30
0
50
40
30
20
10
0
(billion yen) (%)Operating Income MarginOverseas Ratio
Net SalesOperating Margin
32
RestructuringIntra-groupOperations
Refining Existing Business Models Creating New Business Models
CRO
SMO
CSOGR
EKISHIN
Strengtheningfoundations in
the Asia-Pacificmarket.Establishing
a presence inAmerican and
Europeanmarkets.
Front-lineNeeds
Solutions
Services
BusinessNeeds
Services
Embarking on a New Medium-Term Business Plan, Targeting100 Billion Yen in Sales with an Overseas Business Ratio of 30% 1. Establishing a Firm Position as a Provider of Solutions in the Healthcare Industry
Providing Solutions intended to
Enhance Customer Value.
Strengthening and Solidifying a Basic
Management Structure.
Securing Top Position in the Domestic Market.
Working Towards, and Establishing Business Models that enable Sustainable Growth.
Enhancing Overseas Expansion.
Promoting a Management System that Enables
Sustainable Growth.
CAGR
13.7%
OverseasRatio 30％
OperatingMargin 12.5％
NetSales ¥100 billion
Toward Even Greater Growth
Management Plan Quantitative Targets
New Medium-Term Management Plan
FY9/16 (Results)
FY9/17 FY9/18(New Mid-Term Business Plan)
FY9/19
Quantitative Targets (FY9/21)
2. Securing Scale
3. Strengthening and Solidifying a Structure of Management
EPS Holdings achieved the sales target for its three-year management plan a year earlier than expected. Based on this success, we created a new management plan for implementation starting in October 2016.
This new Plan covers a period of five years, the last of which is the fiscal year that ends in September 2021 and will mark the 30th anniversary of our founding. Under the Plan, three fundamental directions - “Establishing a Firm Position as a Provider of Solutions in the Healthcare Industry,” “Securing Scale,” and “Strengthening and
Solidifying a Strong Management Structure” - will be pursued to achieve goals including; Net Sales of ¥100 billion, an Operating Margin of 12.5%, a CAGR (compound annual growth rate) of 13.7%, and an overseas business ratio of 30% by the final fiscal year covered by the Plan. “We will contribute to the advancement of the healthcare industry by providing high-value-added solutions to our clients.” Holding fast to that basic philosophy, we aim to advance customer-, business-, and human-oriented policies as we implement our new management Plan.
3 4
150
120
90
60
30
0
50
40
30
20
10
0
(billion yen) (%)Operating Income MarginOverseas Ratio
Net SalesOperating Margin
32
RestructuringIntra-groupOperations
Refining Existing Business Models Creating New Business Models
CRO
SMO
CSOGR
EKISHIN
Strengtheningfoundations in
the Asia-Pacificmarket.Establishing
a presence inAmerican and
Europeanmarkets.
Front-lineNeeds
Solutions
Services
BusinessNeeds
Services
Embarking on a New Medium-Term Business Plan, Targeting100 Billion Yen in Sales with an Overseas Business Ratio of 30% 1. Establishing a Firm Position as a Provider of Solutions in the Healthcare Industry
Providing Solutions intended to
Enhance Customer Value.
Strengthening and Solidifying a Basic
Management Structure.
Securing Top Position in the Domestic Market.
Working Towards, and Establishing Business Models that enable Sustainable Growth.
Enhancing Overseas Expansion.
Promoting a Management System that Enables
Sustainable Growth.
CAGR
13.7%
OverseasRatio 30％
OperatingMargin 12.5％
NetSales ¥100 billion
Toward Even Greater Growth
Management Plan Quantitative Targets
New Medium-Term Management Plan
FY9/16 (Results)
FY9/17 FY9/18(New Mid-Term Business Plan)
FY9/19
Quantitative Targets (FY9/21)
2. Securing Scale
3. Strengthening and Solidifying a Structure of Management
EPS Holdings achieved the sales target for its three-year management plan a year earlier than expected. Based on this success, we created a new management plan for implementation starting in October 2016.
This new Plan covers a period of five years, the last of which is the fiscal year that ends in September 2021 and will mark the 30th anniversary of our founding. Under the Plan, three fundamental directions - “Establishing a Firm Position as a Provider of Solutions in the Healthcare Industry,” “Securing Scale,” and “Strengthening and
Solidifying a Strong Management Structure” - will be pursued to achieve goals including; Net Sales of ¥100 billion, an Operating Margin of 12.5%, a CAGR (compound annual growth rate) of 13.7%, and an overseas business ratio of 30% by the final fiscal year covered by the Plan. “We will contribute to the advancement of the healthcare industry by providing high-value-added solutions to our clients.” Holding fast to that basic philosophy, we aim to advance customer-, business-, and human-oriented policies as we implement our new management Plan.
3 4
Japan
TOPICS
Accelerating Business Activities in China throughCapital and Operational Alliances with Suzuken Co., Ltd.
Pharmaceuticals, medical devices, and healthcare-related
companies
Pharmaceuticals, medical devices, and healthcare-related
companies
EKISHIN (China) Group
Services Offered by the EKISHIN (China) Business
Application (Support)
Application (Support)
PharmaceuticalBusiness
Medical DeviceBusiness LSG Business CRO Business
※contact: EPS International (http://epsi-global.com)
InvestmentBusiness
EPS Holdings and Suzuken Co., Ltd., a major pharmaceutical wholesaler, entered into a capital and operational business alliance in September 2016. Under the alliance, the purpose of which is collaborative development and expansion of business operations, EPS Holdings and Suzuken have invested in each others. In addition, Suzuken has taken a 35% stake in EPS EKISHIN Co., Ltd., an EPS Holdings consolidated subsidiary, via a third-party allocation of new shares. Going forward, the two companies will make the most of their management resources to strengthen business operations in Japan and abroad, with particular attention paid to China.The EKISHIN Group, led by EPS EKISHIN, is a trading
enterprise specializing in healthcare-related trade - medical devices, pharmaceuticals, and related support - between Japan and China. The capital alliance mentioned above will link the EKISHIN Group’s pharmaceutical and medical device development support and commercialization consulting functions with the Suzuken Group’s wholesaling and distribution functions, and its sales network in China. Making the most of their alliance, the EKISHIN Group and the Suzuken Group aim to extend their contributions to China’s medical and health-related industries by working together to strengthen clinical trial and wholesale operations, export and commercialize Japanese-stylemedical services, and develop new medical services.
EPS EKISHIN Co., Ltd. EPS China Co., Ltd.
China
CRO Business
CSO BusinessSMO Business
EKISHIN (China) BusinessGlobal Research Business
100Billion yen
Net Sales 50％30％CRO BusinessOverseas Sales
Specific measures to be implemented Envisioned FY9/21 Business Portfolio
As a company specializing inhealthcare-related trade between Japanand China, the EKISHIN (China) Business
contributes to China’s medicaland healthcare-related industries.
Our Mission
We will contribute to the advancement of the healthcare industry by providing high-value-added solutions to our clients.
Our Vision
Advancing day by day.
Ever Progressing System
Corporate Philosophy
Our Values
For Our ClientsWe always place the highest priority on meeting clients’ needs and providing high-value-added services.
For Our BusinessWe will contribute to the advancement of society through sustained development of our businesses.
For Our PeopleWe will grow through our service to clients, and improve the quality of life (QOL) for all of our stakeholders.
●Improving existing products in ways that match clients’ needs, developing new products that anticipate those needs, and exceeding the market growth rate by ensuring and maintaining stable supply.
●Active business development including M&As.
●Improving supply capacity utilizing a large-scale CRC and our network of facilities, and expanding market share force by enhancing expertise in specific areas such as oncology.
●Active business development that includes M&As and focuses, in particular on creation of new services for client facilities.
●Development of a unique contract sales organization (“CSO”) in combination with contract medical representative (“CMR”), drug information management (“DI”), post-marketing surveillance (“PMS”), MR direct services, and other offerings.
●Active business development that includes M&A and focuses in particular on highly specialized BPO services.
●Strengthening and solidifying an operations system in three regions: Japan, China, and other parts of Asia-Pacific.
●Strengthening Japanese operations and promoting business development in Europe, and in the United States.
●Establishing a global management system that addresses business growth needs.
●Strengthening and expanding the operations of our pharmaceutical and medical devices businesses.●Accelerating commercialization of investment in pharmaceutical
ventures, etc.●Expanding and enhancing existing businesses, utilizing the
management base strengthened by our capital partnership with SUZUKEN CO., LTD., and exploring new businesses such as medical services and nursing care.
65
Japan
TOPICS
Accelerating Business Activities in China throughCapital and Operational Alliances with Suzuken Co., Ltd.
Pharmaceuticals, medical devices, and healthcare-related
companies
Pharmaceuticals, medical devices, and healthcare-related
companies
EKISHIN (China) Group
Services Offered by the EKISHIN (China) Business
Application (Support)
Application (Support)
PharmaceuticalBusiness
Medical DeviceBusiness LSG Business CRO Business
※contact: EPS International (http://epsi-global.com)
InvestmentBusiness
EPS Holdings and Suzuken Co., Ltd., a major pharmaceutical wholesaler, entered into a capital and operational business alliance in September 2016. Under the alliance, the purpose of which is collaborative development and expansion of business operations, EPS Holdings and Suzuken have invested in each others. In addition, Suzuken has taken a 35% stake in EPS EKISHIN Co., Ltd., an EPS Holdings consolidated subsidiary, via a third-party allocation of new shares. Going forward, the two companies will make the most of their management resources to strengthen business operations in Japan and abroad, with particular attention paid to China.The EKISHIN Group, led by EPS EKISHIN, is a trading
enterprise specializing in healthcare-related trade - medical devices, pharmaceuticals, and related support - between Japan and China. The capital alliance mentioned above will link the EKISHIN Group’s pharmaceutical and medical device development support and commercialization consulting functions with the Suzuken Group’s wholesaling and distribution functions, and its sales network in China. Making the most of their alliance, the EKISHIN Group and the Suzuken Group aim to extend their contributions to China’s medical and health-related industries by working together to strengthen clinical trial and wholesale operations, export and commercialize Japanese-stylemedical services, and develop new medical services.
EPS EKISHIN Co., Ltd. EPS China Co., Ltd.
China
CRO Business
CSO BusinessSMO Business
EKISHIN (China) BusinessGlobal Research Business
100Billion yen
Net Sales 50％30％CRO BusinessOverseas Sales
Specific measures to be implemented Envisioned FY9/21 Business Portfolio
As a company specializing inhealthcare-related trade between Japanand China, the EKISHIN (China) Business
contributes to China’s medicaland healthcare-related industries.
Our Mission
We will contribute to the advancement of the healthcare industry by providing high-value-added solutions to our clients.
Our Vision
Advancing day by day.
Ever Progressing System
Corporate Philosophy
Our Values
For Our ClientsWe always place the highest priority on meeting clients’ needs and providing high-value-added services.
For Our BusinessWe will contribute to the advancement of society through sustained development of our businesses.
For Our PeopleWe will grow through our service to clients, and improve the quality of life (QOL) for all of our stakeholders.
●Improving existing products in ways that match clients’ needs, developing new products that anticipate those needs, and exceeding the market growth rate by ensuring and maintaining stable supply.
●Active business development including M&As.
●Improving supply capacity utilizing a large-scale CRC and our network of facilities, and expanding market share force by enhancing expertise in specific areas such as oncology.
●Active business development that includes M&As and focuses, in particular on creation of new services for client facilities.
●Development of a unique contract sales organization (“CSO”) in combination with contract medical representative (“CMR”), drug information management (“DI”), post-marketing surveillance (“PMS”), MR direct services, and other offerings.
●Active business development that includes M&A and focuses in particular on highly specialized BPO services.
●Strengthening and solidifying an operations system in three regions: Japan, China, and other parts of Asia-Pacific.
●Strengthening Japanese operations and promoting business development in Europe, and in the United States.
●Establishing a global management system that addresses business growth needs.
●Strengthening and expanding the operations of our pharmaceutical and medical devices businesses.●Accelerating commercialization of investment in pharmaceutical
ventures, etc.●Expanding and enhancing existing businesses, utilizing the
management base strengthened by our capital partnership with SUZUKEN CO., LTD., and exploring new businesses such as medical services and nursing care.
65
