CMIC Holdings Co Ltd
TSE:2309
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CMIC Holdings Co Ltd
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Thank you all for joining the conference call today. We are now starting the CMIC Holdings Financial Results Presentation meeting for the first quarter of fiscal year ending September 30, 2021.
Today, our CFO, Wataru Mochizuki, will speak about the financial results overview, followed by a Q&A session.
We are scheduled to end at 5:15 p.m. The video recording of this call will later be posted on our IR website and available to view on demand.
Now we'd like to have our CFO, Mochizuki, explain the financial results for the first quarter.
I am Mochizuki, CFO. I'd like to explain the financial results overview for the first quarter of fiscal year ending September 2021 that were disclosed at 3:30 p.m. today.
Please take a look at this table for our business segments and corresponding group companies as of the end of December 2020. Our group consists of total 25 companies that include CMIC Holdings, which is a holding company; 23 consolidated subsidiaries, including 12 overseas affiliates and 1 equity method affiliated company.
For the fiscal year ending September 2021, CMIC Group is executing activities in the midterm plan, including the focus activities such as acceleration of PVC model promoting globalization and creation of health care business with the aim of achieving sustainable growth and increasing corporate values in the medical and the pharmaceutical industry that is undergoing changes.
In particular, as part of our health care revolution project creating health care businesses, we are developing businesses that will contribute to maintaining and improving personal health, including response to the COVID-19 infection as well as utilizing our talent in the health care arena.
Here, I will explain our focus activities in the first quarter of fiscal year ending September 2021.
For COVID-19 countermeasures, we provided a support for COVID-19 vaccination by our local government by using the health care communication channel, harmo-based vaccine management system. Also, we are commissioned with our PCR testing or social testing project targeting home care providers from Setagaya Ward.
In addition, as part of our activities to accelerate and streamline drug developments, we are actively making proposals utilizing digital technologies, including the start of our demonstration experiment of conducting a clinical trial using harmo.
For creating business that contributes to maintaining personal health, a harmo project was designated by the Tokyo Metropolitan Government as business to establish the next-generation wellness solution. In this way, we are formulating our ideas and engaging in activities towards materializing our business models.
For IPM solution, OrphanPacific Inc., received a manufacturing and marketing approval of ORLADEYO capsules, 150 milligram, for the suppression of the onset of attacks in acute heritage angioedema on January 22, 2021.
On the same day, Grifols Therapeutics LLC, received the manufacturing and marketing approval of Lynspad for intravenous infusion, 1,000 milligram, where OrphanPacific Inc., has provided support towards the approval as an appointed marketing authorization holder.
As seen in these examples, the use of our IPM platform is coming to fruition. In addition, on November 27, 2020, we acquired a certification of the international standard ISMS, or Information Security Management System, in order for us to continue to strengthen information security.
Furthermore, on December 21, 2020, we received a letter of appreciation from the Ministry of Economy, Trade and Industry as a company that contributed to the increased production of medical supplies in the COVID-19 pandemic.
This is the overview of consolidated income statement: Sales in this quarter were JPY 18,885 million, down by JPY 915 million or 4.6% year-on-year. Operating income was JPY 811 million, down by JPY 111 million or 12.1% year-on-year. Ordinary income was JPY 803 million, down by JPY 108 million or 11.9% year-on-year. Profit attributable to owners of parent was JPY 561 million, up by JPY 80 million or 16.7% year-on-year. Earnings per share was JPY 31.06.
This is the breakdown of nonoperating income and expenses and extraordinary income and losses: In this quarter, we recorded JPY 125 million of share of profit of entities accounted for using equity method, subsidy income and others as nonoperating income and recorded JPY 133 million of interest expenses, foreign exchange losses and others as nonoperating expenses.
We recorded JPY 115 million as gain on forgiveness of debt for extraordinary income, JPY 30 million as loss on valuation of investment securities for extraordinary loss, JPY 289 million for total income taxes and JPY 36 million as profit attributable to noncontrolling interests.
This table shows sales and operating income by segment: Sales decreased in all segments, except for Healthcare business to JPY 18,885 million, down 4.6% year-on-year. Operating income was JPY 811 million, down 12.1% year-on-year, which was below the same period of the previous year.
This table shows the orders received and backlog by segment: The number of orders received increased year-on-year in all businesses except for CDMO business. For CDMO business, only firm orders are included in the orders received in backlog and the annual order plans proposed by customers are not included. This shows the trend in consolidated sales and operating income. Both sales and operating income decreased year-on-year and operating margin was 4.3%.
This shows the trend in sales and operating income in CRO business: For clinical services, we are working to improve the efficiency of clinical trial process by using harmo, proposing a new clinical trial model for the new normal, and improving the expertise and technical capabilities of our talent.
For nonclinical services, our laboratories in Japan and the United States are in collaboration to actively provide drug discovery support for advanced medicine, including nucleic acid drugs and regenerative medicine.
Sales were below the same period of the previous year due to factors such as weakness in orders for clinical operations in the previous fiscal year as a result of the spread of COVID-19 infection. Operating income was below the same period of the previous year due to factors such as a decrease in revenue from clinical operations, despite an increase in nonclinical operations.
In CRO business, sales in this quarter were JPY 8,728 million, operating income was JPY 1,367 million and operating margin was 15.7%.
This shows the trend in sales and operating income in CDMO business: We are focusing on a larger scale commercial production project that is scheduled to start production in the fiscal year ending September 30, 2022, as well as the launch of new facility and the production line in the United States and the acquisition of new projects.
Sales were below the same period of the previous year due to a decrease in contracted production volume. Operating loss was recorded due to the decrease in sales and the prior investment costs for the contract manufacturing business of biopharmaceutical APIs.
In CDMO business, sales and operating loss were JPY 4,913 million and JPY 112 million, respectively.
This shows the trend in sales and operating income in CSO business: Sales and operating income were below the same period of the previous year due to a decline in the operation rates in the MR or medical representative dispatch services.
In CSO business, sales were JPY 2,053 million, operating income was JPY 225 million, and the operating margin was 11.0%.
This shows a trend in sales and operating income in Healthcare business: Sales were above the same period of the previous year due to growth in the SMO operations. On the other hand, operating income was below the same period of the previous year due to prior investments for the creation of new health care businesses.
In Healthcare business, sales were JPY 2,456 million, operating income was JPY 58 million and the operating margin was 2.4%.
This shows a trend of sales and operating income in IPM business: IPM business provides new business solutions to pharmaceutical companies that combine value chains and the marketing authorization licenses, which are intellectual properties possessed by our group.
In this quarter, we are selling orphan drugs, including products developed in-house. Furthermore, we are strengthening business foundation through the provision of IPM platform that includes supporting foreign pharmaceutical companies entering the Japanese market with strategic options.
Sales were below the same period of the previous year due to a decrease in sales volumes of some products. On the other hand, operating income was above the same period of the previous year due to effect such as the one from reduction in costs.
In IPM business, sales were JPY 924 million, operating income was JPY 102 million and operating margin was 11.1%.
Now I'd like to explain our consolidated balance sheet. Total assets at the end of this quarter decreased by JPY 74 million compared to the end of the previous fiscal year to JPY 89,443 million. This is due mainly to a decrease in cash and deposits, despite an increase in accounts receivable trade and investment securities.
In this quarter, we recorded JPY 1,182 million of capital investment with JPY 930 million for CDMO business and JPY 251 million for others. Depreciation was JPY 1,264 million and amortization of goodwill was JPY 5 million.
Total liabilities decreased by JPY 1,042 million compared to the end of the previous fiscal year to JPY 54,464 million. This is due mainly to an increase in long-term debt and others and a decrease in short-term borrowings, provision for bonuses and others.
Total net assets increased by JPY 967 million to JPY 34,979 million. This is due mainly to an increase in valuation difference on available for sale securities and others.
While there is no clear end insight to the spread of COVID-19 infection, based on the information available at this point in time, there are no changes to the consolidated earnings forecast for the fiscal year ended September 30, 2021, in the consolidated financial results for the fiscal year ended September 30, 2020, announced on November 6, 2020.
The impacts of the third wave of COVID-19 infection and the state of emergency, issued on the January 7, 2021, on our business may include restrictions on visits to medical institutions and a decrease in contracted production volume.
In the meantime, we will strive to expand the clinical trial and post-marketing surveillance projects related to the COVID-19 infection as well as support services for local government and medical institutions.
If there is expected to be an impact on our business performance in the future, we will disclose it promptly.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]