Drivers in Place to Ameliorate Revenue Decline, However, Reduced Gross Margins to Be the New Normal

Asia Healthcare Analyst, Pathology Associates Limited

Dion Stéfan Büchner M.D., FCAP

Asia Healthcare Analyst

Pathology Associates Limited

Equity Bottom-Up

<p><strong>Key highlights</strong></p><ul>
<li>Overall sales (¥50b) stayed flat as brisk uptake of Flutiform (+13% to ¥6.1b), Desalex (+200% to ¥2.8b) and Nasonex (after Merck &amp; Co. granted exclusive Japan distribution rights) compensated continued genericization of key driver, Kipres (-31% to ¥6.2b, LoE in FY16, ~30% of FY16 sales).</li>
<li>However, genericization / NHI price revisions of the key drivers and increased contribution from generics segment (+4% to ¥13.6b) resulted in gross margin decline by ~300bps to 53%</li>
<li>While SG&amp;A expenses declined marginally by 1.5% to ¥18.7b, R&amp;D expenses declined significantly by 30% to ¥5b (due to base effect)</li>
<li>As a result, Core EBIT and Core EPS almost doubled to ¥2.9b and ¥30.8 / share respectively</li>
</ul>

Key highlights
Overall sales (¥50b) stayed flat as brisk uptake of Flutiform (+13% to ¥6.1b), Desalex (+200% to ¥2.8b) and Nasonex (after Merck &amp; Co. granted exclusive Japan distribution rights) compensated continued genericization of key driver, Kipres (-31% to ¥6.2b, LoE in FY16, ~30% of FY16 sales).
However, genericization / NHI price revisions of the key drivers and increased contribution from generics segment (+4% to ¥13.6b) resulted in gross margin decline by ~300bps to 53%
While SG&amp;A expenses declined marginally by 1.5% to ¥18.7b, R&amp;D expenses declined significantly by 30% to ¥5b (due to base effect)
As a result, Core EBIT and Core EPS almost doubled to ¥2.9b and ¥30.8 / share respectively


Kyorin 1H FY18 (YE Mar'19) Results - First Glance

Kyorin Holdings

Kyorin 1H FY18 (YE Mar'19) Results - First Glance