Terumo Corporation (4543) Earnings Call Transcript & Summary

[Interpreted] Hello, everybody. This is the CEO, Sato. Thank you so much for being here today as we announce the Terumo 5-year growth strategy. We also express our gratitude to all of you who are participating remotely. This 5-year growth strategy is also called Growth Strategy '26, so we will call it GS26 for short throughout today's remarks. I will first give the big picture regarding GS26. GS26 is a 5-year growth strategy that also looks beyond the next 10 years. This was the 100th year since the founding of Terumo. So the content of our plan is meant to literally be a strategic turning point toward the next 100 years. First, I will share our midterm vision and then explain what is in our 5-year growth strategy. Before doing that, let's take a look back at the current mid- to long-term growth strategy. While we still need to see the final results of the second half of this fiscal year, the current outlook is that we will miss on growth and profitability while achieving on ROE. Overall, our business fundamentals were on the growth trajectory we anticipated. But the FY '18 shipping delays of interventional products and FY '20 COVID-pandemic slowed us. On the other hand, regarding our Terumo-wide strategic theme of restoring mid- to long-term growth capability, each company cultivated specific seeds for future growth, and we are reaching the stage for those to sustain growth financially as well over the next 5 and 10 years. Another result to point out is the fact that our 3 major acquisitions made in FY '16 are making financial contributions. GS26 actually consists of 4 arrows. The first is to strengthen existing businesses. The second is to establish and accelerate high-growth businesses. The third is to explore new business opportunities, innovation. And the fourth arrow is to strengthen the corporate foundation. These action plans each have their own timeline and will proceed simultaneously over the next 5 years. They will bring about strong growth but also pivot us to a new growth model oriented toward the paradigm shift in healthcare 5 years from now. 20 years into the 21st century, healthcare is in the midst of an enormous change. These are the 3 paradigm shifts of healthcare in which Terumo is focused mid to long term. First, disease structure changes. First, it is important to understand that chronic diseases like diabetes will increase globally as population's age and living standards improve. The number of diabetes patients in the world has already exceeded 500 million and is growing in the double digits and with the emergence of super aging populations, the theme of overcoming organ deterioration due to aging will come to the forefront, these are large social problems that Terumo must take on earnestly. The second shift is timeline changes in healthcare. Up till now, a main theme of healthcare was how to optimize onetime acute treatments. As chronic diseases increase, it is becoming just as important to manage the patient journey on a longer timeline. Improving the efficiency of long-term treatment, results will be required from a medical cost perspective. We will transition into an era in which even acute care results are traced through prognosis to monitor the efficacy of treatment. For these reasons, the focus of healthcare will shift to a longer timeline across prevention, diagnosis, treatment and prognosis and all this with more optimization of care based on each patient's individual condition. And the acceleration of digitalization will drive this shift. Improvement of patient QOL is a vital to Terumo purpose. We will shift to developing solutions that cover this patient journey timeline. The third shift is technology changes. In pharmaceuticals, the largest shift will be from low molecule to biopharmaceuticals, cell and gene therapies and regenerative medicine. This change will be very important to Terumo, which has many technologies that add value to drug administration. Further, genomic analysis and digital and AI technologies have the power to drive individualized medicine. The value of using data to take on themes of diagnosis and treatment optimization and to perform into long-term health management will increase more and more. With these shifts, our new mid- to long-term vision is from devices to solutions, Terumo will maintain its rock-solid commitment to quality while leveraging diverse technologies to meet the needs of 21st century healthcare. This means that Terumo will shift focus from products to customers, becoming a company that ultimately provides solutions with patients in mind. At the same time, we must evolve strategically in line with this disease focus. That is because the ultimate mission of healthcare is to overcome illnesses, and doing that requires constant creation of new technologies, tools and systems. Growth opportunities exist within these kinds of dynamic developments. Devices will continue to be the nucleus of the Terumo product portfolio, but the development direction will have to shift. Rather than simply taking on problems communicated from the healthcare field, we will need to proactively solve the needs of patients and others involved in healthcare. Devices are one way to do that, but devices alone will not bring about the optimization of care that the coming era requires. Terumo will take the initiative in working with medical professionals, pharmaceutical companies and the entire healthcare ecosystem to discover customer and patient needs, becoming a company that can redefine and provide integrated solutions. I will now speak more specifically about the focuses that show the direction of Terumo's solutions development. First is delivery. At their essence, many Terumo products and technologies are used for the functions of achieving access and delivery to inside the body in a safe, certain and easily usable way, needles, syringes, pumps, sheaves, guidewires, catheters, the list goes on and on. In developing new solutions too, these differentiating core technologies will remain our greatest tool. The radial approach, TRI, that drives growth in the interventional systems, business already maximizes this capability. Second is digital. This requires a little further explanation. Digital technologies are indispensable and individualized medicine, improving efficiency through data and optimizing diagnosis and treatment. With the phrase digital patient journey, Terumo will deepen its digitalized solutions. One example of this kind of advanced solution is development of applications for diabetes patients. Third is the new concept of device Deviceuticals. This is a fusion of medical devices and pharmaceuticals that Terumo is pursuing. Another way to express it is solutions that add differentiating value to drug administration. The CDMO business of the general hospital company and sourced plasma business of the Blood and Cell Technologies Company are examples of this Terumo solutions pattern. Next, I will explain the growth outlook that GS26 aims for 5 years from now. First, of most interest to many of you, here are the 5-year financial targets. We will aim for high single-digit revenue growth averaged across the 5 years. In the best case, we will approach annual revenue of JPY 1 trillion. In profitability, we aim to reach operating profit of 20% or higher before adjustment. As our indicator of capital efficiency, this plan will adopt ROIC. The current Terumo ROIC is 8%. In this strategy, we will aim for 10% or higher. We will maintain an ROE of 10%, as we have previously done. Next, I will explain the main growth drivers of GS26. We will aim for high single-digit growth on average across the group. And ideally, all 3 companies will grow in a balanced way. By company we aim for Cardiac and Vascular to grow in high single digits, General Hospital to grow in mid-single digits and Blood and Cell Technologies to approach double-digit growth. All 3 companies aim to grow as fast or faster than their respective markets. And this attests to the evolution of the Terumo portfolio. I should also mention that these numbers do not include new acquisitions. Going forward, M&A will be another positive impact on growth. Now regarding how we will grow by business segment, the Cardiac and Vascular Company growth drivers will be the 2 pillars of treatment and access. The General Hospital Company will grow on the strength of the lines in diabetes businesses and the primary blood and cell technologies company growth factors will be sourced plasma and cell therapies. The areas I have mentioned will account for approximately 80% of overall growth. By region, we will grow in the United States and China, which are the 2 largest med tech markets. These will be key. As I explained in the previous earnings announcement, this next 5 years will be notable for the overwhelming presence of the United States. Lastly, by client segment. The ratio of B2B businesses will greatly increase. This will be the natural result of our solution strategy. There will be more business opportunities as we integrate our technologies with those of pharmaceutical manufacturers. I just mentioned our goal of 20% profitability. In the med tech space, downward pressures on price, stricter environmental regulations and other factors will negatively impact profitability unless we are proactive. That is why Terumo in this growth strategy will strive to increase its ratio of high added value businesses through portfolio management, while also working globally to strengthen profitability and operations. In fact, a project is already underway to improve operational profitability, efficiency over the next 5 years across the Terumo Group. To this point, each company and the headquarters functions have made great efforts toward improvement, but we know that these efforts alone cannot overcome the downward pressure on margins in our industry. This new initiative will address production, SCM and procurement and leveraging group organizational strengths to cooperatively create benefits through economies of scale and overall optimization. In addition, we will advance the standardization and efficiency of global management and indirect departments based on GBS thinking. The key to this is to optimize overall beyond business units and local boundaries. These efforts have become possible because of systems infrastructure investments we have made, such as in SAP. We aim for these efforts to improve profitability over 5 years by 2 percentage points. These actions are indispensable to achieving the operating profitability goal of 20%. In addition to financial targets, GS26 includes a clear commitment to sustainability management. Terumo will evolve its action programs by addressing the 2 pillars of ESG and CSV. CSV, in particular, will be designed in sync with new innovation that brings about solutions based on the purpose of Terumo. This will ensure alignment with our long-term strategy. Specific KPIs and monitoring will be established and assigned its responsibilities to management team members and included into performance evaluations. We will address the specific KPIs in Fumihisa's corporate presentation later today. As has been the case, Terumo growth will continue to rely on both internal development and M&A. We are especially mindful to strengthen awareness in GS26 that our internal R&D and inorganic growth are harmonized and advanced strategically. To achieve this, the CTO will lead corporate R&D, while also heading the strategic planning department to ensure throughout GS26 that R&D and M&A are pursued according to the overall vision. At the same time, our basic comminate stance is that, first, we are always open to opportunities. In other words, we will pursue all attractive opportunities and won't set specific monetary M&A targets. Second, although most of our past M&A targets were centered in the U.S. and in the interventional field, we will consider opportunities globally across all 3 companies and at the corporate level. Third, we anticipate that our subsidiaries outside Japan will make acquisitions as well. Fourth, more than large scale, sudden shift-oriented acquisitions, the focus will be on strengthening our portfolio in line with business strategy. Achievement of GS26 will essentially require us to grow in the double digits. Therefore, we will need to make continuing investments in strengthening our capabilities. The new CDMO and sourced plasma fields, in particular, tend to require large investments. strengthening capabilities, and these 2 will account for around half of the overall investment. From a global optimization perspective, it will be vital that these investments are made efficiently. Regarding dividends, we see a dividend payout ratio at the 30% level, as appropriate during a period of intensive growth investment. Otherwise, when additional funds for an acquisition or alliance, et cetera, are required in service of a growth opportunity, we will consider further capital investment as well. Terumo has sufficient leverage capacity, the growth options, including M&A are not likely to be hindered by capital limitations for the near future. We will address shareholder returns not on a predetermined basis, but rather take appropriate actions as conditions dictate. This concludes my explanation of the overall strategy as CEO. We will now hear from the leaders of the 3 companies who will explain their respective growth strategies following their remarks, Fumihisa will explain our efforts in corporate areas regarding group-wide innovation and strengthening our corporate foundation.

[Interpreted] I am the Cardiac and Vascular Company President, Osada. I will explain GS26 for the Cardiac and Vascular Company. The Cardiac and Vascular Company vision is together with our customers, we strive to create the next standard of patient care and drive the evolution of medicine on the front lines. To this point, we have primarily provided value to patients in interventional procedure and operating rooms. Going forward, we will accompany the patient journey prior to those procedures and following as well. As you may know, treatment is increasingly evolving, and we too must flexibly adapt to changes occurring in the healthcare environment. Through digitalization, robotics, AI and other technologies, we seek to understand and take on the needs of medical settings, along with not only doctors but also patients and partners toward creating new standards of care. Here is a look back on the current mid- to long-term growth strategy. The first thing to mention is that we enhanced our primary product portfolio through acquisitions. These include the cerebral hemorrhage treatment company, Sequent Medical; the aorta extent graft company, Bolton Medical; and the Angio-Seal access product business. These 3 important acquisitions were all integrated smoothly. The second achievement is that the radial approach for coronary intervention was broadly adopted. The third is that we achieved stable supply of products. Ashitaka factory, the main production site for TIS products, experienced shipping difficulties, but these have been greatly improved. Also, the TCV consent decree is now fully closed. On the other hand, there are themes that still require our efforts, including evolving operations to improve profitability and preparing new businesses and technologies for future growth. In P&L performance, our revenue grew annually at 8.1% on average. Adjusted operating profit is expected to finish slightly decreased at around 25%. With that, I will now share 3 key market environment shifts that we had in mind while formulating GS26. The first is that healthcare systems globally are under fiscal pressure and the need for medical cost efficiency is rising. That situation is a tailwind, add strategic implication for us. For the radio TRI approach, what can contribute greatly to early hospital discharges and reduction of complications. The second shift is that a large market exists within the therapeutic segment. There is an enormous opportunity to expand beyond access products, which have historically been our platform products, further into therapeutic products as well. The third shift is that the market has increasingly high expectations for new digital services. To this point, we have primarily provided value to patients through products used in procedure and operating rooms. Going forward, we believe our mission is to provide comprehensive care prior to and after those procedures throughout the patient journey. There are 3 pillars in the Cardiac and Vascular Company mid- to long-term growth strategy. The first is therapeutic business. Through new product launches, we will expand the therapeutic business. We will enhance our therapeutic product lineup in disease areas of stroke, cerebral hemorrhage, aortic oncology and peripheral. In parallel, we will begin to provide personalized medicine that utilizes digital technologies. The second pillar is Access business. We will continue the contribution to adoption of the radio procedure that we have cultivated over many years this time across diseases. Specifically, we will broaden use of the radial procedure beyond its original coronary focus into lower peripheral, abdominal and neurovascular toward covering the entire body. At the same time, we will leverage the large amount of therapeutic data that we have accumulated through procedures to clarify the benefits of the radial procedure as we propose optimal treatments for each patient to doctors. The third pillar is operations. Across all the businesses of the Cardiac and Vascular Company, we will optimize global production and advanced increases in production volume and cost reduction. In addition, we will raise production efficiency through DX or digital transformation. This will enable us to maintain the profitability of high-margin products and significant cost improvement of low-cost products. By executing these strategies, we aim to achieve the following GS26 revenue and profit goals. First, in revenue, high single-digit annual growth and an adjusted operating profit, a 2 percentage point improvement versus revenue amount. The primary policies by which we will make even increased revenue growth are the 3 strategic pillars I just outlined and the expansion of the therapeutic business and radial approach that you also see here. The first, expansion of the therapeutic business will produce growth of JPY 30 billion through products for ischemic stroke and cerebral aneurysm. Full-scale launch of aortic aneurysm products, primarily stent-graft, will account for JPY 30 billion. Peripheral and oncology intervention products will total JPY 20 billion. Second is the expansion of the radial procure across diseases. With a focus on radial procedure adoption, we will expand the vascular access business. Vascular access products, including guidewire, sheath and vascular closure will grow JPY 40 billion and therapeutic lesion access products such as microcatheter and guiding sheath will grow JPY 25 billion. Next, on the right-hand side, we will improve adjusted operating profit by 2 points, and this will be achieved through the third strategy of operational improvement. In the vascular graft business, we improved operational capabilities through expanded production capacity and new products and raising gross profit through production optimization. In the TCV business, we will bring down the cost of next-generation products. These actions will bring both the TCV and vascular graft businesses from what is currently low single-digit operating profitability into double digits. On the next slides, I will explain more detail regarding these items 1 to 3. In the first, through new product launches, we will expand the therapeutic business. We expect the stroke market to expand even further going forward, reaching JPY 300 billion by FY '26. Our share of that market is still low, but we plan to expand share through new products and thereby grow revenue. The cerebral aneurysm market will grow to JPY 280 billion. We do have some market share, but we will also launch new and improved existing products here as well. We anticipate that the aortic market will reach JPY 400 billion, and our plan is to deploy a full product lineup in the United States and world at large. Representative in the effort of the thoracic and abdominal stent graphs and hybrid products that combine artificial blood vessel and stent grafts, we will proactively bring these into the market. The second strategy is in access. The radial procedure will spread into more disease areas. A feature of radial access is that compared to the femoral interventional access, it requires a shorter time for closure and results in fewer complications. This leads to shorter procedure and hospitalization times, which in turn improves medical cost efficiency. In addition, patient QOL has improved. This radial procedure is currently widely adopted primarily in the cardiac and coronary areas. Going forward, it will spread further in the peripheral, abdominal and neurovascular areas to cover the entire body. We see the radial procedure adoption rate as shown on the right-hand graph. In the coronary field, where it has already been widely adopted, we expect it to continue expanding in Europe and the United States to reach 70% globally. In peripheral illnesses and cancer treatment, we anticipate a rise to 20% or higher from the current rates that are below 10%. And in neurovascular intervention, we expect the radial approach to begin being used while staying below 10% adoption. That is the overall picture of how we see the radial procedure being adopted for use throughout the entire body. That is how the TIS business, which has grown steadily to this point on the strength of access continuing to grow going forward as well. Our strength in access' products, another strength, enhanced training programs that enable users to fully utilize the capabilities of the products. It is this combination. The product technology and craftsmanship are refined to the utmost detail, making radial procedures as stress-free for users as possible. We provide education and training to the physicians who serve as proctors while maintaining partnerships with international academic organizations. Through this combination of products and training, we provide a solution to the issues users face in medical settings so that they can perform radial procedures with peace of mind. These are our strengths in the access field. The third strategy is strengthening the operations that support growth. This is an effort that we will continue to advance in parallel with production capacity expansion and cost reduction through global site optimization. In addition, we will raise production efficiency through DX or digital transformation. Under the smart factory project, the Ashitaka factory will utilize DX to raise efficiency and advance automation of production lines. Examples of these efforts include RFID management of components, work progress tracking and inspection status management as well as production line improvements aided by AI movement analysis. The third building of the Yamaguchi factory will begin full operations performing end-to-end production activities, including sterilization. The third building of the Vietnam factory will also add full operation, now producing stent graft products in addition to TIS products. the Puerto Rico factory will expand Angio-Seal production. Beijing and Hangzhou will advance production of TIS products. Maryland will produce access and oxygenator products locally for the largest global market, the U.S. In California, the neurovascular business will develop new products and producing an end-to-end operation, while the third Costa Rica factory building enters full operations to support expanded neurovascular production. These actions toward building out our global production footprint will improve the gross profitability of the Cardiac and Vascular Company. Here are some key products planned for launch during GS26. I cannot show all products, but this introduces some of them. In addition to the 3 strategic pillars I have already mentioned, another important effort is developing medical standards with digital technologies. For example, we will provide pretreatment planning support based on CT and other imaging data. During treatment, we will support physicians in utilizing the vast data accumulated across many treatments to tailor treatment decision-making to each individual patient. After surgery, we will provide support toward early patient recovery. By expanding these efforts, we will provide the next standard of care for the patient journey. Execution of these will be aided by establishment of the C&V digital organization in the United States, which will work to build a foundation for future digital technology efforts. As Sato mentioned at the beginning, Terumo will carry out GS26 with an eye toward our next 100 years. That is why GS26 is not merely about the 5 years leading to FY '26, but will also encompass efforts to prepare for growth further into the future. As we have explained today, our outcomes within GS26 are high single-digit top line growth and a 2-point improvement in adjusted operating profit percentage. The 3 strategic pillars toward achieving these targets are expansion of the therapeutic portfolio through new product launches, expansion of radial across other diseases and further operational enhancement to support growth. And toward growth beyond GS26, as you see on the right side of the slide, we will further expand our adjacent in new therapeutics portfolio. We will also move steadily towards supporting the entire patient journey through our digital health business. This concludes the Cardiac and Vascular Company mid- to long-term growth strategy explanation. Thank you.

[Interpreted] Hello, everyone. I'm Samejima from the General Hospital Company. I will explain our GS26. This is our new strategic vision. I will read it out. We provide patient-centered solutions that integrate our unique technologies, contributing to the advancement of high-quality, innovative medical care. By combining differentiated technologies and services, we can shift from selling products to providing solutions. At the other end of the line is the patient, the recipient of medical care. If we can realize such a world, we will naturally be able to contribute to the advancement of high-quality and innovative medical care. In the next slide, I will show you our core competencies and identity. People may have had the impression that the General Hospital Company was a mishmash of miscellaneous products and that they didn't really know what it was doing. We also regret that we were not able to give a proper explanation to them. As we have shown here, I would like to state clearly that our core competence lies in drug delivery technology. Clockwise from top left, for example, in DM Healthcare, insulin delivery solutions and in Alliance business, drug delivery solutions for pharmaceutical companies and in the pharmaceutical business, peritoneal dialysis solutions. Then going to the lower left, in the General Hospital products, we have IV drug delivery solutions. These are our core strengths, and through them, we are contributing to health care safety and efficiency. Of course, the elemental technologies that support these technologies are differentiated from each other. We have been too much focusing on individual products until now, which may have given you a chaotic image for the company. However, it is true that we have built our business on this strength. This is a review of the current mid- to long-term growth strategy. Please see the graph on the right. Sales growth has been a little less than 3%, averaging out at an annual rate. Compared to the decade or so prior to 2016 when sales were mostly flat, I think we can say that we are clearly on a growth trajectory. We have also maintained our adjusted operating profit at around 15%. During this period. I think the major achievements were the full lineup of the portfolio of DM and the great strengths made in alliances. On the other hand, we still have a long way to go in terms of handling downward price pressure, global expansion of the business and building strong operational structure. In light of this, DM and alliances will be the 2 major growth drivers for GS26. And the overall sense is that we will shift from selling products to providing solutions and create a new business model. Naturally, the sales style in Japan will also need to change. In addition, we will accelerate the development of our overseas business and aim to build optimal global operations. These suggestions can also be found in market dynamics. The medical field is expanding beyond hospitals. We also need to understand the patient journey and the broader ecosystem. With regard to the maturing of the domestic market, the key point is how to accelerate global business and the trends toward the development of new drugs such as biopharmaceuticals requires devices that maximize the effects of drugs. And, of course, stable and lean operations are necessary. With regard to the price offensive, we need to shift from selling tangible products to proposing solutions. Digital technology will be the key to supporting this. Based on these points, this slide shows the outline of our strategy. With regard to Hospital Care Solutions, we will propose solutions to solve hospital management that provide value to the medical front, such as improving infection rate, equipment efficiency and health care safety. In Life Care Solutions, we will create data and vital monitoring systems to support the personalized solutions for patients, especially those with chronic diseases. And in Pharmaceutical Solutions, we provide solutions that combine unique devices and services that maximize the value of drugs. In global business solutions, we will promote development in fields where we can win, in regions where we can win and without necessarily focusing on our own sales network. I'd like to share a few specific examples of each. For Hospital Care Solutions, for example, the administration of drugs in hospitals by connecting these devices to various devices in the hospital, for example, records, vitals management and prescription coordination or by using RFID to recognize drugs, we can prevent incorrect administration. In this way, we will contribute to health care safety and work efficiency. In the area of infection control solutions, we do not just sell equipment and device, but we also analyze the data from actual use and make proposals for further improvements. I would like to make some suggestions as to how we can improve infection prevention. As for Life Care Solutions, take the diabetes management business as an example. Digital technology plays a major role here as well. from left to right, a simple system that can manage SMBG and pump measurement information. In the middle, we will create a system that allows doctors to provide optimal guidance and treatment to individual patients by using AI algorithms to analyze information such as blood glucose, diet, physical activity and medication. Then to the right, we would like to construct the world of the so-called artificial pancreas by linking the so-called AID, pump and CGM. As you can see, in the General Hospital Company, DX is a very important key in GS26. Here, I would like to summarize a little about our DX. Again here, there are 2 aspects to the integration of various devices in the hospital, such as safety and efficiency and drug delivery solutions. On the right side, there is the aspect of data management for improving the prognosis and quality of life of patients with chronic diseases. Ultimately, our goal is to establish digital therapeutics. What about Pharmaceutical Solutions. Currently, we are focusing on the development of solutions that improve drug safety and efficiency, but we will gradually develop patch pumps and intradermal administration devices that improve the effectiveness of drugs in GS26. Beyond that, in the world of nucleic acid medicine and gene therapy, we aim to develop devices that focus more on treatment outcomes, central nervous system, cardiovascular and oncology. Overseas, as I mentioned earlier, it is important to develop in areas where we can win and in regions where we can win. In the area of hospital care, we will continue to develop highly functional infusion systems in Southeast Asia. In North America, we will use B2B rather than our own sales network to strengthen sales of products with vascular access devices. In the Life Care Solutions, we launched an insulin pump in Italy this fiscal year. We will expand this business gradually. In addition, China is growing into a huge market and we would like to establish a solid bridgehead here. In Pharmaceutical Solutions, CDMO will finally be launched globally. Our feature is PLAJEX, which is an injection of polymers, and we will target segments where this can be utilized. As you can see from the above strategy, the name General Hospital Company no longer fits the strategy, we are pleased to announce that we are changing our company name. As the medical field expands, it is no longer limited to hospitals. We also need to shift from products to solutions. In addition, the name should be easy to understand for the increasing number of overseas customers. Based on this, the new company name will be Medical Care Solutions. Under this company, we will reorganize our business into 3 segments: Hospital Care Solutions, Life Care Solutions and Pharmaceutical Solutions. Quality time for better care at the bottom right is our new brand promise. It expresses our aim to provide quality time in every place related to medical care. This is also a visual image of the new company. In order to support such business strategies, strong organizational capabilities are required. The first and foremost of these is production and operations. In the area of Pharmaceutical Solutions, we are planning to build a new plant in addition to the current Kofu pharmaceutical plant and Yamaguchi D&D plant as growth will be accelerated in the future. In addition, in the basic business, basic medical treatment, such as administering vaccines and infusions, has received renewed attention due to the coronavirus. This is also an aspect of our economic security policy, so we will continue to invest in renewals to ensure that we are not making any mistakes while building optimal global operations to increase our cost competitiveness. For example, in the area of Hospital Care, we will be expanding our product lineup to include new PIVC, peripheral intravenous cannulation, the next generation of smart pumps and expansion of CSTD, closed system drug transfer device for anticancer drug exposure prevention, while from a longer-term perspective, we will be expanding our product lineup to include new dialysis solutions and oncology supportive care products. In the area of Life Care, we are planning to launch a CGM linked insulin patch pump and also a new type of VGM, which is designed for emerging countries. And for the longer term, we will establish digital therapeutics I believe that the next generation of CGMs will also play a major role at that time. As for pharmaceutical, we have already received orders for 4 products in the near future. Also, 2 new contracts have been made for a slightly longer perspective. Financially, we have been growing at a rate of 2.9% for the past 5 years, and we will further accelerate this growth to achieve an annual growth rate in the mid-single digits for the next 5 years. The driving force will be Pharmaceutical Solutions, and Life Care Solutions will also contribute. As for adjusted operating profit, we will aim to exceed revenue growth. As pharmaceutical solutions grows, economies of scale will come into play and by increasing its weight in the total, it will have the effect of boosting the company's overall profit margin. Therefore, we are aiming to achieve an adjusted operating profit margin of 15% or higher. This is the last slide. The key to GS26 will be the creation of new value using digital technology, strengthening our portfolio in the diabetes management field and building an ecosystem in collaboration with external partners. At the same time, we will provide solutions that contribute to safety, efficiency and hospital management by linking various data within the hospital. In Pharmaceutical Solutions business, we are expanding our CDMO pipeline and finally, targeting overseas projects. in addition to the lean operations that will support this, the sales style in Japan will also be transformed in the sense of moving from selling things to selling services and selling value. In the world beyond GS26, we will aim to monetize businesses that use DX. We would like to develop various services for hospitals, including consultation services in a way that is profitable. In this context, I would like to aim to create evidence that will help improve patient care by optimizing the administration of drugs rather than simply obtaining data that will improve efficiency in health care safety. In the diabetes management business, we naturally provide personalized treatment for each patient, but we believe that the same business model can be applied not only to diabetes management, but also to other chronic diseases. With regard to Pharmaceutical Solutions, the delivery mechanism required will change as nucleic acid drugs and gene therapy become more and more popular. To address this issue, we would like to develop new devices by leveraging our strengths through collaboration with pharmaceutical manufacturers. At that time, global production in the most suitable areas will be established. This is my presentation on GS26 of Medical Care Solutions Company. Thank you very much for your attention.

Hello. I am Antoinette Gawin, the CEO of Terumo Blood and Cell Technologies. Thank you for the time today, and I wish I could be there in person. Our strategic vision focuses on bringing innovations that are accessible to patients, innovations that really show the potential of blood and cells to address unmet medical needs. That means needs as simple as getting safe blood to people in parts of the world who don't have it or treating sickle cell disease where 40% of patients go undiagnosed. We are doing this by putting together world-class solutions that connect the ecosystem in which these technologies are used and earning customer loyalty through outstanding service, outstanding delivery and a willingness to lead from the front and set industry standards. These elements allow us to achieve double-digit growth on the top line and improve our operating profit to over 20%. As we look back at our commitments for GS21, we renewed our commitment to customers and improved our infrastructure and delivery systems so that over 95% of the time, customers are getting what they need. We renewed our commitment to patients by investing in areas that we knew would get products closer to the point of use. These investments in transformation were tested by COVID, and we're proud that we were the first company to get an emergency use authorization to treat COVID. We also received industry recognition for leading the charge to solve issues using convalescent plasma. And our customers rewarded us for that. We rapidly flexed production so that while we increased demand almost 30%, we also improved quality and put in material infrastructure changes, establishing new plants and getting our products closer to where they are used. In parallel with that, we invested in growth areas, primarily the source plasma market, a high-growth entity that leverages some of the core technologies and the cell therapy market, which is the showcase for how you use and unlock the potential of blood and cells. So as we move forward, you'll see examples of how we are going beyond blood. Everything starts with blood, but we need to go beyond and how we are leveraging our incredible equipment and technology to treat specific diseases and get closer to those patient and physician ecosystems. We have put initial investment in growth geographies, China, Russia, Latin America, areas that are just beginning to take advantage of the full portfolio, and we will continue driving operational excellence that will help us continue improve in both operating margin and capturing that growth. The market in which we operate is changing so quickly with a demand for cell therapy solutions that don't yet have the infrastructure behind them yet. You see all points of care looking for data solutions and really integrating around whatever they provide. COVID illustrated the inequities in access to healthcare and the inefficiencies in the blood supply. So this requires that we understand how to leverage partnerships and build digital capabilities around how we service our customers but more importantly, how we use that data that we collect to improve patient access to influence reimbursements and influence those standards of care. Our competitors have been rationalizing their portfolios, exiting specific geographies and shifting their resources to partnerships. We know they stumbled during COVID, and we're unable to meet the criteria of our customers for the flexible delivery required. This reinforces that we continue investing in our solutions, that we understand how to really monetize those value-added services and keep diversifying our offering to meet those patient needs. And as we continue our operational transformation, that allows us to get even more flexibility to serve our customers. Across all of our diverse portfolio, you see some common themes world-class innovation that allows setting the standard in these specific business areas, accompanied by very specific software solutions. And I'll expand one example, the therapeutic apheresis. This Optia platform collects the majority of cells that are used in cancer treatments and cell therapies around the world. If I am a patient getting a stem cell transplant, it's a complicated process and my equipment is a small piece of that solution. So we have partnered with Stafa cell therapy, which is a tool to follow the patient through his or her journey and a tool that allows the physician to follow the cell that's being collected. We support that with VEDA Solutions, Veda from a word meaning wisdom, that allows us to optimize the solution for that particular caregiver. So this diversity allows us to play in different markets and flex as we need to. As we look forward, we will continue our investment and launch in the plasma space. This disrupts the current market and our growth will continue as we go beyond the U.S. In cell therapy, we will continue following that cell and connecting the complicated logistics in that system. And in therapeutics, understanding how we look at specific proteins and markers to treat unique diseases. From an equipment perspective, we will continue differentiating with service and software and take those investments around the digital ecosystem and bring them back to the rest of the business. We see continued growth in geographies where they have only a fraction of our portfolio today, and this builds on a foundation of continuous improvement and our ability to capture that value in the market. So to go deeper on the source plasma market, our partner chose us because of our willingness to invest in innovation and continue growing as they grow. Today, plasma-derived therapies have tremendous unmet need. And these folks are growing 8% to 10% with what they can do today. We know our solutions will give them greater yield, greater quality and the digital infrastructure to really optimize how they deploy their assets as well as how they link the detailed profile of the plasma they collect to the plasma-derived therapies that are needed at the other end. Very few people can trace from beginning to end. And in parallel, we have built a state-of-the-art automation manufacturing center. This has gone live during COVID and despite COVID, and we are partnering with many people in that value chain, so we deliver a high-quality product. This investment diversifies us and helps us inform the next generation of our products. From a cell therapy perspective, our strategy here is to follow the patient from that cell collection all the way through the manufacturing cycle and back into that therapeutic treatment to the patient. We're unique in that we have the capabilities to connect the services, the logistics, the fragility of handling this fragile source material that is yet so powerful. And our growth will come as we follow patients through this journey. And as people see us as world-class players in the space. And they know we understand their problems and come with solutions that connect this whole ecosystem. From a therapeutics perspective, we have a unique situation where physicians around the world find many ways to use this very flexible platform. One of the illustrative examples is Immunicom where we are partnering with them to treat triple-negative breast cancer. Each one of these solutions filters for a specific protein or a specific cell or something that researchers have understood just doesn't belong in your blood. If I'm filtering for sickle cells, I replace with a healthy cell. And our users are coming with more and more ways to use this powerful platform. This means we have to understand unique patient situations. We have to build those capabilities to connect the clinical data with the health economics and understand how to build that partnership muscle. So these become integrated with our portfolio. But it is a way to unlock the therapeutic potential of your blood. And in our core business, where we are providing safe blood around the world, you see aspects where we can leapfrog in emerging markets, such as Africa, where we are helping to set standards, where we are showing people what safe collections look like and using that to implement new service and business models. At the same time, we work with mature blood centers to help their transition to serve sickle cell patients, their transition to provide cell therapy. If I can collect blood, it's an easy step to collecting cells and providing that service. So the more we differentiate that offering with service, with software, with the things that we do well, the more those folks can differentiate and grow. And we help them serve their end customers. So these translate into near double-digit growth on the sales line. We will continue to disrupt the market with plasma and use those insights to inform our other platforms. We see ongoing growth as researchers understand the complexity of cell therapy and the importance of understanding that source material, which is where everything starts. And then differentiating our equipment with service and software in the data that comes with it. Our operating profit will continue to grow as we are capturing the value of the investments we have made in one quality system, in one service platform in a salesforce.com platform in QMS and facilities that allow us to capture data from the beginning of a product's life to the end. And then strengthening our life cycle management so that we understand how to migrate our customers from these foundations into the future. So I close with asking you to think that every part of healthcare starts with a drop of blood, from diagnosis to treatment. And there are so many ways that we can leverage our core capabilities around collection and processing and treating blood to influence the ultimate personalized healthcare, the therapies and the cell therapy developments that are yet to come. You'll see this in blood centers. You'll see this in hospitals, many different points of care and growth around the world. So that is how we anticipate contributing to society through healthcare and evolving our portfolio to stay relevant for the next 100 years. Thank you for your time.

[Interpreted] I am Hirose, General Manager of Strategic Planning Department and CTO, and I will explain about the part related to the corporate sector, which is our company-wide innovation and strengthening of the management foundation to support the 5-year growth strategy with a 10-year vision in the next 100 years. I will explain the third arrow led by corporate, the preparation and search for new businesses or innovation. And the Fourth Arrow, strengthening corporate foundation, namely DX, human resources, company-wide profit improvement, production, ESG and CSV. The corporate will work on innovation and strengthening corporate foundation from a long-term perspective, looking beyond the 5-year period of GS26 and into the next 10 years and beyond. First, I would like to explain about innovation, which is the driving force behind Terumo's sustainable growth over the medium to long term. the direction of innovation for the next 10 years and beyond, which will be led by the corporate will also be in line with the vision for the medium to long term, shift from devices to solutions and focus on solutions as the 3Ds. Once again, I will briefly review what is 3Ds, which are the axis of innovation and the focus and solutions that Terumo wants to create. In the first D, delivery. Terumo aims to make diagnostic treatment for various diseases thoroughly minimally invasive by providing solutions that leverage its strengths in biological access and delivery, which Terumo has been refining to date, as high value-added biological access and delivery for advanced medical care. In the second D, digital, we have coined the term digital patient journey, and we will use devices, digital technology and data to expand the place and time access of medical care and connect them as a patient journey, thereby improving the patient's lifelong and long-term quality of life. In the third D, Deviceuticals, we aim to add value to new pharmaceuticals, cells and gene therapies by integrating drugs and devices and to challenge innovative therapies by multiplying drugs and devices. Let me explain one by one the directions of innovation along the 3Ds. In the first D, delivery, we will provide new high value-added biological access and delivery solutions for advanced medical care by maximizing the use of our core technologies as the #1 in biological access and delivery, which we have refined through guidewires, which have been trusted by the medical community for more than 30 years, sheaths, catheters and Nanopass, although minimal invasive treatment is becoming more and more popular due to recent medical advancements It has still said that the penetration rate is currently less than 60% except for a few diseases. Under these circumstances as a leading company in biological access and delivery, we aim to achieve a world with 100% minimally invasive therapy that further reduces the burden on patients and surgeons. For this reason, we will make full use of the biological access and delivery technologies that we have established so far, pursue vascular delivery and deliver treatment to areas in cases that were previously difficult to reach. Specifically, we will provide not only arterial solutions with minimally invasive access and delivery, which we have established as one of the leading companies, but also new solutions to deliver diagnosis and intervention to veins. We will also pioneer new treatment routes, including nonvascular routes through completely different biological access routes. For example, by creating a new and safe access route to the epicardium, which covers the heart, we hope to open the way for minimally invasive delivery of cells and biopharmaceuticals from outside of the heart to treat intractable cardiac diseases, which has not been an option until now. Furthermore, we would like to provide a solution to deliver the treatment reliably and precisely to the affected area, which has been difficult to access and deliver accurately by conventional methods. The second D, digital, is the idea of a digital patient journey, where we aim to improve the patient quality of life over the long term by becoming an integrated solution provider in connected care for more sophisticated and efficient treatments. Currently, we believe that the adherence of treatment is only 30% to 60%, especially for chronic diseases, such as heart failure and diabetes because integrated solutions that connect the patient journey from diagnosis and treatment in the acute and chronic phases to monitoring and treatment at home are still not widely available. The world we want to create with this digital solution is a society in which before and after surgery, inside and outside the hospital, and the entire hospital are connected through digital technology so that each patient can be provided with optimal treatment. They can live a life without being aware of their illness at home, and these treatments can be realized digitally, efficiently and economically by providing integrated solutions through digital technology. We aim to achieve a 100% adherence of chronic disease treatment in order to provide, this integrated solution, it is important to connect before and after surgery and inside and outside the hospital through digital technology, data and services with the patient at the center. First, we will connect before and after surgery of each patient with advanced medical data to recommend individualized and optimized treatment. Specifically, we would like to provide solutions for clinical decision support, such as optimizing treatment plans for aortic aneurysms, other conditions on an individual patient basis and predicting acute kidney injury after cardiac surgery. By connecting inside and outside the hospital, we would like to connect the acute and chronic phases to detect the recurrence or onset of the disease and prevent it from becoming serious. Specifically, we will provide a system for home monitoring and detection of heart failure and diabetes, which are typical chronic diseases with great social needs. In addition, we would like to contribute to the improvement of hospital management by optimizing hospital operations and providing consultation services to support transformation and streamlining by connecting data from wards in other areas. The third D, Deviceuticals aims to maximize the treatment outcomes of drugs through the synergy of pharmaceuticals and innovative devices as the word deviceuticals implies. Currently, although the number of pharmaceutical device combination products is increasing. They still account for less than 30% of the total, we will accelerate the evolution of combination products by combining the innovations and delivery technologies that we have developed over the years with the understanding of drugs that we have gained through partnerships pharmaceutical companies to make pharmaceuticals more effective and more tailored to patients' conditions. We aim to achieve a ratio of more than 50%. In order to increase the value of treatment through such synergy between pharmaceuticals and devices, we will first acquire data on patient dynamics and drugs using devices and then realize a system to optimize the dosage and timing of drug administration. Here, too, we will provide a medication management system for high-risk patients with acute kidney injury and heart failure for which there is a high social need. And in diseases with bottlenecks, where therapeutic efficacy has been difficult to realize, we will realize drug delivery that eliminates these bottlenecks by multiplying innovative devices and formulations. Specifically, we will use innovative devices to administer drugs to areas such as brain, which drugs cannot easily reach, and develop systems that provide treatment outcomes that cannot be achieved with drugs alone. We also provide services such as the provision of administration devices and protocols for cell medicine and regenerative medicine, which are new modalities that have shown remarkable growth recently. Then we support the entire supply chain to manufacture innovative combination products with high quality. The specific examples of long-term innovations, mainly driven by the corporate that I have described so far are listed together with examples of midterm innovations by each company to provide an overall picture of the solutions in GS26. As I have repeatedly explained, in line with the focus of our 3Ds, the long-term innovations led by the corporate will seamlessly drive Terumo's future growth while creating synergies with the medium-term innovations provided by each company. In order to ensure the creation of innovation in line with the focus on solutions defined as the 3 Ds, we will introduce a center of excellence, or COE. By this change, we expect that we can enhance, preserve and apply our core technologies, which we have acquired through product development and new technologies that we will continue to acquire in a more multilayered by integrating the knowledge and skills globally. The 2 on the left are manufacturing technologies such as design and processing, material technologies such as materials and coatings that add value to functions and technologies related to pharmaceuticals, regeneration and cells. Since these 2 are fundamental technologies in which Terumo already has a competitive edge, we plan to continue to utilize and strengthen these technologies, mainly through in-house development. On the other hand, biosensing and digital technologies are areas where we are considering more aggressive technology acquisition for the future innovation. With the access of COE, we will dig deep and develop core technologies that will realize the technological needs of the entire company in the future. To develop the core technologies, we will, of course, incorporate external technologies as an option. We will then apply the core technologies established around the COE in a cross-business manner to encompass solutions, thereby improving the ability of the entire Terumo Corporation to create innovations. I mentioned the 3Ds, and it goes without saying that digital technology is indispensable in realizing this. In order to implement this, we established the DX promotion office in April this year. Specifically, we will realize support and treatment decision-making, digitizing disease management and solutions to connect care from treatment through prognosis as shown here. How Terumo can achieve what I explained before? We will achieve this not only by strengthening our own DX capabilities, but also by aggressively pursuing M&A and alliances at a speed that surpasses that of our competitors. We have already selected specific themes to study within the company, such as AI-based image analytics, predictive analytics, remote monitoring, data interoperability, health tech, robotics and mobility. Similarly, we believe that it is human resources that will ultimately drive Terumo's growth, not just DX, and we will implement measures to maximize the potential of our human resources. Our vision for the mid- to long term is to shift from devices to solutions, and we will identify the skills of strategic importance and make the first move to develop and acquire them. For developing digital human resource, we aim to realize the right people in the right place globally through intensive training at DX College, recruitment in overseas markets and skill matching. In addition to promote the change, it is important for employees to take on new challenges and grow, not only in terms of specific skills and for this reason, we will promote the spread of growth mindset as the mindset that everyone can grow. About 70% of sales entire Terumo and 80% of its employees already come from overseas. So having leader human resources who can manage globally is critical for our business promotion. To this end, we are not only conducting global training for the leaders, but also holding regular discussions among the top management for their future activities and utilization. We will gradually expand these measures to promote the visualization and utilization of human resources across the organization. Lastly, Terumo is a highly diverse organization with associates from various backgrounds and attributes, including those who joined the company through M&A. It is important that all human resources can play an active role in their own way, and that collaboration is also the basis of creativity in order to strengthen this environment, we will firmly promote the initiative. Next, I would like to explain in detail about the company-wide profit improvement project that Mr. Sato explained at the beginning. This project, named VC2, value creation through collaboration, is an initiative to build a solid foundation to support future growth and further enhance corporate value through collaboration within the Terumo Group. In the past, efforts to improve profitability have been made by individual businesses, basis, plans, regions and functional divisions under the in-house company system. However, there are still limitations to individual efforts. In addition, based on the current level of profits, we will continue to improve the business and product mix as they grow and the expenses for MDR measures will run their course. As we expect to invest in development and environmental measures, we will work to improve and raise the profit margin to a higher level, moving from the individual optimization of the past to total optimization. In particular, I will focus on production, which will have the greatest impact. In terms of production, we will more strongly promote the optimization of global production. The first keyword is to strengthen our tripolar production network. We will expand production in Costa Rica as a strategic production base for North America and Latin America in addition to neurovascular going on. We are now ready for blood cell technology and are moving forward with plans to gradually expand other businesses in the future. This expansion in Costa Rica will be based on a sustainability conscious location strategy, including transportation distances and CO2 emission factors. On the other hand, we will strongly promote cost efficiency with Vietnam as our first choice as a supply base for the Asia Pacific area. This production initiative is not limited to cost efficiency. The second key word is to promote production innovation, which will lead to competitive advantage. Specifically, we will apply the automation, lean production and digitalization that we have acquired through our production technology in Japan to the global market. In addition, as a result of these efforts, we will strengthen redundancies to ensure business continuity. This effort is not limited to production. With regard to the functions that have been optimized for each business through numerous M&A to date, we have determined that areas that are expected to be optimized on a global basis, namely procurement, logistics and alliance management functions will have the greatest impact of expected effect, and we will start there. This is largely due to the fact that the infrastructure environment is now in place worldwide and is beginning to be linked to the IT infrastructure, thanks to prior investments centered on SAP. We have already formed global teams in these 4 areas and are moving forward aggressively with the ultimate goal of improving earnings by 2 percentage points in 5 years while looking at a 10-year plan. In addition to financial goals, GS26 will clarify our commitment to sustainability management. Terumo will evolve its action program into 2 pillars, ESG and CSV. First, ESG, here are risks to Terumo's sustainability as a company. In order to mitigate the long-term risks, we are setting up in accordance with the guidelines of the SASB, the Sustainability Accounting Standards Board and other organizations. In terms of environment, we aim to achieve a 50% reduction in CO2 emissions by FY 2030 in order to become carbon neutral by FY 2040. From the perspective of society, we will work to ensure the quality, safety and stable supply of our products and services and to transform ourselves into an organization that utilizes diverse human resources to create value. From the perspective of governance, we will focus on improving the effectiveness of the Board of Directors and promoting compliance. For ESG, we set specific KPIs, share responsibility for execution among management members and incorporate them into performance evaluation. CSV is aligned with our long-term strategic direction with a focus on problem solving based on Terumo's purpose. CSV has 3 key areas of focus: spreading medical technologies and services and improve access to healthcare, providing healthcare that is closely aligned with each individual and co-creating a sustainable healthcare system. Based on these, we have set priority themes that are linked to Terumo's vision of shifting from devices to solutions as follows. Cardiovascular Company: further adoption of the radial procedure, promotion of personalized therapy and training. General Hospital Company: provides solutions to challenges in medical settings, patient-centered care continuum focused value proposition and using DX to improve and transform the quality of healthcare. Blood cell technology: bring life-saving technology to previously unreachable patients, provide new treatment options through innovation and bringing efficiency to the infrastructure of healthcare delivery. As for CSV, if new themes are created during GS26, we will add them to the list and report our progress to you. The above is an explanation of our company-wide innovation and strengthening of the management foundation to support the 5-year growth strategy with a 10-year vision in the next 100 years. Thank you very much for your attention. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]