Terumo Corporation ($4543)

[Interpreted] Hello, everyone. Thank you for joining Terumo Corporation's Financial Results Briefing for the fiscal year ended March 2026 out of your busy schedules today. [Interpreted] Today's proceeding is the following. First, Mr. Hagimoto Group Executive Officer and CFO, will provide an overview of the financial results; nextly, Mr. Samejima, Chief Executive Officer; and Mr. Carsten Schroeder, President of Neuro business, who is turning online will make a presentation, GS26 final year and beyond and Terumo Neuro growth road map. [Interpreted] Finally, we have time set aside for questions and answers. We are planning a total of 60 minutes. This webinar is available both in Japanese and English using Zoom's simultaneous interpretation function. Please use the audio switch button at the bottom of the screen as required. Please note that the materials showed on the screen will be displayed in the same language as the speaker. Materials in Japanese or English only can be viewed on our website. Should any technical issues arise with the streaming, we will notify you by email. Prior to the start of the briefing, we advise you of the following disclaimer. [Interpreted] Today's presentation may include forward-looking statements based on our current projections, which are all subject to risks and uncertainties. Actual results may differ from these projections. We thank you for your understanding in advance. [Interpreted] Now Mr. Hagimoto will explain the financial results summary. Mr. Hagimoto please go ahead.

[Interpreted] I'm Jin Hagimoto CFO of Terumo. First, I will walk you through an overview of our financial results for the fiscal year ended March 2026. [Interpreted] Let me begin with the key highlights. In FY '25, revenue reached JPY 1.1 trillion, marking our fifth consecutive year of record high sales. supported by a favorable business environment, demand expansion in North America led overall growth, resulting in 9% year-on-year growth on a local currency basis. On the profit side, although we recorded the impact of U.S. tariffs and onetime expenses related to acquisitions and business restructuring, we achieved record high profits in line with revenue growth. [Interpreted] For the FY 2026 guidance, we aim to deliver record highs for the sixth consecutive year in revenue, operating profit and profit for the year driven by strong organic growth as well as contributions from OrganOx acquired last year. Please note that as April this year, the business segment of OrganOx has been named Terumo Organ Technologies. [Interpreted] Next slide, please. Moving on to our P&L performance. As mentioned earlier, revenue continued to grow globally, led by North America, reaching a record JPY 1.1 trillion for the full year. Operating profit and adjusted operating profit also reached record highs at JPY 176.3 billion and JPY 219.4 billion, respectively. In the second half, the impact of U.S. tariffs became more pronounced and geopolitical uncertainty in the Middle East persisted. Despite these challenges, we successfully maintained the profit margins at a level comparable to the previous year through pricing measures and cost control. Looking at Q4 specifically, margins temporarily declined due to tariff impacts and the recognition of onetime expenses. I will explain the details on the next slide. [Interpreted] The next slide, please. Here, I would like to explain the onetime expenses and adjustment items recorded in FY '25 as well as our outlook for FY '26. As previously disclosed, during fiscal year 2024 and 2025, we conducted ongoing reviews of underperforming businesses and projects to assess whether investments or delivering returns consistent with the original impact. As a result, in FY '25, we recorded JPY 48.8 billion in onetime expenses mainly related to new acquisitions and business portfolio optimization alongside recurring amortization from past acquisitions. [Interpreted] Additionally, we recognized JPY 5.5 billion in litigation-related expenses in Q4, which were not included in our Q3 assumptions. This relates to a class action lawsuit involving our blood and cell technologies company. They were recorded as onetime expenses to mitigate uncertainty and potential future costs associated with prolonged litigation. This does not represent any admission of legal liability or wrongdoing nor does it affect our business operations or mid- to long-term strategy. While FY '25 saw a concentration of acquisition-related and other onetime expenses, we view these as strategic investments for future growth. As a result, we are entering FY '26 with a much cleaner cost base, which we believe positions us to further accelerate growth. In FY '26, the absence of these onetime expenses is expected to contribute more than JPY 10 billion to profit growth. [Interpreted] Next slide, please. Now I will explain the year-on-year profit variance for Q4. There are 2 key factors. First, gross margin and pricing. From Q3 onwards, tariff impacts became more significant, resulting in a JPY 5 billion negative impact in Q4. Pricing had a positive effect of JPY 3.1 billion. However, impairment losses of JPY 2.2 billion related to the termination of certain projects led to a negative impact of JPY 4.5 billion. These impairment losses are included under restructuring expenses in the previous slide. Second, R&D expenses increased due to impairment of capitalized R&D assets in Q4. Both factors are temporary and will not have a continuing impact in FY '26 or beyond. [Interpreted] Moving on to the full year profit variance analysis. Overall, continued demand growth and higher sales volumes were the primary drivers of profit growth. The gross profit increment by sales increase was driven mainly by overseas TIS primarily in North America as well as Global Blood Solutions led by the Plasma business. With regard to the gross margin pricing, pricing measures, especially in C&V contributed positively. However, these gains were offset by the full year impact of tariffs and impairment losses associated with discontinued projects. SG&A increased in line with business expansion and remain broadly within our expectations. [Interpreted] I will now explain performance by company, starting with C&V, the Cardiac and Vascular Company. Revenue increased by 7% on a local currency basis, with strong performance continuing globally particularly TIS in North America and the Neuro business. In North America, all TIS product categories performed well with volume growth contributing more significantly than pricing. The Neuro business continued to deliver strong growth, especially in China and Japan. The profit margin in FY '25 was 24%. Q4 margin temporarily declined to 19% and mainly due to impairment losses related to a change in development locations for new products in TIS as well as negative impact from foreign exchange on a stock basis. In FY '26, we expect margins to improve as these temporary factors subside. [Interpreted] Next slide, please. Next is TMCS, the medical care solutions company. Growth in Pharmaceutical Solutions drove both revenue and profit growth for the company overall. This was led by the domestic CDMO business as well as the strong performance of projects overseas. In Hospital Care Solutions, despite the impact of a business transfer in Q1 of the previous year, and a supply issue with a certain product, the supply issue has since been resolved and growth in Asia contributed to higher sales. Profit increased due to the effects of pricing measures and disciplined cost control. [Interpreted] Although the Leverkusen Plant consolidated from Q3 had a negative profit impact of JPY 3.7 billion. It is excluded here to clearly illustrate the performance of existing businesses. Regarding the Leverkusen Plant, we continue to see strong interest, particularly from European U.S. pharmaceutical companies, and we are making steady progress towards securing new projects. [Interpreted] Next slide, please. Next, TBCT, The Blood and Cell Technologies Company. Revenue increased driven by expanded deployment of Reveos and automated whole blood processing system as well as growth in plasma innovations with global blood solutions. Global Therapy Innovation also performed well, particularly in North America. Profit increased due to strong core businesses, including revenues and improved profitability of expanded sales of Rika. In the second half, we implemented production adjustments related to Rika. However, those remain within our expectations, and the impact on profit margins was limited. In FY '26 as well, production adjustments may be made depending on circumstances, but at this stage, we expect the impact on business performance to be minimal. [Interpreted] We will explain the performance of thermal organ technologies. Since Q3, we have included this business in our consolidated results. In Q4, revenue was JPY 5.1 billion, and adjusted operating profit was JPY 1.1 billion. To illustrate the growth trend, we also disclosed the full year FY '25 performance on a year-on-year basis. Revenue increased by 48% on a local currency basis. The profit margin reached 21%, reflecting that a high-margin business model has already been established. The organ preservation market utilizing NMP is expected to continue expanding supported by the increase in liver transplant procedures and the expansion of our customer base, we aim to achieve growth exceeding that of the market. [Interpreted] Let me move on to revenue by region. In the Americas, demand continued to expand with all companies delivering strong growth. TIS Pharmaceutical Solutions and Global Blood Solutions were a key driver. In Europe, TIS and euro remained stable growth contributors, while Pharmaceutical Solutions grew supported by strong project sales. In Japan, the C&V or business performed well, contributing to higher Pharmaceutical Solutions revenue, Neuro and C&V continued double-digit growth. In China, growth was driven primarily by neuro, supported by expanded market access resulting from VBP. In Asia, strong TIS performance-led C&V growth with TBCT also delivering double-digit growth. [Interpreted] Next slide, please. Now let me explain our FY '26 guidance. First, I would like to explain the key assumptions underlying our FY '26 guidance. The first assumption reflects the recent surge in crude oil prices stemming from the situation in the Middle East. Based on the information currently available, we have incorporated the impact of higher raw material and related costs into our guidance. At this stage, thanks to the collaboration of our suppliers, there have been no issues affecting production or supply. [Interpreted] The second assumption concerns U.S. tariffs. We have assumed a tariff rate of 10% through July. And while conditions thereafter remain uncertain, we have incorporated a rate of 15% into our guidance based on our prior circumstances. Under these circumstances, for FY '26, we expect revenue to grow by 8% on a local currency basis. Our operating profit is projected to increase by 20% year-over-year, significantly outpacing revenue growth. mainly due to the absence of onetime expenses recorded in the previous fiscal year. FY '26 marks the final year of our 5-year growth strategy, GS26. We expect to achieve record high revenue and profits, and we are on track to meet the financial targets set under GS26. [Interpreted] This slide presents our guidance by company. We aim to achieve high single-digit revenue growth across all companies by steadily expanding high-margin growth drivers in each company while advancing operational improvements and the introduction of new products, we expect profit growth to exceed revenue growth in all cases. In addition, the inclusion of thermal organ technologies is expected to become one of the key drivers of overall group growth. Alongside its strong revenue growth, we expect profits of JPY 5.1 billion, making this business a contributor in terms of both growth potential and profitability. [Interpreted] This slide explains the year-on-year profit variance in FY '26 guidance. The GP increment by sales increase is the primary factor behind profit growth, reflecting continued growth across businesses, such as TIS and neuro as well as the full year contribution from Terumo Organ Technologies. With regard to the gross margin, we expect a negative impact of JPY 4.5 billion due to the impact of tariffs throughout the year. [Interpreted] In addition, higher raw material costs are expected to have a negative impact of JPY 2.5 billion. On the other hand, we expect a positive impact of JPY 10 billion from pricing measures as well as JPY 7.5 billion from the absence of onetime expenses recorded in the previous fiscal year and cost reduction effects associated with business restructuring. SG&A are expected to increase at a healthy level in line with business expansion. Next slide, please. [Interpreted] This slide outlines our product expected to drive further growth as well as our key regional expansion initiatives. From FY '26 onwards, we will continue to create growth opportunities by allocating resources to growth areas and expanding sales of new products. In C&V, we will continue to focus on growth segments with large market opportunities in the therapeutic area to drive business expansion. In the access area, we will promote the adoption of radio procedures and together with the expansion of the therapeutic area and for further growth. In TMCS as we will further advance the creation of new value by leveraging devices, pharmaceuticals and digital solutions and expand the provision of a wide range of solutions, including medical management. [Interpreted] In addition, we aim to expense the CDMO and PLAJEX businesses while accelerating overseas expansion by matching our strength with region specific needs. In TBCT the rollout of Reveos is accelerating, and we will continue to expand into new regions. At the same time, by expanding software and service offerings, including the use of AI and enhancing infrastructure through automation, we will secure competitive advantages and achieve further customer acquisition. [Interpreted] Next slide, please. Finally, let me touch on shareholder returns. For FY '25, we expect an annual dividend of JPY 30 per share. with a payout ratio of 33%. For FY '26, we plan to increase the dividend by JPY 6, bringing it to JPY 36 per share with a payout ratio of 32%. We continue to prioritize growth investments while we remain committed to stable and progressive dividend increases going forward. [Interpreted] This concludes my presentation. Thank you very much for your attention. [Interpreted] Next, CEO, Samejima, and President Schroeder will present. President Samejima, please go ahead.

[Interpreted] I am Hikaru Samejima, CEO of Terumo Corporation. Thank you very much for coming. I would like to share our perspective on the final year of GS26 and our strategic direction beyond that. We will explain the strength and future outlook of Terumo Neuro, which continues to drive strong growth for C&V as well as the company overall. [Interpreted] Let me begin with our progress this fiscal year towards the key financial targets of GS26. Regarding the revenue growth, GS26 defined a target range of high single-digit growth. This year as well, driven primarily by organic growth, we are steadily expanding the top line as planned and expect revenue growth to come in within our target range. As for the operating profit through continued progress in pricing measures and optimization of our cost structure, we expect to reach a level of 20% or more in FY '26. [Interpreted] In addition, while continuing to invest for growth, we plan to maintain ROIC at a level of 10% or higher. This demonstrates that we are steadily achieving both profitability and capital efficiency. In this way, in FY '26, the final year of GS26 we expect to reach the target ranges initially set for all 3 key financial indicators, revenue growth, operating profit and ROIC. [Interpreted] Next, I will outline the key growth drivers supporting our performance this fiscal year. Let me start with C&V. Business fundamentals remain strong, particularly in the endovascular segment. Along with continued pricing measures, mainly in North America, core products such as Ultimaster Nagomi and WEB are expected to drive revenue growth this year. [Interpreted] Turning to the global TMCS business continues to expand with new product launches. PLAJEX centered products are the main growth drivers, while ongoing pricing measures are improving profitability of TMCS as well. As for TBCT revenue growth driven by the plasma business continues and core products such as Reveos provide stable support. Finally, Terumo Organ Technologies. As NMP adoption expands in the liver transplant market grows, we are gaining market shares through Metro. As shown, this year's performance is supported by steady plant-based growth across multiple businesses, underpinning our ability to achieve the GS26 financial targets. [Interpreted] With that, I will now hand over to Carsten Schroeder, President of Terumo Neuro, who will outline the strong growth outlook for Terumo Neuro this fiscal year.

Thank you, Hikaru. I'm Carsten Schroeder, President and CEO of Terumo Neuro . I will walk you through today the growth of Terumo Neuro to date, our key strengths and successes and our strategy for the future. The neurovascular business provides endovascular treatment solutions for both ischemic stroke, which is a blocked artery and Hemorrhagic stroke, which is a leaking artery in the brain. Terumo entered this space first, through the acquisition of MicroVention initially focused on coil-based therapies for hemorrhagic stroke. Since then, the business has expanded organically into a full-scale class-leading neurovascular portfolio addressing both Ischemic and Hemorrhagic stroke. Following this, the acquisition of Sequent Medical added the inrasaccular web embolization device, creating a new treatment category where we continue to hold global leadership. The business has consistently delivered above market double-digit growth driven by leadership in key platforms, including the WEB intrasaccular device for Hemorrhagic stroke and SOFIA catheters for Ischemic stroke. Our core strength lies in our ability to continuously innovate, expand and iterate our product portfolio while building a robust clinical evidence to support long-term adoption. Combined with strong commercial and operational capabilities, this allows us to successfully deliver our solutions on a global basis. Under the Terumo Neuro brand, we are focused on sustaining category leadership in core therapies, while selectively expanding into adjacent markets to deliver on our vision to restore brain health globally. Hemorrhagic stroke is fundamentally a leak or weakening in the blood part in the brain leading to a bubble or aneurysm. The portfolio to treat this disease state could involve placing a stent in the artery or filling the aneurysm with numerous calls or putting a single device like the one pictured on the left, which is called the WEB inrasaccular device. The Ischemic stroke on the right is a blockage in the artery that can be removed with a stent retriever over suctioning out through an aspiration catheter or both. To get to the brain from either the growing in the lag or the risks, you can deliver therapies and devices and that requires catheters and guidewires under therapeutic lesion access. The neurovascular business has grown to become complete and class-leading since the acquisition of MicroVention in 2006 with coils as the foundation for the portfolio. Growth has been driven primarily by organic innovation, complemented by the acquisition of Sequent Medical in 2016, which created a new category of intrasaccular devices. In 2024, my convention was rebranded as Terumo Neuro reflecting our ambition to further expand the business and advance our vision to preserve and restore brain health. Terumo euro has consistently delivered double-digit and above-market revenue growth. This consistent growth has been achieved with market-leading brands such as WEB for Hemorrhagic and SOFIA for Ischemic stroke, sustained leadership in therapy lesion access and continued overall portfolio expansion. We finished fiscal year '25 with $710 million in sales, primarily coming from therapeutics. Here are the highlights of the growth strategy of Terumo Neuro. We will continue to deliver above market growth of 3 strategic pillars. First, we plan to grow its current business by producing new products in hemorrhagic and Ischemic and generate clinical evidence. The second pillar, we plan to expand production capacity and improve gross margins. Beyond these 2, the growth drivers of the existing core business, we will expand into adjacent markets using our core portfolio and clinical capabilities to drive new indications and commercial expansion. One of our key strengths lies in our ability to integrate technologies and continuously iterate on them over time. While some companies also offer both core an intrasaccular devices, Terumo's differentiation lies in how deeply and consistently we integrate and evolve these technologies over multiple generations. By combining our core expertise with the WEB platform, we have established a new standard of care in specific aneurysm segments and achieved strong #1 positions. Since the acquisition of Sequent Medical, we have successfully advanced WEB from Generation 1 to the [ co ] Generation 6, supported by accumulated clinical evidence and procedural expertise with Generation 7 already in the pipeline. This long-term disciplined approach to technology integration is what enables Terumo to deliver sustainable above-market growth. Another key strength of Terumo Neuro is our leadership in clinical evidence generation and neurovascular devices. We are conducting large-scale post-approval studies across key products with global patient enrollment underway in the United States, Europe, Japan, China and beyond. Taking comprehensive long-term approach, we have built a broad body of clinical data across geographies, studies, publications and device platforms. This depth of evidence supports regulatory approval and market access while strengthening physician confidence and establishing our technologies as standard of care. The intrasaccular market created by Terumo Neuro is growing at an annual rate of over 10%. Terumo Neuro established this market with a WEB embolization device, the first-in-class technology refined over more than 15 years with over tens of thousands of patients treated globally. Looking ahead, we aim to maintain category leadership in intrasaccular therapy through continued product development. We will also expand clinical indications including [ upteenarism ] in North America and Asia, while further strengthening clinical evidence generation through global studies. Terumo Neuro is also known for its class-leading SOFIA catheter brand in Ischemic stroke treatment. Aspiration catheters today are used in 90% of the cases with 6 French size catheters being the majority used. A new category of larger-sized catheters called SuperBore has recently emerged. Terumo Neuro has category leadership in the 6 French aspiration catheter market with a SOFIA flow with extensive clinical literature supporting its use. We plan to further develop its leadership in the emerging SuperBore category with the introduction of the SOFIA 88. Terumo Neuro has a significant portion of its manufacturing operations in Costa Rica, benefiting from strong government support an attractive talent pool in a well-developed ecosystem around medical device technology. We aim to execute our long-term manufacturing strategy by improving cost of goods sold through increased automation, leveraging capabilities from the Terumo Interventional Systems business. In parallel, we are expanding production capacity for key products while maintaining the high quality of our product offerings. We also see attractive growth opportunities as we expand into adjacent neurovascular markets. The neurovascular market continues to grow at around 6% annually. At the same time, new treatment areas such as Chronic Subdural Hematoma are emerging attracting increasing clinical interest and innovation. We approach these opportunities with deliberate focus. Rather than broader expansion, we selectively develop offerings by our existing technologies and clinical expertise can be most effectively leveraged Chronic Subdural Hematoma is a clear example of how expanding clinical indications allow us to expand our portfolio and capture incremental growth while maintaining strategic discipline. This summarizes our view on the future of Terumo Neuro. Our ambition is to further drive growth in the neovascular business while contributing to company-wide growth by developing class-leading and commercially scalable solution in our core therapies. Our pipeline includes both trip improvement in intra secular devices and new product offerings. Supported by continued expansion of clinical evidence. At the same time, we are improving operational efficiency to ensure these innovations can be scaled effectively and selectively expanding in adjacent markets through indication expansion. Through this focused and disciplined approach, Terumo Neuro aims to preserve and restore brand health while delivering sustainable long-term growth. It has been a pleasure to speak with you today, and I look forward to the Q&A session. Thank you.

[Interpreted] Finally, I would like to share our direction towards GS26, which we plan to announce this December. Through GS26, Terumo has built a solid foundation in revenue growth, profitability and ROIC. Under GS31, building on this foundation, we intend to go beyond simply expanding sales or growing profits by further accelerating innovation. We aim to create new value for patients. [Interpreted] Looking ahead, the needs of patients and health care professionals will continue to become more advanced and more diverse. Leveraging our strength in technological innovation, clinically driven product development and global business execution, Terumo will continue to pursue value creation that enhances the quality of health care itself. Through these efforts, we aim to achieve sustainable revenue growth and profit expansion while becoming a global top-tier medtech company. Beyond FY '26, Terumo will continue striving for even higher levels of growth and performance, transforming the future of health care with innovation as our core driving force. Thank you very much for your attention. We will now move on to the Q&A session.

[Interpreted] This meeting is a hybrid meeting. For those of you in the room, please raise your hand if you have any questions. [Operator Instructions] [Interpreted] The Q&A session will be joined by Samejima, Schroeder, Haki Hagimoto, Head of the Management and Administration Division. We would like to open the floor for questions. [Interpreted] From Mizuho, we would like to take a question from Kohtani-san.

[Interpreted] I am from Mizuho. My first question is related to cost on Page 16 for next year. Gross margin is plus JPY 4.1 billion, but raw material cost is also going up, transportation cost is also going up as well. How come this is positive? I just cannot understand why because it's so far off from my assumption. So could you please explain I think this has to do with Rika and Transmedics. And if possible, please share numbers.

[Interpreted] Thank you very much for your question. As was explained earlier, this year, we have onetime expenses in the U.S. for production. That is included in this year, JPY 2.5 billion. but this will go away. And also restructuring costs and overseas plant restructuring expenses will actually be positive this fiscal year. So gross margin is based on those factors. So onetime expenses will disappear this fiscal year.

[Interpreted] Understood. Next question. I would like to ask in English, if possible. Can you hear me? Yes. Great. So I don't get a chance to pick your brain too much. So it's going to be a somewhat comprehensive question, but bear with me. So in terms of Terumo Neuro, I got 3 concerns. One, WEB device. You will have new entrants enter the market within the next 2 years. I think you have seen the announcement from [indiscernible] Medical with [ Acintra ]. I think they disclosed clinical trial results in March. Galaxy Medical SEAL, they filed PMA. So you're going to see new entrants. Can you defend your market share in the intrasaccular device. The second point is the aspiration catheter. You have a ton of competition in the SuperBore space. I thought SOFIA 88 was great with the Super Bowl, but you've got [indiscernible] 92, you have Route 92 Medical, imperative care, rapid pulse, a lot of competition in the SuperBore space. The somewhat annoying thing is that they're all doing clinical trials, locking up hospitals. disrupting sales. How do you push back with the SOFIA? Finally, CSDH. This is a new topic for most Japanese analysts. The middle meningeal artery embolization space is obviously a very interesting space. Some people say that it is greater than stroke or aneurysm in terms of its potential market. However, we have seen [ Squid from Bult ], OrganOx Medtronic and [ TruFil ] from J&J have already entered the space with indications in MMAE for CSDH. I understand you're trying to expand this indication with Phil. And yes, Phil does have some advantage, I think, in the ease of preparation, the ability to reach distilleries, but is that enough to crack this market when you're going to be probably a fourth, fifth or sixth entering the market?

Yes. Okay. So that's the -- there's 3 questions, rolled into one. So let me talk about the intrasaccular segment first. As you saw on the slide earlier, we are on Generation 7 with our WEB device, and we continue to have new sizes, we continue to have a small delivery system with the 7s system. We continue to expand our clinical indications and roll out on a global basis. We already have competition in certain geographies, and we believe that we can maintain a leading market share through continued iteration of this device and continued expansion of the clinical indications around the key markets in the world. As far as aspiration catheter is concerned, you are right. The 88 large segments is primarily driven by U.S.-based companies. We have our digital access catheter, this and we will be conducting the necessary work to get to an aspiration indication and to create the SOFIA flow. Flow is our name for the SOFIA catheter, which has an aspiration indication, which is particular to the U.S. market. And we are also working on additional sizes and lengths for the SOFIA catheter portfolio. So again, it's a question of iteration in completing our leading portfolio over time. Chronic Subdural Hematoma is indeed a new phenomenon, essentially by embolizing the MMAE, but you need 2 things to do it. You need a catheter and you need a liquid embolic. We have a leading catheter with our headway dual, which is the most used catheter in this particular segment, and we are leveraging the strength of the catheter over into the liquid embolic. And we will be investing money also to do a necessary clinical trial for fill in the United States.

[Interpreted] Next, we have a question from Yoshihara from UBS.

[Interpreted] This is Yoshida from UBS Securities. C&V, if we look at C&V only, and the actual track record and the plan, especially profit margin is going to improve significantly, that is your assumption. Therefore, maybe 24 will become 27, 3-point improved. This is adjusted operating margin. One-off expenses and organic, what are your expectations and the lending result. I think the lending result was slightly less than the company forecast, but can this all be explained by one-off factors.

[Interpreted] Thank you very much for your explanation C&V profit margin. 2 points or so from this year to next fiscal year, there will be an improvement. That is because, as I mentioned earlier, in Americas, there was cancellation of production PLAJEX. And 1 point is one-off factor involved. [Interpreted] And in overseas plants, there are a reduction in force in C&V. This fiscal year, this is going to be positive, which means more than JPY 2 billion positive in this fiscal year. And finally, foreign exchange. This fiscal year, the stock impact of foreign exchange in Cardio and Vascular there was some impact which will improve profit margin next fiscal year. [Interpreted] Especially North America and Terumo Neuro, where profitability is high, they will be growing a lot and contributing significantly as well. That is also a factor.

[Interpreted] Just to make sure I want to confirm that is FX. Stock, JPY 4.7 billion company-wide C&V only, how much?

[Interpreted] Most of you are coming from C&V.

[Interpreted] I see. And then my second question to you is Rika business. As Hagimoto at the beginning, there is going to be a risk of adjustment. I understood. And in CSL's financial results, supply and demand being not good we here and CSL in itself seems to be losing share from competition or losing share to competition. [Interpreted] How is this factored in into this fiscal year's plan? There can be some adjustment but will not affect profit, you said what? What is the logic for us the CSL sales? And for Rika, this is almost all the sales of Rika. And as of now, from CSL, we are receiving orders and looking at the orders from CSL now the order level is within what we expected.

[Interpreted] There can be some ups and downs in the order level that we experienced in the past years, but that impact the total of DCT is going to be very small. We expect with CSL, we are confirming circumstances on an ongoing basis as necessary. And as a result, what we thought would affect our results are all affected and all factored in into our expectation.

[Interpreted] And moving on Mori-san of Nomura Securities, please.

[Interpreted] This is Mori from Nomura Securities. My first question is Slide 15. Leverkusen Plant included and without Leverkusen Plant, you have the disclosure. And if we execute, then the labor cut impact is going to be bigger than fiscal year. Why is Leverkusen impact is going to be greater? And when will this situation start improving? Can you explain further about Leverkusen?

[Interpreted] And this is about Leverkusen this fiscal year, we are booking costs for segment, no correction that is last fiscal year. Last fiscal year, cost for Leverkusen Plant was booked last fiscal year and this fiscal year will be booked for the full year.

[Interpreted] And finally, Leverkusen and investments will reach a full flat stage. That is the background. And here, while you're planning to injection, you are going to convert the plant into? And how much have you progressed? And have you received clearance?

[Interpreted] From multiple pharma companies, we have signed NDAs, and we will conduct promotions and development going forward. We are moving ahead. And if I may add, clean room construction is progressing as planned.

[Interpreted] I see. My second question is about OrganOx. Currently, crude prices are high and inflation is ongoing, which means organ transplant costs must be going up. As operating profit margin, can you maintain 20%, you expect to maintain 20% because the top line will not affect profit margin. What is going to be the impact on profitability to OrganOx coming from inflation and higher crude prices?

[Interpreted] Crude, Japanese plants and agent plants will be impacted a lot from crude. Therefore, -- but for OrganOx business, we do not expect a big impact. with sales increasing, as you said, PLAJEX going to expand. This is the structure of the business. And if I may add, the transportation itself is not included in our business model. The transportation part can be mostly be ignored. People in transportation can pass on cost to pricing, but you are in [ machine ] business. You don't receive as much cost pressure. [Interpreted] You are not receiving cost pressure that much. More than 90% of the business is in U.S., the middle east circumstance is not as much impactful compared to the Far East or Japan.

[Interpreted] Moving on to Citigroup, [ Yamaguchi-san ], please.

[Interpreted] Can you hear me now? I have just unmute a bit. I have 2 brief questions. The first is, in the next midterm plan. The growth, the CAGR, I think you said is going to go up. And there are more business segments now. [Interpreted] And when you aim for the next midterm period, you will achieve this growth level. And then, is there going to be further growth after the near-term results?

[Interpreted] We want to aim for higher goals compared to the current GS26. And upon this direction, we want to get into December.

[Interpreted] I see the raw material cost increase impact is going to be JPY 2.5 billion. But what is the impact coming from the Middle East? Are there any comments inside this?

[Interpreted] The JPY 2.5 billion is raw material cost increase. That is coming from the Middle East. Middle East circumstances resulting in raw material cost increases. In this fiscal year, earnings forecast. And as you are very well aware, tariff impact, tariffs, maybe you can get the tariff paid back to you. Maybe you can get payment returns. Yes, there are many uncertainties as of this point. Therefore, as of this point, and still there is the 10% tariff applied at the -- up to the end of July. This is the assumption up to the end of July. [Interpreted] So far, it used to be 15%, and there is still a possibility that tariffs may go back up to 15%. And repayment back of tariff, there are such movements emerging, we are aware in the U.S. And there is still time available for appeal, but we have not factored this possibility in our forecast.

[Interpreted] Then SMBC Nikko Securities, [ Tooman ], please.

[Interpreted] This is [ Dokumuto ] from Nikko Securities. I have 2 questions for you. The first is guidance. TMCS, Leverkusen, excluding Leverkusen, you are going to increase a lot of profits. But this profit margin improvement and profit increase between CDMO versus Japanese existing business. Can you give me the split what is going to be the profit margin improvement between CDMO and existing Japanese business? Can you keep me the breakdown?

[Interpreted] Thank you very much for pointing out. Last fiscal year, FY '25. In [indiscernible], there were out of stocks. But this year, this is going to recover. In addition, in MCS Japan and global, there will be price pass-ons pass-throughs taking place this fiscal year. In addition, CDMO business is good to expand. These are the factors and contributors for profit margin improvement in FY 2026, which means in the whole of TCMS, there will be improvements.

[Interpreted] Yes. And secondly, I want to ask about Neuro strategy. First of all, brain aneurysm in the next 5 years as there was also a question earlier, the competition will start catching up in the next 5-year time period. Amongst this background, how are you going to innovate? What are the innovations are you going to come up with? There can be more pro diverters and mesh and there can be more improvements, but Stryker is also catching up with similar innovations. So brain aneurysm versus Stryker, what is your strategy? And also the aspiration brain stroke may be may be more vulnerable compared to stat and having Stent Retriever having the combination business, you may not have this in your pipeline. So I would like to hear about your big strategy.

Yes. Thank you very much for the question. Let me talk about Hemorrhagic stroke first. you have multiple ways to treat aneurysms. [ Ruptures are unrated ]. You have coils, you have flow diverters, you have intracycle devices. You have stent-assistid colleagues. Terumo Neuro has the most complete portfolio. We are the only company with coils who has Class 1A evidence of randomized clinical trials with our hydro coils, we are the market leader in intrasaccular. And we are also very strong in stent assisted calling and flow diverters. And we have a pipeline projects to continue to iterate on all 4 categories. That's the -- that is for Hemorrhagic stroke. As far as ischemic stroke is concerned, SOFIA is the class leader in this segment. And we are expanding the segment also by adding new sizes to this portfolio over the next couple of years. and we do have a combination in each of the major geographies, Europe, United States, China and Japan. We also have a Stent Retriever available and we offer the combination, the technique of Stent Retriever plus aspiration catheter.

[Interpreted] Thank you very much. I have a related question for diverter, I think Fred has strong pipeline. In China, Chinese companies, including MicroPort, they are selling their version of the product. However, application expansion is still under preparation. When you think about the next 5 years for aneurysm and for stroke, how big do you think that the Chinese companies will be in the future? How big of a threat are they going to be?

We should not underestimate the Chinese companies. There are a lot of Chinese companies now in China in Neurovascular as they are in peripheral or in cardiology. And the -- obviously, they would like to expand internationally, meaning moving out of China. And some of these Chinese companies also have highly differentiated products. So I would not only see them as a competitive threat I would also see them as a source of new product innovation.

[Interpreted] We have received some comments from you competition is becoming more intensified for neuro, Terumo Neuro competitive advantage and improving its competitiveness is something that we need to think about and tuck-in type M&A is something that we might consider in the future.

[Interpreted] Next, we have Tony Ren from Macquarie Capital.

Tony Ren from Macquarie. I have 2 as well. The first 1 is I would like to ask you about the TMCS, particularly the pharmaceutical solutions. On Page 9, you said in Japan, the CDMO business did very well. Could you help me understand what proportion comes from [indiscernible] . Recently, there is a delay of FDA's approval of the [indiscernible] auto injector. In an induction therapy. I would like to get some sense how does it affect your Japan CDMO business? So that's my first one. My second question is, again, going back to RikaRica, it -- I think as the other analyst mentioned, we are really seeing a very unusual situation of oversupply. I my experience, this type of oversupply last a few years. I would like to see how you have incorporated that into your near-term or midterm plan. Possibly, it will be something in the growth strategy 31. But I just wanted to see whether you have incorporated that into your medium-term planning, probably at least 5 years.

Thank you very much for the question. So the first question relating to LEQEMBI. The impact that is included in FY '25 last fiscal year's results is not large at this moment. We anticipate the majority of the activity sales to be conducted from FY '26 onwards. Based on the delayed situation, from our point of view, we are preparing based on [ Eisai's ] kind of purchase order that has been put in place, and we do not see a notable difference from what we have anticipated in the early years. So I think it's fair to say that there may be some differences in what the [ Eisai ] sales situation may be. Despite that situation, what we are as a provider are still at a very steady growth that we are foreseeing for FY '26. Based on the second question, for Rika devices, of course, we are still anticipating what the future structure within GS31 would look like for Rika at this moment. But for this fiscal year, FY '26, I think it's fair to say that we have incorporated any kind of demand changes that CSL have put forward to us. And based on those numbers, we do not foresee a significant difference from what we've anticipated in the planning phases for FY '26. So again, what we would consider for FY -- the next 5-year plan, GS31, is something that we would like to clarify and announce at December when we announce the overall GS31 plans.

[Interpreted] Next, from Morgan Stanley. Securities, Hayashi-san, please go ahead.

[Interpreted]Hello. I am Hayashi from Morgan Stanley. Can you hear me?

[Interpreted] Yes, we can.

[Interpreted] I have 1 question. Maybe it was already covered earlier. This fiscal year FY '26, your sales plan -- if you exclude ForEx, growth rate is also disclosed by segment. Thermal Medical Solutions is 8% growth for sales. This company, I think, in the past was only able to grow by mid-single digit or low single-digit percentage. But this time around, you're expecting 8% growth. So what's different now? Could you please share with us your thoughts? Which business is growing. I guess it CDMO, but -- please confirm whether my thinking is correct. 8% growth is relatively high. So could you please tell us why?

[Interpreted] Yes. There are 3 factors. First of all, in FY '25, there was a shortage. And second is global pricing pass-through. And that will be added on to the sales value and pharmaceutical business we are receiving orders from pharma companies, and they will promote sales growth. So that means that these are contents you have covered from the past.

[Interpreted] We are receiving many more hands up, but this is now time to finish. This is time to finish the meeting. We will close the questions-and-answer session. For the questions we were not able to take today, please contact our IR department individually. [Interpreted] With this, we conclude Terumo Corporation's financial results presentation for the year ending March 2026. Thank you very much for your participation. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]