New Mid-Term Management Plan “ASAHI Road to...

New Mid-Term Management Plan “ASAHI Road to 1000”

Aiming to be a Strong Global Niche No. 1 Company with Unique Technology

(Security code: 7747 Second Section of the Tokyo Stock Exchange. Second Section of the Nagoya Stock Exchange)

Asahi Intecc Co., Ltd.

August 10, 2018

All Rights Reserved.Copyright © 2018 ASAHI INTECC CO.,LTD. 1

Long-Term Management Vision

Aggressively market products for minimally invasive

treatment from Japan to the world, to improve QOL

(Quality of Life) for all patients worldwide while

establishing the “ASAHI brand”

All Rights Reserved. Copyright ©2018 ASAHI INTECC CO., LTD.

Review of the Previous Mid-Term Management Plan -1 (FYE June 2015 ~ FYE June 2018)

Achievement of sales strategy Japan: Main PTCA GW retains overwhelming market share by capitalizing on the spread of Sion series

US: Started direct sales of peripheral vascular products (July 2015~)

Decision to start direct sales of PTCA GW (July 2018~)

EU: Expanded market share by switching from Abbott to local distributers (June 2011~)

China: Changed sales channel for cardiovascular products to multiple agent system (June 2016~)

Achievement of product strategy Launched Penetrating Catheter “Caravel” which applied technology of “Corsair” to general lesions

(September 2014 ~ )

Launched Multifunction Catheter “SASUKE” (January 2016 ~)

Launched PTCA GW “Gaia Next” adopting new technology “XTRAND structure” (June 2017~)

Launched Guide Wires for Examination “Silverway” pursuing safety and usability (February 2018~)

Launched Non-con type PTCA Balloon Catheter “NC Kamui” (January 2017~)

2


Review of the Previous Mid-Term Management Plan -2 (FYE June 2015 ~ FYE June 2018)

Achievement of R&D / production system Decision to construct a new building to expand R&D base and strengthen business cooperation

(Scheduled to be completed in December 2018)

Decision to establish “Tohoku R&D” as the center of development for high-precision processing techniques (Started operations in July 2018)

Promoting decentralization to improve production efficiency and BCP compliance

— Construction of a new medical factory to enable production of medical devices at Cebu factory (Started operation in October 2017)

Achievement of partnership / M & A strategy Business partnership with Boston Scientific Corporation (August 2014~)

—Started selling pressure guide wires, a jointly developed product for FFR (fractional flow reserve) (July 2016)

Stock acquisition and absorption merger with limited company Meisen （May 2015）

— Further strengthened wire forming technology by incorporating a company that manufactures high-performance stranding machines

Conversion of Nihon Chemical Coat Co., Ltd. to a subsidiary (August 2017)

— Pursue synergy between our "stainless steel processing technology" and the company's "Fluororesin Coating Technology“

Capital business partnership with Fuji Co., Ltd. (November 2017)

— Joint research and development for creating next-generation medical devices in the catheter intervention field with the company (Industrial Robot Manufacturer)

3

All Rights Reserved. Copyright ©2018 ASAHI INTECC CO., LTD. 4


Always pursue performance and quality sought by the top 20% of the world Realize product fields that competitors cannot develop or imitate, create a global niche

market and establish No. 1 domain

［What we have］ Our own materials Difficult for other companies to replicate Our own elemental technology Able to meet various needs Corporate culture

Accommodate any request Keep thinking until a solution is found Always striving for the top （Pursuit of performance and quality ） Endless quest

Not just possessing "proprietary technology / original products / top-share products," but continuing to be a company with characteristics that can be boasted of to the world from the

viewpoints of temperament and corporate culture which underlie the company

Realization of demand

Technology inquiring mind

Taking in technology

Accumulation of technology

Keep doing Keep fussing

over

New needs New requirement

levels

Expansion of new business regions

New product development

Realization of new functions

Our engine for growth


Positioning of New Mid-Term Management Plan - 1 (FYE June 2019 ~ FYE June 2023)

Strengthen profitability of existing business

Culmination of existing basic

strategies

1

Sowing for the future Investment for growth

Create new business 2

Develop R&D and Production System

Optimized for Global Expansion

3 Establish management

structure for sustainable growth

4

Business base supporting growth strategy

Establish business portfolio to achieve sales revenue of 100 billion yen

“ASAHI Road to 1000”


Positioning of New Mid-Term Management Plan - 2 (FYE June 2019 ~ FYE June 2023)

Maintain and improve No. 1 position in PTCA guide wire Increase share of catheter field (Penetrating Catheter, Balloon,

Guiding) Further increase market share in the US, where we shifted to a

direct sales structure Strengthen sales structure in rapidly expanding Chinese market Shift to direct sales in some parts of Europe and Asia Strengthen sales structure in areas of Peripheral and Neuro

Develop Global Market Strategically and Expand Affected /Treatment Area

Exploration of advanced technology and integration with in-house technology

Advance into the gastrointestinal field Advance into robotics field Advance into other global niche fields

Create new business in global niche market

Strengthen profitability of existing business

Culmination of existing basic

strategies

1

Sowing for the future Investment for growth

Create new businesses 2

Establish business portfolio to achieve sales revenue of 100 billion yen

Priority measures of growth strategy


R&D

Industrial Products

Industrial Component Manufacturer

R&D

Industrial Products

Medical Products

Medical Device Manufacturer

R&D

Industrial Products

Medical Products

Medical Device Sales （Direct Sales in Japan）

Medical Device Manufacturer and Sales

R&D

Industrial Products

Medical Products


Medical Device Sales （Promote domestic and overseas）

Global Medical Device Company

Consolidated Sales 80 billion yen



Global Niche NO.1 company


R&D

Industrial Products

Medical Products


Medical Device Sales （Promote domestic and overseas

Create new business

Aiming to become a Global Medical Device Company providing total support from development

to production & sales with less invasive therapeutic devices as an axis

Aiming to be a Global Niche No. 1 company


5,176 5,498 6,271 7,888 9,883 11,643 11,700 12,718

15,339 16,007 14,852

19,968

28,145

35,323

39,511

42,709

50,124

54,493

FYE June2002

FYE June2003

FYE June2004

FYE June2005

FYE June2006

FYE June2007

FYE June2008

FYE June2009

FYE June2010

FYE June2011

FYE June2012

FYE June2013

FYE June2014

FYE June2015

FYE June2016

FYE June2017

FYE June2018

FYE June2019

FYE June2020

FYE June2021

FYE June2022

FYE June2023

8

Mid-Term Management Plan “ASAHI Road to 1000”

Public Listing

（※）

ASAHI Road to 1000

From FY ending

June 2019 to FY ending June 2023

Five-Year Plan

(*)

Develop Global Market Strategically and Expand Affected /Treatment Area

Create New Business in Global Niche Market

Develop R&D and Production System Optimized for Global Expansion

Establish Management Foundation for Sustainable Growth

1

2

3

4

(Plan)

Consolidated Sales

80 billion yen

Operating margin

25％


Net Sales (Mil. Yen)

(*) In FYE June 2012, a temporary decrease in sales and profit occurred due to reduced production. The reason for such was that our main factory of our consolidated subsidiary company, Asahi Intecc Thailand was forced to suspend operations temporarily when flooding hit Thailand at that time.


15,339 16,007

14,852

19,968

28,145

35,323

39,511 42,709

50,124 54,493

80,000

2,929 3,247 2,038

4,351 5,995

7,976

10,002 10,795

13,773 14,565

20,000

1,000

3,000

5,000

7,000

9,000

11,000

13,000

15,000

17,000

19,000

21,000

23,000

25,000

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

FYE June2010

FYE June2011

FYE June2012

FYE June2013

FYE June2014

FYE June2015

FYE June 2016

FYE June 2017

FYE June 2018

FYE June 2019

FYE June 2023

Net sales Operating income

(*) (Plan)

Operating margin

25％

Net Sales: 80 billion Yen Operating Income: 20 billion yen

(Plan)

Mid-Term Management Plan: Profit Goals to FYE June 2023 Net sales (Mil. Yen)

Operating income (Mil. Yen)

(*) In FYE June 2012, a temporary decrease in sales and profit occurred due to reduced production. The reason for such was that our main factory of our consolidated subsidiary company, Asahi Intecc Thailand was forced to suspend operations temporarily when flooding hit Thailand at that time.


Develop Global Market Strategically and Expand Affected / Treatment Area

1

Create New Business in Global Niche Market 2


3

Establish Management Foundation for Sustainable Growth 4

Mid-Term Management Plan “Asahi Road to 1000”




3




1


Cardiovascular Peripheral Abdominal

Overseas

Dom

estic

Neuro

12

< Culmination of existing basic strategies>

Expanding Markets

Expanding Affected / Treatment Areas



Priority Measures Maintain the No. 1 position of PTCA Guide Wire Further increase market share in the US, where we shifted to a direct sales structure

Increase market share by strengthening the sales structure in the rapidly expanding Chinese market

Launch new product: Ni-Ti (Nickel Titanium) stainless hybrid guide wire

Launch new products closely tied to regional needs

Shift to direct sales in some parts of Europe and Asia

Increase market share by improving performance of products other than PTCA Guide Wires

Increase market share of Penetration Catheters, PTCA Guiding Catheters, and PTCA Balloon Catheters

Expand sales of non-cardiovascular products (peripheral vascular, abdominal vascular, neurovascular)

Expand product lineup

Increase market share by strengthening overseas markets mainly for peripheral vascular and neurovascular products

13


Product Strategy Matrix per Affected Area （Cardiovascular/ Peripheral/ Abdominal / Neuro）

Sales Area

Japan US EU/Middle East China Others

Cardiovascular

Main Products

PTCA Guide Wires

Penetration Catheters

PTCA Guiding Catheters

PTCA Balloon Catheters

Guide Wires for Examination

Peripheral

Main Products

Peripheral Guide Wires

Peripheral Penetration Catheters

Neuro

Main Products

Neuro Guide Wires

Neuro Guiding Catheters

Abdom

inal

Main Products

IVR Guide Wires

IVR Micro Catheters

1st Phase (Priority area) 2nd Phase


Medical Treatment Areas

Cardiovascular Peripheral Abdominal Neurovascular

PTCA-GW Non-PTCA-GW

Sales Area

Japan

Entire product line-ups were switched to direct sales from June 30, 2014. Aim at further share expansion through direct sales permeation.

Dist. Direct Sales (from Jan. 2012) Direct Sales (from June 30, 2014) Direct Sales (from July 2013)

US

PTCA-GW under long-term contract with Abbott Vascular (~June, 2018). Plan to strengthen products other than cardiovascular products.

Dist. ABBOTT→Direct Sales (from July 2018) Direct Sales Direct Sales

(from July 2015 ) Direct Sales Direct Sales

EU/ Middle

East

Distribution agent changed from Abbott to local distributors in July 2011. Seeking market share in PTCA-GW market.

Dist. Local Dist. → Direct sales planned for some areas

Asia (inc.

China)

Increase share in cardiovascular products and promote other treatment areas. Along with market expansion, distributor business to be further emphasized, taking into consideration decentralized distribution.

Dist. Local Dist.

Sales Strategy Matrix by Area

15


Japan: Priority Measures

Expand sales of cardiovascular and non-cardiovascular products Maintaining No. 1 position in the cardiovascular area

Expand target products in the Neuro and Peripheral area

Pursue efficient marketing to respond to reimbursement price reduction Promote further multi-sales

Review and reform distribution system

Absorb know-how through sales of other companies' products (J-Sales) Utilize nationwide sales network as a trading company function

Expand sales through synergy between other companies' products (domestic and overseas) and our own products

16


China Europe

Asia South America

North America

Expand sales by switching to direct sales in the US Each area (EU, Asia, China, South America): Re-establish sales network to correspond to local market features

Direct sales by area Establishment of a Russian base

Multiple-agent system Correspondence to Two Invoices System

Direct sales by area Strengthen sales in India / South Korea / Taiwan / Indonesia

Pursue opening effect of Brazilian subsidiary

Start of direct sales Penetration of CTO Market

17

Overseas: Expand Market Share across the World


Peripheral Guide Wires (Jul. 2015~)

Penetration Catheters (Jan. 2012~)

PTCA Guide Wires (Jul. 2018~)

Direct Sales in the U.S.

18

US: Start of Direct Sales of PTCA Guide Wires

Hospitals, etc.

To date, Asahi Intecc Group’s flagship product line of PTCA guide wires has been sold by Abbott Laboratories (Abbott) in the U.S. ASHAI INTECC USA, INC., a wholly owned subsidiary of the Asahi Intecc Group, began direct sales of PTCA guide wires for hospitals as of July 1, 2018.

http://asahi-inteccusa-medical.com/


Time axis Sales by

the distributor Jul.

2018～ Jan.

2019～ FYE June

2019 FYE June

2020 FYE June

2021 FYE June

2022

Direct sales by our group Overlapping period

(Six months)

Sales will increase from the second half in the FYE June 2019, aiming to expand market share

FYE June 2023

Image of Market Share Expansion

19

US: Image of Market Share Expansion by Direct Sales

Market share


Develop R&D and Production System Optimized for Global Expansion 3


Develop Global Market Strategically and Expand Affected / Treatment Area 1





Strengthen Profitability of Existing Business and Create New Business

Abdominal Peripheral Cardiovascular Neuro Gastrointestinal

Overseas

Dom

estic

Fields integrating advanced technology Vascular Products Non-vascular

Products

Create New Business

Robotics field

Gastrointestinal related

products

Strengthen Profitability of Existing Business

Future Frontier

21

New field: Plasma wire system

New field: Treatment products

for cerebral aneurysm and stroke

Expanding Markets


Target Area of New Business

Value that (1) customers want, (2) competitors cannot offer, and (3) we can offer

Value that competitors can

offer

Value that we can offer

(Including use of technology of

other companies)

Value customers want

Value that we can offer and customers want, but

which cannot be differentiated from

competitors

Value Proposition


Exploration of Advanced Technology and Integration with In-house Technology

Accumulation of various material processing technologies

Expertise and experience of highly functional medical devices / medical components

~Four Core Technologies~ ・ Torque Technology ・ Polymer Coating Technology ・ Wire Drawing Technology ・ Wire Forming Technology ＋ Laser processing technology Molds and injection molding technique

Plasma energy

AI, IOT

Sensing technology

Coating (Biocompatibility / Hydrophilicity)

Regenerative medicine, etc.

Integration with New Technology Advanced Technology

of Other Companies

Create new business through technological innovation

Asahi Intecc


Execution of Strategic Investment

Invest mainly in companies in the early stage By adding delivery performance, which is our core competence, to the

breakthrough technology of venture companies, we will manufacture

from an early stage products that function effectively in actual clinics

Curbing investment expenses

Utilize technology of invested companies Retro Vascular, Inc. (Utilization of plasma energy for other fields), etc.

Invest at an early stage in several companies possessing technology

24





Overseas

Dom

estic

Vascular Products Non-vascular Products

Create New Business

Robotics field


products


Future Frontier

25




Expanding Markets

Fields integrating advanced technology

All Rights Reserved.Copyright © 2018 ASAHI INTECC CO.,LTD.

Overview of Retro Vascular,Inc. Location 5976 W. Las Positas Blvd. Suite 120, Pleasanton, California 94588, U.S.A.

Title and name of representative President & CEO Wayne Ogata

Description of business Life science development

Capital (Including additional paid in

capital)

Common stock: 127 thousand US dollars (14 million yen) Series A preferred stock: 499 thousand US dollars (54 million yen) Series B preferred stock: 2,050 thousand US dollars (225 million yen) Total: 2,677 thousand US dollars (294 million yen)

Date of establishment March 27, 2006

Acquisition price Common stock: 22,154 thousand US dollars (2,436 million yen) Preferred stock: 3,725 thousand US dollars (409 million yen) Total (estimated amount): 25,879 thousand US dollars (2,846 million yen)

Date of Resolution Resolution at Board of Directors’ meeting: July 6, 2018 Execution of share transfer: July 6, 2018

Amount of goodwill 2,841 Mil. Yen（Approximate amount）（Scheduled to be amortized for 20 years）

26

The Acquisition of Shares of Retro Vascular(Conversion to Sub-subsidiary ) Disclosed in July 6, 2018

ASAHI INTECC USA, INC., a 100% subsidiary of Asahi Intecc, acquired shares of Retro Vascular,

Inc. that was a R&D-type company in the United States and made Retro Vascular its subsidiary (sub-subsidiary of Asahi Intecc)

In recent years, Retro has been also working on the development of plasma energy technology using electrical energy aiming at further improvement of treatment results in the PTCA treatment and is in the process of establishing the basic technology

It is possible to use Retro as the base for gathering and surveying most-advanced information because the company is based on the Silicon Valley which is the center of cutting-edge and advanced medical device innovation in the world


Exploration of Advanced Technology and Integration with In-house Technology (Retro Vascular)

Accumulation of various material processing technologies

Expertise and experience of highly functional medical devices / medical components

Plasma energy technology

Integration with New Technology

Retro Vascular

Potential for realizing innovative medical devices leading to improvement in the CTO area

Expected to accelerate transition from surgical operation to PTCA treatment in the

CTO area

Expected to be used in various fields such as obstruction not only in cardiovascular area

but also in peripheral vasculature area

Asahi Intecc





Overseas

Dom

estic

Fields integrating advanced

technology Vascular Products Non-vascular Products

Create New Business

Robotics field


products


Future Frontier

28




Expanding Markets


Development of R&D System Optimized for Global Expansion

Product Development and Prototype manufacturing

New Building (including head office functions) Global Headquarters and R&D Center

R&D of high-precision processing techniques

and production

Tohoku R&D Center

Material Development

Osaka R&D Center

Resin Development

GMA R&D Center

Production Technology

Development

Thailand Factory

State-of-the-art R&D

R&D for the US

R&D-type company in the US Retro Vascular, Inc.

Sub-subsidiary in July, 2018

ASAHI INTECC USA, INC.

Completion in December 2018 (Planned)

Started operations on July 2, 2018

Product Improvement Development


Establishment of Tohoku R&D Center Started operations on July 2, 2018

By pursuing high-precision processing techniques, we will further improve the development capabilities of next-generation medical devices and expect to contribute to the development of medical devices as No. 1 and unique products

Medical device development utilizing injection molding and high-precision processing techniques

Newly opened as a central base for development of high-precision processing techniques such as casting and injection molding

Toyoflex Towada Factory Relocation of

techniques High-precision processing

techniques (casting and injection molding techniques)

Relocation of existing techniques and new

reinforcement

Tohoku R&D Center

Tohoku R&D Center 【appearance】

31


Construction of Global Headquarters and R&D Center Scheduled to be Completed in December 2018

New building to be

constructed

To be used as is

New warehouse to be demolished

Backyard/loading dock

Build a soundproof wall

Access way

Access way for employees (planned)

Front gate

Demolish the office building and

construct a new parking lot

Catheter surgery simulation room Prevent X-ray radiation from from leaking to

the surrounding rooms by embedding lead boards into the walls and ceiling

<Layout Plan of R&D Base> R&D Environment Similar to Clinical Practices

Construction of new building within the premises of the Seto factory and R&D base

Enhancement of R&D functions Promote strengthening and efficiency of business by transferring and

consolidating the head office functions The new building was completed in July 2018

We will demolish the existing administrative building and construct an access way ahead of relocating our headquarters and starting full-scale operation in December 2018

▲Global Headquarters and R & D Center

32


R&D System Encompassing the Entire Process of Product Development

Enhance “Practical Competence” through Globalization of R&D Structure, including prototype manufacturing

Osaka R&D Center GMA R&D Center Tohoku R&D Center

Global Headquarters and R&D Center

Thailand Factory

US Development

Base

US Medical Device Market

Material Development

Resin Development

Product Development and Prototype Manufacturing

Production Technology

Development Large Distributor

Large Medical Manufacturer

KOL Doctor (KOL: Key Opinion Leader)

Needs from Medical Front

R & D for the US

High-precision Processing Techniques

Product Improvement Development


Implemented restructuring of production bases to improve production efficiency and realize decentralization for BCP

In areas requiring local production, consider establishing new production bases closely tied to the areas and in line with local regulations

Mass production / Increase production efficiency Development / Prototyping / Production transfer

Cebu Factory (Philippines)

Pursue production efficiency as “Mass production factory”

Establish system that can produce medical devices by constructing a new medical factory

<Medical factory>

Thailand Factory Shifted to new development base with roles of

“Rolling-up development system” and “Smooth production transfer of development project,” from conventional “Mass production / Trial production factory"

Hanoi Factory (Vietnam) Pursue production efficiency as “Mass

production factory” Plan to utilize the remaining capacity of the

new factory for further mass production

Japan Expand prototype line for passing on

technology Maintain production back-up system in

case of emergency although R&D is the main body

< Global Headquarters and R&D Center> <Tohoku R&D Center>

Development of Production System Optimized for Global Expansion


2,714 3,230 3,886

4,496

5,052 5,739

12,000

9.6% 9.1% 9.8%

10.5%

10.1%

10.5%

5%

10%

15%

20%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

FYE June2014

FYE June2015

FYE June2016

FYE June2017

FYE June2018

FYE June2019

FYE June2023

R&D Expenses

Ratio of Revenue toR&D Expenses

35

(Plan) (Plan)

Maximum 15.0％

R&D expenses are expected to increase towards entry into new fields

R&D Expenses

R&D Expenses (Mil. Yen)

Ratio of sales to R&D expenses (%)


Approach to ESG (Environment, Society, Governance)

Optimization of production bases

assuming risk management (BCP)

Strengthening corporate governance

Reduce the physical, mental and economic

burden of patients Solve social issues through business

Approach to Environment, Health and Safety

Strengthen management foundation

Contribute to curbing medical expenses

Environmental policy

Responding to legal regulations

Quality Assurance System

Strengthening global human resource base

Request for reduction of environmental burden

Policies for curbing medical expenses in each country

Legal regulation

Need for safe and secure products

Risks in disasters and emergencies

Social significance of business based on long-term

management vision

G E S

Promoting diversity

Penetration of human resources vision

Reform of personnel system

In addition to consideration for the environment and society, we will strengthen our human resource management and governance to bolster the management foundation and technology base and establish a system that can secure profitability at a global scale


Acquisition of Shares of Ficas Co., Ltd. (Conversion to Subsidiary) Disclosed in July 12, 2018

Overview of Ficas Co., Ltd. Location 2-210 Kamisuge, Meitou-ku, Nagoya-shi, Aichi

Title and name of representative Representative Director: Nobutoshi Hirota

Description of business Welfare service business for people with disabilities

Capital 40 Mil. Yen

Date of establishment December 7, 2011

Acquisition price Common stock: 40 Mil. Yen Advisory expenses etc. (estimated amount): 0 Mil. Yen Total (estimated amount): 40 Mil. Yen

Date of Resolution Resolution at Board of Directors’ meeting: July 12, 2018 Execution of share transfer: July 12, 2018

Promote the activities of people with disabilities Ficas Co., Ltd. is a company that has been certified as providing “Continuous Support for

Employment (type A)" in providing people with disabilities opportunities for work as well as in conducting training, etc. necessary for improving knowledge and ability through production activities

We made the company a wholly-owned subsidiary to tackle social contribution in terms of welfare for people with disabilities by promoting stable employment of people with disabilities in our group companies.

In the future, in addition to existing business, the company will be part of our group's business From the viewpoint of importance to business results, we have made the company an

unconsolidated subsidiary

S


Long-Term Management Vision

Aggressively market products for minimally invasive

treatment from Japan to the world, to improve QOL

(Quality of Life) for all patients worldwide while

establishing the “ASAHI brand”

39


Caution Regarding Information Presented

40

【 IR contact 】

Asahi Intecc Co., Ltd. corporate strategic office TEL 052-768-1211

URL http://www.asahi-intecc.co.jp/en/

All forward looking statements contained herein, including sales forecasts, outlooks, and strategic plans, are based on the best currently available data; however, risk and

uncertainty are involved in these statements. Please note that actual results may differ greatly from plans presented here.

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