Nipro / 8086
Transcript of Nipro / 8086
Nipro / 8086
COVERAGE INITIATED ON: 2019.04.23
LAST UPDATE: 2020.05.22
Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to
provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate,
objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will
always present opinions from company management as such. Our views are ours where stated. We do not try to
convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at
[email protected] or find us on Bloomberg.
Research Coverage Report by Shared Research Inc.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
02/53
R Coverage
INDEX
How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent
earnings. First-time readers should start at the business section later in the report.
Executive summary ----------------------------------------------------------------------------------------------------------------------------------- 3 Key financial data ------------------------------------------------------------------------------------------------------------------------------------- 5 Recent updates ---------------------------------------------------------------------------------------------------------------------------------------- 6
Highlights ------------------------------------------------------------------------------------------------------------------------------------------------------------ 6 Trends and outlook ----------------------------------------------------------------------------------------------------------------------------------- 9
Quarterly trends and results ----------------------------------------------------------------------------------------------------------------------------------- 9 Business ------------------------------------------------------------------------------------------------------------------------------------------------ 15
Business model --------------------------------------------------------------------------------------------------------------------------------------------------- 15 Business overview by segment ----------------------------------------------------------------------------------------------------------------------------- 16
Market and value chain---------------------------------------------------------------------------------------------------------------------------- 28 Competitors ------------------------------------------------------------------------------------------------------------------------------------------------------- 30 Strengths and weaknesses ------------------------------------------------------------------------------------------------------------------------------------ 33
Historical results and financial statements -------------------------------------------------------------------------------------------------- 35 Income statement ----------------------------------------------------------------------------------------------------------------------------------------------- 35 Balance sheet ----------------------------------------------------------------------------------------------------------------------------------------------------- 37 Cash flow statement -------------------------------------------------------------------------------------------------------------------------------------------- 38 Historical performance ---------------------------------------------------------------------------------------------------------------------------------------- 39
Other information ---------------------------------------------------------------------------------------------------------------------------------- 48 History -------------------------------------------------------------------------------------------------------------------------------------------------------------- 48 News and topics ------------------------------------------------------------------------------------------------------------------------------------------------- 48 Corporate governance and top management --------------------------------------------------------------------------------------------------------- 50 Dividend policy -------------------------------------------------------------------------------------------------------------------------------------------------- 51 Major shareholders --------------------------------------------------------------------------------------------------------------------------------------------- 52 Employees --------------------------------------------------------------------------------------------------------------------------------------------------------- 52 Profile ---------------------------------------------------------------------------------------------------------------------------------------------------------------- 52
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
03/53
R Coverage
Executive summary
Business overview
◤ Nipro is a comprehensive healthcare company that manufactures and sells medical devices—notably, dialyzers used in
hemodialysis (has top share in Japan; ranks second globally)—and generic drugs. It also manufactures new, long-listed, and
generic drugs on contract, supplies glass medical packaging materials, and is expanding into regenerative medicine products.
In medical devices, Nipro handles a broad range of items, including those that are not NHI price listed. The company operates
in three segments: the Medical-Related business (76.8% of sales in FY03/19; handles dialyzers and other artificial
organ-related products, injectables/infusion-related products, own-brand generic drug-related products, and pharmaceuticals
for pharmaceutical kit products); the Pharmaceutical-Related business (14.9%; mainly engages in contract manufacturing of
pharmaceuticals and joint development of generic drugs); and the PharmaPackaging business (8.3%; mostly manufacture and
sale of medical packaging materials [such as glass, plastics, and rubber] and pharmaceutical kit products [pharmaceutical
reconstitution and administration devices]). Mainstay dialyzers account for about 15% of overall sales.
◤ The breadth of Nipro’s product portfolio reflects its approach to development, whereby its sales division is constantly on the
lookout for needs demonstrated in medical settings, parlaying this information into product modifications and entirely new
products. In many fields, Nipro offers kits combining medical devices and pharmaceuticals. In medical settings such kits are
highly convenient, as they eliminate treatment delays arising as medical personnel grapple with combining products from
different manufacturers. Nipro started out in the manufacturing and sales of glass and glass products, and entered the medical
arena when it shifted into medical glass. Since then, Nipro has drawn on the experience gained in resolving side effects
associated with its own devices to craft a product development approach focused on the importance of customer needs. By
consistently reflecting these needs in new products, the company believes it has established a position of trust.
◤ Nipro’s activities overseas are mostly in the Medical-Related business (dialysis-related products, injection and infusion
products, diabetes-related products) and PharmaPackaging business (manufacture and sale of medical-use glass tubes and
medical packaging materials). In the dialyzer-related business, which is the Medical-Related business segment’s main pillar of
operations, Nipro is beefing up its production and sales infrastructure in the Americas, Europe, Asia, and China, in order to
better respond to local demand. By region, 61% of FY03/19 sales were generated in Japan, versus 14% in the Americas, 12%
in Europe, and 13% in Asia (including China).
◤ Nipro also is expanding into Pharmaceutical-related areas, including the manufacturing and sales of own-brand generic drugs
and contract manufacturing of drugs for other companies. While retaining medical equipment as its cash cow, the company
has a biotech company aspect as well. Nipro believes that over the medium term, regenerative medicine also could become
an engine for growth. In this focus area of regenerative medicine, Nipro submitted an application to Japan's Ministry of Health,
Labour and Welfare (MHLW) in June 2018 for approval to manufacture and sell as a “regenerative medicine product” an
autologous bone marrow-derived mesenchymal stem cell product for the treatment of spinal cord injury, developed in
conjunction with Sapporo University. Approval was granted in December 2018.
Trends and outlook
◤ For FY03/20, the company reported full-year consolidated sales of JPY442.5bn (+3.8% YoY), operating profit of JPY26.4bn
(+10.9% YoY), recurring profit of JPY23.4bn (+4.4% YoY), and net loss of JPY12.3bn (net income of JPY12.1bn iFY03/19). Sales
increased due to strong performance by the Medical-Related business, which includes dialysis-related product sales in Japan
and overseas and the Pharmaceutical-Related Business, in which Nipro has one of the largest contract manufacturing
structures in Japan. Although operating profit was up due to growth of the Medical-Related business and cost reduction
efforts, the company recorded a substantial net loss because of securities valuation losses due to a steep decline in world
share prices in reaction to the COVID-19 pandemic and impairment of fixed assets of subsidiaries whose performance had
deteriorated.
◤ The company’s FY03/21 forecast calls for sales of JPY470.0bn (+6.2% YoY), operating profit of JPY26.5bn (+0.3% YoY),
recurring profit of JPY245bn (+4.6% YoY), and net income of JPY13.5bn (JPY12.3bn net loss in FY03/20). The company has
reflected the impact of the COVID-19 spread on overseas production. It assumes no impact on its earnings forecast in the
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
04/53
R Coverage
domestic market in anticipation of COVID 19-related one-time demand and the difficulty of predicting at this stage when the
pandemic will end, although some impact is likely if the trend of patients cutting back on hospital visits and reduction of
outpatient treatment were to continue. In global markets, the company has factored in opportunity loss, assuming earnings
will bottom in Q1 due to the COVID-19 impact such as delays in increasing production at overseas plants following lockdown
measures and logistics restrictions.
◤ Nipro released its medium-term management plan (FY03/21–FY03/25) on May 11, 2020. This medium-term management
plan is positioned as a step toward achieving the longer-term target of consolidated sales of JPY1tn in FY03/31.Main KPIs are
average annual sales growth of 7.0% plus (growth rate), OPM of 9.0% plus (profitability), net interest-bearing debt to EBITDA
ratio in the 4x range (financial soundness), and ROE of 14.0% (asset efficiency). For business development, the company
plans to expand sales channels and release new products in Japan and overseas. It aims for mainstay dialyzer sales growth
worldwide by expanding its own dialysis centers. As well, the company is focused on expanding and upgrading its lineup of
vascular products (catheters and other products for vascular intervention), which is positioned as the next growth business, as
well as stepping up investment in regenerative medicine. The company’s policy is to build a global production structure for
contract manufacturing of pharmaceuticals for other companies in the Pharmaceutical-Related business, and to set up a
structure to increase production in line with demand in the PharmaPackaging business.
Strengths and weaknesses
◤ Nipro’s strengths are its global presence in mainstay dialyzers, brand equity built on success in medical devices such as
injectables and infusions, and speedy decision-making.
◤ Its weaknesses are the existence of low-margin products due to its business policy of supplying a broad range of products
essential for medical treatment, global expansion of vascular products, a focus area, and low asset efficiency.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
05/53
R Coverage
Key financial data
Source: Shared Research based on company data; per-share data adjusted for stock splits Notes: Figures may differ from company materials due to differences in rounding methods.
R&D expenses Capital expenditures Depreciation
Source: Shared Research based on company data
Income statement FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Est.Sales 212,013 241,020 300,752 325,084 366,650 359,699 395,397 426,399 442,516 470,000
YoY 8.2% 13.7% 24.8% 8.1% 12.8% -1.9% 9.9% 7.8% 3.8% 6.2%Gross profit 62,760 65,706 87,532 99,558 115,876 115,097 127,125 130,631 134,211 143,500
YoY 7.9% 4.7% 33.2% 13.7% 16.4% -0.7% 10.5% 2.8% 2.7% 6.9%GPM 29.6% 27.3% 29.1% 30.6% 31.6% 32.0% 32.2% 30.6% 30.3% 30.5%
Operating profit 15,825 11,370 12,289 16,571 24,204 28,770 27,088 23,827 26,420 26,500YoY -8.1% -28.2% 8.1% 34.8% 46.1% 18.9% -5.8% -12.0% 10.9% 0.3%OPM 7.5% 4.7% 4.1% 5.1% 6.6% 8.0% 6.9% 5.6% 6.0% 5.6%
Recurring profit 11,983 14,363 11,918 19,661 14,623 23,166 22,684 22,431 23,417 24,500YoY -10.4% 19.9% -17.0% 65.0% -25.6% 58.4% -2.1% -1.1% 4.4% 4.6%RPM 5.7% 6.0% 4.0% 6.0% 4.0% 6.4% 5.7% 5.3% 5.3% 5.2%
Net income 4,585 10,231 2,861 12,470 19,718 11,346 11,829 12,136 -12,281 13,500YoY 86.8% 123.1% -72.0% 335.9% 58.1% -42.5% 4.3% 2.6% - -Net margin 2.2% 4.2% 1.0% 3.8% 5.4% 3.2% 3.0% 2.8% - 2.9%
Per share data (split-adjusted; JPY)Shares issued (year-end; '000) 171,459 171,459 171,459 171,459 171,459 171,459 171,459 171,459 171,459 171,459 EPS 35.3 60.0 18.2 81.0 116.2 67.6 71.2 73.7 -75.3 82.8 EPS (fully diluted) 31.0 54.1 16.3 - 114.7 61.3 64.5 66.8 - - Dividend per share 23.5 27.5 30.5 32.5 33.5 29.0 28.5 28.0 13.5 27.0 Book value per share 643.9 703.5 832.1 988.8 977.6 999.5 1,037.3 990.1 912.2 - Balance sheet (JPYmn)
Cash and cash equivalents 95,737 106,000 84,957 112,871 126,667 123,188 141,940 129,438 95,925 Total current assets 250,435 287,974 296,119 350,346 368,117 386,775 429,087 442,953 433,030 Tangible fixed assets 145,678 174,702 191,593 220,195 223,756 244,222 270,273 284,483 307,551 Investments and other assets 84,420 82,360 89,724 80,395 72,094 78,004 81,091 78,986 57,882 Intangible fixed assets 19,151 34,265 42,216 44,369 44,913 43,836 45,994 39,398 33,401 Total assets 499,686 579,302 619,654 695,306 708,882 752,839 826,447 845,821 831,865
Accounts payable 37,721 40,878 45,661 51,750 56,185 57,587 62,105 69,646 69,539 Short-term debt 124,557 139,526 157,543 175,027 139,154 144,200 130,079 144,590 165,096
Total current liabilities 189,089 213,758 250,714 278,401 252,147 251,792 251,184 274,277 289,404 Long-term debt 190,294 228,993 224,346 229,340 271,407 314,265 383,061 390,546 370,610
Total fixed liabilities 196,645 236,780 232,979 238,095 281,227 324,639 391,776 399,712 381,223 Total liabilities 385,735 450,539 483,694 516,496 533,375 576,431 642,961 673,990 670,628 Net assets 499,686 579,302 619,654 695,306 708,882 752,839 826,447 845,821 831,865 Total interest-bearing debt 314,851 368,519 381,892 404,367 410,561 458,465 513,140 535,136 535,706 Cash flow statement (JPYmn)Cash flows from operating activities 15,486 22,593 21,552 27,981 29,934 33,472 41,046 41,362 37,246 Cash flows from investing activities -67,919 -37,431 -31,936 -29,713 -16,513 -66,351 -64,140 -64,712 -58,272 Cash flows from financing activities 45,725 23,359 -16,346 26,598 -3,633 36,483 47,341 12,646 -4,566 Financial ratiosROA (RP-based) 2.5% 2.7% 2.0% 3.0% 2.1% 3.2% 2.9% 2.7% 2.8% ROE 4.2% 8.9% 2.3% 8.5% 11.8% 6.8% 7.0% 7.3% -7.9% Equity ratio 22.0% 20.7% 20.2% 24.1% 23.4% 22.1% 20.9% 19.1% 17.9%
4,000 4,931 5,507 5,8568,078 8,190 8,050
3,7503,550
4,6545,548
7,924 8,235 9,350
139 163107
112
111 100
7,890 8,64510,269
11,517
16,113 16,52617,400
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20Est.
Regenerative medicine-relatedPharmaPackagingPharmaceutical-RelatedMedical-Related
(JPYmn)
11,666 12,13520,421 21,519 18,489 22,640 26,300
10,52417,473
21,183 17,43617,297
21,009 14,500
5,215
8,374
5,9135,324 9,020
5,579 6,000
15,900
3,683
5,527
2,390 9,547 12,909 7,047
31,089
43,51149,910
53,82657,718 56,276
62,700
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20Est.
CorporateRegenerative medicine-relatedPharmaPackagingPharmaceutical-RelatedMedical-Related
(JPYmn)
12,896 13,356 15,133 14,231 14,836 15,931 16,800
8,777 9,5689,326 10,761 11,042 11,646 12,3002,394
3,0233,402 3,302 3,147
3,712 3,300
4,400
1,0831,718
2,283 2,832 3,5393,962
25,15127,667
30,147 31,128 32,56535,253
36,800
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20Est.
CorporateRegenerative medicine-relatedPharmaPackagingPharmaceutical-RelatedMedical-Related
(JPYmn)
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
06/53
R Coverage
Recent updates
Highlights On May 22, 2020, Nipro Corporation announced the introduction of performance-linked stock compensation program.
The company announced that at a board of directors meeting held on the same day, it had resolved to introduce the
performance-linked stock compensation program Board Benefit Trust (BBT) and to submit a proposal regarding this at the 67th
General Meeting of Shareholders scheduled for June 26, 2020.
The purpose of BBT is to better clarify the correlation between the compensation of directors (excluding outside directors) and
the company’s earnings results and share price, thereby raising directors’ motivation to contribute to enhancing medium- to
long-term earnings performance and enterprise value. See the company release for details of the program.
On May 11, 2020, the company announced earnings results for full-year FY03/20; see the results section for details.
On May 8, 2020, the company announced revisions to its FY03/20 forecast.
Revisions to consolidated FY03/20 forecast
▷ Sales: JPY442.5bn (previously JPY444.8bn)
▷ Operating profit: JPY26.4bn (JPY25.8bn)
▷ Recurring profit: JPY23.4bn (JPY22.1bn)
▷ Net loss*: JPY12.3bn (net income of JPY12.2bn)
▷ Loss per share: JPY75.40 (EPS of JPY74.80)
* Net income (loss) attributable to owners of the parent
Reasons for revision
The company revised down its sales forecast on a drop in consultations and outpatient clinic visits as well as suspension of new
hires especially in Q4 as COVID-19 spread. Meanwhile, operating profit and recurring profit are likely to come in above previous
forecasts. Profit benefited from solid growth in hemodialysis equipment sales, a smaller drag from forex than formerly expected,
and changes to ROE-based performance linked bonuses. That being said, Nipro forecasts a net loss of JPY12.3bn. It expects to
book an impairment loss of JPY29.9bn (on investment securities) due to falling share prices amid the pandemic and a further
JPY5.6bn write-down on goodwill and fixed assets. In addition to these extraordinary losses, it also expects to book a valuation
allowance for deferred tax assets and a negative impact on minority interests from deteriorating performance at some
subsidiaries.
On March 31 2020, the company announced the recording of an extraordinary loss (loss on valuation of investment securities)
and a revision to its year-end dividend forecast.
On the same day, the company recorded an extraordinary loss (loss on valuation of investment securities) in FY03/20 and revised
its FY03/20 year-end dividend forecast announced on February 6, 2020.
Extraordinary loss: The company booked an impairment loss of JPY29.9bn (loss on valuation of investment securities) for those
investment securities whose share prices have fallen significantly from their prices at the time of acquisition and for which the
probability of recovery in the short term was deemed low.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
07/53
R Coverage
Revision to dividend forecast: The company revised its FY03/20 year-end dividend from the previously announced JPY11.50 per
share to no dividend payment as a result of the abovementioned extraordinary loss and in line with its dividend policy (paying
dividends based on the sum of 75% of consolidated net income and 25% of parent net income; the company had planned to pay
out 38% of this amount in FY03/20.)
At present, the company is carefully investigating the impact of these developments on FY03/20 performance and will promptly
announce any conclusions as soon as they become clear.
On March 25 2020, the company announced the issuance of its third series unsecured bonds (privately placed SDGs promotion
bonds).
The third series unsecured bonds will be guaranteed by Resona Bank and their private placement will be limited to qualified
institutional investors. The proceeds from the new unsecured bond issue was used to repay the company’s second series
unsecured bonds, which matured on March 25, 2020. For the second series unsecured bonds, Resona Bank also served as the
guarantor and their placement was limited to qualified institutional investors.
The privately placed unsecured bonds was issued under Resona Bank’s private placement SDGs promotion bonds financing
program. An amount equal to 0.1% of the proceeds from the issue will be held out by Resona Bank and donated to organizations
that support SDGs, which is in keeping with Nipro’s guiding philosophy of supporting the health of all people around the world.
Overview of corporate bond issue
Total issue amount: JPY3.0bn
Face value of each bond: JPY100mn
Coupon rate: 0.250% per annum
Payment amount: JPY100 per JPY100 of face value
Redemption amount: JPY100 per JPY100 of face value
Maturity date: March 25, 2025
Redemption method: Lump-sum redemption upon maturity
Interest payment dates: March 25 and September 25
Fiscal agent, issuing agent, and payment agent: Resona Bank, Ltd.
Underwriter: Resona Bank, Ltd.
Guarantor: Resona Bank, Ltd.
Transfer agent: Japan Securities Depository Center, Inc.
Sustainable Development Goals (SDGs): The 2030 Agenda for Sustainable Development, adopted by the United Nations General Assembly in
September 2015 and look to 2030, laid out 17 global goals (with a total of 169 targets under those goals) as “a blueprint to achieve a better and more
sustainable future for all.” The SGDs are meant to be universal goals for adoption by not just by developing countries but developed countries as well,
and Japan is among the countries actively working toward those goals.
On March 17, 2020, Shared Research updated the report following interviews with the company.
On March 3, 2020, the company announced the establishment of a dialysate manufacturing company in the US.
The company announced that its consolidated subsidiary Nipro Medical Corporation (headquarters: Miami, Florida) had acquired
the dialysate manufacturing business from US-based dialysate manufacture and sales company Dimesol USA LLC (hereafter
“Dimesol”), and established a subsidiary company for dialysate manufacturing in Lewisberry, Pennsylvania (US) on December 13,
2019.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
08/53
R Coverage
The company already sells dialysis-related products within the US, but the company indicated a policy to expand its product
lineup in the US market (which has one of the world’s largest number of dialysis patients at approximately 500,000), adding
dialysate to conventional dialyzers and disposable dialysis products such as extracorporeal blood circuits.
Details of the new company
(1) Name: Nipro Renal Solutions USA Corporation
(2) Representative: Joseph Dawson (President)
(3) Location: Lewisberry, Pennsylvania, USA
(4) Date established: December 13, 2019
(5) Business commencement date: January 2, 2020
(6) Capital: USD8.9mn
(7) Business: Manufacture and sale of dialysate (liquid and powder)
Details of Dimesol
(1) Name: Dimesol USA LLC
(2) Representatives: Daniel Rangel, Stephen Callaghan
(3) Location: Lewisberry, Pennsylvania, USA
(4) Date established: October 17, 2016
(5) Capital: USD200,000
(6) Business: Manufacture and sale of dialysate (liquid and powder)
Dialysate: A liquid used in hemodialysis which comes into contact with the blood across the dialyzer’s dialysis membrane, with certain components
from the blood being transferred to the dialysate, or from the dialysate into the blood, through small holes in the dialysis membrane. The constituents
of dialysate concentrate (powder) vary according to the product, but principally include calcium, bicarbonate, potassium, and magnesium.
For previous releases and developments, please refer to the News and topics section.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
09/53
R Coverage
Trends and outlook
Quarterly trends and results
Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods.
Sales by quarter Operating profit by quarter
Source: Shared Research based on company data
Cumulative(JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 % of FY FY Est.Sales 103,201 208,325 321,312 426,399 109,761 222,668 336,721 442,516 100.0% 442,516
YoY 10.3% 10.9% 9.3% 7.8% 6.4% 6.9% 4.8% 3.8% 3.8%Gross profit 33,589 63,944 99,220 130,631 34,040 66,720 102,111 134,211
YoY 10.5% 7.7% 5.1% 2.8% 1.3% 4.3% 2.9% 2.7% GPM 32.5% 30.7% 30.9% 30.6% 31.0% 30.0% 30.3% 30.3%
SG&A expenses 26,091 51,922 78,808 106,804 27,032 53,948 82,120 107,791 YoY 7.6% 8.4% 7.0% 6.8% 3.6% 3.9% 4.2% 0.9% SG&A ratio 25.3% 24.9% 24.5% 25.0% 24.6% 24.2% 24.4% 24.4%
Operating profit 7,498 12,022 20,411 23,827 7,008 12,772 19,990 26,420 100.0% 26,420YoY 22.0% 4.6% -1.8% -12.0% -6.5% 6.2% -2.1% 10.9% 10.9%OPM 7.3% 5.8% 6.4% 5.6% 6.4% 5.7% 5.9% 6.0% 6.0%
Recurring profit 7,953 13,699 18,772 22,431 5,128 9,885 17,767 23,417 100.0% 23,417YoY 27.4% 16.3% -6.7% -1.1% -35.5% -27.8% -5.4% 4.4% 4.4%RPM 7.7% 6.6% 5.8% 5.3% 4.7% 4.4% 5.3% 5.3% 5.3%
Net income 4,682 7,615 9,852 12,136 2,792 5,886 10,858 -12,281 - -12,281YoY 10.4% -8.1% -28.7% 2.6% -40.4% -22.7% 10.2% - -Net margin 4.5% 3.7% 3.1% 2.8% 2.5% 2.6% 3.2% - -2.8%
Quarterly(JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Sales 103,201 105,124 112,987 105,087 109,761 112,907 114,053 105,795
YoY 10.3% 11.4% 6.6% 3.5% 6.4% 7.4% 0.9% 0.7%Gross profit 33,589 30,355 35,276 31,411 34,040 32,680 35,391 32,100
YoY 10.5% 4.7% 0.8% -4.0% 1.3% 7.7% 0.3% 2.2%GPM 32.5% 28.9% 31.2% 29.9% 31.0% 28.9% 31.0% 30.3%
SG&A expenses 26,091 25,831 26,886 27,996 27,032 26,916 28,172 25,671YoY 7.6% 9.2% 4.5% 6.0% 3.6% 4.2% 4.8% -8.3%SG&A ratio 25.3% 24.6% 23.8% 26.6% 24.6% 23.8% 24.7% 24.3%
Operating profit 7,498 4,524 8,389 3,416 7,008 5,764 7,218 6,430YoY 22.0% -15.4% -9.6% -45.9% -6.5% 27.4% -14.0% 88.2%OPM 7.3% 4.3% 7.4% 3.3% 6.4% 5.1% 6.3% 6.1%
Recurring profit 7,953 5,746 5,073 3,659 5,128 4,757 7,882 5,650YoY 27.4% 3.8% -39.2% 42.6% -35.5% -17.2% 55.4% 54.4%RPM 7.7% 5.5% 4.5% 3.5% 4.7% 4.2% 6.9% 5.3%
Net income 4,682 2,933 2,237 2,284 2,792 3,094 4,972 -23,139YoY 10.4% -27.4% -59.6% - -40.4% 5.5% 122.3% -Net margin 4.5% 2.8% 2.0% 2.2% 2.5% 2.7% 4.4% -
FY03/20FY03/20
FY03/20FY03/19
FY03/19
6,148 7,498 7,008
5,347 4,524 5,764
9,280 8,389 7,218
6,3133,416 6,430
27,08823,827
26,420
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
FY03/18 FY03/19 FY03/20
Q1 Q2 Q3 Q4(JPYmn)
93,552 103,201 109,761
94,351 105,124 112,907
105,966112,987 114,053
101,528105,087 105,795
395,397426,399 442,516
0
100,000
200,000
300,000
400,000
500,000
FY03/18 FY03/19 FY03/20
Q1 Q2 Q3 Q4(JPYmn)
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
10/53
R Coverage
Quarterly earnings by segment
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Cumulative(JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Total sales 103,201 208,325 321,312 426,399 109,761 222,668 336,721 442,516
YoY 10.3% 10.9% 9.3% 7.8% 6.4% 6.9% 4.8% 3.8%Medical-Related 79,257 159,686 247,883 327,359 83,732 168,216 255,874 335,767
YoY 14.3% 14.6% 12.0% 0.0% 5.6% 5.3% 3.2% 2.6%% of total sales 76.8% 76.7% 77.1% 76.8% 76.3% 75.5% 76.0% 75.9%
Pharmaceutical-Related 14,818 30,375 46,548 63,482 17,939 35,656 53,321 70,357YoY -7.5% -3.2% 0.5% 0.0% 21.1% 17.4% 14.6% 10.8%% of total sales 14.4% 14.6% 14.5% 14.9% 16.3% 16.0% 15.8% 15.9%
PharmaPackaging 9,118 18,247 26,856 35,526 9,053 18,712 27,398 36,217YoY 11.3% 6.2% 2.7% 0.0% -0.7% 2.5% 2.0% 1.9%% of total sales 8.8% 8.8% 8.4% 8.3% 8.2% 8.4% 8.1% 8.2%
Other 7 15 23 31 35 81 127 174YoY 0.0% 7.1% 4.5% 0.0% 400.0% 440.0% 452.2% 461.3%% of total sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Operating profit 7,498 12,022 20,411 23,827 7,008 12,772 19,990 26,420YoY 22.0% 4.6% -1.8% -12.0% -6.5% 6.2% -2.1% 10.9%Medical-Related 11,134 18,959 30,852 36,722 10,534 19,178 28,859 36,249
YoY 42.8% 15.3% 11.2% 0.0% -5.4% 1.2% -6.5% -1.3%OPM 14.0% 11.9% 12.4% 11.2% 12.6% 11.4% 11.3% 10.8%
Pharmaceutical-Related 2,139 4,281 7,505 10,662 3,888 6,085 8,532 13,196 YoY -34.6% -15.3% -8.9% 0.0% 81.8% 42.1% 13.7% 23.8%OPM 14.4% 14.1% 16.1% 16.8% 21.7% 17.1% 16.0% 18.8%
PharmaPackaging 45 323 610 778 -5 502 518 675 YoY - 1918.8% 47.3% 0.0% - 55.4% -15.1% -13.2%OPM 0.5% 1.8% 2.3% 2.2% -0.1% 2.7% 1.9% 1.9%
Other 33 40 81 146 25 92 128 176YoY 266.7% 53.8% 92.9% 94.7% -24.2% 130.0% 58.0% 20.5%OPM 471.4% 266.7% 352.2% 471.0% 71.4% 113.6% 100.8% 101.1%
Adjustments -5,853 -11,582 -18,637 -24,482 -7,434 -13,087 -18,048 -23,877 Quarterly(JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Total sales 103,201 105,124 112,987 105,087 109,761 112,907 114,053 105,795
YoY 10.3% 11.4% 6.6% 3.5% 6.4% 7.4% 0.9% 0.7%Medical-Related 79,257 80,429 88,197 79,476 83,732 84,484 87,658 79,893
YoY 14.3% 14.9% 7.5% -25.0% 5.6% 5.0% -0.6% 0.5%% of total sales 76.8% 76.5% 78.1% 75.6% 76.3% 74.8% 76.9% 75.5%
Pharmaceutical-Related 14,818 15,557 16,173 16,934 17,939 17,717 17,665 17,036YoY -7.5% 1.3% 8.1% -1.3% 21.1% 13.9% 9.2% 0.6%% of total sales 14.4% 14.8% 14.3% 16.1% 16.3% 15.7% 15.5% 16.1%
PharmaPackaging 9,118 9,129 8,609 8,670 9,053 9,659 8,686 8,819YoY 11.3% 1.6% -3.9% -7.6% -0.7% 5.8% 0.9% 1.7%% of total sales 8.8% 8.7% 7.6% 8.3% 8.2% 8.6% 7.6% 8.3%
Other 7 8 8 8 35 46 46 47YoY 0.0% 14.3% 0.0% -11.1% 400.0% 475.0% 475.0% 487.5%% of total sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Operating profit 7,498 4,524 8,389 3,416 7,008 5,764 7,218 6,430YoY 22.0% -15.4% -9.6% -45.9% -6.5% 27.4% -14.0% 88.2%Medical-Related 11,134 7,825 11,893 5,870 10,534 8,644 9,681 7,390
YoY 42.8% -9.5% 5.3% - -5.4% 10.5% -18.6% 25.9%OPM 14.0% 9.7% 13.5% 7.4% 12.6% 10.2% 11.0% 9.2%
Pharmaceutical-Related 2,139 2,142 3,224 3,157 3,888 2,197 2,447 4,664 YoY -34.6% 20.0% 1.4% - 81.8% 2.6% -24.1% 47.7%OPM 14.4% 13.8% 19.9% 18.6% 21.7% 12.4% 13.9% 27.4%
PharmaPackaging 45 278 287 168 -5 507 16 157 YoY - 54.4% -27.9% - - 82.4% -94.4% -6.5%OPM 0.5% 3.0% 3.3% 1.9% -0.1% 5.2% 0.2% 1.8%
Other 33 7 41 65 25 67 36 48YoY 266.7% -58.8% 156.3% - -24.2% 857.1% -12.2% -26.2%OPM 471.4% 87.5% 512.5% 812.5% 71.4% 145.7% 78.3% 102.1%
Adjustments -5,853 -5,729 -7,055 -5,845 -7,434 -5,653 -4,961 -5,829
FY03/20
FY03/20
FY03/19
FY03/19
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
11/53
R Coverage
Full-year FY03/20 results (out May 11, 2020)
Overview: Full-year FY03/20 (April 2019 to March 2020)
▷ Sales: JPY442.5bn (+3.8% YoY)
▷ Operating profit: JPY26.4bn (+10.9% YoY)
▷ Recurring profit: JPY23.4bn (+4.4% YoY)
▷ Net loss*: JPY 12.3bn (net income of JPY12.1bn in FY03/19)
* Net loss attributable to owners of the parent
▷ Business environment: As COVID-19 has spread, the market contracted as a result of patients cutting back on hospital visits and
hospitals reducing outpatient care. However, demand has picked up in some respects due to calls to increase production of
ventilators and medications said to be effective in treating COVID-19, as well as numerous vaccine development projects.
▷ Company response: The company maintained efforts to increase domestic market share, expand overseas sales, and cut
production costs while developing products that address user needs. Sales increased 3.8% YoY as the Pharmaceutical-Related
business reported solid performance.
▷ Operating profit increased 10.9% YoY on brisk sales of dialyzers and other core products, despite the unfavorable impact of
NHI drug price revisions in October 2019 and forex fluctuations (particularly against the yuan and euro). Recurring profit grew
only 4.4% YoY, because the company booked a JPY3.0bn foreign exchange loss as a non-operating expense. The company
recorded a substantial net loss because of securities valuation losses due to a steep decline in world share prices in reaction to
the COVID-19 pandemic and impairment of fixed assets of subsidiaries whose performance had deteriorated.
Performance by segment Medical-Related business
▷ In FY03/20, sales (to external customers) increased 2.6% YoY to JPY335.8bn.
▷ Segment profit: JPY36.2bn (-1.3% YoY)
▷ Domestic sales: Domestic sales (product sales) came to JPY267.7bn (+2.6% YoY). Sales of mainstay dialysis-related products
(dialyzers and HDF filters*) increased 6.9% YoY to JPY37.4bn. In pharmaceuticals, sales to pharmacies increased for both oral
drugs and external preparations, with contributing factors including integration of Nipro ES Pharma’s sales division and
additional approval of a dexmedetomidine hydrochloride injection. However, sales growth was relatively modest due to
supply constraints stemming from problems with antibiotics ingredients at the beginning of FY03/20, reduced purchases after
the October 2010 NHI drug price revisions, and cuts in hospital treatments in response to the spread of COVID-19. In the
regenerative medicine business, the company began supplying autologous bone marrow-derived mesenchymal stem cells
(trade name: Stemirac®) as a treatment for spinal cord injury in May 2020.
*HDF filters are similar in structure to dialyzers, but use hemofiltration versus hemodialysis in dialyzers.
▷ Overseas sales: Overseas sales (product sales) were JPY174.8bn (+5.7% YoY), driven by growth of dialysis-related products
such as dialyzers and other dialysis equipment (up 9.4% YoY to JPY83.5bn). In Q4 FY03/20, the company opened dialysis
centers in South Africa, Guatemala, Ecuador, and India, and plans to set up more in Latin America, India, Asia, and Africa.
▷ Overseas production facilities: Production was suspended for some time at plants in China and India after their governments
declared a state of emergency in response to the spread of COVID-19. However, the company negotiated with governments
in other countries where it has production facilities and received permission to continue production after efforts to secure
personnel and raw materials. Considering country risk, the company has decided to set up a new dialyzer production facility at
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
12/53
R Coverage
the Vietnam plant in 2022 instead of the factory in Hefei, China, and the factory in India will be working on three new dialyzer
production lines in 2020–21.
Pharmaceutical-Related business
▷ In FY03/20, sales (to external customers) in this business were up 10.8% YoY to JPY70.4bn.
▷ Segment profit: JPY13.2bn (+23.8% YoY)
▷ Contract pharmaceutical manufacturing and development: Proposing contract manufacturing of all dosage forms handled by
Nipro group, including oral dosage, injectables, and external preparations, and highly pharmacologically active preparations
(such as antibiotics, steroids, and anticancer agents); focus on contract manufacturing of investigational new drugs and
contract services for inspection and packaging, as well as development proposals for use (and packaging as kits) of
pharmaceutical containers and delivery systems
▷ Drug manufacturing: In addition to pharmaceutical production facilities in Kasukabe and Kawagoe in Saitama Prefecture
acquired in FY03/19, major subsidiary Nipro Pharma Corporation acquired all shares in Tanabe Pharma Corporation’s Yoshiki
factory in April 2019, which began operation as Nipro Pharma Hida Factory Corporation and continued to contribute to sales
and profit growth. The Vietnam factory began contract manufacturing in the previous fiscal year, and in 1H FY03/20 the factory
was operating at full tilt, contributing to sales and profits.
PharmaPackaging business
▷ In FY03/20, sales (to external customers) were JPY36.2bn (+1.9% YoY).
▷ Segment profit: JPY675mn (-13.2% YoY)
▷ The company strengthened global sales of medical devices and kit products and stepped up sales of high-performance
products that combine glass medical packaging with other packaging materials for a one-stop solution. In manufacturing, the
company carried out modifications to equipment to enable ad hoc responses to changes in demand, and sought to boost
quality and cut costs through 100% camera inspection, both domestically and overseas.
▷ Overseas sales: Sales of glass tubing increased in France, US, and India amid global growth in glass tubing demand. Sales of
medical containers were driven by robust sales of sterilized syringes made in Germany. Looking ahead, the company plans to
increase production of high-grade products targeting the markets for vaccines and bio-products such as sterilized syringes,
which are selling fast. In China, Nipro began deliveries of medical containers to a major vaccine manufacturer.
▷ Domestic sales: Vial sales had been impacted by customer circumstances but are now recovering, while in medical devices,
sales of kit products and syringes were strong. Sales of rubber stoppers, which the company began producing at the Biwako
factory, were brisk.
Other business
▷ Sales (to external customers) in the Other business in FY03/20 including sales in the real-estate rental business were JPY174mn
(+461.3% YoY).
▷ Segment profit: JPY176mn (+20.5% YoY)
For details on previous quarterly and annual results, please refer to the Historical financial statements section.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
13/53
R Coverage
Full-year company forecasts
Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods.
The company’s FY03/21 forecast calls for sales of JPY470.0bn (+6.2% YoY), operating profit of JPY26.5bn (+0.3% YoY), recurring
profit of JPY245bn (+4.6% YoY), and net income of JPY13.5bn (JPY12.3bn net loss in FY03/20).
The company has reflected the impact of the COVID-19 spread on overseas production. It assumes no impact on its earnings
forecast in the domestic market in anticipation of COVID 19-related one-time demand and the difficulty of predicting at this stage
when the pandemic will end, although some impact is likely if the trend of patients cutting back on hospital visits and reduction
of outpatient treatment were to continue. In global markets, the company has factored in opportunity loss, assuming earnings
will bottom in Q1 due to the COVID-19 impact such as delays in increasing production at overseas plants following lockdown
measures and logistics restrictions.
Forecast sales of JPY470.0bn and operating profit of JPY26.5bn break down by the three main segments as follows (before
adjustments). Medical-Related business: Sales of JPY358.3bn (+6.7% YoY) and operating profit of JPY39.0bn (+7.6%);
Pharmaceutical-Related business: Sales of JPY72.3bn (+2.7%) and operating profit of JPY11.0bn (-16.6%), and PharmaPackaging
business: Sales of JPY39.3bn (+8.5%) and operating profit of JPY1.4bn (+109.0%).
1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Est. 2H Est. FY Est.Sales 187,903 207,494 395,397 208,325 218,074 426,399 222,668 219,848 442,516 229,650 240,350 470,000
YoY 5.8% 13.9% 9.9% 10.9% 5.1% 7.8% 6.9% 0.8% 3.8% 3.1% 9.3% 6.2%Cost of sales 128,510 139,762 268,272 144,380 151,388 295,768 155,947 152,953 308,900 326,500Gross profit 59,393 67,732 127,125 63,944 66,687 130,631 66,720 69,180 135,900 143,500
GPM 31.6% 32.6% 32.2% 30.7% 30.6% 30.6% 30.0% 31.5% 30.7% 30.5%SG&A expenses 47,897 52,139 100,036 51,922 54,882 106,804 53,948 56,152 110,100 117,000
SG&A ratio 25.5% 25.1% 25.3% 24.9% 25.2% 25.0% 24.2% 25.5% 24.9% 24.9%Operating profit 11,495 15,593 27,088 12,022 11,805 23,827 12,772 13,648 26,420 11,950 14,550 26,500
YoY -27.9% 21.6% -5.8% 4.6% -24.3% -12.0% 6.2% 15.6% 10.9% -6.4% 6.6% 0.3%OPM 6.1% 7.5% 6.9% 5.8% 5.4% 5.6% 5.7% 6.2% 6.0% 5.2% 6.1% 5.6%
Recurring profit 11,776 10,908 22,684 13,699 8,732 22,431 9,885 13,532 23,417 11,400 13,100 24,500YoY 76.8% -33.9% -2.1% 16.3% -19.9% -1.1% -27.8% 55.0% 4.4% 15.3% -3.2% 4.6%RPM 6.3% 5.3% 5.7% 6.6% 4.0% 5.3% 4.4% 6.2% 5.3% 5.0% 5.5% 5.2%
Net income 8,282 3,547 11,829 7,615 4,521 12,136 5,886 -18,167 -12,281 4,700 8,800 13,500YoY 183.3% -57.9% 4.3% -8.1% 27.5% 2.6% -22.7% -501.8% -201.2% -20.1% -148.4% -209.9%Net margin 4.4% 1.7% 3.0% 3.7% 2.1% 2.8% 2.6% -8.3% -2.8% 2.0% 3.7% 2.9%
FY03/19(JPYmn)
FY03/18 FY03/21FY03/20
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
14/53
R Coverage
Medium-term outlook
While Nipro has not released a medium-term management plan, it targets sales of JPY500bn in FY03/21and looks to increase sales
to JPY1tn by FY03/31.
According to the company, its founder and previous president Minoru Sano was the first to articulate JPY1tn as a medium-term
target for consolidated sales, back in 2012. As a stepping stone toward that target, in the three years to FY03/21 the company
aims to raise sales by another JPY100bn (from about JPY400bn in FY03/18). As Nipro is forecasting FY03/19 sales of JPY426.8bn, in
FY03/21 it must achieve sales growth of 8.5% YoY, or around JPY35bn more than the plan for FY03/20. While expecting sales to
be driven higher by ongoing growth in demand for existing products, Shared Research believes the following will also prove
critical:
Medical-Related business
◤ Global expansion in dialyzers and other dialysis-related products, particularly in North America, China, and India
◤ Strengthened lineup of products to join dialyzers as key pillars of earnings (e.g., vascular-related products), accompanied by
expanded sales in Japan and overseas
◤ Further diversification into new business areas such as endoscopes (subsidiary Machida Endoscope), orthopedic surgery, and
surgical equipment
◤ Increase in scope of generic drug offerings
Pharmaceutical-Related business
Increase in business alliances, through greater efforts to put forward joint development type contract manufacturing projects
PharmaPackaging business
Business expansion underpinned by increase in overseas production capacity
Nipro expects its regenerative medicine business to ultimately contribute to sales. Regenerative medicines are innovative
treatments approved under the Sakigake Designation system for accelerated review. In June 2018, the company applied to the
MHLW for approval to manufacture and market as regenerative medicine product a revolutionary new treatment for spinal
damage, which earlier had obtained Sakigake Designation for accelerated review. Approval was granted in December 2018.
However, even if this product obtains approval, sales are likely to be small for the time being; hence Shared Research expects
minimal contribution to earnings in FY03/21.
Sakigake Designation System: The MHLW established the Sakigake Designation System to address the issue of unapproved drugs or off-label uses of
drugs that are approved in other developed countries but not in Japan, shortening the review period by increasing the number of reviewers in the
Pharmaceuticals and Medical Devices Agency (PMDA) and assessing the medical necessity of submitted requests for development from patient
advocacy groups, academic societies, and so forth. In order to provide patients with the world’s most advanced treatments at the earliest possible
juncture, this system enables innovative new drugs which meet several requirements to be treated as targets of priority consultation and review at a
relatively early stage of development, while providing the sponsors with full support to establish the manufacturing system and promising smooth
release into clinical practice. In principle, drugs designated under this system are expected to demonstrate extremely strong efficacy against
life-threatening conditions, through a novel mechanism of action.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
15/53
R Coverage
Business
Business model Nipro's sales strategy rests on identifying needs in medical settings and parlaying that knowledge into new products. The
company is a major force in Japan’s medical device market. Nipro's business scope is not confined to medical devices, however; it
extends to other aspects of medicine, also encompassing the manufacturing and sales of own-brand generic drugs and contract
manufacturing of drugs for other pharmaceutical companies as well as regenerative medicine. The company’s medical devices
and own-brand generic drugs principally belong to the Medical-Related business, while contract manufacturing of
pharmaceuticals for other companies is handled by the Pharmaceutical-Related business. Nipro also has a PharmaPackaging
business, a part of the company since its founding, that manufactures and sells glass products (such as vials and ampoules) and
other forms of pharmaceutical packaging.
Business composition, showing group companies included in each business segment
Source: Shared Research based on company data (as of March 31, 2018)
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
16/53
R Coverage
Business overview by segment
Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods.
The figure below shows the weightings of individual product categories within each segment, notable for the breadth of product
categories in the Medical-Related business, and the existence of product categories that blur the lines between the
Medical-Related, Pharmaceutical-Related, and PharmaPackaging businesses.
Segment sales and profit FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19(JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act.Sales 177,829 195,942 212,013 241,020 300,752 325,084 366,650 359,699 395,397 426,399
YoY 1.1% 10.2% 8.2% 13.7% 24.8% 8.1% 12.8% -1.9% 9.9% 7.8%Medical-Related 118,517 132,816 145,082 169,971 221,362 237,777 272,167 262,198 300,117 327,359
YoY - 12.1% 9.2% 17.2% 30.2% 7.4% 14.5% -3.7% 14.5% 9.1%% of total sales 66.6% 67.8% 68.4% 70.5% 73.6% 73.1% 74.2% 72.9% 75.9% 76.8%
Pharmaceutical-Related 34,527 38,004 59,715 66,212 51,507 57,372 62,266 69,140 60,080 63,482YoY - 10.1% 57.1% 10.9% -22.2% 11.4% 8.5% 11.0% -13.1% 5.7%% of total sales 19.4% 19.4% 28.2% 27.5% 17.1% 17.6% 17.0% 19.2% 15.2% 14.9%
PharmaPackaging 24,338 24,703 6,953 4,602 27,610 29,830 32,184 28,331 35,170 35,526YoY - 1.5% -71.9% -33.8% 500.0% 8.0% 7.9% -12.0% 24.1% 1.0%% of total sales 13.7% 12.6% 3.3% 1.9% 9.2% 9.2% 8.8% 7.9% 8.9% 8.3%
Other 446 417 262 234 271 104 32 29 29 31YoY - -6.5% -37.2% -10.7% 15.8% -61.6% -69.2% -9.4% 0.0% 6.9%% of total sales 0.3% 0.2% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%
Operating profit 18,094 17,225 15,825 11,370 12,289 16,571 24,204 28,770 27,088 23,827 YoY 22.5% -4.8% -8.1% -28.2% 8.1% 34.8% 46.1% 18.9% -5.8% -12.0%Medical-Related 19,923 18,437 17,077 14,287 20,435 23,812 28,203 30,638 36,522 36,722
YoY - -7.5% -7.4% -16.3% 43.0% 16.5% 18.4% 8.6% 19.2% 0.5%OPM 16.8% 13.9% 11.8% 8.4% 9.2% 10.0% 10.4% 11.7% 12.2% 11.2%% of operating profit 110.1% 107.0% 107.9% 125.7% 166.3% 143.7% 116.5% 106.5% 134.8% 154.1%
Pharmaceutical-Related 2,102 1,657 4,939 3,988 8,013 10,553 12,059 14,135 11,428 10,662 YoY - -21.2% 198.1% -19.3% 100.9% 31.7% 14.3% 17.2% -19.2% -6.7%OPM 6.1% 4.4% 8.3% 6.0% 15.6% 18.4% 19.4% 20.4% 19.0% 16.8%% of operating profit 11.6% 9.6% 31.2% 35.1% 65.2% 63.7% 49.8% 49.1% 42.2% 44.7%
PharmaPackaging 3,103 2,700 454 600 -2,182 -2,889 -1,618 -1,313 367 778 YoY - -13.0% -83.2% 32.2% - - - - - 112.0%OPM 12.7% 10.9% 6.5% 13.0% -7.9% -9.7% -5.0% -4.6% 1.0% 2.2%% of operating profit 17.1% 15.7% 2.9% 5.3% -17.8% -17.4% -6.7% -4.6% 1.4% 3.3%
Others 63 88 230 220 216 131 61 -10 75 146 YoY - 39.7% 161.4% -4.3% -1.8% -39.4% -53.4% - - 94.7%OPM 14.1% 21.1% 87.8% 94.0% 79.7% 126.0% 190.6% -34.5% 258.6% 471.0%% of operating profit 0.3% 0.5% 1.5% 1.9% 1.8% 0.8% 0.3% 0.0% 0.3% 0.6%
Adjustments -7,098 -5,658 -6,876 -7,726 -14,192 -15,036 -14,502 -14,679 -21,306 -24,482
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
17/53
R Coverage
FY03/19 business breakdown by product category
Source: Shared Research based on company data
Segment changes
Nipro’s business is essentially comprised of three segments, but because of the high degree of interconnection between the
Medical-Related, Pharmaceutical-Related, and PharmaPackaging businesses, there have been changes in segment classification
accompanying business restructuring. The company retroactively reflects the new segmentation to the results of the preceding
fiscal year. The principal changes in segment classification are outlined below.
◤ FY03/13: The Materials segment became the Glass-Related business segment, with some divisions transferred to the
Pharmaceutical-Related business segment
◤ FY03/14: The Glass-related business in China transferred to the Pharmaceutical-Related business segment
◤ FY03/17: The Glass-Related business segment renamed PharmaPackaging business segment
◤ FY03/19: Some divisions of the Pharmaceutical-Related business segment transferred to the PharmaPackaging business
segment
The breakdowns of financial results by segment outlined earlier have been retroactively adjusted to reflect these changes.
Medical-Related business The Medical-Related business comprises a domestic operation and an international (overseas) operation, with the domestic
operation further divided into three areas: Medical devices, Own-brand generic drugs, and Dispensing pharmacies. In Medical
devices, the company sells products manufactured by Nipro, Nipro Medical Industries Co., Ltd., Goodman Co., Ltd., and
overseas subsidiaries. Cell Science & Technology Institute, Inc. develops, manufactures, and sells cell culture-related products.
NexMed International Co., Ltd. develops, manufactures, and sells orthopedic medical devices. In Own-brand generic drugs,
Nipro sells generic drugs manufactured in-house by the company and Nipro ES Pharma Co., Ltd., as well as those purchased from
Nipro Pharma Corporation and Zensei Pharmaceutical Co., Ltd. In Dispensing pharmacies, Nichihos Co., Ltd. manages dispensing
pharmacies and sells pharmaceuticals.
A DialyzerB Other dialysis-related productsC
D Injection-relatedE Diabetes-relatedF Infusion-relatedG CatheterH Testing productsI Nursing care productsJ Other injection and infusionK Injectable and kitsL Dialysis fluid and powdered preparationsM Artificial kidney replacement fluidN GlucometerO Diagnostic productsP Oral dosage productsQ VialsR External preparationsS Other pharmaceutical-relatedT Pharmaceutical medicinesU Ampoules and feeding tubesV Other tubes and bottlesW Thermo bottlesX Lighting bulbsOther Other glass packagingY Plastic productsZ Machinery; real estate
Mechanical circulatory support andcardiopulmonary bypass products
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
18/53
R Coverage
The international (overseas) operation is primarily engaged in manufacturing and selling medical devices. Nipro (Thailand)
Corporation, Nipro (Shanghai) Co., Ltd. and Nipro India Corporation Private Limited and other subsidiaries manufacture medical
devices, which are sold through Nipro and its overseas subsidiaries. In addition, Belgium-based Nipro Medical Europe N.V.,
US-based Nipro Medical Corporation, Nipro Trading (Shanghai) Co., Ltd., and other sales subsidiaries purchase products mainly
from Nipro and its subsidiaries, and sell medical devices and other items in their respective areas of operation.
FY03/19 sales breakdown at Medical-Related business (overseas operation only)
Source: Shared Research based on company data
Medical devices: the mainstay products
Broadly speaking, products handled by the Medical devices business fall into six categories: 1) Renal products, especially
dialyzers (artificial kidneys); 2) Mechanical circulatory support and cardiopulmonary bypass products; 3) Interventional products,
chiefly balloon catheters; 4) Diagnostic products, including testing equipment and reagents; 5) Injection and infusion products
such as syringes and infusion sets (tubes to deliver drugs directly into the body); and 6) Cell culture-related and other products,
including devices and bags used in culturing cells.
Renal products
Renal products represent Nipro’s core business, and its mainstay dialyzers (artificial kidneys) are ranked No. 1 in Japan, with the
company being one of the top two suppliers globally. Dialysis is used when kidney function falls below 10%, at which point the
body is no longer capable of adequately filtering the blood to remove excess water and waste products. In such cases, dialysis
can be employed to artificially perform the blood-cleansing normally done by the kidney.
Dialyzers fulfil the kidney's role in a dialysis system, and they are made of about 10,000 hollow fibers jacketed in a cylinder.
Passing the patient’s blood through the dialyzer removes excess fluid and waste products, after which the filtered blood is
pumped back into the patient’s body. The performance of a dialyzer is largely contingent on the size and density of pores on the
surface of the hollow fibers it contains. It is important to have on hand hollow fibers of different pore sizes, as the main toxins to
be removed vary according to the symptoms of the dialysis patient. Further, while large pores allow for swift removal of waste
products, the rapid change can adversely affect the patient. Here again, it is important to have a range of hollow fibers with
different pore sizes, which can be varied according to the patient’s physical condition. In short, fiber-manufacturing technology
providing control over pore size is a critical factor in determining dialyzer performance. In addition, as blood is temporarily
transported outside of the body, it is essential to prevent blood clotting inside the dialyzer; to that end, pores need to be spaced
uniformly and the synthetic membrane must have a smooth and flat surface.
Dialyzer (artificial kidney)
Source: Company data
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
19/53
R Coverage
Process of hemodialysis via dialyzer Inside of dialyzer packed with hollow fibers
Structure of dialyzer and hollow fiber
Source: Company data
Dialyzer shipments (consolidated; left: value basis, right: volume basis)
Source: Shared Research based on company data Note: The downturn in FY03/17 is due to a one-time factor (end of OEM shipments), which had a JPY1.2bn negative impact, and the effect of progressive yen appreciation. Shipments grew 11% on a volume basis.
Various factors can cause the kidney to stop functioning properly—a condition referred to as renal failure. Generally speaking,
there are two types of renal failure: acute renal failure, in which kidney function deteriorates rapidly, and chronic renal failure,
where there is a gradual decline in kidney function over time. In the former instance, kidney function can be largely restored if the
patient receives timely and appropriate treatment. In chronic renal failure, though, early detection is difficult as subjective
symptoms do not appear until the decline in function has reached a certain stage. In such cases, it is difficult to restore kidney
function once lost. When the kidney stops functioning properly, waste products accumulate in the body instead of being flushed
out during urination. Symptoms vary according to the degree and severity of renal failure and the cause, but can include urinary
abnormalities, swelling in some areas, and hypertension. Patients in the late stages of renal failure can develop uremia, which if
serious can cause convulsions. Treatment of end-stage renal failure is limited to two options: dialysis or kidney transplant.
Dialyzer and HDF filter: Hemodiafiltration (HDF) filters are used for hemodialysis, like dialyzers. They are medical devices with a similar structure to
dialyzers, i.e., a plastic cylinder filled with hollow fibers. However, the two devices have different specific applications. Dialyzers are used for
hemodialysis (HD) and HDF filters for hemodiafiltration (HDF) therapies. HDF combines HD, which excels in the removal of small-molecular-weight
substances, and hemofiltration (HF), which excels in the removal of medium-molecular-weight substances and low-molecular-weight proteins.
Physicians decide which device to use with a patient, depending on the patient’s blood data, diet, and other factors. However, some overseas hospitals
do not distinguish between HD and HDF. In this report, data for HDF filters and dialyzers are combined.
33,672 33,72234,022 34,595
37,61242,882
49,984
58,40955,402
61,74665,179
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19
OEM Overseas Japan(JPYmn)
33,00735,329
38,22241,517
46,829 46,715
52,13957,005
60,924
66,604
73,828
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19
('000 units)
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
20/53
R Coverage
Mechanical circulatory support and cardiopulmonary bypass products
Products in this category include left ventricular assist systems and cardiopulmonary bypass products. The left ventricular assist
systems support the patient’s weakened heart pumping function by sending the blood throughout the body. Cardiopulmonary
bypass products are used during open heart surgery to replace the heart and lung functions.
Mechanical Circulatory Support Products
Source: Company data
Cardiopulmonary bypass products
Source: Company data
Interventional products
Products in this category include therapeutic catheters and associated instruments that help resolve problems inside blood
vessels, such as the narrowing of blood vessels (angiostenosis) and dispersal of blood clots.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
21/53
R Coverage
Catheters and associated instruments
PTCA balloon catheter Embolic protection catheter
Thrombus aspiration catheter Guidewire Guiding catheter
Source: Company data
Diagnostic products
Products in this category mainly consist of equipment and reagents used in the various tests necessary to treat lifestyle diseases
such as diabetes.
SMBG (self-monitoring blood glucose) devices Dry chemistry clinical analyzers used in Blood collection tubes
point-of-care-testing (POCT)
Source: Company data
Injection and infusion products
Products in this category include devices such as syringes and infusion sets that use puncture needles to administer medical
solutions into the body (the most direct way to transport drugs into the body).
Syringes Infusion sets Winged needle sets that help prevent accidental
needlestick injuries
Source: Company data
Cell culture-related and other products
Products in this category include devices and instruments used in regenerative medicine and other evolving areas of cell
research.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
22/53
R Coverage
Automated cell culture system for stem cells Culture media for use in experimental research Cell cryopreservation bags
and others
Source: Company data
Pharmaceuticals sales: Nipro and Nipro ES Pharma charged with selling group’s generic pharmaceuticals
Nipro ES Pharma is a wholly owned subsidiary established in October 2017 to market Nipro Group’s long-listed products and
generic drugs. Previously, this company was known as Tanabe Seiyaku Hanbai Co., Ltd., which Nipro acquired in 2017 from
Mitsubishi Tanabe Pharma (TSE1: 4508). In including the letters “ES” in the company name, Nipro is referencing the first two
letters of “Establish” and “Essential,” signifying the company’s long-listed products and generic drugs. The Japanese government
advocates greater uptake of generic drugs as a means of lightening the economic burden on both the state and patients from
ever-increasing medical expenditure. In April 2018 the Ministry of Health, Labour and Welfare (MHLW) simultaneously revised
medical treatment and long-term care fees, and with drug price revisions now expected annually, the healthcare industry faces a
constantly evolving business climate. Demand for generic drugs is rising, with the MHLW targeting a generic drug utilization rate
of 80% by 2020. According to Nipro’s website, as of end-March 2018 the company handled some 600 generic pharmaceuticals,
and apparently its aim is to grow that number still further. Nipro’s Pharmaceutical-Related business is responsible for producing
these drugs.
Dispensing pharmacies: operated by Nichihos mainly in Kinki area
Nichihos operates community-based, health insurance-covered dispensing pharmacies, usually in close proximity to the main
hospital in the area. The company’s aim is to provide communities with a “family pharmacy” as advocated by the MHLW; one
that goes beyond dispensing drugs and also offers services including guidance on at-home drug usage and advice concerning
meals, living habits, and so on. Nichihos’ dispensing pharmacies are mostly located in the Kansai, Kinki, and Chubu regions.
Family pharmacy: In community-based healthcare, family pharmacies are insurance-covered pharmacies that operate within the community-based
comprehensive care framework advocated by the MHLW, supplying residents with the drugs they need, but also fulfilling other functions via “family
pharmacists” who are on hand to provide comprehensive and ongoing guidance on drug management, as well as offering advice on various subjects
including pharmaceuticals, drug therapy, and health.
Regenerative Medicine Business
In its bid to become a comprehensive healthcare company, Nipro is also delving into regenerative medicine business. As of
FY03/18, the project furthest along was an autologous bone marrow-derived mesenchymal stem cell product to treat spinal cord
injury (investigational drug identification code: STR01), which Nipro is developing jointly with Sapporo Medical University. On
June 29, 2018, Nipro submitted an application to the MHLW for approval to manufacture and sell STR01 as a regenerative
medicine product. Approval was granted on December 28, 2018.
Nipro’s engagement in regenerative medicine dates back to the early 1990s, when the company began developing products for
medical fields involving technologies such as cell culture—e.g., immune cell therapy research, hematopoietic stem cell
transplantation, and assisted reproductive technology. Around 1992, Nipro drew on technologies previously applied to medical
device manufacturing to launch a gas-permeable container for use in cell culture (CulturebagTM). This marked Nipro's first foray
into cellular products. Subsequently, in 1998 Nipro debuted a cryopreservation bag for storing hematopoietic stem cells derived
from cord blood at extremely low temperatures (Frozebag®), while in the assisted reproductive technology space it has
developed a range of products including egg collection needles and specialty petri dishes.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
23/53
R Coverage
An automated cell culture device for human pluripotent stem cells (such as ES/iPS cells) opened up Nipro’s business
opportunities with research organizations mainly specializing in regenerative medicine. The development project began in 2011
with New Energy and Industrial Technology Development Organization (NEDO), and continued as a Japan Agency for Medical
Research and Development (AMED) project in 2015, culminating in the launch of the automated cell culture device. In 2014,
Nipro made Cell Science & Technology Institute (CSTI, a Tohoku University biotech company) a subsidiary, marking a
full-fledged entry into the business of culture media to support cell culture. In that same year, Nipro embarked on development
of regenerative medicine products when it entered into a licensing agreement with Sapporo Medical University* for the latter’s
patent on autologous bone marrow mesenchymal cells for the treatment of cerebral infarction and spinal cord injury. The
patented product was approved by the MHLW.
*Sapporo Medical University (Sapporo, Hokkaido) is a public university established in 1950. It undertakes cutting-edge and international research while
serving as a core hospital for the Hokkaido region.
In 2017, Nipro commenced the sale of a nerve regeneration assisting tube, made from collagen of porcine origin and used to
reconnect and promote regeneration of peripheral nerves by connecting it to the damaged part of the nerve. The scale of this
business continues to grow, aided by CSTI's recent construction of a new plant in Tendo, Yamagata Prefecture.
Business overview (autologous bone marrow mesenchymal cells)
Source: Shared Research based on company data
Pharmaceutical-Related business The Pharmaceutical-Related business engages in contract manufacturing of pharmaceutical products (CDMO or contract
development and manufacturing organization) and promotion of joint development of generic drugs. In Japan, Nipro and
consolidated subsidiaries Nipro Pharma and Zensei Pharmaceutical manufacture and sell generic drugs. Overseas, Nipro Pharma
subsidiary Nipro Pharma Vietnam Limited and affiliate Mekophar Chemical Pharmaceutical Joint-Stock Company supply products
to Nipro Pharma. The Nipro Group’s CDMO business is summarized below.
Features of Nipro’s CDMO business
Source: Shared Research based on company data
In the CDMO business, Nipro develops and manufactures all dosage forms (injectables, oral dosage, and external preparations)
and has a development and production structure capable of handling compounds with high pharmacological activity. It has
production bases mainly in Japan but some overseas, which allows it to provide a flexible manufacturing service. Having
production facilities in multiple locations ensures business continuity planning (BCP), minimizing the risk of business interruption
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
24/53
R Coverage
as a result of natural disasters and other events as well as helping to resume operations quickly afterward. In this way, the CDMO
business provides a stable supply structure for pharmaceutical products.
Pharmaceutical production bases
Source: Shared Research based on company data
Nipro also has a PharmaPackaging business that manufactures containers and packaging for pharmaceutical products. Contract
manufacturing (of mainly pharmaceutical kit products) is a collaboration between the Pharmaceutical-Related and
PharmaPackaging businesses. Thus Nipro can offer customers a one-stop solution from containers and drug delivery devices to
the manufacturing of drugs, all provided by group companies. The company started up a manufacturing base specializing in
inspection and packaging at Nipro Pharma’s Ise facility to help overseas companies moving into the Japanese market.
Pharmaceutical kit products are pharmaceutical products that are packaged or sold in the form of prefilled containers. They
include prefilled syringes (syringes prefilled with drug solution), multi-chambered bags (multiple pharmaceuticals packaged in
separate compartments for mixing via a connector just prior to administration), premixed bags, and multi-chambered prefilled
syringes.
Compound with high pharmacological activity: Drugs that have a potent pharmacological effect on the human body at a small dose (such as steroids
and anticancer drugs) and those with toxicity. Classification is determined using the No Observed Adverse Effect Level (NOAEL), which is based on
pharmacological and toxicity data from preclinical and clinical trials, and other parameters calculated using NOAEL such as Occupational Exposure Limit
(OEL) and Acceptable Daily Intake (NOAEL x safety coefficient). A drug classified as having high pharmacological activity requires stringent production
control know-how such as management of the manufacturing facility, technology and equipment to contain active pharmacological ingredients, etc.
Kit products: The number of pharmaceutical kit products has increased since the 1985 signing of the Market-Oriented, Sector-Selective (MOSS)
Agreement between Japan and the US, aimed at streamlining Japanese approval and licensing procedures and establishing a more transparent pricing
mechanism for medical devices and pharmaceutical kit products. Prior to this agreement, drug prices were calculated solely for the powdered drugs
and dissolving solutions that make up pharmaceutical kit products. With the MOSS Agreement, drug prices now take into account the drug’s availability
in kit form, creating an economic incentive for drug makers to manufacture kit products.
MOSS Agreement: The market-oriented, sector-selective (MOSS) agreement concluded trade talks between Japan and the US that were limited in
scope to individual product categories. Subsequently, the Structural Impediments Initiative (SII) talks ran between 1989 and 1990, with a much broader
scope extending to commercial practices and other aspects of economic structure.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
25/53
R Coverage
Examples of pharmaceutical kit products
Prefilled syringes
In addition to eliminating the step of filling the syringe with a drug taken from an ampoule or vial, such kits also avoid the risk of contamination, for example with glass shards from ampoules or debris from rubber stoppers.
Multi-chambered bags (a connector allows mixing of pharmaceuticals just prior to administration)
Such products lighten the burden on medical staff, enabling them to work rapidly without having to prepare connectors and syringes for mixing multiple drugs, and without the risk of contamination during mixing and dissolving.
Source: Shared Research based on company data
Largest manufacturer of contract pharmaceutical products in Japan
The company has evolved into Japan's leading provider of contract manufacturing services, underpinned by strengths that
include expertise in pharmaceutical design, a flexible approach to contracting style, and stringent quality control. According to
Nipro's own findings, in FY2016 the company’s contract manufacturing business had sales in excess of JPY60.0bn, whereas the
unlisted Bushu Seiyaku and Teikoku Seiyaku (mainly manufactures OTC drugs and has few products that compete with Nipro)
each had sales of about JPY30.0bn, and CMIC Holdings (TSE1: 2309) had sales of around JPY15.0bn. Nipro’s contracting styles
basically follow the four patterns outlined below. The company does not disclose a breakdown by the type of contract.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
26/53
R Coverage
Contracting styles
Source: Shared Research based on company website
List of pharmaceutical production facilities
Source: Shared Research based on company data
PharmaPackaging business In this segment, Nipro offers a comprehensive lineup of pharmaceutical packaging-related items ranging from materials and
molded parts to machining equipment, providing an integrated development, manufacturing, and sales system. It supplies
materials such as plastic and rubber as well as devices for pharmaceutical reconstitution and administration. The segment has 16
manufacturing facilities worldwide, while development mostly takes place at facilities in Japan. Examples of products developed
by this segment include VIALEX® which is a vial with minimized alkaline elution, D2F® (Direct-to-Fill) which is a sterilized product
that can be used immediately after opening the package, surface and glass processing technologies applied to pharmaceutical
glass containers, and reconstitution and administration devices for safer and easier use in medical settings. Additionally, the
company manufactures non-medical-use products such as glass bulbs for thermos bottles, using hard glass with superior heat
resistance and chemical durability.
Contract manufacturing agreement
Contract manufacturing
Contract manufacturing agreement
Contract manufacturing
Formulation design and development
Assistance on preparation of documents for application for approval
Contract manufacturing agreement
Contract manufacturing
Development of high value-added formulations based on Nipro's formulation technologies
Assistance on preparation of documents for application for approval
Contract manufacturing agreement
Contract manufacturing
Synthesis of high quality active ingredient and intermediary materials through alliance with YukiGosei Kogyo
1 Simple contract manufacturing2 Generics approval application
support3 Development of high value-added
ingredient
1. Simple contract manufacturing
2. Generics approval application support (* IND manufacture and market application)
3. High value-added formulation development (IND, existing products)
4. Support on synthesis of active ingredientsContract manufacturing unique to Nipro Group
Company DescriptionNipro Corporation
Pharmaceutical Research Center R&D of new formulation technology (kit formulation, DDS, other)Research and Development Laboratory Development of parts for PharmaPackaging products
Odate Factory Manufacture of parts for PharmaPackaging productsNipro Pharma Corporation
Odate Factory Manufacture of injectable drugs, kit formulations, and external preparationsIse Factory Manufacture of injectable drugs and kit formulations
Kagamiishi Factory Manufacture of orally administered drugs and ointmentsSaitama Site Manufacture of external preparations and orally administered drugsShiki Factory Manufacture of injectable drugs
Shirokita Factory Manufacture of orally administered drugsNipro Pharma Vietnam Co., Ltd.
Manufacture of ampoules and vialsZensei Pharmaceuticals Co., Ltd.
Pharmaceutical Research Center R&D for new formulation technologyKishiwada Factory Manufacture of orally administered drugs
Izumi Factory Manufacture of orally administered drugs(Associated company)
Mekophar Chemical PharmaceuticalJoint-Stock Company
Manufacture of orally administered drugs
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
27/53
R Coverage
Key products
Vials Ampoules Syringes
Reconstitution and administration devices Rubber parts
VIALEX® D2F®
Source: Company data
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
28/53
R Coverage
Market and value chain
Number of dialysis patients continuing to increase globally Worldwide, the number of patients requiring dialysis is expected to continue increasing in tandem with rising standards of living
in developing countries. This is in large part driven by the rising number of dialysis patients in China and India. In China, for
example, dialysis patient numbers are projected to increase at an average annual clip of 15–20% through 2020.
2000-2020 outlook for hemodialysis patient numbers in China
Source: Shared Research based on data from 2016 Blood Purification Forum, Chinese Society of Nephrology (CNS)
Looking at the causes of death in Asia, the incidence of communicable diseases is decreasing as living standards rise, yet more
people are suffering from non-communicable diseases and so-called lifestyle diseases, shifting from an African model to a
European model.
Disease structures in Africa, Asia, and Europe
Source: Shared Research based on Cabinet Secretariat, Office of Healthcare Policy materials, based in turn on WHO Global Health Observatory (GHO) data
The International Society of Nephrology (ISN) estimates that as many as 850mn people globally have kidney disease, roughly
double the number of people with diabetes (422mn) and more than 20 times the number of people with cancer (42mn) and
HIV/AIDS (37mn). As kidney disease progresses, renal function deteriorates rapidly and the patient must consider treatment
options such as dialysis or a kidney transplant.
According to Nipro, the global dialysis market is expected to be worth JPY1tn by 2022. In short, it is a growth market with
projected growth of 9.3% per annum over the period up to 2022. As the global dialysis market is expected to keep expanding as
living standards rise, the company believes the market will continue to grow steadily, reaching JPY1.6tn by 2030.
37 45 54 65 90122
180235 248
284339
385443
518
611
721
866
0
100
200
300
400
500
600
700
800
900
1,000
2000 2002 2004 2006 2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F
('000)
2,428.6
1,138.5
419.4
412.7
334.9
262.5
261.1
176.3
172.4
161.5
Ischemic heart disease
Stroke
Dementia
Cancer (trachea, bronchi,lung)
Chronic obstructivepulmonary disease
Lower respiratory infection
Colorectal cancer
Diabetes
Cardiomyopathy,myocarditis, endocarditis
Breast cancer
Deaths per 100,000 people■Non-communicable diseases ■Communicable diseases ■Perinatal, nutrition, other ■Accidents
1,000.6
760.1
643.3
450.9
440.5
435.0
403.4
343.5
321.2
269.3
Lower respiratory infection
HIV/AIDS
Diarrhoeal diseases
Stroke
Ischemic heart disease
Tuberculosis
Malaria
Preterm birth complications
Birth asphyxia and birthtrauma
Road traffic injuries
2,004.4
1,353.2
1,125.2
839.2
695.1
540.6
505.2
399.7
394.1
385.0
Ischemic heart disease
Stroke
Chronic obstructivepulmonary disease
Lower respiratory infection
Tuberculosis
Diarrhoeal diseases
Diabetes
Preterm birth complications
Liver cirrhosis
Road traffic injuries
Africa Southeast Asia Europe
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
29/53
R Coverage
Dialysis market outlook
Source: Shared Research based on company data *The dialysis market includes markets for dialyzers, extracorporeal blood-delivery systems, arteriovenous fistula (AVF; intravascular shunt), dialysis machines, and dialysate (A/B)
Outlook for dialyzer demand
Source: Shared Research based on company data
Medical device market largest in US and Europe, but Asia seen driving growth While the US and Europe are expected to remain the largest sources of medical device demand through 2020, Asia appears likely
to be the region contributing the most to growth. For medical device manufacturers, capturing demand in Asia therefore will be
critical.
Breakdown of global medical device market
Source: Shared Research based on Cabinet Secretariat, Office of Healthcare Policy materials, based in turn on BMI Research Worldwide Medical Devices Market Forecast 2017
640720
780840
9201,000
1,1001,160
1,2301,310
1,3801,460
1,5501,650
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
(JPYbn) JPY1.6tn
JPY1.0tn
273,110292,750
314,047337,439
364,097394,658
430,200471,100
518,400546,300
577,300613,400
649,200686,800
728,000
773,500
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Japan North America Europe Latin America Asia and Middle East India China
(mn units)
117.2 121.1 127.2 133.6 140.1182.3
100.9 98.5 103.2 106.1 91.4
125.331.0 34.637.4 39.6 39.7
57.9
30.4 32.9 28.228.1 26.0
30.7
26.5 27.9 28.629.4 27.2
39.6
306.0 315.0 324.6336.8
324.4
435.8
0
50
100
150
200
250
300
350
400
450
500
2011 2012 2013 2014 2015 2020 (forecast)
US Europe Asia Japan Other
(JPYbn)
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
30/53
R Coverage
Competitors Nipro ranked No. 1 in domestic market share for dialyzers (artificial kidneys), and No. 2 globally Around 45mn dialyzers are shipped annually in Japan, and Nipro is the No. 1 supplier with shipments of 20mn units (44% market
share), followed by Asahi Kasei Medical (an unlisted, wholly owned subsidiary of Asahi Kasei [TSE1: 3407] at 13.5mn units [30%]),
and Toray Industries (TSE1: 3402) at 6.3mn units (14%). Globally, Nipro is ranked No. 2. Approximately 345mn dialyzers are
shipped annually worldwide, and Fresenius Medical Care is the top supplier with shipments of 140mn units (41% market share),
followed by Nipro at 74mn units (21%), and Baxter at 31mn units (9%).
Nipro’s biggest rival in overseas markets therefore is Fresenius Medical Care (FWB: FME, and NYSE: FMS), whose parent company
Fresenius (FWB: FRE), operates Europe’s largest private hospital chain. Fresenius Medical Care specializes in dialysis and the
treatment of kidney disease and failure, manufacturing medical devices for both hemodialysis and peritoneal dialysis. It was
established in 1996 when Fresenius split off its dialysis equipment division and merged it with the US healthcare company
National Medical Care, acquired the same year. Fresenius Medical Care supplies dialyzers and other dialysis equipment to a wide
range of medical institutions, including hospitals run by its parent company. In Japan, Fresenius Medical Care has a subsidiary,
Fresenius Medical Care Japan Co., Ltd., as well as a joint venture with Kawasumi Laboratories (TSE1: 7703), Fresenius-Kawasumi
Co., Ltd., which manufactures hollow fibers for domestic-use dialyzers.
Aside from dialyzers, Nipro supplies other dialysis products to client companies. For instance, it provides blood collection needles
on an OEM basis to Becton, Dickinson and Company (a global healthcare company handling medical devices, in vitro diagnostics,
reagents, and other healthcare-related products) and Fresenius.
Comparable peer companies
Source: Shared Research based on individual company data
The table above outlines listed Japanese companies with businesses comparable to Nipro’s medical devices business. Hogy
Medical Co., Ltd. (TSE1: 3593) deals mainly in surgical gowns, gauze, and other non-woven products for medical use, while
Daiken Medical Co., Ltd. (TSE1: 7775) principally handles vacuum suction devices (prevents hospital-acquired infection) and
anesthesia products. Nikkiso Co., Ltd. (TSE1: 6376) manufactures pumps used to circulate blood during dialyzer use. Companies
that similarly have medical devices as their mainstay businesses include Terumo Co., Ltd. (TSE1: 4543), JMS Co., Ltd. (TSE1:
7702), and the aforementioned Kawasumi Laboratories.
Terumo started out with a vision of manufacturing thermometers in Japan, but now offers a range of products including plastic
syringes. The company is particularly adept at manufacturing cardiovascular and cerebrovascular catheter systems. JMS was
originally founded as Japan Medical Supply, Co., Ltd., handling disposable medical products. It is now a leading global supplier
Sales OPM ROE(JPYmn)
3593 Hogy Medical 36,658 12.0% 6.6%Leader in medical non-woven fabrics; operates Opera Master, a system to receive orders for kits of medicalsupplies; pays quarterly cash dividends.[Cons. sales] Sterilization products (10), Surgical products (87), Treatment products (1), Others (2)
4543 Terumo 599,481 17.8% 11.4%A medical device major with strength in cardiac and vascular products such as catheter; also covers pharmaceuticalmedicine; expanding production in US and China[Cons. sales] Cardiac and Vascular (55), General Hospital (27), Blood Management (18) [Overseas (68)]
6376 Nikkiso 165,326 6.2% 9.7%Leader in chemical precision pump and dialysis machines; expanding into nanotechnology area and aerospaceengine parts areas[Cons. sales] Industrial (60), Medical (40) [Overseas (61)]
7702 JMS 58,059 2.5% 3.7%
A disposable medical supply major with strength in blood circuits and dialysis machines, and dialysis needles;actively expanding overseas markets[Cons. Sales] Infusion & Nutrition (41), Dialysis (32), Cardiovascular (8), Transfusion (17), Other (2) [Overseas(35)]
7703 Kawasumi Laboratories 24,104 2.5% 1.2%Has a high market share in dialysis products; also strong in blood-related products such as bags and filters; hascapital and business alliance with Kuraray and Asahi Kasei[Cons. Sales] Blood Transfusion and Endovascular (46), Hemodialysis and Plasmapheresis (54) [Overseas (30)]
7775 Daiken Medical 8,407 14.9% 14.5%
Manufactures medical devices; mainly covers products related to prevention of in-hospital infection and narcotics,such as suction container system: looking to develop products in the leading edge medical areas[Parent sales] Suction Container Related (64), Infusion Related (24), Syringe Pump Related (2), Medical HandWashing Related (7), Other (3)
8086 Nipro 426,399 5.6% 7.3%Disposable medical device major, with strengthen in dialysis. Expanding generics and contract manufacturing ofpharmaceuticals; conducting R&D in regenerative medicine[Cons. sales] Medical-Related (76), Pharmaceutical-Related (17), PharmaPackaging (7), Other (0) [Overseas (39)]
CompanyLatest full-year results
Business description(segment as % of total sales)Ticker
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
31/53
R Coverage
of dialysis needles. Like Nipro, JMS has established a prefilled syringe business in cooperation with pharmaceutical manufacturers.
Kawasumi Laboratories is known for its disposable blood collection and transfusion sets.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
32/53
R Coverage
Financial condition of comparable peer companies
Source: Shared Research based on individual company data
(JPYmn) FY03/17 FY03/18 FY03/19 FY03/17 FY03/18 FY03/19 FY03/17 FY03/18 FY03/19Cons. Cons. Cons. Cons. Cons. Cons. IFRS Cons. IFRS Cons. IFRS Cons.
Sales 359,699 395,397 426,399 36,859 36,918 36,658 514,164 587,775 599,481Gross profit 115,097 127,125 130,631 16,503 14,467 14,827 273,835 319,333 326,497SG&A expenses 86,326 100,036 106,804 9,060 9,194 10,444 183,288 212,363 226,334Operating profit 28,770 27,088 23,827 7,443 5,273 4,382 87,777 108,552 106,637Recurring profit 23,166 22,684 22,431 7,403 5,380 4,503 74,881 106,630 102,709Net income 11,346 11,829 12,136 5,786 5,262 6,043 55,003 91,295 79,287ROE 6.8% 7.0% 7.3% 6.5% 5.6% 6.6% 11.2% 16.6% 11.4%ROA (RP-based) 3.1% 2.7% 2.7% 7.3% 5.1% 4.4% 7.3% 9.9% 9.2%OPM 8.0% 6.9% 5.6% 20.2% 14.3% 12.0% 17.1% 18.5% 17.8%Total assets 752,839 826,447 845,821 103,196 106,449 103,327 1,022,262 1,081,045 1,120,790Net assets 176,408 183,485 171,830 89,629 94,063 91,404 491,522 550,435 698,113Equity ratio 22.1% 20.9% 19.1% 86.8% 88.4% 88.5% 48.1% 50.9% 62.3%Operating CF 33,472 41,046 41,362 10,066 8,367 7,446 82,888 114,562 93,571Investing CF -66,351 -64,140 -64,712 -3,868 -1,807 1,627 -183,517 -44,105 -74,792Financing CF 36,483 47,341 12,646 -1,877 -1,945 -6,958 60,993 -4,132 -67,540Cash and deposits 123,188 141,940 129,438 16,244 20,840 22,903 105,046 167,832 122,982Interest-bearing debt 458,465 513,140 535,136 508 399 285 349,282 354,135 232,483Net debt 335,277 371,200 405,698 -15,736 -20,441 -22,618 244,236 171,964 190,522
FY12/16 FY12/17 FY12/18 FY03/17 FY03/18 FY03/19 FY03/17 FY03/18 FY03/19IFRS Cons. IFRS Cons. IFRS Cons. Cons. Cons. Cons. Cons. Cons. Cons.
Sales 130,045 140,912 165,326 55,574 56,520 58,059 24,726 25,437 24,104Gross profit 44,855 48,608 56,977 14,435 14,282 14,818 15,865 8,682 8,208SG&A expenses 37,374 42,218 47,123 13,329 13,708 13,355 7,937 7,995 7,609Operating profit 8,117 8,718 10,302 1,106 573 1,462 923 687 598Recurring profit 6,801 8,310 9,741 1,451 820 1,520 1,023 788 787Net income 4,883 5,182 7,448 1,182 631 1,160 1,116 440 186ROE 7.3% 6.9% 9.7% 2.4% 2.0% 3.7% 3.0% 1.1% 1.2%ROA (RP-based) 3.8% 3.4% 3.9% 2.0% 1.2% 2.3% 2.3% 1.7% 1.8%OPM 6.2% 6.2% 6.2% 2.0% 1.0% 2.5% 3.7% 2.7% 2.5%Total assets 177,717 244,692 249,788 65,681 67,304 67,320 43,848 45,312 44,190Net assets 67,664 76,787 78,338 31,061 31,549 31,900 38,156 39,456 38,368Equity ratio 37.4% 30.7% 30.7% 47.1% 46.7% 47.2% 86.1% 86.1% 86.7%Operating CF 13,400 4,915 14,076 4,675 2,666 4,353 3,225 2,947 1,392Investing CF -7,993 -48,058 12,218 -4,809 -3,203 -3,074 -221 -2,418 1,718Financing CF -6,251 51,015 -5,771 64 1,420 -1,229 -13,598 -329 -1,252Cash and deposits 25,919 34,095 29,269 6,333 7,220 7,216 15,180 7,216 18,472Interest-bearing debt 70,944 123,670 118,728 7,852 19,703 18,924 4 3 0Net debt 45,025 89,575 89,459 1,519 12,483 11,708 -15,176 -7,213 -18,472
FY03/17 FY03/18 FY03/19Cons. Cons. Cons.
Sales 8,400 8,585 8,407Gross profit 4,408 4,226 3,738SG&A expenses 2,697 2,720 2,688Operating profit 1,711 1,506 1,250Recurring profit 1,715 1,504 1,246Net income 1,246 1,012 852ROE 18.1% 14.5% 14.5%ROA (RP-based) 16.2% 13.6% 13.6%OPM 20.4% 17.5% 14.9%Total assets 11,008 11,137 10,971Net assets 7,280 6,694 5,768Equity ratio 60.8% 60.1% 52.6%Operating CF 1,350 1,255 881Investing CF -604 -624 -209Financing CF -729 -581 -823Cash and deposits 2,320 2,368 2,218Interest-bearing debt 965 1,051 2,118Net debt -1,354 -1,317 -100
Daiken Medical (7775)
Nipro (8086) Terumo (4543)
Nikkiso (6376) JMS (7702) Kawasumi Laboratories (7703)
Hogy Medical (3593)
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
33/53
R Coverage
Strengths and weaknesses
Strengths
◤ Global presence in mainstay dialyzers: In shipments of dialyzers (artificial kidneys) used in dialysis therapy, Nipro is ranked
No. 1 in Japan with a 44% market share, and No. 2 globally with a share of 21%. The company’s dominance in the domestic
market is attributable to its perspicacity in bringing dialysis therapy to Japan from its birthplace in Europe, and the manner in
which it has learned from the side effects accompanying earlier products, putting that knowledge to use in improving
production technology and enhancing performance. While Nipro still lags the top-ranked Fresenius Medical Care (41% share)
in the global market, many of the latter's shipments are to group-run hospitals; so in reality, Nipro-brand dialyzers have strong
brand recognition worldwide. In the field of medical devices, where after-sales service and equipment reliability are
considered more important than price, Nipro has 124 sales and service centers in 54 countries around the world (excluding
Japan; as of end-March 2019).
◤ Brand equity built on success in medical devices: Nipro maintains a sales strategy built on identifying the needs of
medical institutions and using the knowledge thus gained to modify products so that medical professionals find them more
user-friendly. Because of this approach, the company is very well known in medical settings, and its products are considered
highly reliable. Even in the area of pharmaceutical kit products, which combine pharmaceuticals with a delivery device in one
convenient kit, the company has the advantage of being able to manufacture everything—the medical device,
pharmaceuticals, and constituent materials—within the group. This attribute aids in product development and modifications,
while from the hospital's perspective a one-stop supplier can contribute to shorter treatment times and fewer accidents, since
sourcing is simpler, as is the task of combining different products.
◤ Speedy decision-making: Nipro’s board of directors has a total of 30 members, with a director in charge of each of the
diverse range of businesses in order to maintain a good grasp of demand conditions on the ground. Executive boards are
responsible for decision-making, and despite the large number attending the meetings, as a rule, decision-making matters are
always acted upon on the same day. This ability to practice quick decision-making is a testament to the leadership of company
president Yoshihiko Sano. From a product development standpoint, this means that needs identified in medical settings are
swiftly reflected in products via product modifications and new product development, and this in turn enhances product
credibility.
Weaknesses
◤ Some low-margin products due to business policy of supplying a broad range of products essential for medical
treatment: Nipro reflects on-site needs in its product development, and for this very reason its product portfolio grows very
easily, with margins on individual products varying, depending on demand. Certain products are loss-making on a
stand-alone basis, according to the company. Nipro had an operating profit margin of 5.6% in FY03/19, versus 17.8% at
competitor Terumo. It differs from many companies in that it does not seek to narrow its product portfolio by selecting and
focusing on particular areas; rather, it aspires to a management style that prioritizes convenience for medical professionals and
relationships of trust by supplying a broad range of products essential for medical treatment.
◤ Global expansion of vascular products, a focus area: Like dialyzers, vascular devices used to treat conditions such as
cardiac disease and stroke are expected to find increasing demand as living standards rise around the world. With a view to
earnings expansion, Nipro is committed to growing its vascular device business into a second pillar of earnings for the
Medical-Related business. However, unlike the dialyzer business in which Nipro is a powerful force, in vascular devices the
company already has rivals in Japan, while overseas it is taking time to increase the number of products approved for sale and
to establish a sales network. It seems that if the company is to expand its vascular business, it will need to deploy a different
strategy to that which has worked so well for the dialyzer business.
◤ Low asset efficiency: Over the five years through FY03/19, Nipro’s R&D expenses expanded by 90%, and capital
expenditure by 30%, as a result of investment in new medical device domains, expansion of manufacturing facilities for
pharmaceuticals, and continued capital injection into the regenerative medicine business. Over those same five years, sales in
the regenerative medicine business grew by only 30%, although it generally takes time to recoup investment in this field.
Nipro sources funds primarily through external financing, and in FY03/19 interest-bearing debt already amounted to a high
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
34/53
R Coverage
63% of total assets (versus 21% at Terumo and 28% at JMS). Its ROA at 1.4% (versus 7.1% at Terumo) also points to the
adverse impact of interest-bearing debt on asset efficiency.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
35/53
R Coverage
Historical results and financial statements
Income statement
Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods.
Nipro has grown sales virtually every year since FY03/09, even in recessionary conditions. Sales slid 1.9% YoY in FY03/17, but this
was mainly due to effects from the sale of subsidiary Nipro Diagnostics, Inc. at the end of FY03/16. The subsidiary reported sales
of JPY14.9bn in FY03/16, and this was absent in FY3/17. If not for this factor, it appears sales would have also increased in FY03/17.
This sustained growth in sales is likely attributable to Nipro’s handling of products spanning many aspects of medicine, as well as
its commitment to regularly launching new products, carrying out product modifications, cultivating new markets, and
expanding overseas operations. The company recorded double-digit decline in operating profit in FY03/19 due in part to the
impact from NHI drug price revisions in Japan.
Breakdown of SG&A expenses
Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods. Expenses items are as disclosed by the company.
Operating profit decreased YoY in FY03/11, mainly because of higher personnel expenses, and again in FY03/12 and FY03/13,
principally because of growth in SG&A expenses accompanying increases in experimental research, depreciation, and
amortization of goodwill. There is also a tendency for the operating profit margin to fall in the fiscal year immediately after NHI
price revisions, as was the case in FY03/13 after biennial revisions to medical treatment fees and the reduction of official prices for
drugs and medical materials in FY2010 and FY2012. Recurring profit declined YoY for three consecutive years from FY03/11, but
this is likely attributable to ongoing effects from the Great East Japan Earthquake that struck in March 2011. Within the Nipro
group, business locations in the East Japan area sustained some damage and production was temporarily halted at seven
Income statement FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons.Sales 177,829 195,942 212,013 241,020 300,752 325,084 366,650 359,699 395,397 426,399
YoY 1.1% 10.2% 8.2% 13.7% 24.8% 8.1% 12.8% -1.9% 9.9% 7.8%Cost of sales 126,144 137,768 149,253 175,314 213,220 225,525 250,773 244,602 268,272 295,767Gross profit 51,685 58,174 62,760 65,706 87,532 99,558 115,876 115,097 127,125 130,631
YoY 0.3% 12.6% 7.9% 4.7% 33.2% 13.7% 16.4% -0.7% 10.5% 2.8%GPM 29.1% 29.7% 29.6% 27.3% 29.1% 30.6% 31.6% 32.0% 32.2% 30.6%
SG&A expenses 33,591 40,949 46,934 54,336 75,242 82,987 91,671 86,326 100,036 106,804SG&A ratio 18.9% 20.9% 22.1% 22.5% 25.0% 25.5% 25.0% 24.0% 25.3% 25.0%
Operating profit 18,094 17,225 15,825 11,370 12,289 16,571 24,204 28,770 27,088 23,827YoY 22.5% -4.8% -8.1% -28.2% 8.1% 34.8% 46.1% 18.9% -5.8% -12.0%OPM 10.2% 8.8% 7.5% 4.7% 4.1% 5.1% 6.6% 8.0% 6.9% 5.6%
Non-operating income 1,314 1,709 2,386 7,010 5,754 9,729 4,955 3,524 3,981 5,370Non-operating expenses 4,499 5,563 6,228 4,017 6,125 6,639 14,536 9,128 8,384 6,766Recurring profit 14,908 13,371 11,983 14,363 11,918 19,661 14,623 23,166 22,684 22,431
YoY 50.7% -10.3% -10.4% 19.9% -17.0% 65.0% -25.6% 58.4% -2.1% -1.1%RPM 8.4% 6.8% 5.7% 6.0% 4.0% 6.0% 4.0% 6.4% 5.7% 5.3%
Extraordinary gains 986 1,819 2,409 5,231 4,141 5,039 19,777 2,129 2,416 2,142Extraordinary losses 2,024 7,758 3,370 1,536 3,169 4,793 8,116 6,971 8,075 3,340Income taxes 6,367 4,619 6,005 7,439 9,789 7,095 6,806 6,720 4,727 9,357Implied tax rate 45.9% 62.2% 54.5% 41.2% 75.9% 35.6% 25.9% 36.7% 27.8% 44.1%Minority interests 251 356 430 387 240 341 -240 258 468 -260Net income 7,252 2,455 4,585 10,231 2,861 12,470 19,718 11,346 11,829 12,136
YoY 60.1% -66.1% 86.8% 123.1% -72.0% 335.9% 58.1% -42.5% 4.3% 2.6%Net margin 4.1% 1.3% 2.2% 4.2% 1.0% 3.8% 5.4% 3.2% 3.0% 2.8%
SG&A expenses FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons.Salaries and allowances 8,528 10,357 11,813 - - - - - - -Personnel expenses - - - 20,875 28,613 32,246 35,067 30,535 34,957 35,663Selling expenses - - - - - - - - - -Advertising expenses 1,198 1,757 - 2,016 2,253 - 2,918 - - -Transportation expenses 3,775 4,684 5,142 5,706 6,526 7,357 8,204 7,778 9,242 9,911Warehousing expenses - - - - - - - 1,844 2,214 2,585Travelling and transportation expenses - 1,707 2,464 2,853 3,776 - - 4,291 4,941 0Commission fees - - - - - - 2,622 2,718 3,092 0Rents - - - 2,476 3,469 4,034 0 4,245 4,643 5,040Experiment and research expenses 2,210 1,441 1,914 2,551 4,086 3,775 6,061 1,294 1,578 1,867R&D expenses - - - - - - - 10,232 14,447 15,116Depreciation 2,063 0 2,449 2,751 4,226 5,235 5,799 4,025 4,428 5,359Taxes and dues - 548 1,414 - - - - - - -Amortization of goodwill 294 1,743 2,651 2,834 4,827 5,392 3,686 2,907 3,431 3,372Provision for doubtful accounts - - - 258 1,193 855 281 - - -Other 15,520 18,708 19,082 12,013 16,268 24,088 27,028 16,453 17,059 27,888Total 33,591 40,949 46,934 54,336 75,242 82,987 91,671 86,326 100,036 106,804
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
36/53
R Coverage
locations: Nipro’s Odate Factory, Nipro Pharma’s Odate Factory, Nipro Medical Industries’ Tatebayashi Factory, Tohoku Nipro
Pharmaceutical’s Kagamiishi Factory, Nipro Patch’s Kasukabe Factory and Hanyu Factory, and Nipro Genepha’s Kasukabe Factory
(company names at the time of the earthquake). Also, Nipro has stepped up R&D in the regenerative medicine field since around
2014, and since FY03/17 rising R&D expenditure has been a factor in markedly driving up SG&A expenses. This remained the
case in FY03/19. As advanced medicine, such as regenerative medicine, is included in this, Shared Research expects R&D
expenses to remain high for the time being.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
37/53
R Coverage
Balance sheet
Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods.
Nipro aspires to become a comprehensive healthcare company, and to that end it periodically engages in M&A to expand the
scope of its business. Goodwill, which falls under intangible fixed assets, has risen sharply since FY03/11 when the company has
accelerated its push into China and Indonesia.
Since Q3 FY03/11, when it established Nipro Medical (Hefei) Co., Ltd. to manufacture medical devices in China, Nipro has taken
capital stakes in Jilin Nipro Jiaheng Pharmaceutical Packaging Co., Ltd. and Anyang Nipro Changda Pharmaceutical Packaging Co.,
Ltd. to expand its medical glass business overseas. In Q4 FY03/11, Nipro established PT. Nipro Indonesia Jaya for the purpose of
manufacturing and selling medical devices, and expanded into the medical business in Bangladesh by establishing Nipro JMI
Company Ltd.
In FY03/13 Nipro made Goodman Co., Ltd. a subsidiary with the aim to strengthen its cardiovascular business. In FY03/17, the
company made NexMed International Co., Ltd. a subsidiary in 1H to increase its presence in the orthopedic field. In 2H, Nipro
converted Tanabe Seiyaku Hanbai Co., Ltd. (now Nipro ES Pharma Co., Ltd.) to a subsidiary to market Nipro-brand generic drugs,
and made a subsidiary out of Machida Endoscope Co., Ltd.
To raise funds, Nipro mainly relies on borrowings from financial institutions, and in general, interest-bearing debt amounts to
around 50–60% of total assets. In FY03/19, the company continued to conduct business expansion that accompanied an increase
in interest-bearing debt.
FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons.ASSETS
Cash and deposits 59,266 81,115 95,737 106,000 84,957 112,871 126,667 123,188 141,940 129,438Notes and accounts receivable 56,303 61,237 68,641 83,665 103,179 114,477 113,235 121,038 140,511 148,970Inventories 54,703 60,941 71,603 81,654 90,485 102,474 102,701 115,328 129,217 137,924Deferred tax assets 3,149 4,204 4,829 5,375 7,354 6,963 6,380 6,404 0 0Others 6,937 9,935 9,983 11,741 12,154 16,341 20,115 22,194 18,854 27,867Allowance for doubtful accounts -432 -414 -360 -463 -2,010 -2,783 -983 -1,378 -1,437 -1,248
Total current assets 179,928 217,021 250,435 287,974 296,119 350,346 368,117 386,775 429,087 442,953Total tangible fixed assets 124,208 128,505 145,678 174,702 191,593 220,195 223,756 244,222 270,273 284,483Total intangible fixed assets 2,376 13,568 19,151 34,265 42,216 44,369 44,913 43,836 45,994 39,398
Goodwill 561 7,833 11,894 22,740 28,493 26,364 28,876 27,996 27,358 19,327Lease assets 78 291 305 567 443 1,625 2,469 2,263 2,366 3,669Other 1,736 5,442 6,950 10,958 13,278 16,379 13,566 13,575 16,268 16,401
Investments and other assets 76,883 117,414 84,420 82,360 89,724 80,395 72,094 78,004 81,091 78,986Investment securities 72,875 105,564 71,829 63,141 65,507 64,076 58,560 68,888 62,936 61,365Deferred tax assets 334 2,489 6,597 8,805 8,453 7,899 3,947 1,459 10,354 11,335Other 6,860 12,345 8,955 13,767 18,634 12,042 15,879 11,878 12,645 9,108Allowance for doubtful accounts -3,186 -2,984 -2,961 -3,353 -2,870 -3,622 -6,292 -4,221 -4,844 -2,822
Total fixed assets 203,468 259,488 249,250 291,328 323,534 344,960 340,764 366,063 397,359 402,867Total assets 383,396 476,510 499,686 579,302 619,654 695,306 708,882 752,839 826,447 845,821LIABILITIES
Total current liabilities 138,204 176,401 189,089 213,758 250,714 278,401 252,147 251,792 251,184 274,277Notes and accounts payable 29,203 33,581 37,721 40,878 45,661 51,750 56,185 57,587 62,105 69,646Short-term debt 84,920 112,034 124,557 139,526 157,543 175,027 139,154 144,200 130,079 144,590Income taxes payable 4,932 3,165 3,276 4,266 10,734 3,934 4,266 4,304 4,993 5,350Other 19,149 27,619 23,533 29,085 36,776 47,687 52,540 45,698 54,009 54,691
Total fixed liabilities 129,121 191,070 196,645 236,780 232,979 238,095 281,227 324,639 391,776 399,712Long-term debt 116,937 179,635 190,294 228,993 224,346 229,340 271,407 314,265 383,061 390,546Deferred tax liabilities 7,771 7,465 1,761 2,212 1,976 2,162 1,985 1,766 473 204Other 4,413 3,970 4,590 5,575 6,657 6,593 7,835 8,608 8,242 8,962
Total liabilities 267,325 367,472 385,735 450,539 483,694 516,496 533,375 576,431 642,961 673,990Net assets
Capital stock 28,663 28,663 84,397 84,397 84,397 84,397 84,397 84,397 84,397 84,397Capital surplus 29,972 29,972 636 636 688 635 0 0 0 0Retained earnings 47,219 46,631 48,389 54,788 52,567 58,885 73,067 78,422 83,570 90,719Treasury stock -862 -864 -864 -865 -17,999 -1,686 -1,475 -6,243 -6,004 -10,826
Shareholders' equity 104,992 104,402 132,558 138,956 119,653 142,231 155,989 156,576 161,963 164,29015,024 11,387 -6,528 -12,547 -7,443 -2,311 -3,347 1,589 -712 -5,173-5,708 -9,281 -16,209 -6,436 13,535 27,870 14,187 8,640 11,404 2,625
Other 1 2 0 1 -318 -130 -831 -722 -33 -253Minority Interests 1,761 2,527 4,129 8,789 10,533 11,150 9,509 10,325 10,863 10,341
Total net assets 116,070 109,037 113,950 128,763 135,960 178,810 175,507 176,408 183,485 171,830Total liabilities and net assets 383,396 476,510 499,686 579,302 619,654 695,306 708,882 752,839 826,447 845,821Working capital 81,803 88,597 102,523 124,441 148,003 165,201 159,751 178,779 207,623 217,248Total interest-bearing debt 201,857 291,669 314,851 368,519 381,892 404,367 410,561 458,465 513,140 535,136Net debt 142,591 210,554 219,114 262,519 296,935 291,496 283,894 335,277 371,200 405,698
Valuation difference on marketable securities
Foreign currency translation adjustments
Balance sheet
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
38/53
R Coverage
Cash flow statement
Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods.
Cash flows from operating activities Pre-tax profit continues to increase for the most part. In FY03/11 and FY03/12, pre-tax profit declined as the company booked
extraordinary losses related to the Great East Japan Earthquake. Pre-tax profit swung upward in FY03/13 when Nipro booked
gains on the sale of investment securities, but fell again in FY03/14 in the absence of those gains, and due to the booking of
extraordinary losses. Nipro continues to invest intermittently in business expansion both domestically and internationally and
depreciation is growing. These factors also drove up cash flows from operating activities in FY03/19.
Cash flows from investing activities Cash flows from investing activities have consistently displayed a net outflow. Nipro is still expanding the scope of its business
and to that end it continues acquiring businesses and taking capital stakes (see the Balance sheet section). As shown in the cash
flow statement above, purchases of tangible fixed assets have kept cash flows from investing activities in the negative since
FY03/09. Free cash flows, combined with cash flows from operating activities, have remained at roughly the same level for the
past two years (FY03/18 and FY03/19).
Cash flows from financing activities Nipro raises virtually all of its funds via borrowing from financial institutions. In FY03/16 the company redeemed corporate bonds
(JPY27.8bn) and in FY03/14 it bought back shares (JPY17.1bn), so in those years cash flows from financing activities were
negative. Otherwise, they have mostly been positive, judging by the net increase/decrease in long-term loans payable. In
FY03/19, interest-bearing debt shrank while short-term debt fell and long-term debt rose, albeit to a lesser extent than before.
Cash flow statement FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons.Cash flows from operating activities (1) 26,240 21,799 15,486 22,593 21,552 27,981 29,934 33,472 41,046 41,362
Pretax profit 13,870 7,431 11,022 18,058 12,891 19,908 26,284 18,324 17,026 21,233Depreciation 18,420 21,244 21,581 21,209 25,151 27,667 30,147 31,128 32,565 35,252Amortization of goodwill 294 1,743 2,651 2,834 4,827 5,837 3,686 2,907 3,431 3,372Change in accounts receivable -7,035 -4,926 -7,490 -8,965 -10,729 -6,765 -5,681 -9,317 -7,331 -12,278Change in inventories -2,856 -5,472 -10,923 -3,182 -2,441 -8,120 -6,704 -17,730 -4,902 -11,448Change in accounts payable 4,987 6,542 4,909 -830 -2,467 1,146 6,161 4,576 -3,821 11,814
Cash flows from investing activities (2) -44,994 -84,658 -67,919 -37,431 -31,936 -29,713 -16,513 -66,351 -64,140 -64,712Purchase of tangible fixed assets -26,071 -20,138 -39,730 -37,794 -29,239 -40,680 -41,936 -64,146 -62,382 -55,980
-20,646 -57,967 -3,542 -6,208 7,919 8,247 602 -1,092 3,931 -765-5 -1,342 -225 1,443 12 154 -249 682 -192 -3,756
Free cash flow (1+2) -18,754 -62,859 -52,433 -14,838 -10,384 -1,732 13,421 -32,879 -23,094 -23,350Cash flows from financing activities 30,135 86,265 45,725 23,359 -16,346 26,598 -3,633 36,483 47,341 12,646
Change in short-term debt 23,712 23,062 -3,653 9,444 -9,340 3,209 -32,858 1,018 8,825 -6,736Change in long-term debt 10,354 56,874 30,394 18,590 14,252 30,947 39,358 47,874 60,207 20,445Acquisition of treasury stock -15 -3 0 -18 -17,082 212 199 -4,768 239 -4,822Dividends paid -1,491 -3,041 -2,758 -4,008 -5,056 -5,007 -5,384 -4,100 -6,504 -4,983
C hange in loans receiv able (net of long- and short-term)
Purchase, sale, and redemption of inv estment securities
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
39/53
R Coverage
Historical performance
Q3 FY03/20 results (out February 6, 2020)
Overview: Q3 FY03/20 (April to December 2019)
▷ Sales: JPY 336.7bn (+4.8% YoY)
▷ Operating profit: JPY20.0bn (-2.1% YoY)
▷ Recurring profit: JPY17.8bn (-5.4% YoY)
▷ Net income*: JPY 10.9bn (+10.2% YoY)
* Net income attributable to owners of the parent
▷ There was no change to the revised earnings outlook announced at the time Q2 results were reported (November 7, 2019).
▷ Business environment: Conditions remain severe in the medical devices and pharmaceuticals industries, as in addition to the NHI
drug price revision that accompanied the consumption tax hike in October 2019, another price revision is scheduled to go into
effect in April 2020.
▷ Company response: The company maintained efforts to increase domestic market share, expand overseas sales, and cut
production costs while developing products that address user needs. Sales increased 4.8% YoY as the Pharmaceutical-Related
business reported solid performance.
▷ Operating profit decreased 2.1% YoY, as brisk sales of dialyzers and other core products failed to offset the unfavorable impact of
NHI drug price revision in October 2019 and forex fluctuations (particularly against renminbi). Recurring profit fell 5.4% YoY, as
the company booked a JPY1.9bn foreign exchange loss as a non-operating expense.
▷ In cumulative Q3, forex had a large impact on both sales and profit. Based on company calculations, sales would have been up
6.0% YoY (instead of 4.8%), and operating profit would have been up 6.7% (instead of down 2.1%) YoY if not for forex impact.
For this reason, the company maintains that the recorded results belie actual strong performance in terms of both sales and
profit.
Performance by segment Medical-Related business
▷ In cumulative Q3 FY03/20, sales (to external customers) increased 3.2% YoY to JPY255.9bn.
▷ Segment profit: JPY28.9bn (-6.5% YoY)
▷ Domestic sales: Overall sales in medical devices were fairly lackluster, rising 4.9% YoY to JPY82.5bn absent the demand surge that
occurred before the consumption tax hike. Sales of mainstay dialysis products (dialyzers and HDF filters*) increased 5.1% YoY to
JPY16.4bn. In the Medical-related business, the company handles house brand generic drugs and received additional approvals
for dexmedetomidine hydrochloride injection solution (only Nipro may sell it as a syringe preparation). Sales of orally
administered drugs and external preparations to dispensing pharmacies in cumulative Q3 grew, thanks in part to the integration
of Nipro ES Pharma’s sales division.
*HDF filters are similar in structure to dialyzers, but use hemofiltration versus hemodialysis in dialyzers.
▷ Overseas sales: Overseas sales of dialysis-related products such as dialyzers and other dialysis equipment grew 10.2% YoY, to
JPY63.1bn. Sales of dialyzers and HDF filters accounted for JPY38.5bn (+12.8% YoY). Overall sales of medical devices were
JPY105.3bn (+6.0% YoY). In Q3, the company continued to actively participate in major overseas academic meetings and trade
fairs (including various European nephrology society meetings held in October 2019 in Italy, Spain, and Turkey, and the
American Society of Nephrology’s Kidney Week in November) to raise the profile of the Nipro brand. In cumulative Q3, sales of
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
40/53
R Coverage
Nipro brand products rose in all regions, finishing at JPY90.7bn (+8.4% YoY), with JPY37.4bn generated in the Americas (+12.5%
YoY), JPY25.1bn in Europe (+2.6% YoY), JPY17.0bn in Asia (+11.5% YoY), and JPY11.2bn in China (+4.8% YoY). Meanwhile, OEM
product sales, which rise or fall based on negotiations with partner companies, declined to JPY15.7bn (-10.2% YoY).
▷ Overseas production facilities: The Vietnam plant began preparations for commercial sales in October 2019. The dialyzer
production facility at the factory in Hefei, China, is preparing to start up two new production lines in February 2022, and the
factory in India will start work on three new dialyzer production lines in 2020–21. The company continues to strengthen systems
for manufacturing and increasing the production of dialyzers, which are the target of rising global demand.
Pharmaceutical-Related business
▷ In cumulative Q3 FY03/20, sales (to external customers) were up 14.6% YoY to JPY53.3bn.
▷ Segment profit: JPY8.5bn (+13.7% YoY)
▷ Contract pharmaceutical manufacturing and development: Proposing contract manufacturing of all dosage forms handled by
Nipro group, including oral dosage, injectables, and external preparations, and highly pharmacologically active preparations
(such as antibiotics, steroids, and anticancer agents); focus on contract manufacturing of investigational new drugs and contract
services for inspection and packaging, as well as development proposals for use (and packaging as kits) of pharmaceutical
containers and delivery systems. Cumulative Q3 contract manufacturing sales increased in all categories, with generic drugs
accounting for JPY30.5bn (+6.3% YoY), original drugs and long-listed products for JPY19.5bn (+23.9% YoY), and
over-the-counter drug substances and other goods for JPY3.3bn (+56.9% YoY).
▷ Drug manufacturing: In addition to pharmaceutical production facilities in Kasukabe and Kawagoe in Saitama Prefecture acquired
in FY03/19, major subsidiary Nipro Pharma Corporation acquired all shares in Tanabe Pharma Corporation’s Yoshiki factory in
April 2019, which began operation as Nipro Pharma Hida Factory Corporation and continued to contribute to sales and profit
growth, particularly in the category of orally administered drugs. The Vietnam factory began contract manufacturing in the
previous fiscal year, and in FY03/20 the factory began operating at full tilt, contributing to sales.
PharmaPackaging business
▷ In Cumulative Q3 FY03/20, sales (to external customers) were JPY27.4bn (+2.0% YoY).
▷ Segment profit: JPY518mn (-15.1% YoY)
▷ The company strengthened global sales of medical devices and kit products and stepped up sales of high-performance products
that combine glass medical packaging with other packaging materials for a one-stop solution. In manufacturing, the company
carried out modifications to equipment to enable ad hoc responses to changes in demand, and sought to boost quality and cut
costs through 100% camera inspection, both domestically and internationally.
▷ Overseas sales: Cumulative Q3 sales were JPY19.3bn (+3.5% YoY). Sales of glass tubing increased in France, the Americas, and
India amid global growth in glass tubing demand. Sales of medical containers were brisk, because VIALEX® was selected by a
major US pharmaceutical company and syringe sales were strong in Germany. Sales in Europe accounted for JPY9.4bn of overseas
sales (+1.8% YoY), while sales in the Americas accounted for JPY6.3bn (+6.4% YoY), sales in China JPY2.6bn (+2.3% YoY), and
sales in India JPY920mn (+5.7% YoY). Looking ahead, the company plans to increase production of high-grade products
targeting the markets for vaccines and bio-products. As the Chinese market transitions to global quality standards in pharma
packaging, Nipro is increasing technological exchanges with local pharmaceutical companies.
▷ Domestic sales: Cumulative Q3 sales were JPY8.1bn (-1.3% YoY). The company plans to carry out quality improvements and
production streamlining at the Biwako factory, including for the rubber stoppers that are now in commercial production.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
41/53
R Coverage
Other business
▷ Sales (to external customers) in the Other business in cumulative Q3 FY03/20, including sales in the real-estate rental business,
were JPY127mn (+452.2% YoY).
▷ Segment profit: JPY128mn (+58.0% YoY)
1H FY03/20 results (out November 7, 2019)
Overview: 1H FY03/20 (April to September 2019)
▷ Sales: JPY 222.7bn (+6.9% YoY)
▷ Operating profit: JPY12.8bn (+6.2% YoY)
▷ Recurring profit: JPY9.9bn (-27.8% YoY)
▷ Net income*: JPY 5.9bn (-22.7% YoY)
* Net income attributable to owners of the parent
▷ Sales were affected by a change in the scope of consolidated subsidiaries. Nichihos Co., Ltd., which operates dispensing
pharmacies mainly in the Kansai region, was removed from the scope of consolidation after the company transferred 51% of
shares in Nichihos to Qol Holdings Co., Ltd. (TSE1: 3034) as of January 11, 2019. The company commented that the
equivalent of JPY4.5bn in sales of Nichihos recorded in 1H FY03/19 was not recorded in 1H FY03/20.
▷ The company estimates that forex had a JPY2.1bn negative impact on gross profit, mainly due to yen appreciation against the
euro.
▷ Nipro revised its full-year forecast, citing as the main reasons altered forex assumptions and changes to its 2H demand outlook
in view of 1H demand trends.
▷ Business environment: Conditions remain severe in the medical devices and pharmaceuticals industries, as in addition to the
NHI drug price revision that accompanied the consumption tax hike in October 2019, another revision is scheduled to go into
effect in April 2020.
▷ Company response: The company maintained efforts to increase domestic market share, expand overseas sales, and cut
production costs while developing products that address user needs. Sales increased 6.9% YoY as both the Medical-Related
business and Pharmaceutical-Related business reported solid performances.
▷ In the regenerative medicine business, the company began supplying autologous bone marrow-derived mesenchymal stem
cells (trade name: Stemirac®) as a treatment for spinal cord injury. Sales of regenerative medicine products totaled JPY44mn in
1H FY03/20. The company is in the process of developing automated production of Stemirac®.
▷ Operating profit increased 6.2% YoY, as brisk sales of dialyzers and other dialysis-related products in the Medical-Related
Business and strong performance of the Pharmaceutical-Related Business (manufacturing and sales of pharmaceutical products)
combined with a surge in demand for dialysis equipment ahead of the consumption tax hike in October 2019 offset
unfavorable impact of exchange rate changes (particularly against the euro and yuan). Recurring profit, though, fell 27.8% YoY,
as the company booked JPY3.0bn foreign exchange losses as a non-operating expense, mainly due to yen appreciation against
the euro.
Performance by segment Medical-Related business
▷ In 1H FY03/20, sales (to external customers) increased 5.3% YoY to JPY168.2bn.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
42/53
R Coverage
▷ Segment profit: JPY19.2bn (+1.2% YoY)
▷ Domestic sales: Sales of mainstay dialysis products (dialyzers and HDF filters; HDF filters are similar in structure to dialyzers, but
used for hemofiltration versus hemodialysis in dialyzers), injectables/infusion-related products, and vascular devices were solid.
As a result, domestic sales totaled JPY95.1bn (+3.7% YoY). All mainstay businesses performed well, with sales of JPY54.1bn for
Medical devices (+10.7% YoY), JPY41.0bn for Pharmaceuticals (+6.8%), and dialyzers (part of Medical devices) of JPY10.6bn
(+6.3%). As noted above, the Dispensing Pharmacies (mainly Nichihos) business did not record sales in 1H FY03/20 (sales of
JPY4.5bn in 1H FY03/19), because it was removed from the scope of consolidation.
▷ Overseas sales: The international (overseas) operation posted sales of JPY70.5bn (+6.9% YoY), of which own-brand products
accounted for JPY59.9bn (+9.8%), while OEM products were JPY10.5bn (-7.3%) due to a decline in syringe needles and other
products. Sales of dialyzers outside Japan were robust at JPY25.0bn (+12.2%), driving sales growth, while sales of other
dialysis-related products and injectables/infusion-related products (mainly needles) also grew. By region on a local currency
basis, sales were USD164mn in Latin America (+13.1% YoY), EUR116mn in Europe (+10.5%), USD59mn in North America
(+7.3%), CNY451mn in China (+5.9%), and JPY6.9bn in Asia-Pacific (+13.1%), recording solid growth in almost all regions.
The company plans to continue active participation in major overseas academic meetings and trade fairs and opening dialysis
and training centers worldwide to raise the profile of the Nipro brand.
▷ Overseas production facilities: The Vietnam plant began commercial production in October 2019. The dialyzer production
facility at the factory in Hefei, China is preparing to transition to four production lines in 2022. The factory in India began
operation of a second dialyzer production line and started work on a third and fourth. The company commented that its
priority is to strengthen dialyzer production worldwide, because supply is insufficient to fulfill global demand, with shortages
mainly in Europe, Asia, and South America.
Pharmaceutical-Related business
▷ In 1H FY03/20, sales (to external customers) were up 17.4% YoY to JPY35.7bn.
▷ Segment profit: JPY6.1bn (+42.1% YoY)
▷ Contract pharmaceutical manufacturing and development: Proposing contract manufacturing of all dosage forms handled by
Nipro group, including oral dosage, injectables, and external preparations, and highly pharmacologically active preparations
(such as antibiotics, steroids, and anticancer agents); focus on contract manufacturing of investigational new drugs and
contract services for inspection and packaging
▷ Collaboration with PharmaPackaging business: Development proposals for use (and packaging as kits) of pharmaceutical
containers and administration systems (see below for internal transactions of PharmaPackaging business)
▷ Drug manufacturing: In addition to pharmaceutical production facilities in Kasukabe and Kawagoe in Saitama Prefecture
acquired in FY03/19, major subsidiary Nipro Pharma Corporation acquired all shares in Tanabe Pharma Corporation’s Yoshiki
factory in April 2019, which began operation as Nipro Pharma Hida Factory Corporation and continued to contribute to sales
and profit growth, recording sales of JPY45.2bn (+17.6% YoY) in 1H FY03/20. The Vietnam factory began contract
manufacturing in the previous fiscal year, and in 1H FY03/20 the factory was operating at full tilt, contributing to sales. The
company’s other pharmaceutical production subsidiary Zensei Pharmaceutical Co., Ltd. also recorded higher sales of JPY8.8bn
(+7.6% YoY).
PharmaPackaging business
▷ In 1H FY03/20, sales (to external customers) were JPY18.7bn (+2.5% YoY).
▷ Segment profit: JPY502mn (+55.4% YoY)
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
43/53
R Coverage
▷ Internal transactions (mainly with Nipro Pharma Corporation) totaled JPY2.7bn in 1H FY03/20 (versus JPY2.4bn in 1H FY03/19).
▷ The company strengthened global sales of medical devices and kit products and stepped up sales of high-performance products
that combine glass medical packaging with other packaging materials for a one-stop solution. In manufacturing, the company
sought to boost quality and cut costs through 100% camera inspection, both domestically and internationally.
▷ Overseas sales: Overseas sales were JPY13.4bn in 1H FY03/20 (+5.1% YoY, 71.8% sales share). Sales of glass tubing increased in
France, US, and India amid global growth in glass tubing demand. Sales of medical containers were brisk, because VIALEX® was
selected by a major US pharmaceutical company and syringe sales were strong in Germany. Looking ahead, the company plans
to increase production of high-grade products targeting the markets for vaccines and bio-products. Expansion of the traditional
medicine market in China greatly increased sales of containers for oral medicines.
▷ Domestic sales: Domestic sales were JPY5.3bn in 1H FY03/20 (-3.5% YoY, 28.2% sales share). Sales of glass tubing and glass bulbs
for thermos bottles have been recovering. The company plans to carry out quality improvements and production streamlining at
the Biwako factory by bringing in new European vial making machines to comply with global quality standards and using the
latest automated inspection and packaging equipment.
▷ On the profit front, looking at performance by region, performance was flat in Japan and worsened slightly in China, but segment
profit improved sharply due to Europe, North America, and other regions turning profitable. Brisk sales of vials and syringes in the
US and Germany also contributed to earnings improvement. Operating profit before goodwill amortization was JPY740mn.
Other business
▷ Sales (to external customers) in the Other business in 1H FY03/20 including sales in the real-estate rental business were
JPY81mn (+440.0% YoY).
▷ Segment profit: JPY92mn (+130.0% YoY)
Q1 FY03/20 results (out August 8, 2019)
Overview Q1 FY03/20 (April–June 2019)
▷ Sales: JPY109.8bn (+6.4% YoY)
▷ Operating profit: JPY7.0bn (-6.5% YoY)
▷ Recurring profit: JPY5.1bn (-35.5% YoY)
▷ Net income*: JPY2.8bn (-40.4% YoY)
* Net income attributable to owners of the parent
According to the company, Q1 sales were negatively affected by extraordinary factors (negative effects equivalent to almost
JPY3.0bn; see below). However, this was covered by strong performance in contract manufacturing of pharmaceuticals and
elsewhere, and as a result Q1 sales finished only slightly below company forecasts.
On the profit front, GPM fell due to lower sales and adjustments for unrealized gains. However, operating profit came in slightly
above initial forecasts as a result of lower SG&A expenses owing to cost-saving measures and delayed execution of planned R&D
expenses (approximately JPY100mn for regenerative medicine-related, JPY450mn for the vascular products, JPY100mn for
contract manufacturing of pharmaceuticals, and JPY300mn for generic drugs). The company noted that Q1 profit would have
posted steady growth were it not for the drag from extraordinary factors.
Business environments remained severe in the medical devices and pharmaceuticals industries, with another NHI drug price
revision expected to follow the Consumption Tax hike scheduled for October 2019. The previous revision went into effect in April
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
44/53
R Coverage
2018. The company is maintaining efforts to increase domestic market share, expand overseas sales, and cut production costs
while developing products that address user needs.
Extraordinary factors: Sales came in a little short of the company forecast as a result of the extraordinary factors described below.
The company commented that excluding the effects of these factors, sales would have grown about 9.0% YoY, or approximately
JPY3.0bn higher than actual Q1 results. However, the negative effects were partly covered by strong performance in the contract
manufacturing of pharmaceuticals and elsewhere, reducing the shortfall between forecasts and results to about JPY1.0bn. The
extraordinary factors were as follows:
(1) Shipments from its logistics center in western Japan were temporarily suspended because of traffic restrictions associated
with the G20 Summit held in June 2019
(2) Shipment adjustment for older models (FY03/19 results: JPY2.5bn in sales, mostly in Japan) following the launch of left
ventricular assist device (LVAD) HeartMate3 (JPY300mn)
(3) Consolidation of an overseas subsidiary’s financial results on a three-month lag (due to differences in fiscal year ends) under
progressive yen appreciation (JPY500mn)
(4) Poor performance of an OEM customer (syringe needles; JPY300mn)
(5) Suspension of operations at a factory in Brazil for three to four months due to a defect (JPY200–300mn)
Besides the above, there were factors whose impact it was difficult to calculate such as difficulty in procurement of ingredients
due to a fire at an antibiotics materials factory in China and delayed commencement of pharmaceuticals sales as a result of delays
in increasing production capacity at contract manufacturers of pharmaceuticals. The company expects these factors, along with
the defect in the Brazil factory, to have an impact on Q2 as well.
Other than the extraordinary factors mentioned above, sales were also affected by the removal of Nichihos Co., Ltd. from the
scope of consolidation following the change in Nichihos’ status from a consolidated subsidiary to an equity-method affiliate.
Negative factors for profit included progressive yen appreciation against the euro, and inventory adjustments accompanying
sales integration and adjustments in transaction prices between affiliates in response to transfer pricing regulations in the vascular
device business.
Performance by segment Medical-Related business
▷ Sales (to external customers): JPY82.7bn (+4.4% YoY)
▷ Segment profit: JPY10.5bn (-5.4% YoY)
▷ Domestic sales: Sales of mainstay dialysis-related products (dialyzers and HDF filters; HDF filters are similar in structure to
dialyzers, but used for hemodiafiltration versus hemodialysis in dialyzers) were solid. In the domestic market, replacement of
dialyzers for higher value-added HDF filters seemed to be ongoing. Sales of injectables/infusion-related products and vascular
devices were strong, rising 4.1% YoY to JPY30.1bn, broken down to JPY16.4bn (+3.0% YoY) in Japan and JPY13.7bn (+5.5%
YoY) overseas.
▷ Overseas sales: Overseas sales of dialysis-related products such as dialyzers and dialysis equipment grew 13.9% YoY. By region,
sales grew 11% YoY in the US, 19% YoY in Europe, 40% YoY in Asia, and were flat YoY in China. Installation of dialysis centers in
Asia drove overseas sales growth. A business tie-up with DaVita Inc. (NYSE: DVA), which runs dialysis clinics mainly in North
America contributed to higher sales in North America. Concerning the dialysis-related business, the company plans to
participate in major overseas academic conferences and trade fairs and open dialysis and training centers worldwide to raise
the profile of the Nipro brand through the spread of its devices. Such strategies aimed at expanding the dialysis-related
business seemed to be bearing fruit as attested by the above-forecast Q1 results.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
45/53
R Coverage
▷ Overseas production facilities: The dialyzer production factory in Hefei, China is preparing to transition to four production lines
in 2022 (planned addition of two lines, production capacity per line: 6mn units). Meanwhile, the company is also working to
automate dialyzer production and thinks it can increase the production capacity to 7.5mn units. The factory in India began
operating a second production line and started to work on installing a third production line, which is progressing according to
plan. These efforts are aimed at expanding the supply system in Asia.
Pharmaceutical-Related business
▷ Sales (to external customers): JPY17.9bn (+21.1% YoY)
▷ Segment profit: JPY3.9bn (+81.8% YoY)
▷ By product, sales of the mainstay orally administered drugs were robust both in Japan and overseas at JPY18.7mn (+17.2% YoY),
broken down to JPY17.9bn (+16.2% YoY) in Japan and JPY839mn (+45.4% YoY) overseas. Sales of injectable kits also grew
8.3% YoY to JPY6.5bn, mainly in Japan.
▷ Contract manufacturing and development of pharmaceuticals: The company focused on proposing contract manufacturing of
all formulations handled by the Nipro group (including orally administered drugs, injectables, and external preparations),
highly pharmacologically active preparations (such as antibiotics, steroids, and anticancer agents), and investigational new
drugs, as well as contract services for pharmaceuticals inspection and packaging. At present, however, production capacity is
lagging behind the demand for contract manufacturing and services. According to the company, demand for orally
administered drugs is outstripping its production capacity, despite these products having the highest production volume,
resulting in delays in delivery.
▷ Collaboration with PharmaPackaging business: Development proposals for use (and packaging as kits) of pharmaceutical
containers and administration systems
▷ Expansion of drug manufacturing capacity: In addition to pharmaceutical production facilities in Kasukabe and Kawagoe in
Saitama Prefecture acquired in FY03/19, major subsidiary Nipro Pharma Corporation acquired all shares in Tanabe Seiyaku
Yoshiki Factory Co., Ltd. in April 2019, which began operation as Nipro Pharma Hida Factory Corporation. In Q1, Nipro Pharma
Corporation posted sales of JPY22.1bn (+12.5% YoY) and Zensei Pharmaceutical Co., Ltd. JPY4.6bn (+18.5% YoY). With the
aim of increasing production capacity and efficiency at each of its pharmaceutical manufacturing lines, the company plans to
refit lines to the appropriate specifications for contract manufacturing (especially those in newly acquired factories) as it heads
into 2H. The Vietnam factory also began full-scale contract manufacturing, which started in FY03/19.
PharmaPackaging business
▷ Sales (to external customers): JPY9.1bn (-0.7% YoY)
▷ Segment loss: JPY5mn (segment profit of JPY45mn in Q1 FY03/19)
▷ The company strengthened global sales of medical devices and kit products and stepped up sales of high-performance
products that combine glass materials with other packaging materials for a one-stop solution.
▷ Overseas sales: Overseas sales of the mainstay medical glass were JPY6.7bn (+2.4% YoY). Sales of glass tubing increased in
France, Americas, and India amid a global glass tubing shortage. Sales of medical containers were brisk, because VIALEX® was
adopted by a major US pharmaceutical company and syringe sales were strong in Germany. Expansion of the traditional
medicine market in China led to increased sales of containers for oral medicines, but sales of ampoules for injections were weak
due to the above-mentioned trend in the antibiotics market (related to fire at an antibiotics ingredients factory).
▷ Domestic sales: Despite success overseas, domestic sales of medical glass were down 16.0% YoY to JPY895mn. Overall sales of
glass materials fell 4.4% YoY to JPY1.7bn, influenced mainly by poor domestic performance as sales of glass tubing were weak
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
46/53
R Coverage
due to a supply shortage and sales of glass bulbs for thermos bottles were hurt by manufacturers’ production adjustment.
However, sales of medical devices such as subcutaneous injection sets (produced in collaboration with the
Pharmaceutical-Related business) were brisk.
Other business
▷ Sales (to external customers): JPY35mn (+400.0% YoY), including sales in the real-estate rental business
▷ Segment profit: JPY25mn (-24.2% YoY)
Full-year FY03/19 results
Overview:
▷ Full-year sales: JPY 426.4bn (+7.8% YoY)
▷ Operating profit: JPY23.8bn (-12.0% YoY)
▷ Recurring profit: JPY22.4bn (-1.1% YoY)
▷ Net income*: JPY 12.1bn (+2.6% YoY)
* Net income attributable to owners of the parent
▷ Business environment: In the medical devices and pharmaceuticals industries, the climate for earnings remained tough due to the
April 2018 revisions to medical treatment fees and lower NHI drug prices
▷ Company response: Medical-Related business and Pharmaceutical-Related business drove sales
▷ Medical-Related business: In the domestic market the company strengthened sales of mainstay dialysis equipment and infusion
systems, and in the overseas market it expanded sales of dialyzers and other dialysis equipment
▷ Pharmaceutical-Related business: the company strengthened contract pharmaceutical manufacturing and development
Performance by segment Medical-Related business
▷ In FY03/19, sales (to external customers) increased 9.1% YoY to JPY327.4bn.
▷ Segment profit: JPY36.7bn (+0.5% YoY)
▷ Domestic sales: Despite the impact from revisions to the reimbursement prices for medical devices in accordance with the April
2018 NHI drug price revisions, sales volume increased, particularly in core products. Sales rose 3.3% YoY in dialysis-related
devices, including HDF filters (a dialysis product; similar in structure to a dialyzer, but uses hemodiafiltration as compared with
hemodialysis in dialyzers) and dialysis machines, and 3.6% YoY in injectables/infusion-related products, due in part to the
contribution from the SafeTouch infusion system. Growth in vascular products, a focus area, slowed to 0.8% YoY. This was owing
to the timing of new product launches and strengthening of the sales structure.
▷ Overseas sales: Sales rose 8.7% YoY in the international division on growth in sales of dialysis-related equipment, such as dialyzers
and other dialysis equipment, in regions worldwide (overseas sales accounted for 63% of the total). In descending order, the
ratio of sales was highest in Asian emerging countries (China and Asia Pacific), then South and Central America, then Europe, and
then North America, but sales grew in all regions.
▷ Overseas production facilities: Improved productivity at Nipro’s two dialyzer production lines at factory in Hefei, China and
launch of operations at second line in Indian factory in FY03/20, with third line under consideration
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
47/53
R Coverage
Pharmaceutical-Related business
▷ In FY03/19, sales (to external customers) in this business were up 5.7% YoY to JPY63.5bn.
▷ Segment profit: JPY10.7bn (-6.7% YoY)
▷ Contract pharmaceutical manufacturing and development: Proposing contract manufacturing of all dosage forms handled by
Nipro group, including oral dosage, injectables, and external preparations, and highly pharmacologically active preparations
(such as antibiotics, steroids, and anticancer agents); focus on contract manufacturing of investigational new drugs and contract
services for inspection and packaging
▷ Domestic sales: Sales rose 24.1% YoY in pharmaceuticals and 43.2% in orally administered drugs, driven by the generic
pharmaceuticals manufacturer, Nipro ES Pharma Co., Ltd. Profit was negatively impacted by NHI price revisions.
▷ Collaboration with PharmaPackaging business: Development proposals for use (and packaging as kits) of pharmaceutical
containers and administration systems
▷ Drug manufacturing: Strengthened production system with acquisition of two pharmaceutical manufacturing plants
PharmaPackaging business
▷ In FY03/19, sales (to external customers) were JPY35.5bn (+1.0% YoY).
▷ Segment profit: JPY778mn (+112.0% YoY)
▷ Business structure change: Medical systems development division and medical systems sales division within pharmaceutical
business merged to contribute to life cycle management of pharmaceuticals in one stop from primary containers through
medical devices such as those for mixing and administering drugs
▷ Overseas sales: Growth in high value-added products contributed to profit. Sales of bottles for oral solutions in China were strong
due to growing traditional medicine market and sales of ampoules meeting new Chinese standards increased. In Europe, orders
for contract manufacturing of sterilized glass syringes for a major German pharma company were strong
▷ Domestic sales: Solid thermos bottle demand amid tight global supply/demand for glass tubing
Other business
▷ Sales (to external customers) in the Other business in FY03/19 including sales in the real-estate rental business were JPY31mn
(+6.0% YoY).
▷ Segment profit: JPY146mn (+94.7% YoY)
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
48/53
R Coverage
Other information
History
Source: Shared Research based on company data
News and topics
January 2020 On January 30, 2020, the company announced the acquisition of shares in a Bangladesh-based medical device sales company.
Nipro Asia PTE LTD (HQ: Singapore; “NIA”), Nipro’s medical device sales subsidiary, announced that it made JML Marketing Ltd.
(HQ: Dhaka; “JML”), a Bangladesh-based medical device sales company, a subsidiary by acquiring JML’s newly issued shares via
third-party allocation.
JML holds strong market share in disposable medical device sales for items such as syringes, infusion sets, and IV catheters in the
high-growth Bangladesh market. With this equity participation, Nipro determined it can further strengthen its market share in
Bangladesh and expand its business. NIA acquired 2,179,333 shares of JML stock issued through third-party allocation. The share
acquisition date was November 30, 2019. With this, the company controls 70.0% of JML’s voting rights, making the latter a
consolidated subsidiary. JML reported sales of BDT604mn (about JPY780mn) and had 258 employees (as of end-November
2018).
The impact of this transaction on the company’s consolidated full-year FY03/20 forecast is minimal.
December 2019 On December 25, 2019, the company announced the construction of a prefilled syringe production facility at its subsidiary.
Date DescriptionJuly 1954 Establishes Nihon Glass Shoji Co., Ltd. in Shimogyo-ku, Kyoto; starts sales of glass tubes for ampoules and pill bottles
August 1969 Makes Tomisawa Manufacturing Co., Ltd. (current Nipro Medical Industries Co., Ltd.) a subsidiary; starts production of medical devicesApril 1972 Nipro Co., Ltd. starts sales of medical devices in JapanMay 1977 Renamed to Nissho CorporationMay Opens Technological Development Center (current Research and Development Center) in Kusatsu, ShigaApril 1981 Builds Odate Factory in Odate, Akita; starts manufacture of medical devices
February 1987 Listed on the Second Section of the Osaka Securities ExchangeApril 1988 Establishes Nissho Nipro Corporation (current Nipro [Thailand] Corporation Limited) for manufacture and sales of medical devices in Thailand
September Makes capital participation to Hishiyama Pharmaceutical Corporation (current Nipro Pharma Corporation) to enter pharmaceuticals businessMarch 1990 Listed on the First Section of the Osaka Securities Exchange
December Listed on the First Section of the Tokyo Stock ExchangeApril 2001 Acquires Nipro Co., Ltd; renamed to Nipro CorporationApril 2006 Makes capital participation to Zensei Pharmaceutical Co., Ltd.
February 2010 Establishes Nipro India Corporation Private Limited for manufacture and sales of medical devices in IndiaOctober Establishes Nipro Medical (Hefei) Co., Ltd. for manufacture of medical devices in China
February 2011 Establishes Pt. Nipro Indonesia Jaya for manufacture and sales of medical devices in IndonesiaMarch 2013 Makes Goodman Co., Ltd. a subsidiary to enhance cardiovascular business
June Makes Nichihos Co., Ltd. a subsidiary; enters dispensing pharmacy businessApril 2015 Acquires medical business of Unitika Ltd. to enhance test drug business
October Establishes Nipro PharmaPackaging (Shanghai) Co., Ltd. to develop medical glass business in ChinaDecember 2016 Opens Regenerative Medicine R&D Center
January 2017 Makes NexMed International Co., Ltd. a subsidiary to enhance orthopedics businessMarch Establishes Nipro Vietnam Company Limited for manufacture of medical devices in Vietnam
October Makes Tanabe Pharma Sales Co., Ltd. (current Nipro ES Pharma Co., Ltd.) a subsidiary to enhance generic drug business under its own brandFebruary 2018 Makes Machida Endoscope Co., Ltd. a subsidiary; enters endoscope-related business
April Merges sales organization of Goodman Co., Ltd. with Nipro's Vascular Division to enhance vascular business
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
49/53
R Coverage
The company’s pharmaceuticals manufacturing subsidiary Nipro Pharma Corporation (Chuo-ku, Osaka; hereafter “Nipro
Pharma”) announced its decision to build a new production facility on the premises of the Ise Factory to scale up production of
prefilled syringes.
Prefilled syringes are kits that come with syringes pre-filled with drug solution, with advantages including decreased risks of
infection for healthcare providers, prevention of medical accidents, and improved operational efficiency at medical facilities.
These advantages have been well appreciated, and an increasing number of medical facilities are adopting prefilled syringes. The
company group’s pharmaceuticals business consists of two main components: Contract Development and Manufacturing
Organization (CDMO) business, in which it conducts under contract a range of operations from drug development to
manufacturing, inspection and packaging, and logistics, and the generics drug manufacturing and sales business. The company
thinks that by increasing its production capacity of prefilled syringes, it can capture outsourcing demand for drug manufacturing
and contribute to promoting the use of generic drugs the Japanese government is encouraging*.
With the construction of the new production facility, the company aims to achieve production at a low cost through realizing
such initiatives as the acceleration of takt time and the construction of labor-saving production lines based on its expertise rooted
in its track record in mass production. The operation of the production facility, together with the prefilled syringe production
lines already in operation at the company’s Ise Factory and Odate Factory (Odate, Akita Prefecture), will further diversify the
company’s production bases. Through this, the company plans to strengthen its crisis management and ensure stable supplies.
Details of the prefilled syringe production facility
▷ Name: Nipro Pharma Corporation Ise Factory Prefilled Syringe Production Facility
▷ Address: Nipro Pharma Ise Factory, Matsusaka, Mie Prefecture
▷ Facility overview
Structure: Two-story steel frame
Building area: Approx. 3,450sqm
Total floor area: Approx. 6,900sqm
▷ Total investment: Approx. JPY16.0bn
▷ Production item: Prefilled syringes
▷ Start of operation: February 2023 (planned)
*Measures to promote the use of generic drugs: Measures aimed at increasing the share of generic drugs to or over 80% as early as possible between
FY2018 and end FY2020 (cabinet decision, June 2015).
October 2019 On October 18, 2019, the company announced the issuance of its 12th series unsecured bonds.
The company decided on the terms and conditions for the issuance of its 12th series unsecured bonds (see below). It plans to
use the proceeds from the issuance to redeem commercial papers and repay borrowings.
Summary
Total issue amount: JPY10.0bn
Face value of each bond: JPY100mn
Coupon rate: 0.440% per annum (interest paid twice a year)
Maturity date (planned): October 25, 2029 (10-year bond)
Underwriter: Mizuho Securities Co., Ltd.
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
50/53
R Coverage
Corporate governance and top management
Source: Shared Research based on company data
Top management Yoshihiko Sano (President and representative director)
April 1968 Joined Nippon Glass Fiber Co., Ltd.
November 1975 Joined Nipro Co., Ltd.
February 1993 Director and assistant general manager of marketing division
June 2000 Director and general manager of marketing division
Director (Nipro Corporation)
April 2001 Director and assistant manager of domestic division
June 2006 Managing director and manager of domestic division
May 2012 President and representative director, and manager of domestic division
June 2012 President and representative director, and manager of material division
October 2012 President and representative director (to present)
Corporate governance Nipro has an established corporate governance system including a board of directors, audit & supervisory board members and
an audit & supervisory board, and an accounting auditor, in addition to the meeting of shareholders and directors as required
under the Companies Act. The company also has established internal committees including an operational risk management
committee, and maintains close coordination with external parties such as the company attorney, to achieve effective monitoring
and supervision of the operations across the company as a whole. Nipro has established an independent management system for
each business unit, based on which it operates, while cross-unit communication and companywide governance ensure an
integrated and effective operation as a group, creating a structure where responsibilities can be clarified and management
systems strengthened.
The company strives to make business units the foundation of its internal control system for the Nipro Group as a whole. Its
directors and audit & supervisory board members, as well as representatives of each of the major companies of the group, hold
an executive board meeting at least once a month. These meetings are used to report on the progress of business activities,
decide key operating matters, and deliberate on pending matters. To build awareness of compliance with laws, regulations, and
corporate ethics among executives and employees, Nipro has established, and promotes awareness toward, the Nipro Code of
Practice, while preparing legal compliance manuals and making them available on the corporate portal site, implementing an
internal reporting system to collect and respond to risk data, and distributing appropriate information via net bulletin boards and
the intranet.
The company has established risk management regulations and a system for managing business and other specific risks. Their
purpose is to recognize and capture risks that could have a material impact on business operations in an appropriate and
comprehensive manner. Nipro also has established an operational risk management committee to ensure management across all
group companies. This committee endeavors to further strengthen risk management systems to prevent, avoid, and learn from
General meeting of shareholders
Accounting auditor
(Audit & Supervisory
Board members)
Audit & Supervisory
Board
(Directors)
Board of Directors
Committees
(Decision making)Accountingaudit
Operational audit
Supervision of directors' execution
of duties
ElectionPresident
Directors with responsibility for each operation
Divisions:General manager, manager,
assistant manager, other
Operational risk
management committee
Third-party professionals
(corporate lawyer,accountant, other)
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
51/53
R Coverage
risks and crises. Nipro also has established a sanction committee, chaired by the president, which endeavors to ensure sound
business management through the appropriate handling of sanctions. Nipro has produced a disaster prevention and crisis
management handbook and seeks to keep employees fully informed about taking calm and appropriate action when faced with
disasters and about reassessing and renewing business continuity plans as appropriate. In addition, to strengthen its rollout of
compliance training and to enhance its risk management system, the company has established a compliance section within its
general affairs department, and is working to ensure awareness of compliance among employees.
To ensure the appropriateness of subsidiaries’ operations, Nipro has established rules of subsidiary administration and
accompanying guidance notes. Subsidiaries are required to discuss important matters in advance with the company and
otherwise keep it involved, and to report regularly or as necessary to the company on affairs covered by the rules.
The company has established an internal audit division, consisting of an audit office and an overseas audit office, and conducts
audits of accounting and other operations based on internal audit protocols. The two full-time employees in the internal audit
division, and employees dispatched as necessary from the head office management division or other divisions, carry out
inspections and ensure smooth and efficient performance. Audit & supervisory board members attend key meetings such as
those of the board of directors, in accordance with the auditing policy and roles determined by the audit & supervisory board.
They receive performance reports from directors and employees, and are able to request further explanation when necessary,
and inspect key documents. They also undertake other auditing duties such as investigating the state of operations and assets in
key places of business. Audit & supervisory board meetings are held regularly, or as necessary, in order for members to exchange
views and hold discussions.
Dividend policy
Source: Shared Research based on company data
Source: Shared Research based on company data; per-share data adjusted for stock splits Note: Figures may differ from company materials due to differences in rounding methods Note: Nipro’s dividend policy uses 25% of parent net income + 75% of consolidated net income as the base for calculating dividends. In FY03/19, the company plans to allocate 39% of this figure to dividends.
57.2
9.7
35.3
60.0
18.2
81.0
116.2
67.6 71.2 73.7
46.4%
129.1%
66.6%
45.8%
167.6%
40.1%28.4%
42.9% 40.1% 38.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19
EPS Payout ratio (RHS)(JPY)
(Split-adjusted; JPY) FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19Dividend per share 26.5 25.0 23.5 27.5 30.5 32.5 33.5 29.0 28.5 28.0EPS 57.2 9.7 35.3 60.0 18.2 81.0 116.2 67.6 71.2 73.7Payout ratio 46.4% 129.1% 66.6% 45.8% 167.6% 40.1% 28.4% 42.9% 40.1% 38.0%
Nipro / 8086 LAST UPDATE: 2020.05.22 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
52/53
R Coverage
Major shareholders
Source: Shared Research based on company data * As of March 31, 2019
Employees
Source: Shared Research based on company data * Figures for part-time employees are annual averages (eight hours per day equivalent)
Profile
Company Name Head Office
Nipro Corporation 3-9-3 Honjo-nishi, Kita-ku, Osaka
Phone Listed On
+81-6-6372-2331 Tokyo Stock Exchange, First Section
Established Exchange Listing
July 8, 1954 February 1987
Website Fiscal Year-End
https://www.nipro.co.jp/en/ March 31
IR Contact IR Web
Corporate Planning Department https://www.nipro.co.jp/en/ir/
Nippon Electric Glass Co., Ltd. 20,225 12.40%The Master Trust Bank of Japan, Ltd. (Trust account) 8,565 5.25%Japan Trustee Services Bank, Ltd. (Trust account) 8,113 4.97%Resona Bank Limited 4,414 2.71%Japan Trustee Services Bank, Ltd. (Trust account 5) 2,714 1.66%SSBTC Client Omnibus Account (Standing proxy: The Hongkong and Shanghai Banking Corporation Ltd. Tokyo Branch)
2,548 1.56%
Japan Post Insurance Co., Ltd. (Standing proxy: Trust & Custody Services Bank, Ltd.)
2,322 1.42%
Japan Trustee Services Bank, Ltd. (Trust account 9) 2,246 1.38%Kazumi Sano 1,910 1.17%JP Morgan Chase Bank 385151 (Standing proxy: Mizuho Bank, Ltd. Settlement Department)
1,833 1.12%
SUM 54,895 33.66%
Top shareholders Shares held('000)
Shareholdingratio
Segment FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 5-year change
Medical-Related 14,745 15,097 16,759 17,783 20,706 21,289 21,979 +6,882
Temporary staff 1,090 789 525 488 533 628 662 -127
Pharmaceutical-Related 2,589 2,389 2,496 2,647 2,901 3,198 3,587 +1,198
Temporary staff 140 181 379 442 423 231 242 +61
PharmaPackaging 1,636 3,928 3,430 3,279 3,195 3,162 2,995 -933
Temporary staff 359 86 288 297 321 317 197 +111
Other 0 0 0 22 26 31 29 +29
Temporary staff 0 0 0 2 0 0 3 +3
Corporate 357 412 468 512 587 650 735 +323
Temporary staff 23 23 24 25 29 33 32 +9
Total employees 19,327 21,826 23,153 24,243 27,415 28,330 29,325 +7,499
Total temporary staff 1,612 1,079 1,216 1,254 1,306 1,209 1,136 +57
About Shared Research Inc. Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp
53/53
R Coverage
We offer corporate clients comprehensive report coverage, a service that allows them to better inform investors and other stakeholders by presenting a continuously
updated third-party view of business fundamentals, independent of investment biases. Shared Research can be found on the web at https://sharedresearch.jp.
Current Client Coverage of Shared Research Inc.
Attention: If you would like to see companies you invest in on this list, ask them to become our client, or sponsor a report yourself.
Disclaimer: This document is provided for informational purposes only. No investment opinion or advice is provided, intended, or solicited. Shared Research Inc. offers
no warranty, either expressed or implied, regarding the veracity of data or interpretations of data included in this report. We shall not be held responsible for any damage
caused by the use of this report. The copyright of this report and the rights regarding the creation and exploitation of the derivative work of this and other Shared
Research Reports belong to Shared Research. This report may be reproduced or modified for personal use; distribution, transfer, or other uses of this report are strictly
prohibited and a violation of the copyright of this report. Our officers and employees may currently, or in the future, have a position in securities of the companies
mentioned in this report, which may affect this report’s objectivity.
Japanese Financial Instruments and Exchange Law (FIEL) Disclaimer: The report has been prepared by Shared Research under a contract with the company
described in this report (“the company”). Opinions and views presented are ours where so stated. Such opinions and views attributed to the company are
interpretations made by Shared Research. We represent that if this report is deemed to include an opinion from us that could influence investment decisions in the
company, such an opinion may be in exchange for consideration or promise of consideration from the company to Shared Research.
Contact Details
Shared Research Inc.
3-31-12 Sendagi Bunkyo-ku Tokyo, Japan
https://sharedresearch.jp
Phone: +81 (0)3 5834-8787
Email: [email protected]
Accordia Golf Trust Digital Arts Inc. Kawanishi Holdings, Inc. RYOHIN KEIKAKU CO., LTD.Advance Create Co., Ltd. Digital Garage Inc. KFC Holdings Japan, Ltd. SanBio Company LimitedADJUVANT COSME JAPAN CO., LTD. Doshisha Corporation KI-Star Real Estate Co., Ltd. SANIX INCORPORATEDAeon Delight Co., Ltd. Dream Incubator Inc. Kondotec Inc. Sanrio Company, Ltd.Aeon Fantasy Co., Ltd. Earth Corporation Kumiai Chemical Industry Co., Ltd. SATO HOLDINGS CORPORATIONAi Holdings Corporation Edion Corporation Lasertec Corporation SBS Holdings, Inc. AirTrip Corp. Elecom Co., Ltd. Locondo, Inc. Seikagaku Corporationand factory, inc. en-Japan Inc. LUCKLAND CO., LTD. Seria Co.,Ltd.ANEST IWATA Corporation euglena Co., Ltd. MATSUI SECURITIES CO., LTD. SHIFT Inc.AnGes Inc. FaithNetwork Co., Ltd. Media Do Holdings Co., Ltd. Shikigaku Co., LtdAnicom Holdings, Inc. Ferrotec Holdings Corporation Medical System Network Co., Ltd. SHIP HEALTHCARE HOLDINGS, INC.Anritsu Corporation FIELDS CORPORATION MEDINET Co., Ltd. SIGMAXYZ Inc.Apaman Co., Ltd. Financial Products Group Co., Ltd. MedPeer,Inc. SMS Co., Ltd.ARATA CORPORATION First Brothers Col, Ltd. Mercuria Investment Co., Ltd. Snow Peak, Inc.Artspark Holdings Inc. FreeBit Co., Ltd. Micronics Japan Co., Ltd. Solasia Pharma K.K.AS ONE CORPORATION FRONTEO, Inc. MIRAIT Holdings Corporation SOURCENEXT CorporationAteam Inc. Fujita Kanko Inc. Monex Goup Inc. Star Mica Holdings Co., Ltd.Aucfan Co., Ltd. Gamecard-Joyco Holdings, Inc. MORINAGA MILK INDUSTRY CO., LTD. Strike Co., Ltd.AVANT CORPORATION GameWith, Inc. Mortgage Service Japan Limited. SymBio Pharmaceuticals LimitedAxell Corporation GCA Corporation NAGASE & CO., LTD Synchro Food Co., Ltd.Azbil Corporation Good Com Asset Co., Ltd. NAIGAI TRANS LINE LTD. TAIYO HOLDINGS CO., LTD.AZIA CO., LTD. Grandy House Corporation NanoCarrier Co., Ltd. Takashimaya Company, LimitedAZoom, Co., Ltd. Hakuto Co., Ltd. Net Marketing Co., Ltd. Take and Give Needs Co., Ltd.BEENOS Inc. Hamee Corp. Net One Systems Co.,Ltd. Takihyo Co., Ltd.Bell-Park Co., Ltd. Happinet Corporation Nichi-Iko Pharmaceutical Co., Ltd. TEAR CorporationBenefit One Inc. Harmonic Drive Systems Inc. Nihon Denkei Co., Ltd. Tenpo Innovation Inc.B-lot Co.,Ltd. HOUSEDO Co., Ltd. Nippon Koei Co., Ltd. 3-D Matrix, Ltd.Broadleaf Co., Ltd. H2O Retailing Corporation NIPPON PARKING DEVELOPMENT Co., Ltd. TKC CorporationCanBas Co., Ltd. IDOM Inc. NIPRO CORPORATION TKP CorporationCanon Marketing Japan Inc. IGNIS LTD. Nisshinbo Holdings Inc. Tsuzuki Denki Co., Ltd.Career Design Center Co., Ltd. i-mobile Co.,Ltd. NS TOOL CO., LTD. TOCALO Co., Ltd.Carna Biosciences, Inc. Inabata & Co., Ltd. OHIZUMI MFG. CO., LTD. TOKAI Holdings CorporationCARTA HOLDINGS, INC Infocom Corporation Oisix ra daichi Inc. Tokyu Construction Co., Ltd.CERES INC. Infomart Corporation Oki Electric Industry Co., Ltd TOYOBO CO., LTD.Chiyoda Co., Ltd. Intelligent Wave, Inc. ONO SOKKI Co., Ltd. Toyo Ink SC Holdings Co., LtdChori Co., Ltd. ipet Insurance CO., Ltd. ONWARD HOLDINGS CO.,LTD. Toyo Tanso Co., Ltd.Chugoku Marine Paints, Ltd. Itochu Enex Co., Ltd. Pan Pacific International Holdings Corporation Tri-Stage Inc.cocokara fine Inc. JSB Co., Ltd. PARIS MIKI HOLDINGS Inc. TSURUHA HoldingsCOMSYS Holdings Corporation JTEC Corporation PIGEON CORPORATION VISION INC.COTA CO.,LTD. J Trust Co., Ltd QB Net Holdings Co., Ltd. VISIONARY HOLDINGS CO., LTD.CRE, Inc. Japan Best Rescue System Co., Ltd. RACCOON HOLDINGS, Inc. WirelessGate, Inc.CREEK & RIVER Co., Ltd. JINS HOLDINGS Inc. Raysum Co., Ltd. YELLOW HAT LTD.Daiichi Kigenso Kagaku Kogyo Co., Ltd. JP-HOLDINGS, INC. RESORTTRUST, INC. YOSHINOYA HOLDINGS CO., LTD.Daiseki Co., Ltd. KAMEDA SEIKA CO., LTD. ROUND ONE Corporation YUMESHIN HOLDINGS CO., LTD.Demae-Can CO., LTD Kanamic Network Co.,LTD RVH Inc. Yushiro Chemical Industry Co., Ltd.DIC Corporation ZAPPALLAS, INC.