On November 4, 2022 Kyowa Hakko Kirin reported of Consolidated Financial Results Fiscal 2022 Third Quarter (Press release, Kyowa Hakko Kirin, NOV 4, 2022, View Source [SID1234623159])
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1. Consolidated Financial Results for the Nine Months Ended September 30, 2022
(1) Consolidated operating results
2) Consolidated financial position
2. Dividends
3. Consolidated Earnings Forecasts for the Fiscal Year Ending December 31, 2022 (from January 1, 2022 to December 31, 2022)
* Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.
* Notice regarding the appropriate use of the earnings forecasts and other special comments The forward-looking statements, including earnings forecasts, contained in these materials are based on the information currently available to the Company and on certain assumptions deemed to be reasonable by management. As such, they do not constitute guarantees by the Company of future performance. Actual results may differ materially from these projections for a wide variety of reasons.
1. Operating Results and Financial Statements
(1) Summary of Consolidated Financial Position Assets as of September 30, 2022, were ¥940.4 billion, an increase of ¥18.5 billion compared to the end of the previous fiscal year.
Non-current assets increased by ¥14.3 billion compared to the end of the previous fiscal year, to ¥418.0 billion, due mainly to increases in deferred tax assets and property, plant and equipment. Current assets increased by ¥4.1 billion compared to the end of the previous fiscal year, to ¥522.4 billion, due mainly to an increase in inventories. Liabilities as of September 30, 2022, were ¥177.5 billion, a decrease of ¥7.2 billion compared to the end of the previous fiscal year, due mainly to decreases in income taxes payable and contract liabilities.
Equity as of September 30, 2022, was ¥762.8 billion, an increase of ¥25.7 billion compared to the end of the previous fiscal year, due mainly to the recording of profit attributable to owners of parent, despite a decrease due to the payment of dividends, etc. As a result, the ratio of equity attributable to owners of parent to total assets as of the end of the third quarter was 81.1%, an increase of 1.1 percentage points compared to the end of the previous fiscal year.
(2) Summary of Consolidated Business Performance
1) Overview of results The Group now applies the International Financial Reporting Standards ("IFRS") in line with its policy of expanding business globally, and adopts "core operating profit" as a level of profit that shows the recurring profitability from operating activities. Core operating profit is calculated by deducting "selling, general and administrative expenses" and "research and development expenses" from "gross profit," and adding "share of profit (loss) of investments accounted for using equity method" to the amount. For the nine months ended September 30, 2022 (January 1, 2022 to September 30, 2022), revenue was ¥283.8 billion (up 11.7% compared to the same period of the previous fiscal year), and core operating profit was ¥60.9 billion (up 30.0%). Profit attributable to owners of parent was ¥49.2 billion (up 49.5%).
The increase in revenue was the result of growth of global strategic products in North America and EMEA and a rise in revenue from technology out-licensing, despite lower revenue in Japan. The positive effect on revenue from foreign exchange was ¥18.7 billion. Core operating profit rose, despite increases in selling, general and administrative expenses and research and development expenses, due to higher gross profit resulting from an increase in overseas revenue and a rise in revenue from technology out-licensing. The positive effect on core operating profit from foreign exchange was ¥6.7 billion.
Profit attributable to owners of parent increased as a result of an increase in finance income in addition to an increase in core operating profit, despite an increase in income taxes.
1. Revenue by regional control function is classified based on consolidated revenue from products of regional control functions in the One Kyowa Kirin structure (a global management structure with axes combining four regions – Japan, North America, EMEA, and Asia/Oceania – and the functions needed by a global specialty pharmaceutical company).
2. EMEA consists of Europe, the Middle East, Africa, etc.
3. Others consists of revenue from technology out-licensing, original equipment manufacturing, etc. Revenue in North America increased year on year due to the growth of global strategic products. Revenue from Crysvita, a treatment for X-linked hypophosphatemia, has been growing since its launch in 2018. Revenue from POTELIGEO, an anticancer agent, has been growing. Revenue from NOURIANZ (product name in Japan: NOURIAST), an antiparkinsonian agent, has been growing since its launch in October 2019. Revenue in EMEA increased year on year due to the growth of global strategic products.
Revenue from Crysvita, a treatment for X-linked hypophosphatemia, has been growing as the number of countries where it has been released has been increasing since its launch in 2018. Approval for the extended indication for tumor induced osteomalacia (TIO) was acquired from the European Commission (EC) in August 2022, and sales were launched in Germany and other countries. Revenue from POTELIGEO, an anticancer agent, has been growing as the number of countries where it has been released has been increasing since its launch in June 2020. Revenue from Abstral, a treatment for cancer pain, decreased due to the impact of the market penetration of generics. Revenue in Asia/Oceania increased year on year.
Revenue from REGPARA, a treatment for secondary hyperparathyroidism, declined after it became subject to China’s centralized governmental purchasing system* in October 2021. * Volume-Based Procurement (VBP) program that was introduced in 2018 for reducing healthcare cost in China. Even though only 2 to 5 companies are selected as suppliers through a tender, drug prices dramatically dropped down. Revenue from Gran, a neutropenia treatment drug, has been growing particularly in South Korea. < Revenue from Others >
Revenue from Others increased year on year. Technology out-licensing increased due to the recognition of revenue of upfront payment of USD400 million over a certain period in conjunction with the conclusion of an agreement in 2021 with Amgen Inc. to jointly develop and commercialize KHK4083, anti-OX40 fully human monoclonal antibody for the treatment of atopic dermatitis, in addition to an increase in royalties revenue from AstraZeneca in relation to benralizumab.
Core operating profit increased compared to the same period of the previous fiscal year due mainly to an increase in gross profit due to increases in revenue from U.S. and Europe, mainly from global strategic products, and in revenue from technology out-licensing, despite increases in research and development expenses mainly regarding progress in development of next-generation strategic products, in addition to increases in selling, general and administrative expenses related to investments in human resources and in IT/digital platform aimed at maximizing the value of global strategic products and rapidly establishing competitive global business bases. The positive effect on core operating profit from foreign exchange was ¥6.7 billion