Summary of 3rd Quarter Financial Results for year ended March 31, (Unaudited)

Transcription

1 Summary of 3rd Quarter Financial Results for year ended March 31, 2009 (Unaudited) Company name: Stock exchange listings (Section): Securities code number: URL: Headquarters: Representative: For further information, please contact: Planned date of filing of quarterly securities report: February 12, 2009 Note; Amounts less than \ 1 million have been rounded. January 29, 2009 Mitsubishi Tanabe Pharma Corporation Tokyo, Osaka (First Sections) , Dosho-machi, Chuo-ku, Osaka Name: Natsuki Hayama Title: President and Representative Director Name: Yoshihisa Sasou Title: General Manager, Corporate Communications Department Telephone: (06) Results for 3rd Quarter (April 1, 2008 to December 31, 2008) (1) Consolidated Business Results Net sales Operating income Ordinary income 3rd Quarter of Fiscal rd Quarter of Fiscal 2007 Yen million % change Yen million % change Yen million % change 325,314-65,091-66, ,688-51,079-51,650 - Net income Net income per share Net income per share (diluted) Yen million % change Yen Yen 3rd Quarter of Fiscal , rd Quarter of Fiscal , (Note) Percentage changes in the above list show change in comparison with the previous 3rd quarter. (2) Consolidated Financial Position Total assets Net assets Equity ratio Net assets per share Yen million Yen million % Yen December 31, 2008 March 31, , , , , , , (Note) Shareholders' equity \660,771 million (\653,229 million in fiscal 2007) 2. Dividends Dividends per share (Record date) 1st Quarter 2nd Quarter 3rd Quarter Year-end For the year Yen Yen Yen Yen Yen Fiscal Fiscal Fiscal (projected) (Note) 1. Revision to dividend forecast in the quarter under review: No 2. In the fiscal year ended March 31, 2008, dividends were paid to the shareholder as of September 20, rather than as shareholders of the end of the period. For further information, please see the notes on page 3.

2 3. Forecasts for Fiscal 2008 (April 1, 2008 to March 31, 2009) Net sales Operating income Ordinary income Yen million % change Yen million % change Yen million % change Full year 420, , , Net income Net income per share Yen million % change Yen Full year 33, (Note) 1. Revision to consolidated results forecast in the quarter under review: Yes 2. For details, please see page 6, Qualitative Information / Financial Statements, etc., 3. About consolidated results forecasts. 4. Other (1) Significant change involving subsidiaries during the period (changes in designated subsidiaries accompanying changes in the scope of consolidation) [Yes/No]: No (2) Application of simplified accounting methods or of special accounting methods in the preparation of quarterly financial statements: Yes Note: For details, please see page 6, Qualitative Information / Financial Statements, etc., 4. Other. (3) Changes in accounting principles, procedures, method of presentation associated with the preparation of the quarterly consolidated financial statements (Items noted in the Changes in the Basis of Presenting Quarterly Consolidated Financial Statements section) 1. Change accompanying revision of accounting standards: Yes 2. Other changes: No Note: For details, please see page 6, Qualitative Information / Financial Statements, etc., 4. Other. (4) Number of shares issued (common stock) 1. Number of shares issued at the end of the period (including treasury stock) 3rd Quarter of fiscal ,417,916 shares Fiscal ,417,916 shares 2. Number of shares of treasury stock at the end of the period 3rd Quarter of fiscal ,474 shares Fiscal ,957 shares 3. Average number of shares of during the period (nine months) 3rd Quarter of fiscal ,198,642 shares 3rd Quarter of fiscal ,820,327 shares (Notes) From the current fiscal year, the Company has adopted ASBJ Statement No. 12, Accounting Standard for Quarterly Financial Statements, and ASBJ Guidance No. 14, Implementation Guidance for Accounting Standards for Quarterly Financial Statements. In addition, the Company prepares quarterly financial statements according to Rules for Quarterly Financial Reporting. All these estimates are forward-looking statements based on a number of assumptions and beliefs in light of the information currently available to management and are subject to risks and uncertainties. Actual financial results may differ materially depending on a number of factors, including economic conditions and currency exchange rate fluctuations.

3 (Notes) (1) Consolidated results of operations On October 1, 2007, the Company merged with the former Mitsubishi Pharma Corporation. Because the merger was completed as a reverse acquisition under the accounting standards for business combinations, the results for the nine-month period ended December 31, 2007, are the sum of the results of the former Mitsubishi Pharma Corporation in the six-month period ended September 30, 2007 and the results of Mitsubishi Tanabe Pharma Corporation for the three-month period ended December 31, As a result, year-on-year comparisons are not provided. (2) Net income per share in the 3rd quarter of the fiscal year ended March 31, 2008 In calculating net income per share, the average number of shares during the period is calculated on basis of the number of shares issued allocated to a shareholder of the former Mitsubishi Pharma Corporation at the time of the merger until the end of September, as well as that of shares issued of Mitsubishi Tanabe Pharma Corporation (excluding treasury stock) in or after October. (3) Dividends per share (Record date) Fiscal 2007 Dividends per share 20-Sep. Yen 7.68 For dividends per share in the fiscal year ended March 31, 2008, the dividend to the shareholder on the record date of September 20, 2007 are distributed from the retained earnings of the former Mitsubishi Pharma Corporation, and the year-end dividends are the ones from the retained earnings of Mitsubishi Tanabe Pharma Corporation, respectively. The former Tanabe Seiyaku Co., Ltd. paid an interim dividend of 13 per share, for total dividends of 3,183 million.

4 [Qualitative Information Financial Statements etc.] 1. Qualitative information about consolidated results of operations Consolidated results for the first nine months of the fiscal year ended March 31, 2009 (April 1, 2008 to December 31, 2008) were as follows. (Millions of yen) First nine months of previous fiscal year (simple sum) First nine months of current fiscal year % change Net sales 323, , Pharmaceuticals 301, , Other Businesses 22,387 22, Operating income 69,523 65,091 (6.4) Ordinary income 70,882 66,383 (6.3) Net income 37,581 32,116 (14.5) (Note): Regarding the calculation of figures for the corresponding nine-month period of the previous fiscal year (simple sum) For the corresponding nine-month period of the previous fiscal year (April 1, 2007 to December 31, 2007), the six-month period from April 1 to September 30 was prior to the merger between the former Tanabe Seiyaku Co., Ltd. and the former Mitsubishi Pharma Corporation. Accordingly, figures for the corresponding nine-month period of the previous fiscal year are the simple sum of the consolidated results of the former Tanabe Seiyaku Co., Ltd. for the six-month interim period, the consolidated results of the former Mitsubishi Pharma Corporation for the six-month interim period, and the consolidated results for Mitsubishi Tanabe Pharma Corporation for the three-month period from October 1, 2007, to December 31, Hereafter, year-on-year comparisons with the corresponding period of the previous year are based on simple sums calculated in this manner. The financial crisis that originated in the U.S. subprime problem has rapidly spread around the world, and from the beginning of fall 2008, it has had a major influence on the real economy as well. Japan has also been affected. Exports have declined rapidly, and business confidence has decreased sharply. The operating environment in the pharmaceutical industry remained challenging due to such factors as the NHI drug price revisions in April 2008, an increase in the number of hospitals implementing the diagnosis procedure combination (DPC) system, and the implementation of measures to promote the use of generics. In addition, the economic slowdown is expected to lead to a reduction in doctor-patient consultations. In this setting, the Company has carefully considered its approach to the key challenges spelled out in the Medium-Term Management Plan. In the nine-month period ended December 31, 2008, as called for by the plan, the Company implemented measures targeting the rapid achievement of merger synergies. These measures included working to bolster the domestic sales presence and integrating personnel systems, production subsidiaries, and certain research facilities. As a result of discussions with Centocor,Inc., the Company has resolved all issues with respect to Remicade, an anti-tnf α monoclonal antibody licensed from Centocor,Inc., arising from the merger,

5 and the Company will continue to sell Remicade as it has done to date. For the nine-month period ended December 31, 2008, consolidated net sales totaled billion. In the pharmaceuticals segment, net sales were billion, up 0.5%, or 1.3 billion, year-on-year. This gain was attributable to continued strong growth in sales of Remicade, and Mearubik, a measles and rubella combined vaccine, which offset lower sales of such products as Sermion, a cerebral circulation and metabolism ameliorator, and Venoglobulin-IH, a human immunoglobulin. In the other business segment, domestic sales of fine chemical products were favorable, and the segment recorded sales of 22.8 billion, an increase of 2.1%. Overseas sales were 27.9 billion, and the ratio of overseas sales to net sales was 8.6%. Factors affecting profits included the NHI drug price revisions and the cost of sales ratio, which increased by 1.5 percentage points year-on-year due to a change in the product mix. As a result, gross profit was down 1.8% year-on-year, to billion. SG&A expenses ( billion) included merger-related goodwill amortization ( 7.5 billion) and R&D expenses ( 53.9 billion), which increased due in part to the recording of a lump-sum payment related to the licensing agreement with Cytochroma Inc. for CTA018, a treatment for secondary hyperparathyroidism, in July As a result, operating income was down 6.4% year-on-year, to 65.0 billion, and ordinary income declined 6.3%, to 66.3 billion. Extraordinary losses included special retirement expense ( 3.9 billion) due to early retirements, an impairment loss ( 2.9 billion) associated with the closure of the Hirakata Office (Osaka) and the 1st and 2nd Nabari Training Centers (Mie Prefecture), and loss on valuation of investment in securities of 2.9 billion. As a result, net income for the nine-month period was 32.1 billion, down 14.5% year-on-year. 2. Qualitative information about consolidated financial position (1) Assets, liabilities, and net assets Total assets as of December 31, 2008, were billion, an increase of 9.5 billion from the end of the previous fiscal year. Major increases included investment in securities and short-term loans receivable, while cash and time deposits declined due to such factors as purchases of bonds for the fund management. Liabilities were billion, an increase of 2.0 billion from the end of the previous fiscal year. Major increases included accounts payable-trade and accounts payable-other. Net assets were billion, an increase of 7.4 billion from the end of the previous fiscal year. As a result, the equity ratio was 80.9%, unchanged from the end of the previous fiscal year. Unrealized holding gains on securities declined 5.9 billion due to the stock market conditions. (2) Cash flows (Cash flows from operating activities) Net cash provided by operating activities was 26.9 billion.the main inward cash flows were income before income taxes of 56.5 billion, and an increase in trade notes and accounts payable. The main

6 outward flows were an increase in trade notes and accounts receivable, and income taxes paid. (Cash flows from investing activities) Due principally to purchases of marketable securities and investment in securities, funded by cash on hand, net cash used in investing activities totaled 67.8 billion. (Cash flows from financing activities) Due to such items as dividends paid, net cash used in financing activities was 16.0 billion. As a result, the balance of cash and cash equivalents at the end of the period under review was billion, a decrease of 58.8 billion from the end of the previous fiscal year. 3. Qualitative information about consolidated results forecasts In consideration of recent market trends, the results forecasts that were announced on October 30, 2008, have been revised as follows. (1) Revision of consolidated results forecast for the fiscal year ended March 31, 2009 (April 1, 2008 to March 31, 2009) Net sales Operating income Ordinary income Net income Net income per share Yen million Yen million Yen million Yen million Yen Previous forecast (A) 420,000 73,000 74,500 35, Current forecast (B) 420,000 73,000 74,500 33, Difference (B-A) (2,500) % change (7.0) (Reference) Results in previous fiscal year (fiscal year ended March 31, 2008) 315,636 54,024 54,408 21, (2) Reasons for revision In regard to the consolidated results forecast for the fiscal year, due to the effect of a loss on valuation of investment in securities, which was recorded as an extraordinary loss in the three-month period ended December 31, 2008, the forecast for net income for the fiscal year has been reduced from the previously announced forecast. 4. Other (1) Significant changes involving subsidiaries during the period (changes in designated subsidiaries accompanying changes in the scope of consolidation) Not applicable.

7 (2) Application of simplified accounting methods or of special accounting methods in the preparation of quarterly financial statements: (Simplified accounting methods) 1. Inventory valuation method In regard to write-downs of inventory, the carrying amount of items for which the profitability has clearly declined is reduced to the estimated net selling value. 2. Method of calculation of income taxes, deferred tax assets, and deferred tax liabilities. The calculation of income tax payments, deferred tax assets, and deferred tax liabilities is based on the sum of important adjustment and tax credit items. In regard to judgments about the recoverability of deferred tax assets, in the event that there are no marked changes in the management environment, etc., since the end of the previous fiscal year and there are no marked changes in the occurrence of temporary differences, the judgments utilize a method based on the future results forecasts used in the previous consolidated settlement of accounts and on tax planning. In the event that there are marked changes in the management environment, etc., since the end of the previous fiscal year or there are marked changes in the occurrence of temporary differences, the judgements utilize the a method based on the future results forecasts used in the previous consolidated settlement of accounts and on tax planning as well as the influence of the marked changes. (3) Changes in accounting principles, procedures, method of presentation associated with the preparation of the quarterly consolidated financial statements 1. From the current fiscal year, the Company has adopted ASBJ Statement No. 12, Accounting Standard for Quarterly Financial Statements, and ASBJ Guidance No. 14, Implementation Guidance for Accounting Standards for Quarterly Financial Statements. In addition, the Company prepares quarterly financial statements according to Rules for Quarterly Financial Reporting. 2. Changes in inventory valuation standard and inventory valuation method Previously, merchandise and finished goods were principally handled by the lower of cost or market method using weighted average cost, and raw materials and others were principally handled by the cost method using weighted average cost. From the first quarter of the current fiscal year, accompanying the adoption of Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9, July 5, 2006), the Company has principally changed to the cost method using weighted average cost (method of reducing book value in accordance with declines in profitability). This change will not have a significant effect on results. 3. From the first quarter of the current fiscal year, the Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements (PITF Practical Solution No.18, ASBJ, May 17, 2006) is applied, and necessary amendments for consolidated financial statements are made. This change will not have a significant effect on results.

8 5. CONSOLIDATED FINANCIAL STATEMENTS (1) CONSOLIDATED BALANCE SHEETS (Millions of yen) Year As of As of December 31, 2008 March 31, 2008 Accounts Amount Amount Assets Current assets Cash and time deposits 24,854 79,655 Notes and accounts receivable-trade 149, ,280 Marketable securities 38,671 55,634 Merchandise and finished goods 57,197 51,652 Work in process 2,714 4,017 Raw materials and supplies 17,630 17,804 Short-term loans receivable 57,730 30,924 Deferred tax assets 9,917 12,664 Other 3,265 4,419 Allowance for doubtful receivables (58) (23) Total current assets 361, ,026 Fixed assets Property, plant and equipment Buildings and structures, net 48,315 51,320 Machinery, equipment and vehicles, net 24,212 23,698 Tools, furniture and fixtures, net 5,824 5,991 Land 53,830 55,124 Construction in progress 1,746 3,377 Total property, plant and equipment 133, ,510 Intangible fixed assets Goodwill 138, ,550 Other 3,632 3,506 Total intangible fixed assets 141, ,056 Investments and other assets Investment in securities 120,905 88,000 Deferred tax assets 10,757 4,037 Prepaid pension expenses 35,162 33,988 Other 12,973 10,677 Allowance for doubtful receivables (3) (33) Total investments and other assets 179, ,669 Total fixed assets 455, ,235 Total assets 816, ,261

9 Liabilities Current liabilities Year Accounts As of (Millions of yen) As of December 31, 2008 March 31, 2008 Amount Amount Notes and accounts payable-trade 35,647 27,139 Short-term loans payable 6,925 6,741 Current maturities of long-term loans payable 445 1,240 Accounts payable-other 20,161 18,206 Income taxes payable 10,343 15,271 Reserve for bonuses 6,170 13,593 Other reserves 1,395 1,040 Other 11,270 6,219 Total current liabilities 92,356 89,449 Long-term liabilities Long-term loans payable Deferred tax liabilities 12,800 12,802 Accrued retirement benefits for employees 16,414 16,928 Accrued retirement benefits for directors and corporate auditors Reserve for health management allowances for HIV compensation 1,688 1,758 Reserve for health management allowances for SMON compensation 4,649 5,093 Reserve for HCV litigation 11,200 11,200 Other 2,338 2,010 Total long-term liabilities 49,152 50,004 Total liabilities 141, ,453 Net assets Shareholders' equity Common stock 50,000 50,000 Capital surplus 451, ,184 Retained earnings 170, ,332 Treasury stock (260) (209) Total shareholders' equity 671, ,307 Valuation and translation adjustments Unrealized holding gains on securities (4,437) 1,511 Deferred gains or losses on hedges (2,004) (841) Foreign currency translation adjustment (4,010) (1,748) Total valuation and translation adjustments (10,451) (1,078) Minority interests 14,484 14,579 Total net assets 675, ,808 Total liabilities and net assets 816, ,261

10 (2) CONSOLIDATED STATEMENTS OF INCOME (Millions of yen) Year Accounts April 1, December 31, 2008 Amount Net sales 325,314 Cost of sales 123,907 Gross profit 201,407 Selling, general and administrative expenses Advertising expenses 2,314 Sales promotion expenses 8,704 Salaries and allowances 27,603 Provision for bonuses 3,278 Provision for directors' bonuses 3 Retirement benefit expenses 368 Provision for directors' retirement benefits 10 Depreciation and amortization 1,483 Research and development expenses 53,919 Amortization of goodwill 7,541 Other 31,093 Total selling, general and administrative expenses 136,316 Operating income 65,091 Non-operating income Interest income 1,692 Dividends income 804 Foreign exchange gain 137 Equity in earnings of affiliates 21 Other 586 Total non-operating income 3,240 Non-operating expenses Interest expenses 67 Donations 374 Loss on disposal of property, plant and equipment 706 Other 801 Total non-operating expenses 1,948 Ordinary income 66,383 Extraordinary income Gain on sales of property, plant and equipment 21 Gain on transfer of business 125 Gain on sales of investment in securities 9 Total extraordinary income 155 Extraordinary loss Special retirement expenses 3,916 Impairment loss 2,977 Loss on valuation of investment in securities 2,910 Other 197 Total extraordinary losses 10,000 Income before income taxes and minority interests 56,538 Income taxes-current 23,042 Income taxes-deferred 887 Total income taxes 23,929 Minority interests 493 Net income 32,116

11 (3) CONSOLIDATED STATEMENTS OF CASH FLOWS Cash flows from operating activities: Year Accounts (Millions of yen) April 1, December 31, 2008 Income before income taxes and minority interests 56,538 Depreciation and amortization 11,425 Impairment loss 2,977 Amortization of goodwill 7,541 Increase (decrease) in accrued retirement benefits for employees (474) Decrease (increase) in prepaid pension expenses (1,174) Increase (decrease) in allowance for doubtful receivables 8 Interest and dividends income (2,496) Interest expenses 67 Loss (gain) on sales and disposal of fixed assets 457 Loss (gain) on sales of investment in securities (9) Loss (gain) on valuation of investment in securities 2,910 Equity in (earnings) losses of affiliates (21) Special retirement expenses 3,916 Decrease (increase) in notes and accounts receivable-trade (24,717) Decrease (increase) in inventories (4,375) Increase (decrease) in notes and accounts payable-trade 8,984 Increase (decrease) in accounts payable-other 872 Other, net (7,270) Subtotal 55,159 Interest and dividends income received 2,465 Interest expenses paid (70) Proceeds from subsidy 1,027 Special retirement expenses paid (3,916) Income taxes paid (27,736) Net cash provided by (used in) operating activities 26,929 Cash flows from investing activities: Purchase of marketable securities (54,462) Proceeds from sales and redemption of marketable securities 42,467 Increase in time deposits (1,157) Decrease in time deposits 613 Decrease in long-term deposits 1,000 Purchase of property, plant and equipment (8,085) Proceeds from sales of property, plant and equipment 41 Purchase of intangible fixed assets (834) Purchase of investment in securities (53,464) Proceeds from sales and redemption of investment in securities 5,723 Other, net 290 Net cash provided by (used in) investing activities (67,868) Cash flows from financing activities: Increase (decrease) in short-term loans payable, net 185 Repayment of long-term loans payable (919) Cash dividends paid (15,156) Other, net (143) Net cash provided by (used in) financing activities (16,033) Effect of exchange rate change on cash and cash equivalents (1,873) Net increase (decrease) in cash and cash equivalents (58,845) Cash and cash equivalents at beginning of period 160,096 Cash and cash equivalents at end of period 101,251

12 From the current fiscal year, the Company has adopted ASBJ Statement No. 12, Accounting Standard for Quarterly Financial Statements, and ASBJ Guidance No. 14, Implementation Guidance for Accounting Standards for Quarterly Financial Statements. In addition, the Company prepares quarterly financial statements according to Rules for Quarterly Financial Reporting. (4) Note regarding going concern assumption Not applicable. (5) Segment Information 1. Segment information by business segment April 1, December 31, 2008 Net sales Pharmaceuticals Other businesses (Millions of yen) Total Elimination Consolidated 1. Sales to third parties 302,456 22, ,314 ( - ) 325, Intra-group sales or transfers - 4,106 4,106 (4,106) - Total 302,456 26, ,420 (4,106) 325,314 Operating income 62,662 2,298 64, ,091 (Notes) 1. The business segments are classified into Pharmaceuticals and Other businesses on the basis of the kind and character of products and merchandise. 2. The principal products in each of the business segment are as follows: Business Principal products segment Pharmaceuticals Ethical drugs, over-the-counter drugs Other businesses Fine chemicals, real-estate leasing, information services, advertising, etc. 3. As noted in "Changes in Accounting Principles, Procedures, Method of Presentation associated with the Preparation of the Quarterly Consolidated Financial Statements," accompanying the adoption of new accounting standards for the valuation of inventories, ("Accounting Standard for Measurement of Inventories," ASBJ Statement No. 9, July 5, 2006) from the first quarter of the current fiscal year, the Company has principally changed from the previous method under which merchandise and finished goods were principally handled by the lower of cost or market method using weighted average cost, and raw materials and others were principally handled by the cost method using weighted average cost to the cost method using weighted average cost (method of reducing book value in accordance with declines in profitability). This change will not have a significant effect on business segment information.

13 2. Segment information by geographical area Since net sales outside Japan of all segments constituted less than 10% of the consolidated totals for the nine months of the fiscal year ended December 31, 2008, the disclosure of geographical segment information has been omitted. 3. Overseas sales April 1, December 31, 2008 Overseas sales Consolidated net sales (Millions of yen) Rate of overseas sales to consolidated net sales 27, , % (Notes) 1. Overseas sales include export sales of the Company and its domestic subsidiaries and sales of its foreign consolidated subsidiaries other than exports to Japan. 2. Since overseas sales of each segment constituted less than 10% of the consolidated totals for the period, the disclosure of overseas sales by region has been omitted. (6) Note regarding substantial change in shareholders' equity Not applicable.

14 Reference (1) CONSOLIDATED STATEMENTS OF INCOME FOR PREVIOUS 3RD QUARTER Year (Millions of yen) Apr.1, Dec.31, 2007 Accounts Amount % Net sales 229, Cost of sales 81, Gross profit 148, Reversal of reserve for sales returns Gross profit after reversal adjustment 148, Selling, general and administrative expenses 97, [Including research and development expenses] [40,281] [17.5] Operating income 51, Non-operating income 2, Interest income 875 Dividend income 356 Rent income 152 Foreign exchange gains 158 Other 547 Non-operating expenses 1, Interest expense 84 Donations 412 Loss on disposal of property, plant and equipment 303 Losses on disposal of inventories 141 Equity in losses of affiliates 4 Other 573 Ordinary income 51, Special Gains Gains on sale of property, plant and equipment 107 Gains on sale of investment in securities 99 Other 40 Special Losses 5, Merger-related expenses 3,596 Losses on shutdown of plants 1,354 Special retirement expenses 932 Provision for reserve for HCV litigation 43 Write-down of investment in securities 6 Other 1 Income before income taxes 45, Income taxes: Current 18, Minority interests (392) (0.1) Net income 27,

15 (2) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR PREVIOUS 3RD QUARTER Year Accounts (Millions of yen) Apr.1, Dec.31, 2007 Cash flows from operating activities: Income before income taxes and minority interests 45,964 Depreciation 8,721 Amortization of goodwill 2,591 Increase (decrease) in accrued employees' retirement benefits 390 (Increase) decrease in prepaid pension expenses (6,610) Increase (decrease) in allowance for doubtful receivables (56) Interest and dividend income (1,231) Interest expense 84 Gains on sale of property, plant and equipment 966 Gains on sale of investments in securities (99) Loss on valuation of investments in securities 6 Equity in (earnings) losses of affiliates 4 Special retirement expenses 932 (Increase) decrease in notes and accounts receivable (5,216) (Increase) decrease in inventories (4,417) Increase (decrease) in notes and accounts payable 156 Increase (decrease) in accrued payable (5,874) Other, net (3,342) Subtotal 32,969 Interest and dividend received 1,139 Interest paid (89) Special retirement expenses paid (1,644) Income taxes paid (15,416) Net cash provided by (used in) operating activities 16,959 Cash flows from investing activities: Purchases of marketable securities (591) Proceeds from sales of marketable securities 3,340 Increase in time deposits (10,000) Decrease in time deposits 201 Increase in long-term deposits (2,862) Purchases of property, plant and equipment (6,556) Proceeds from sales of property, plant and equipment 248 Purchases of intangible fixed assets (1,325) Purchases of investments in securities (3,657) Proceeds from sales of investments in securities 457 Other, net 47 Net cash provided by (used in) investing activities (20,698) Cash flows from financing activities: Net increase (decrease) of short-term loans 1,298 Repayments of long-term debt (934) Contribution from minority interest 4,163 Payments for purchases of treasury stock (22) Proceeds from sales of treasury stock 14 Dividends paid (9,708) Other, net (74) Net cash provided by (used in) financing activities (5,263) Effect of exchange rate changes on cash and cash equivalents (457) Increase (decrease) in cash and cash equivalents (9,459) Cash and cash equivalents at beginning of the period 85,182 Increase in cash and cash equivalents resulting from merger 47,255 Increase in cash and cash equivalents resulting from inclusion of consolidated subsidiaries 1,277 Decrease in cash and cash equivalents resulting from exclusion of consolidated subsidiaries (33) Cash and cash equivalents at end of the period 124,222

16 (3) Segment Information For Previous 3rd Quarter 1. Segment information by business segment April 1, December 31, 2007 Net sales Pharmaceuticals Other businesses (Millions of yen) Total Elimination Consolidated (1) Sales to third parties 213,745 15, ,688 ( - ) 229,688 (2) Intra-group sales or transfers - 2,504 2,504 (2,504) - Total 213,745 18, ,192 (2,504) 229,688 Operating expenses 164,266 16, ,260 (2,651) 178,609 Operating income 49,479 1,453 50, ,079 (Notes) 1. The business segments are classified into Pharmaceuticals and Other businesses on the basis of the kind and character of products and merchandise. 2. The principal products in each of the business segment are as follows: Business segment Principal products Pharmaceuticals Other businesses Ethical drugs, over-the-counter drugs Fine chemicals, real-estate leasing, information services, advertising, etc. 2. Segment information by geographical area Since net sales of all segments outside Japan constituted less than 10% of the consolidated totals for the nine months ended December 31, 2007, the disclosure of geographical segment information for the period has been omitted. 3. Overseas sales April 1, December 31, 2007 Overseas sales Consolidated net sales (Millions of yen) Rate of overseas sales to consolidated net sales 18, , % (Notes) 1. Overseas sales include export sales of the Company and its domestic subsidiaries and sales of its foreign consolidated subsidiaries other than exports to Japan. 2. Since overseas sales of each segment constituted less than 10% of the consolidated totals, the disclosure of overseas sales by region has been omitted.

17 1. Profit and Loss (April to December 2008) (Billion yen) FY2007/Q3 Simple sum FY2008/ Q3 (Apr.-Dec., 2007) (Apr.-Dec., 2008) Increase (Decrease) % Change Forecasts for FY2008* (Apr.,2008 -Mar., 2009) Achieved % Net Sales [Domestic] [295.8] [91.4] [297.4] [91.4] [1.6] [0.5] [382.6] [91.1] [77.7] [Overseas] [27.7] [8.6] [27.9] [8.6] [0.3] [0.9] [37.4] [8.9] [74.6] Pharmaceuticals [Domestic] [280.2] [86.6] [280.9] [86.4] [0.7] [0.3] [361.9] [86.2] [77.6] [Overseas] [20.9] [6.5] [21.5] [6.6] [0.7] [3.1] [28.7] [6.8] [75.0] Other Businesses [Domestic] [15.6] [4.8] [16.5] [5.0] [0.9] [5.5] [20.6] [4.9] [79.8] [Overseas] [6.8] [2.1] [6.4] [2.0] [(0.4)] [(5.8)] [8.7] [2.1] [73.3] Cost of Sales SG&A expenses R&D expenses Labor costs (2.4) (6.0) Sales promotion expenses (0.9) (9.2) Amortization of goodwill Others (2.0) (6.7) Operating Income (4.4) (6.4) Non-operating income (0.1) Interest income Dividends income Foreign exchange gains Others (0.3) Non-operating expenses (0.1) Interest expenses Losses on disposal of property, plant and equipment Donations (0.1) Others Ordinary income Extraordinary income Extraordinary losses (4.5) (6.3) (0.1) Special retirement expenses Impairment loss Losses on valuation of investment in securities Merger-related expenses (5.6) Losses on plant shutdown (1.4) Others Net income Total labor costs (5.5) (14.5) (2.5) (3.5) *: Revised forecasts (revised from the forecasts announced in FY2008 2nd Quarter Business Briefing on Oct. 30, 2008, increased extraordinary losses by \3.6 billion, reduced net income by \2.5 billion)

18 2. Profit and Loss (Q3, October to December 2008) (Billion yen) Net Sales FY2007/Q3 FY2008/ Q3 (Oct.-Dec., 2007) (Oct.-Dec., 2008) Increase (Decrease) % Change Forecasts for 2nd half of FY2008* (Oct.,2008 -Mar., 2009) Achieved % [Domestic] [107.0] [92.4] [110.1] [92.5] [3.1] [2.9] [195.3] [91.4] [56.4] [Overseas] [8.8] [7.6] [8.9] [7.5] [0.1] [1.4] [18.4] [8.6] [48.4] Pharmaceuticals [Domestic] [101.6] [87.7] [104.6] [87.9] [3.0] [2.9] [185.6] [86.9] [56.3] [Overseas] [6.8] [5.9] [6.9] [5.8] [0.1] [1.9] [14.1] [6.6] [49.2] Other Businesses [Domestic] [5.4] [4.7] [5.5] [4.6] [0.1] [2.2] [9.7] [4.5] [57.0] [Overseas] [2.0] [1.7] [2.0] [1.7] [0.0] [(0.3)] [4.3] [2.0] [45.7] Cost of Sales SG&A expenses (0.4) (0.8) R&D expenses Labor costs (0.4) (3.3) Sales promotion expenses Amortization of goodwill (0.1) Others (0.5) (5.5) Operating Income Non-operating income (0.3) Interest income Dividends income Foreign exchange gains (0.2) Others (0.2) Non-operating expenses Interest expenses Losses on disposal of property, plant and equipment Donations Foreign exchange losses Others Ordinary income Extraordinary income Extraordinary losses Impairment loss Losses on valuation of investment in securities Merger-related expenses (2.0) Others Net income Total labor costs (1.5) (8.6) (0.3) (1.4) *: Revised forecasts (revised from the forecasts announced in FY2008 2nd Quarter Business Briefing on Oct. 30, 2008, increased extraordinary losses by \3.6 billion, reduced net income by \2.5 billion)

19 3. Sales of Main Products (April to December 2008) (Billion yen) FY2007/Q3 Simple sum (Apr.-Dec., 2007) FY2008/Q3 (Apr.- Dec., 2008) Increase (Decrease) % Forecasts for FY2008 (Apr.,2008 -Mar., 2009) Achieved % Ethical drugs Ethical drugs domestic sales (1.6) (0.6) Remicade Radicut (0.3) (1.5) Anplag Urso (0.4) (3.3) Ceredist Tanatril (0.6) (6.0) Herbesser (1.1) (10.4) Depas Venoglobulin-IH (0.7) (7.5) Maintate (0.2) (2.6) Liple (0.2) (2.8) Sermion (1.3) (16.9) Talion Neuart (0.1) (1.6) Omeprazon (0.4) (8.9) Theodur (0.7) (14.5) Fulcaliq (0.5) (13.1) Gastrom (0.8) (18.9) Novastan Vaccine [Influenza] [6.5] [6.2] [(0.2)] [(3.6)] [6.8] [91.6] [Mearubik] [5.4] [9.1] [3.7] [69.8] [11.0] [83.0] Generic Drugs* Ethical drugs overseas sales Herbesser Argatroban (Novastan) Tanatril Vaccine Contracted manufacturing products*2 Licensing Fee, etc. OTC prodcuts Pharmaceuticals Other businesses Total (0.4) (8.7) *1: Sold by Tanabe Seiyaku Hanbai Co., Ltd *2: Active pharmaceutical ingredients, etc. ordered by other companies

20 4. Sales of Main Products (Q3, October to December 2008) (Billion yen) FY2007/Q3 Simple sum (Oct.- Dec., 2007) FY2008/Q3 (Oct.- Dec., 2008) Increase (Decrease) % Forecasts for 2nd half of FY2008 (Oct., Mar., 2009) Achieved % Ethical drugs Ethical drugs domestic sales Remicade Radicut Anplag Urso (0.1) (1.4) Ceredist Tanatril (0.2) (6.6) Herbesser (0.4) (10.2) Depas Venoglobulin-IH Maintate (0.8) Liple Sermion (0.4) (14.9) Talion Neuart Omeprazon (2.5) Theodur (0.3) (14.0) Fulcaliq (0.1) (9.3) Gastrom (0.3) (19.5) Novastan Vaccine [Influenza] [5.6] [4.9] [(0.7)] [(12.4)] [5.4] [89.5] [Mearubik] [0.9] [1.9] [1.0] [101.1] [3.8] [50.4] Generic Drugs* Ethical drugs overseas sales Herbesser (0.2) Argatroban (Novastan) Tanatril Vaccine Contracted manufacturing products*2 Licensing Fee, etc. OTC prodcuts Pharmaceuticals Other businesses Total (0.2) (11.7) *1: Sold by Tanabe Seiyaku Hanbai Co., Ltd *2: Active pharmaceutical ingredients, etc. ordered by other companies

21 5 Quarterly Trend for FY2007 and FY2008 (P/L) (Billion yen) FY2007 (Simple sum) FY2008 Q1 Apr. to Jun. Q2 Jul. to Sep. Q3 Oct. to Dec. Q4 Jan. to Mar. FY2007 Actual Q1 Apr. to Jun. Q2 Jul. to Sep. Q3 Oct. to Dec. FY2008 Forecasts Net Sales % 25.1% 28.3% 21.0% 100.0% 25.8% 23.4% 28.3% 100.0% [Domestic] [96.7] [92.1] [107.0] [76.3] [372.1] [99.2] [88.1] [110.1] [382.6] [26.0%] [24.7%] [28.7%] [20.6%] [100.0%] [25.9%] [23.0%] [28.8%] [100.0%] [Overseas] [8.2] [10.7] [8.8] [9.6] [37.3] [9.1] [10.0] [8.9] [37.4] [21.9%] [28.8%] [23.5%] [25.8%] [100.0%] [24.2%] [26.6%] [23.8%] [100.0%] Pharmaceuticals % 25.1% 28.6% 20.6% 100.0% 25.8% 23.1% 28.5% 100.0% [Domestic] [90.9] [87.8] [101.6] [71.1] [351.4] [93.7] [82.7] [104.6] [361.9] [25.9%] [25.0%] [28.9%] [20.2%] [100.0%] [25.9%] [22.8%] [28.9%] [100.0%] [Overseas] [6.6] [7.5] [6.8] [7.3] [28.2] [6.9] [7.6] [6.9] [28.7] [23.5%] [26.5%] [24.2%] [25.8%] [100.0%] [24.2%] [26.6%] [24.2%] [100.0%] Other Business % 25.3% 24.6% 25.2% 100.0% 26.0% 26.5% 25.5% 100.0% [Domestic] [5.9] [4.3] [5.4] [5.2] [20.8] [5.5] [5.5] [5.5] [20.6] [28.3%] [20.7%] [25.9%] [25.0%] [100.0%] [26.6%] [26.5%] [26.7%] [100.0%] [Overseas] [1.6] [3.3] [2.0] [2.3] [9.1] [2.1] [2.3] [2.0] [8.7] [17.1%] [35.8%] [21.5%] [25.5%] [100.0%] [24.4%] [26.4%] [22.5%] [100.0%] Cost of Sales The cost of sales ratio % 35.9% 36.8% 37.4% 36.8% 36.6% 40.1% 37.8% 38.5% SG & A Expenses % 25.7% 23.3% 27.2% 100.0% 23.3% 27.0% 23.2% 100.0% R&D Expenses % 26.1% 22.4% 26.9% 100.0% 22.0% 28.8% 22.0% 100.0% Labor Costs % 25.9% 23.9% 24.8% 100.0% 25.4% 25.7% 24.8% 100.0% Sales promotion expenses % 33.4% 18.6% 27.7% 100.0% 19.7% 28.8% 25.3% 100.0% Amortization of goodwill % 0.4% 50.2% 49.0% 100.0% 25.1% 25.1% 25.1% 100.0% Others % 25.6% 22.2% 28.0% 100.0% 23.9% 25.1% 22.2% 100.0% Operating Income % 24.8% 41.1% 4.0% 100.0% 34.8% 11.9% 42.5% 100.0% Ordinary Income % 23.8% 41.7% 3.7% 100.0% 34.8% 12.3% 41.9% 100.0% Net Income (5.6) % 23.3% 53.9% (17.7)% 100.0% 44.4% 5.3% 47.7% 100.0% The each figure (excluding Cost of Sales) in the lower displays the progress rate

22 6 Quarterly Trend for FY2007 and FY2008 (Sales of Main Products) Ethical drugs Ethical drugs domestic sales Total Remicade Radicut Anplag Urso Ceredist Tanatril Herbesser Depas Venoglobulin-IH Maintate Liple Sermion Talion Neuart Omeprazon Theodur Fulcaliq Gastrom Novastan Vaccines [Influenza] [Mearubik] Generic Drugs*2 Ethical drugs overseas sales Herbesser Argatroban (Novastan) Tanatril Vaccines Contracted Manufacturing Products*3 Licensing Fee, etc. OTC Drugs Pharmaceuticals Other Businesses Q1 Apr. to Jun. Q2 Jul. to Sep. FY2007 (Simple sum) Q3 Oct. to Dec. *1: The each figure in the lower displays the progress rate *2: Sold by Tanabe Seiyaku Hanbai Co., Ltd. *3: Active pharmaceutical ingredients, etc. ordered by other companies Q4 Jan. to Mar. FY2007 Actual Q1 Apr. to Jun. Q2 Jul. to Sep. FY2008 Q3 Oct. to Dec. (Billion yen) Forecasts for FY % 25.0% 28.6% 20.7% 100.0% 25.8% 23.0% 28.6% 100.0% % 24.3% 29.5% 20.1% 100.0% 26.1% 22.9% 29.2% 100.0% % 25.3% 30.6% 22.1% 100.0% 23.7% 23.8% 29.2% 100.0% % 26.4% 28.8% 18.9% 100.0% 25.5% 22.8% 29.3% 100.0% % 26.5% 27.3% 20.6% 100.0% 26.4% 22.4% 29.0% 100.0% % 25.3% 28.3% 21.2% 100.0% 26.1% 23.0% 28.3% 100.0% % 24.8% 28.8% 19.6% 100.0% 26.6% 23.4% 28.5% 100.0% % 24.0% 29.9% 18.3% 100.0% 28.7% 22.4% 29.1% 100.0% % 23.8% 29.4% 19.0% 100.0% 27.5% 22.7% 28.7% 100.0% % 25.3% 27.6% 21.6% 100.0% 26.1% 23.4% 28.1% 100.0% % 26.3% 28.7% 18.1% 100.0% 26.4% 23.9% 30.9% 100.0% % 24.1% 29.2% 19.5% 100.0% 27.0% 23.1% 29.3% 100.0% % 25.7% 27.4% 21.3% 100.0% 26.4% 22.5% 29.1% 100.0% % 17.6% 24.4% 38.1% 100.0% 20.1% 14.3% 24.5% 100.0% % 24.6% 28.8% 17.9% 100.0% 28.1% 23.1% 28.7% 100.0% % 25.6% 31.1% 18.9% 100.0% 25.0% 23.6% 31.7% 100.0% % 27.1% 27.6% 19.9% 100.0% 26.5% 22.2% 28.5% 100.0% % 23.5% 31.6% 18.0% 100.0% 28.0% 21.2% 31.1% 100.0% % 25.8% 29.0% 18.2% 100.0% 25.8% 24.5% 29.6% 100.0% % 24.5% 28.6% 18.9% 100.0% 29.1% 23.5% 28.3% 100.0% % 25.4% 29.9% 19.4% 100.0% 24.8% 22.3% 28.4% 100.0% % 16.6% 40.7% 18.9% 100.0% 26.3% 23.4% 35.2% 100.0% [(0.1)] [1.0] [5.6] [0.2] [6.6] [0.0] [1.4] [4.9] [6.8] [(1.3)%] [14.7%] [83.6%] [3.0%] [100.0%] [(0.2)%] [20.1%] [71.7%] [100.0%] [3.1] [1.3] [0.9] [2.2] [7.6] [4.6] [2.6] [1.9] [11.0] [41.2%] [16.9%] [12.4%] [29.5%] [100.0%] [41.9%] [23.8%] [17.3%] [100.0%] % 23.1% 29.8% 21.0% 100.0% 23.6% 22.1% 26.1% 100.0% % 25.6% 24.8% 25.2% 100.0% 24.6% 25.7% 23.0% 100.0% % 28.7% 24.1% 23.3% 100.0% 24.0% 26.1% 18.0% 100.0% % 23.6% 22.4% 29.9% 100.0% 23.3% 22.8% 18.6% 100.0% % 33.7% 19.8% 24.8% 100.0% 29.9% 26.7% 24.3% 100.0% % 23.7% 15.5% 21.6% 100.0% 27.7% 35.5% 15.9% 100.0% % 37.2% 17.2% 21.8% 100.0% 20.6% 20.2% 27.0% 100.0% % 38.0% 14.1% 39.4% 100.0% 34.4% 34.4% 19.1% 100.0% % 29.1% 26.2% 20.9% 100.0% 22.7% 28.5% 24.1% 100.0% % 25.1% 28.6% 20.6% 100.0% 25.8% 23.1% 28.5% 100.0% % 25.3% 24.6% 25.2% 100.0% 26.0% 26.5% 25.5% 100.0% % 25.1% 28.3% 21.0% 100.0% 25.8% 23.4% 28.3% 100.0%

23 State of New Product Development (as of January 29, 2009) 1. Pipeline in Japan (1) New Molecular Entities Development code (Generic name) TA-8317 /ACREF (Fentanyl ciitrate) MCC-847 Narcotic analgesic Category (Indications) (Breakthrough cancer pain: oral transmucosal) Leukotriene D4 antagonist Stage Origin Remarks NDA filed (Aug. 2008) (Masilukast) (Asthma) Phase 3 MP-424 (Allergic rhinitis) Phase 2 NS3-4A protease inhibitor (Telaprevir) (Chronic hepatitis C) Phase 3 APTA-2217 PDE4 inhibitor (Roflumilast) (Asthma) Phase 2/3 CNTO148 (COPD) Phase 2/3 Anti-TNFα monoclonal antibody (Golimumab) (Rheumatoid arthritis) Phase 2/3 FTY720 Sphingosine-1-phosphate receptor modulator (Fingolimod hydrochloride) (Multiple Sclerosis) Phase 2 MP-513 DPP4 Inhibitor (Type 2 Diabetes mellitus) Phase 2 US:Cephalon UK: AstraZeneca US:Vertex Switzerland: Nycomed US:Centocor MP-214 D3/D2 antagonist Hungary: Gedeon- (Cariprazine) (Schizophrenia) Phase 2 Richter MP-435 TA-6666 TA-7284 C5a antagonist (Rheumatoid arthritis) Phase 1 DPP4 inhibitor (Type 2 Diabetes mellitus) Phase 1 SGLT2 inhibitor (Diabetes mellitus) Phase 1 Co-development -Nycomed, Switzerland Co-development -Janssen Pharma Co-development -Novartis Pharma -Mitsui Sugar

24 (2) Additional Indications Development code (Generic name) Venoglobulin-IH (Polyethylene glycol treated human normal immunogloblin) Category (Indications) Human immunoglobulin G (IgG2 deficiency) snda filed (Dec. 1997) (Polymyositis, Dermatomyositis* ) snda filed (May 2003) (Hypo and gammagloblinemia: additional dose) snda filed (Mar. 2008) (Systemic Sclerosis) Phase 3 Stage Origin Remarks Remicade (Infliximab recombinant ) Valixa (Valganciclovir) Ceredist (Taltirelin hydrate) Modiodal (Modafinil) Anplag (Sarpogrelate hydrochloride) (Myasthenia Gravis) Phase 3 Anti-TNFα monoclonal antibody (Rheumatoid arthritis: dose escalation) snda filed (Sep. 2007) (Psoriasis) snda filed (Feb. 2008) (Ankylosing spondylitis*) snda filed (Sep. 2008) (Ulcerative colitis) Phase 3 (Crohn's disease: dose escalation) Phase 3 Antiviral (Post- transplantation cytomegalovirus infection ) Spinocerebellar degeneration remedy (Orally disintegrating tablet: additiona formulation) Psychoneurotic agent snda filed (Jun. 2008) snda filed (Jul. 2008) (Obstructive sleep apnea) Phase 3 5HT2 antagonist (Prevention of recurrence of cerebral infarction) Phase 3 US:Centocor Switzerland:Roche US:Cephalon Co-development -Alfresa Pharma Radicut Free radical scavenger (Edaravone) (Amyotrophic lateral sclerosis*) Phase 3 Maintate Selective β1 antagonist Germany: (Bisoprolol) (Chronic heart failure) Phase 3 Merck KGaA Pazucross (Pazufloxacin mesilate) Cholebine Injectable quinolone synthetic antibacterial agent (Severe or intractable case: additional dose) (Sepsis, Pneumococcus) Phase 3 New mode of action for diabetes treatment Japan: Toyama Chemical Co-development -Toyama Chemical (Colestimide(JAN)) (Type 2 Diabetes mellitus) Phase 2 Non-absorbed phosphate binder (Hyperphosphatemia) Phase 1 *: Orphan drug designated