Aiming to Create a Fulfilling and Healthy Society Sysmex Corporation Company Briefing
February 2021 Hisashi Ietsugu Chairman and CEO
(Securities Code: 6869) 1 About Sysmex Corporation Index
2 Sysmex's Initiatives
3 Dividend Policy
Appendix 1 About Sysmex Corporation Lines of Business
Blood/urine sampling Measurement Test results
Software
Tests, medical Testing instruments Specialized reagents checkups, etc. We develop, manufacture and sell the instruments, reagents and software needed for blood and urine testing.
Hospital Commercial labs laboratories (facilities that specialize in testing)
Sysmex supports people’s health through testing.
4 About Sysmex Corporation
Head office Chuo-ku, Kobe, Japan Established February 20, 1968 Paid-in capital ¥12,877 million Consolidated net ¥301,980 million sales Affiliated 77 (12 in Japan, 65 overseas) companies Note: Including one equity-method affiliate 9,231 (3,705 in Japan, 5,526 overseas) Employees Note: Including part-time employees and others Development, manufacture, sales and export/import of Lines of business laboratory testing instruments (testing of blood, urine and other bodily fluids), reagents and related software Origin of the SYStematical MEdics ＋ X company name Note: As of March 31, 2020
We provide products and services in more than 190 countries and regions from approximately 60 locations around the world.
5 Business Domains
Examination Diagnosis, treatment and monitoring Recovery
Clinical Laboratory Testing
In Vitro Diagnostics (Take and test samples) In Vivo Diagnostics (Run tests on the body directly)
・Hematology ・Hemostasis ・Image scanning ・Urinalysis ・Electrocardiography ・Immunochemistry ・Respiratory function ・Clinical chemistry testing ・Gene testing ・Electroencephalogram testing ・Ultrasonography
Sysmex’s business domains
Testing is essential for supporting diagnosis and measuring the results of treatment and drug administration. 6 Group’s Corporate Philosophy
7 Taking on New Challenges
1963 1968 Succeeded in the Established TOA MEDICAL 1960 commercialization of ELECTRONICS CO., LTD. Japan’s first hematology (now Sysmex Corporation) A visit to the United States in search analyzer of ideas for diversifying the business drew the founder’s attention to the field of medical electronic devices (TOA ELECTRIC CO., LTD. (now TOA))
CC-1001 automated hematology analyzer
Prototype on display at the General Assembly of the Japanese Association of Medical Sciences
Sysmex founder Taro Nakatani setting off on an overseas visit
8 Operating Performance (Since IPO)
Net sales Operating profit (Billions of yen) Japanese GAAP IFRS (Billions of yen) 350 100 310.0 301.9 300 Overseas sales 80 Domestic sales 250 Operating profit 60 200
150 40
100 20 50 30.9
0 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (Fiscal years to March 31) (Forecast ) ■Interest rate fluctuations vs. JPY 1US('96.3~) 1EUR('02.3~) 1CNY('04.3~) Low yen
Base
High yen 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
More than 80% of sales are from overseas.
9 Similar Business Types
Printing In Vitro Diagnostics (IVD)
Specialized Specialized inks reagents
Printers Testing instruments
Testing requires instruments and specialized reagents.
10 Sysmex’s Business Model 1 ■Even after customers purchase instruments, they continue to need reagents, service and support, which are essential for testing. Sales Profit margins are higher on reagents than on Service instruments. and support + Relatively unaffected by economic Reagents conditions
Instruments + Other Reagents
Instruments Service and support
Year 1 Year 2 Year 3 Year 4 ● ● ● ● The Company generates long-term stable earnings that are relatively unaffected by economic conditions. 11 Sysmex’s Business Model 2
■We conduct R&D, manufacturing, sales, and service and support globally.
Manufacturing and Sales, service and support R&D distribution
７ instrument production 21 bases, centered on Japan Networks with customers in more than countries and locations Reagent production at 14 190 globally global locations regions throughout the world
Internal feedback of customer needs, which are the source of new products and services
Our direct sales and service structure allows us to ascertain customer needs swiftly and accurately.
12 Business Locations
(As of January 2021) Asia Pacific 9% Japan 15%
Sysmex Corporation Sales by (Japan) China destination Americas 27% ¥301.9 billion 23% (Fiscal year ended March 31, 2020)
EMEA 26%
Sysmex Europe Sysmex Asia Pacific Sysmex Shanghai Ltd. Sysmex America, Inc. GmbH (Germany) Pte Ltd. (Singapore) (China) (United States)
Since establishment, we have continued to develop globally, creating our own network. 13 Sysmex’s Sales Composition and Market Share
Note: Figures are Sales by Field Share of the IVD Market Sysmex estimates
* Hematology Others 10% Hematology Immunochemistry 62% 5% 1st: Sysmex Market Urinalysis 2nd: Danaher (United States) share: 7% Net sales: Sysmex 50%+ Others ¥301.9 billion (Fiscal year Market scale: Approx. USD3.9 billion Hemostasis ended March 31, 16% 2020) Urinalysis Hemostasis (urine sediment analysis)
1st: Sysmex 1st: Sysmex +Siemens (Germany) 2nd: IL (Spain) 2nd: Danaher (United States) *Others: Clinical chemistry, gene testing, etc.
Highly competitive: Around 80% of sales are in markets where Sysmex has a No. 1 global market share (including through alliances) 14 2 Sysmex’s Initiatives The Environment Surrounding Sysmex
A Changing Market Environment
Aging societies Increasing populations, Increasingly stringent COVID-19 pandemic (developed countries) economic growth regulatory systems, (emerging markets) mounting geopolitical risk
Technological Innovation
Cancer genomic Robotics, VR AI, big data Regenerative medicine technology medicine
16 Initiatives (1) COVID-19: (1) Related Tests ■Hematology and hemostasis both used
A stable supply of products to support healthcare activities (left: Indonesia; right: India) ■Developing and commercializing new diagnostic technologies
Antigen tests: Measure proteins in viruses (To check whether infected with the virus) Reagents Antigen Antibody tests: Measure proteins in people + (To check reactions to the virus)
Antibody Prediction of increased severity: Measure patients’ proteins, which can indicate increases in severity several days in advance (to help optimize treatment) Fully automated immunochemistry systems In addition to a stable supply of products and services, we are working to develop new testing technologies. 17 Initiatives (1) COVID-19: (2) Enhanced PCR Testing System
■Automated PCR testing robot system
Unmanned, automated
Nucleic PCR Taking Inactivation Unsealing, Reagent Test acid Measure- samples processing dispensing adjustment results extraction ment
• Using robots in a mass testing system • Aimed at allowing large quantities of test to be processing in a short period of times at large-scale facilities, airports and other locations Automated PCR testing robot system • Sysmex provides sample inactivation processing and PCR (Developed with Kawasaki Heavy testing instruments and reagents Industries and Medicaroid)
■Lab assay measurement of PCR tests
• To enhanced the PCR testing system, we constructed a system in collaboration with the city of Kobe and SRL, Inc. • Receiving samples from the city of Kobe (increasing capacity to handle tests from workers at care facilities)
PCR testing at the Sysmex BMA Laboratory (Kobe) Sysmex continues with activities aimed at achieving a return to normalcy as soon as possible. 18 Initiatives (2) Realizing Personalized Medicine: Cancer Genomic Medicine
Identifying gene mutations that cause cancer could facilitate decisions about treatment methods and enable more effective drug selection, allowing the provision of medicine optimized to individual patients.
Conventionally Cancer genomic medicine
Select drug based on The potential to select drugs type of cancer (organ) according to the gene mutation causing the cancer Lung Stomach Colon cancer cancer cancer Gene Gene Gene ↓ ↓ ↓ mutation mutation mutation A B C
Drug XX Drug YY Drug ZZ
Drug A Drug B Drug C Drug efficaciousness and side effects differ by person
Sysmex supports the selection of optimal treatment methods through gene mutation testing. 19 Initiatives (3) Moving into New Domains: Applying Robotics Technologies to Healthcare
August 2013 Established Medicaroid Corporation with Kawasaki Heavy Industries, Inc. August 2020 Obtained manufacturing and marketing approval on Japan’s first surgical support robot December 2020 Launched a surgical robot unit, the hinotoriTM surgical robot system
In addition to reducing the burden on patients and doctors, we aim to support overall surgery operations. 20 3 Dividend Policy Dividend (Forecast for the Fiscal Year Ending March 31, 2021)
Sysmex aims to maintain a proper balance between aggressive investment, which is designed to sustain steady high growth, and returns to our shareholders as our earning power increases. In terms of returns to shareholders, we intend to provide a stable dividend on a continuous basis and aim for a consolidated payout ratio of 30% under our basic policy of sharing the successes of our operations in line with business performance.
(Yen) Dividend increases for 18 consecutive years, through the fiscal year 80 ended March 31, 2020 72 72 (The forecast for the fiscal year ending March 31, 2021 calls for leaving dividends 70 70 at the previous year’s level.) 66
60 Dividend (annual) retroactively converted to basis 58 following stock split on April 1, 2014 52 50 Dividend payout ratio (consolidated) 48.8% 40 38 43.1% 27 35.1% 35.4% 30 31.9% 29.4% 29.1% 29.1% 29.6% 29.7% 26.8% 27.0% 27.1% 27.5% 22.6% 20.0% 20 18.9% 17.8% 17.9% 17 20 12.5 14 15 12 10 9 5 6.5 3.125 3.75 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (Fiscal years to March 31) (Forecast)
Notes: Figures are according to IFRS from the fiscal year ended March 31, 2016. The Company conducted two-for-one stock splits on November 18, 2005, April 1, 2011, and April 1, 2014. 22 In Closing
We are supporting the efforts of figure skaters from Kobe as they take on the world. Please give them your support, too!
Mai Mihara Kaori Sakamoto
23
Appendix Long-Term Vision
■ Long-Term Management Goals (Vision)
A Unique & Advanced Healthcare Testing Company Corporate philosophy • Unique - A unique company having its own strengths and advantages Long-term management goals - Continue to be a unique existence different from global major companies (2025) • Advanced - An industry leader constantly demonstrating “advanced” capabilities - Embody new diagnostic value, original business models and Mid-term management plan innovative corporate management • Healthcare Testing - A company contributing to healthcare advancement - Continuously provide testing/diagnostic technologies conducive to enhancing the quality, efficiency and economy of healthcare
Positioning of the long-term management goals (2025):
Creating innovative diagnostic value as a global top-five company in IVD
A leading company in personalized diagnostics for optimizing medical treatment
A solution provider contributing to the advancement of primary care diagnostics
An attractive company providing value and instilling confidence
One Sysmex carrying out high-speed management
26 Perspective on Investment
Major initiatives
Strengthen profitability Generation Cash generation of cash flow ・Strengthen competitiveness and raise market Cash flow share in the IVD business ・Improve asset efficiency IVD business (Hematology, hemostasis, Urinalysis, immunochemistry, Investment Investment in sustainable growth etc.)
R&D Using cash ・Strengthen sales and service in emerging Capital expenditure markets Investment in growth (including IT) ・Enhance IVD product development and Investment production capacity M&A ・Invest in transforming our business portfolio IVD business ・Reform business processes (digitalization, etc.) (FCM) Human resources ・Recruit and develop human resources
Life science business Shareholder returns ・Target a dividend payout ratio of 30%
Raising cash ・Raise cash as needed
We are leveraging stable earnings and investing with a view to sustainable growth 27 Sysmex’s Business Risks
Sysmex is responsible for providing customers in more than 190 countries and regions around the world with products that ensure uninterrupted testing, which is an essential element of medical care. For that reason, we have formulated countermeasures from a short- to long-term perspective to ensure that operations continue under any circumstances. In addition to natural disasters and country risks, we consider increasingly stringent healthcare restrictions in individual countries, the emergence of product quality issues and information leaks to be important risks. Principal Operating Risks Risks Major content Principal responses ●We have configured a global risk management structure (such as by reinforcing our BCP) aimed at reducing The spread of infectious ●The impact on operations of global pandemics of damage and facilitating an early recovery of business disease or emergence of other COVID-19 and other unknown infectious diseases to risks that could substantially activities. which humans are not immune ●We have built an infrastructure capable of responding affect business activities flexibly to emergencies (such as by introducing remote working). ● ●Damage to manufacturing facilities and the stoppage We have introduced seismically isolated structures at of production activities due to severe accidents, such instrument factories, diversified our reagent production Disaster, severe accident or function globally and created a system of mutual supply. other occurrences that disrupt as natural disasters and fires ● product supply ●Obstacles to the procurement of substances if We procure materials and parts from multiple suppliers suspend operations companies and maintain stockpiles. We also conduct CSR surveys of our business partners. ● Overseas business accounting for more than 80% of ●Finance divisions and local subsidiaries hedge risks total Group sales through forward exchange contracts. Exchange rate fluctuations ●Growth in sales in emerging markets leading to a ● higher proportion of sales taking place in currencies We have globally diversified our reagent production that are not key currencies functions. Increasingly stringent ●Worsening market prices due to budget reductions by ●We provide highly productive products and services that measures to curtail healthcare countries and medical institutions help make healthcare management more efficient. expenditure ●We comply with individual countries’ laws and regulations, as well as international restrictions, and we have created structures for maintaining and enhancing Emergence of quality quality. problems related to products ●Major impact on test results ●We have enhanced our operational and design quality, or services bolstered mass-production quality and reinforced our systems for checking quality prior to market launch. ●We hold supplier presentations aimed at increasing the quality of the materials and parts we procure. 28 Consolidated Earnings Forecast (Announced November 2020)
Consolidated earnings forecast for the fiscal year ending March 31, 2021
Net sales: Operating profit: Operating margin: ¥310.0 billion ¥48.5 billion 15.6%
Profit attributable to owners Profit attributable to owners of the parent: of the parent to net sales: ¥30.8 billion 9.9% Capital expenditure: Depreciation and Planned R&D expenditure: (tangible only) amortization: investment ¥23.1 billion ¥14.7 billion ¥25.7 billion
■Assumed exchange rates ■Exchange rate sensitivity
Net sales Operating profit Assumed Previous year exchange rates Second half (Fiscal year ended (year) (year) for full year March 31, 2020) USD ¥0.61 billion ¥0.27 billion 1 USD ¥106.5 ¥106.0 ¥108.7 EUR ¥0.44 billion ¥0.14 billion 1 EUR ¥121.6 ¥122.0 ¥120.8 1 CNY ¥15.3 ¥15.3 ¥15.6 CNY ¥5.38 billion ¥3.65 billion
29 Share Price (From IPO to January 2021)
(Yen) 15,000
Highest level since listing: ¥13,310 (Jan. 2021)
Two-for-one stock split 10,000 (Apr. 2014)
OSE and TSE 1st Section listings (Mar. 2000) Two-for-one stock split TSE 2nd Section (Apr. 2011) listing (Jul. 1996) 5,000 Two-for-one stock OSE 2nd Section split Global financial listing (Nov. 2005) crisis (Nov. 1995) (Sep. 2008)
0 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
30 Environmental Consideration through Business Activities
■ Developed a hemostasis analyzer Electricity reduction: (launched in 2018) Down by approx. 36% ・ Increased processing capacity Lower CO emissions from ・ Made more compact, reduced electricity 2 transport due to compactness consumption New model Down by approx. 12%
■ Promoting concentrated reagents 1/25 the volume (hematology field) of conventional ・Enhanced customer usability (reduced reagents frequency of reagent changing) ・Made containers more compact, reducing waste
・Curtailed CO2 emissions from transportation
January 2021 Declaration of support for the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD)
We are stepping up initiatives to reinforce our competitive advantage and be environmentally considerate. 31 External Evaluation (Excerpted)
Dow Jones Sustainability World Index (from fiscal 2016) Dow Jones Sustainability Asia Pacific Index (from fiscal 2012)
FTSE4Good Index (from fiscal 2008) FTSE Blossom Japan Index (from fiscal 2017)
MSCI ESG Leaders Indexes (from fiscal 2011) MSCI SRI Indexes (from fiscal 2013)
MSCI Japan ESG Select Leaders Index (from fiscal 2017) MSCI Japan Empowering Women Index (WIN) (fiscal 2017, 2019, 2020)
S&P/JPX Carbon Efficient Index (from fiscal 2018)
■For more details, see our website (“Sustainability” > “External Evaluation”). 32 Supporting Our Stakeholders
◼ Activities to support regions affected by the COVID-19 pandemic
Producing sterilizing liquid (Brazil) Donating non-contact thermometers (Ghana) ■Making the Group an easier place for employees to work
Promoting mobile work 33 Supporting Our Stakeholders
■Supporting employees’ social ■Providing a mobile laboratory (Kenya) contribution activities
(Left) © UNICEF/UNI150956/Asselin (Right) © UNICEF/UNI108970/Asselin Provided by: Japan Committee for UNICEF Mobile laboratory
Sysmex has introduced a system in which To help eradicate the three leading infectious employees are given points for social contribution diseases, Sysmex provided a mobile laboratory to activities. They can exchange accumulated points an NGO in cooperation with Toyota Tsusho on a social contribution menu. Corporation. Note: These include donations via UNICEF of emergency ■Campaigns to eradicate cancer drug kits and oral polio vaccines.
Participation in the Breast Participation in Macmillan Cancer Participation in Relay for Life, Cancer Walk, a charity walk Support, a charity event a charity event (Sysmex America) (Sysmex UK) (Sysmex Corporation) 34 Analyst Coverage
Company name Analyst (honorifics omitted) Ace Research Institute Co., Ltd. Tomohiko Ikeno Citigroup Global Markets Japan Inc. Hidemaru Yamaguchi Credit Suisse Securities (Japan) Limited Fumiyoshi Sakai Daiwa Securities Co., Ltd. Tomoko Yoshihara Goldman Sachs Japan Co., Ltd. Akinori Ueda Jefferies (Japan) Limited Mitsuko Miyasako Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. Mie Yamazaki Mizuho Securities Co., Ltd. Hidekatsu Watanabe Morgan Stanley MUFG Securities Co., Ltd. Ryotaro Hayashi Nomura Securities Co., Ltd. Motoya Kohtani SMBC Nikko Securities Inc. Shinnosuke Tokumoto Tokai Tokyo Research Center Co., Ltd. Takashi Akahane UBS Securities Japan Co., Ltd. Yukihiro Koike
(As of January 5, 2021)
35 About the Sysmex logo:
The mark which combines two contrasting elements symbolizes the fusion and sublimation of two contrasting ideas. The shape reminds us of the infinity symbol “∞” and illustrates the unlimited possibilities of Sysmex. The ocean and mountain design evokes the evolution of life as well as the kobe landscape, the birthplace of Sysmex.
36