Kyowa Hakko Nine-Month Operating Income up 17.5%

Kyowa Hakko Kogyo Co., Ltd. (Kyowa Hakko) (TOKYO:4151) today
announced its third quarter financial results for the nine-month
period from April 1, 2006 to December 31, 2006. Consolidated net sales
for the period were 268.1 billion yen, a decline of 1.5% compared to
the first nine months of the previous fiscal year. Results were
however ahead of initial plans for the fiscal year, driven mainly by
strong performances from the Pharmaceuticals business and the
Chemicals business. Operating income increased by 17.5% to 26.8
billion yen, benefiting from lower R&D expenses and reduced personnel
costs, while net income was affected by extraordinary losses and
declined by 20.4 % to 11.6 billion yen.

Commenting on the results, Dr. Yuzuru Matsuda, President of Kyowa
Hakko said, 'We have maintained the momentum we achieved at the
interim stage and strong performances in our Pharmaceuticals and
Chemicals businesses, along with our success at reducing costs, have
resulted in continued strong growth in operating income. We are
focused on achieving our forecasts for fiscal 2006 and will continue
to pursue our medium-term plan strategy of investing in growth.'

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Summary of operating results for the nine months ended December 31,
2006
(Amounts less than 100 million yen have been ignored)
Billions of yen %
--------------------------------------- --------
Consolidated Consolidated Change
results for the results for the
period ended period ended
December 31, 2006 December 31, 2006
-------------------- ------------------- ------------------- --------
Net sales 268.1 272.2 -1.5%
Operating income 26.8 22.8 +17.5%
Recurring income 27.5 25.9 +6.2%
Net income 11.6 14.6 -20.4%
Net income per share 28.63 yen 34.67 yen -17.4%
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Segmental performance

Core pharmaceutical products overall delivered a strong
performance. Despite pharmaceutical price cuts introduced in April
2006, higher sales volumes of Allelock (olopatadine hydrochloride), an
antiallergic agent, resulted in sales similar to those in the first
nine months of the previous fiscal year and Durotep Patch, an
analgesic for persistent cancer pain, recorded an increase in sales.
Coniel, a treatment for hypertension and angina pectoris, maintained
sales volumes, despite competition from generic products launched in
July 2006, and Patanol, an ophthalmic solution, which was launched in
October 2006, rapidly penetrated its market and contributed to sales.
However, net sales in the Pharmaceuticals business were lower than in
the first nine months of the previous fiscal year, affected by a large
fall in sales of antimycological agent Itrizole after the ending of
its distribution agreement in March 2006 (sales in the first nine
months of last fiscal year: 19.4 billion yen). In the Bio-Chemicals
business, sales increased compared to the first nine months of last
fiscal year. Despite continued intense price competition in domestic
and overseas markets core amino acid, nucleic acid and related
compounds performed well, and generic pharmaceutical raw materials,
mail-order sales of the Remake series, and industrial-use alcohol,
each increased sales. In the Chemicals business, market prices of
products generally maintained high levels in Japan and overseas, and
sales increased significantly. In the Food business continued growth
in umami seasonings contributed to higher sales.

Group profits

The strong performance from core pharmaceutical products, along
with a decrease in R&D expenses and personnel costs, resulted in
operating income for the nine-month period of 26.8 billion yen, an
increase of 3.9 billion yen, or 17.5%. Recurring income increased by
6.2% to 27.5 billion yen, while net income for the period was affected
by extraordinary losses, including losses from the sale of equity in
related companies, and declined by 20.4% to 11.6 billion yen.

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Forecasts for the fiscal year ending March 31, 2007(a)
Billions of Yen %
----------------------- -----------------------
FORECAST Change compared to the
Fiscal Year ending previous fiscal year
March 31, 2007
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Net sales 353.0 -0.1%
Operating income 29.0 +13.6%
Recurring income 29.0 +2.8%
Net income 12.0 -26.3%
Net income per share 30.14 yen -21.4%
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Our results for the first nine months of fiscal 2006 were ahead of
plan, driven in particular by strong performances from the
Pharmaceuticals and Chemicals businesses. However, no change has been
made to our fiscal year forecasts that were announced with our interim
results on October 30, 2006 as we have today announced a joint
development and sales contract for inflammatory bowel disease agent
Asacol with Zeria Pharmaceutical Co., Ltd., which is expected to
result in an increase in R&D expenses resulting from initial contract
payments.

(a) The above forecasts are based on information available and
assumptions made at the time of release of this document about a
number of uncertain factors that can affect results in the future. It
is possible that actual results are materially different for a wide
variety of reasons.

For further information please access:
http://ir.kyowa.co.jp/english/index.cfm

This document is an English translation of parts of the
Japanese-language original. All financial information has been
prepared in accordance with generally accepted accounting principles
in Japan. It contains forward-looking statements based on a number of
assumptions and beliefs made by management in light of information
currently available. Actual financial results may differ materially
depending on a number of factors, including fluctuations in exchange
rates, changing economic conditions, legislative and regulatory
developments, delays in new product launches, and pricing and product
initiatives of competitors.