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Empresas y finanzas

Kyowa Hakko Fiscal 2006 Operating Income up 20.2%


    Kyowa Hakko Kogyo Co. Ltd. (Kyowa Hakko) (TOKYO:4151) today
    announced its consolidated financial results for the year ended March
    31, 2007 (Fiscal 2006). Consolidated operating income was 30.6 billion
    Yen, an increase of 20.2% compared to fiscal 2005, and ahead of the
    company's October 2006 forecast of 29.0 billion Yen. Fiscal 2006
    consolidated net sales were 354.2 billion Yen, up 0.2%, while
    recurring income increased 9.5% to 30.9 billion Yen. Consolidated net
    income was affected by extraordinary losses, including losses on the
    sale of subsidiaries' shares and asset impairment losses, and declined
    by 22.0% to 12.6 billion Yen.

    Despite the effects of pharmaceutical price cuts averaging 6.7%,
    operating income in the Pharmaceuticals segment grew by 10.6%. In the
    Bio-Chemicals segment higher prices of raw materials and fuels
    resulted in an increase in operating income of only 0.7%, while in the
    Chemicals segment, domestic and overseas product markets were
    generally strong and operating income was up 77.2%.

    R&D spending in fiscal 2006 was up 1.4% on fiscal 2005 to 33.3
    billion Yen, which represented 9.4% of net sales.

    For the fiscal year ending March 31, 2008 (fiscal 2007) Kyowa
    Hakko forecasts a 7.3% increase in net sales, and a 10.8% increase in
    operating income, while recurring income and net income are forecast
    to grow by 10.0% and 96.9% respectively.

    Commenting on the results, Dr. Yuzuru Matsuda, President of Kyowa
    Hakko said, 'We have achieved strong profit growth in fiscal 2006,
    despite significant price cuts in our core pharmaceutical products and
    tough competition in our Bio-Chemicals business. In fiscal 2007, we
    expect to achieve further growth in both sales and profits, driven by
    strong performances in Pharmaceuticals and Bio-Chemicals. We aim to
    create sustained growth in shareholder value and will continue to
    pursue our medium-term plan strategy of investing in growth while
    implementing broad-ranging cost reductions.'

    I. Fiscal 2006 Results

    -0-
    *T
    Results for the fiscal year ended March 31, 2007
    (Billions of Yen)
    -----------------------------------------
    FY ended FY ended YOY
    March 31, 2007 March 31, 2006 Change (%)
    --------------------------- -------------- -------------- -----------
    Net sales 354.2 353.4 +0.2%
    Operating income 30.6 25.5 +20.2%
    Recurring income 30.9 28.2 +9.5%
    Net income 12.6 16.2 -22.0%
    Net income per share (Yen) 31.32 38.68 -19.0%
    -----------
    *T

    Segmental results for the fiscal year ended March 31, 2007

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    Sales
    (Billions of Yen)
    -----------------------------------------------
    FY ended FY ended YOY
    March 31, 2007 March 31, 2006 Change (%)
    --------------------- --------------- --------------- ---------------
    Pharmaceuticals 131.5 149.5 -12.0%
    Bio-Chemicals 67.1 57.4 +16.9%
    Chemicals 98.6 85.8 +14.9%
    Food 42.5 42.4 +0.4%
    Other 48.4 55.3 -12.4%
    ---------------
    *T

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    *T
    Operating Income (Billions of Yen)
    ---------------------------------------------------------------------
    FY ended FY ended YOY
    March 31, 2007 March 31, 2006 Change (%)
    ----------------------- --------------- --------------- -------------
    Pharmaceuticals 15.7 14.2 +10.6%
    Bio-Chemicals 4.1 4.0 +0.7%
    Chemicals 7.9 4.5 +77.2%
    Food 1.8 1.6 +14.3%
    Other 0.9 1.1 -16.2%
    ----------------------- --------------- --------------- -------------
    *T

    Segmental Performance

    In the Pharmaceuticals business, net sales declined 12.0%, to
    131.5 billion Yen, while operating income increased by 10.6%, to 15.7
    billion Yen.

    Despite strong volume growth in core ethical pharmaceutical
    products, sales were affected by pharmaceutical price cuts of 6.7%
    introduced in April 2006 and a large fall in sales of antimycological
    agent Itrizole after the ending of a distribution agreement in March
    2006. Sales of Coniel, a treatment for hypertension and angina
    pectoris, were lower than in the previous fiscal year, but sales of
    Allelock (olopatadine hydrochloride) an antiallergic agent, Durotep
    Patch, an analgesic for persistent cancer pain, and Navelbine, an
    anticancer agent, each increased. In the licensing-out of technologies
    and export of pharmaceutical products, sales of antiallergic agent
    Olopatadine continued to perform very well.

    In new drug development in Japan, Bothdel (MM-Q01), the contrast
    medium for MRI, received approval in April 2006 and sales commenced in
    September, while the antiepileptic KW-6485 is currently in the NDA
    application stage. Kyowa Hakko is also carrying out Phase II clinical
    trials in Japan on KW-6002, an anti-Parkinson's disease treatment and
    KW-2246, an analgesic for cancer pain, while KW-0761, a therapeutic
    antibody that utilizes our Potelligent(R) technology, is in Phase I
    clinical trials as a blood cancer treatment. In addition, inflammatory
    bowel disease agent Asacol, for which we agreed a joint development
    and sales contract with Zeria Pharmaceutical Co., Ltd. in January
    2007, is in Phase III clinical trials.

    Overseas, KW-6002 has completed Phase III clinical trials in North
    America and Europe as an anti-Parkinson's treatment and application in
    the U.S. for its approval as a new drug was made in April 2007. In
    North America, cancer treatment KW-2449 is in Phase I trials, and in
    Europe therapeutic antibody KW-0761 is in Phase I trials as an
    antiallergic agent. In September 2006, our U.S. subsidiary Biowa Inc.
    commenced Phase I clinical trials of BIW-8405, an anti-asthma agent
    incorporating Kyowa Hakko's Potelligent(R) technology and in December
    BIW-8405 was outlicensed to MedImmune of the U.S. Meanwhile, in China
    Phase III clinical trials are underway for Allelock, an antiallergic
    agent, and for additional indications for Coniel as a treatment for
    angina pectoris.

    In the Bio-Chemicals business, sales increased 16.9%, to 67.1
    billion Yen, while operating income increased by 0.7% to 4.1 billion
    Yen. Strong sales of pharmaceuticals and industrial materials
    including amino acids, nucleic acids, and related compounds reflected
    increased overseas demand, and increased sales in Japan of raw
    materials for generic pharmaceuticals. In healthcare products sales
    increased, as despite sluggish demand for domestic beverage-use amino
    acids, mail-order sales in Japan of the Remake series grew strongly,
    while sales in overseas markets of amino acids used as dietary
    supplements also increased.

    In the Chemicals business, sales increased 14.9%, to 98.6 billion
    Yen, while operating income increased by 77.2%, to 7.9 billion Yen.
    Firm domestic demand underpinned an increase in shipment volumes,
    while core product prices were revised against a background of higher
    raw materials and fuel prices, leading to a large increase in sales
    compared to last fiscal year. Export shipment volumes were lower, but
    strong overseas demand for plasticizer raw materials and solvents led
    to an increase in sales. By product category, sales of high-purity
    solvents to the IT industry were strong and specialty chemicals
    products recorded sales growth in Japan and overseas, driven by a
    strong performance from core refrigerant oil raw materials.

    In the Food business, sales increased 0.4%, to 42.5 billion Yen,
    while operating income decreased 14.3%, to 1.8 billion Yen. In
    seasonings, sales of natural seasonings increased as sales of
    fermented seasonings to the prepared food and restaurant markets
    expanded and sales volumes of Umami seasonings also increased, leading
    to higher overall sales.

    In the Other business segment, sales decreased 12.4%, to 48.4
    billion Yen, while operating income decreased 16.2% to 0.9 billion
    Yen.

    II. Forecasts for the fiscal year ending March 31, 2008(a)

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    *T
    (Billions of Yen)
    ---------------------------------------------------------------------
    Fiscal 2007 Compared to Reference:
    Forecast Fiscal 2006 Fiscal 2007
    medium-term plan
    target announced
    May 2005
    ------------------ ------------- -----------------
    Fiscal Year ending
    March 31, 2008 Change (%)
    ------------------ ------------------ ------------- -----------------
    Net sales 380.0 +7.3% 350.0
    Operating income 34.0 +10.8% 34.0
    Recurring income 34.0 +10.0% --
    Net income 25.0 +96.9% --
    ------------------ ------------------ ------------- -----------------
    *T

    Forecast net income per share for the year ending March 31, 2008:
    62.83 Yen.

    These forecasts assume average exchange rates for fiscal 2007 of
    115 Yen/US$ and 150 Yen/euro.

    In fiscal 2007, the final year of its three-year business plan,
    Kyowa Hakko is looking towards future growth by carrying out active
    investments while implementing comprehensive cost-cutting measures. We
    will also increase investment in marketing to expand sales as we
    strive to build the foundations for future profits.

    In fiscal 2007, we expect increased sales and profits compared to
    fiscal 2006. We forecast net sales will increase by 7.3% to 380.0
    billion Yen and that operating income will increase by 10.8% to 34.0
    billion Yen. Recurring income is forecast to grow by 10.0% to 34.0
    billion Yen and net income to increase by 96.9% to 25.0 billion Yen.

    In the Pharmaceuticals business, fiscal 2007 net sales and
    operating income are each forecast to increase as core products
    including Allelock continue to grow, and new product Patanol
    contributes to growth. We also expect increased licensing-out of
    technologies and export of pharmaceutical products, in particular of
    Olopatadine. In the Bio-Chemicals business, sales volumes are expected
    to grow as we fully develop our sales strategy for amino acids,
    Coenzyme Q10, and mail-order sales of the Remake series. The
    consolidation of Daiichi Fine Chemical Co., Ltd. following our planned
    acquisition of shares in June should also contribute, leading to
    increased sales and operating income. In the Chemicals business, sales
    and operating income are forecast to decline as overseas market prices
    soften somewhat following a long period of strength. In the Food
    business, as we actively utilize solutions-based marketing and
    introduce new products, sales volumes of natural seasonings,
    particularly sauces, and of bread ingredients such as baking improvers
    are expected to increase, and net sales and operating income are
    forecast to increase compared to fiscal 2006.

    (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.