Profit Dependence on FTY720 Royalties and the Risk of Competing Drug Approvals

「In non-operating income and expenses, there was a decline in royalty income received under the licensing of development and sales rights for fingolimod, FTY720, as well as the recognition of equity-method investment losses mainly due to worsening earnings at overseas affiliates,」

「In non-operating income and expenses, the Company recorded ¥5,176 million in dividends received and ¥1,158 million in royalty income, primarily from royalties received under the licensing of development and sales rights for fingolimod, FTY720.」

「Since the arbitration proceedings began, the Company had not recognized as revenue the royalty income relating to the portion disputed by Novartis. However, as announced on 14 February 2023, following the arbitral tribunal's decision fully rejecting Novartis's claims, the Company recognized in a lump sum during the current consolidated fiscal year ¥17,552 million in long-term advances received as of the end of the third-quarter consolidated accounting period, which had been included in other under non-current liabilities, as revenue.」

「In non-operating income and expenses, the Company recorded ¥112 million in royalty income received under the licensing of development and sales rights for fingolimod, FTY720. As arbitration proceedings remain ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis"), the portion concerning which Novartis has raised questions regarding the validity of the agreement has continued not to be recognized as revenue.」

「In non-operating income and expenses, the Company recorded ¥447 million in royalty income received under the licensing of development and sales rights for fingolimod, FTY720. As arbitration proceedings remain ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis"), the portion concerning which Novartis has raised questions regarding the validity of the agreement has continued not to be recognized as revenue.」

「In non-operating income and expenses, the Company recorded ¥314 million in royalty income received under the licensing of development and sales rights for fingolimod, FTY720. As arbitration proceedings remain ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis"), the portion concerning which Novartis has raised questions regarding the validity of the agreement has continued not to be recognized as revenue.」

「In non-operating income and expenses, the Company recorded ¥158 million in royalty income received under the licensing of development and sales rights for fingolimod, FTY720. As arbitration proceedings remain ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis"), the portion concerning which Novartis has raised questions regarding the validity of the agreement has continued not to be recognized as revenue.」

「In non-operating income and expenses, the Company recorded ¥628 million in royalty income received under the licensing of development and sales rights for fingolimod, FTY720. As arbitration proceedings remain ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis"), the portion concerning which Novartis has raised questions regarding the validity of the agreement has continued not to be recognized as revenue.」

「In non-operating income and expenses, the Company recorded ¥450 million in royalty income received under the licensing of development and sales rights for fingolimod, FTY720. As arbitration proceedings remain ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis"), the portion concerning which Novartis has raised questions regarding the validity of the agreement has continued not to be recognized as revenue.」

「In non-operating income and expenses, the Company recorded ¥284 million in royalty income received under the licensing of development and sales rights for fingolimod, FTY720. As arbitration proceedings remain ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis"), the portion concerning which Novartis has raised questions regarding the validity of the agreement has continued not to be recognized as revenue.」

「In non-operating income and expenses, the Company recorded ¥164 million in royalty income received under the licensing of development and sales rights for fingolimod, FTY720. As arbitration proceedings remain ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis"), the portion concerning which Novartis has raised questions regarding the validity of the agreement has continued not to be recognized as revenue.」

「In non-operating income and expenses, the Company recorded ¥1,340 million in royalty income received under the licensing of development and sales rights for fingolimod, FTY720. As arbitration proceedings remain ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis"), the portion concerning which Novartis has raised questions regarding the validity of the agreement was again not recognized as revenue.」

「Although the performance of 中糧糖業遼寧有限公司, in which the Company invested in the previous fourth quarter, remained solid, the performance of the Thai affiliate weakened due to sluggish overseas raw sugar prices. In addition, because arbitration proceedings concerning FTY720 royalty income remained ongoing, recognition of part of the revenue was withheld. As a result, ordinary income was ¥4,800 million, down 41.1% year on year, and quarterly net income attributable to owners of the parent was ¥2,759 million, down 45.2%.」

「As a result of withholding recognition of part of the FTY720 royalty income, profits declined year on year.」

「With arbitration proceedings ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis") regarding royalty income received under the licensing of development and sales rights for fingolimod, FTY720, the Company decided not to recognize as revenue the portion concerning which Novartis had raised questions about the validity of the agreement. As a result, royalty income declined 63.0% year on year.」

「With arbitration proceedings ongoing between Mitsubishi Tanabe Pharma Corporation, the Company's co-patent holder, and Novartis Pharma AG (hereinafter, "Novartis") regarding royalty income received under the licensing of development and sales rights for fingolimod, FTY720, the Company decided not to recognize as revenue the portion concerning which Novartis had raised questions about the validity of the agreement. As a result, ordinary income is expected to decline substantially in the fiscal year ending March 2020.」

「The Group has a structure in which royalty income received under the basic patents for FTY720, a treatment for multiple sclerosis, accounts for a high proportion of ordinary income, making its operating results susceptible to changes in the business environment. The approval and sale in Japan and overseas of drugs competing with FTY720 may affect the Group's operating results and financial position.」

「The Group has a structure in which royalty income received under the basic patents for FTY720, a treatment for multiple sclerosis, accounts for a high proportion of ordinary income, making its operating results susceptible to changes in the business environment. The approval and sale in Japan and overseas of drugs competing with FTY720 may affect the Group's operating results and financial position.」