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Kaoru Asano: This is Asano from Sysmex. Thank you, as always, for your continued support. We have just announced our financial results for Q1 FY2026. Revenue declined and profit dropped significantly YoY, and we apologize for any concern this may cause. However, this does not indicate a deterioration in our business performance; rather, it is due to special factors that occurred during Q1. I will first explain these special factors and give an overview of our business status. More details will follow from Iizuka. The first special factor is the impact of switching our core internal systems. Our long-standing investment in digitalization was completed at the end of last fiscal year, and the system went fully live globally in July. Since the system covered a wide range of operations, including production, logistics, and order processing (SCM), we took great care in the transition to avoid any disruptions or stockouts that could hinder hospital operations. We designated the month of July as a system transition period, during which we restricted order intake and carefully migrated to the new system. At the same time, we asked our customers to build up inventory toward the end of the previous fiscal year. As a result, revenue in Japan in April dropped significantly. In addition, amortization of the new system started in Q1. While amortization will continue throughout the year, expenses related to system development will decline, so we expect the combined total of amortization and related expenses to remain within a manageable range for the full year. The impact of this system transition in Q1 resulted in a JPY3.3 billion decrease in revenue and a JPY3 billion decrease in operating profit. However, these effects were incorporated into our initial plan. The second special factor is a revision to the valuation of overseas inventories. We conducted a reassessment of the valuation of inventories at our overseas affiliates on a consolidated basis, and recorded JPY1.7 billion in cost of sales adjustments in this quarter. This was not anticipated when we formulated our plan, and was not included in it. Together, these two special factors caused a negative impact of JPY3.3 billion on revenue and JPY4.8 billion on operating profit in Q1. However, both are one-time factors limited to Q1. On the business front, revenue increased on a local currency basis in all regions except Japan and China. In Japan, as mentioned earlier, the system transition affected sales, and we estimate that revenue would have increased without this factor. As for China, we had anticipated slight local-currency revenue growth, but due to intensified [unclear audio] resulting from the Chinese government's strengthened medical cost control policies, revenue declined 5% YoY in local currency. However, this was not due to losing out to competitors—we have maintained our market share. Although the overall picture is somewhat subdued due to the stronger yen, this does not indicate any deterioration in our business performance. To summarize, the core system transition led to a negative impact of JPY3.3 billion in revenue and JPY3 billion in operating profit in the Japan region. However, this was factored into our initial plan, and we intend to offset this decline within H1 by aiming for revenue growth in other regions, as well as through the medical robotics business and product portfolio expansion. In addition, we recorded a JPY1.7 billion cost of sales adjustment due to the reassessment of consolidated inventories, which was not anticipated. These two special factors affected Q1. As for the outlook for H1, we had initially planned to recover the revenue shortfall caused by the system transition in Japan and the inventory valuation revision during Q1. However, this recovery is slightly behind schedule. Furthermore, regarding the impact of China's medical cost containment policy, while Q1 saw a 5% decline in local currency, we are now factoring in a 5–10% downside risk. In light of the above, we have revised our forecast. Although H1 will see a temporary dip, we intend to maintain our full-year targets and strive to meet them. As we will explain later, there are many positive developments, such as the launch of the XR and CN series in the U.S., and the Alzheimer’s test. In both the Japan and China regions, we plan to strengthen and restructure our sales frameworks and expand our product portfolio, and we believe this will enable us to recover. Additionally, the new growth opportunities in the IVD domain that we presented at the beginning of the year are progressing smoothly, and we believe we will be able to disclose the full picture soon. We remain fully committed to meeting your expectations, and we appreciate your continued support. Now, I will hand over to Iizuka.
Kensuke Iizuka: This is Iizuka. Thank you for joining us. Let me begin by asking you to look at page 8. I would like to start with a summary of our financial results, with a focus on YoY comparisons. As Asano mentioned earlier, revenue declined YoY due to the strong yen and the impact of restricted orders associated with the core system transition in Japan, which resulted in a JPY3.3 billion decrease. As a result, total revenue was approximately JPY105.7 billion, or 94.4% compared to the same period last year. As for operating profit, the decline was mainly driven by a decrease in gross profit resulting from lower revenue. In addition, as previously explained, we recorded a JPY1.7 billion adjustment due to the reassessment of overseas inventories, and amortization expenses increased by JPY600 million due to the activation of the new core system. These factors led to a YoY decrease in operating profit, which came to JPY10.62 billion, or 63.5% of the figure in the same period last year. Quarterly profit declined to JPY4.55 billion due to foreign exchange losses and other factors, representing 41.3% of the figure from the same period last year. Now please turn to slide 9. I will explain the factors behind changes in revenue by business and segment. First, the graph on the left shows YoY revenue by segment, excluding the effects of the system transition and currency exchange, providing what we could call a "real-term" comparison. For Hematology, as shown, revenue decreased by JPY940 million, or 98.7% YoY—a slight decline. Excluding only the currency effects, it was 96.8%, which is nearly flat compared to last year. In Japan, revenue increased by JPY1.69 billion, or 118.9% YoY—a significant increase. Even excluding currency effects, it was 116.3%, indicating double-digit growth. For Coagulation, revenue increased by JPY1.79 billion, or 112.3% YoY—another strong double-digit gain. Excluding currency effects, the figure was 106%. In Immunochemistry, revenue rose slightly by JPY80 million, or 101.7% YoY. However, excluding currency effects, it was 90.3%. Next, let me explain revenue trends by region. Excluding Japan and China, revenue increased YoY on a local currency basis in all other regions. In particular, in the Americas, Hematology and urinalysis in North America grew significantly. In EMEA, although some regions such as Turkey showed weakness, major countries generally performed well. In AP (Asia Pacific), urinalysis and coagulation saw particularly strong growth. Taken together—Americas, EMEA, and AP—performance may appear to have had a slow start, but there has been no deterioration in the market environment nor any loss of market share. Therefore, we are optimistic about a recovery from Q2 onward and are not overly concerned. On the other hand, as we will explain in more detail later, China was affected to some extent by the government’s medical cost control policies, leading to a YoY decline of approximately 5%. In Japan, as explained earlier, the impact of restricted orders due to the core system transition and the delayed recovery resulted in a YoY revenue decline to approximately 80%. However, excluding the impact of the system transition, revenue would have increased by 4% YoY. Americas Region In Latin America, revenue declined due to the strong performance in the same period of the previous year. However, Hematology and urinalysis in North America grew significantly, resulting in a 102.9% increase YoY on a local currency basis for the Americas overall. Instruments saw a revenue decline in Latin America, but in the U.S., urinalysis and coagulation performed strongly. The number of coagulation instruments installed also continued to increase. With the recent FDA approval of our new CN products, we expect this to further accelerate growth. As for reagents, both Hematology and urinalysis have been performing well, supported by the increase in installed instruments. Going forward, we also anticipate growth in coagulation reagents. Regarding the amyloid-beta testing reagent, we have made progress, which we will discuss shortly. The number of tests being conducted by LabCorp in the U.S. is also steadily increasing. The delivery delays that were an issue in the previous quarter are gradually improving, so we are optimistic about the impact of new products such as XR and CN in the coming quarters. Please turn to page 12. Now, let’s look at the EMEA region. Although some geopolitical impacts are being seen in the Middle East, major countries have generally performed well. On a local currency basis, revenue increased 3.7% YoY. For instruments, the effects of the XR series are becoming apparent in countries like France and North America, and in Italy, which had a slow start last year, business is now gaining momentum. Reagents saw a slight decline in Turkey and Saudi Arabia, but in countries such as Germany and France, the benefits of direct sales in coagulation are starting to show, and overall urinalysis also performed well. Looking ahead, we expect growth in the EMEA region through enhanced promotional activities in direct sales areas and expansion in the coagulation field. China The current situation and countermeasures related to the government's medical cost control policies are shown on the next page, but for Q1, revenue declined 5% YoY. For instruments, last year saw strong sales of the XN-L model produced through knockdown manufacturing for the intermediary market. However, due to the rebound effect, Hematology declined slightly. On the other hand, local production and sales of urinalysis, coagulation, and immunochemistry instruments, which began last year, have been strong—all recording double-digit growth. As for reagents, the cost control policy has led to greater sharing of test data between facilities and limitations on PET testing, which affected items such as CRP. As CRP is classified under Hematology in our reporting, this contributed to a revenue decline in that segment. The impact of VBP (volume-based procurement) continues to be felt in the immunochemistry segment. However, Sysmex’s overall share of immunochemistry in China is relatively small. Additionally, as previously mentioned, the number of locally manufactured instruments is increasing, and the range of reagent items being adopted is expanding. As a result, for Q1, reagent revenue grew YoY across immunochemistry, urinalysis, and coagulation. That said, as you know, the distributor-based business model in China is subject to seasonal fluctuations, so it remains an area to monitor. Nonetheless, in the most recent Q1, reagent performance was strong. As many of you may already be aware, China’s medical cost control policy remains in effect. While this trend is expected to continue for some time, similar efforts to optimize testing costs have been implemented in other countries in the past. Therefore, we believe it is important not only to take the necessary countermeasures, but also to accelerate initiatives that deliver new value through diagnostic testing. On the right side of the slide, we have included a graph showing the number of tests performed using our Hematology instruments. Due to seasonal fluctuations, including national holidays such as the National Day and Chinese New Year, testing volumes in China can vary significantly. Thus, it is difficult to assert any statistically significant trend from this graph alone. However, looking at the average number of tests from April through June, there does not appear to be a major difference. While there may be a slight downward trend, we believe the overall change is not significant. Now moving on to the Asia Pacific region. On a local currency basis, revenue increased 3.5% YoY. For instruments, Hematology in India grew significantly—by 30% YoY. However, in Indonesia, medical device budgets were constrained during the quarter, leading to an overall decline in instrument sales. On the other hand, reagent sales increased 3.1% YoY, with urinalysis and coagulation performing steadily. That said, in India, Hematology appeared slightly weaker YoY due to a large vendor deal in the same period of the previous year, which had a strong positive impact. However, the market itself continues to show strong momentum, so we are not particularly concerned. Additionally, as shown in the presentation, the number of hinotori robotic surgeries continues to increase steadily in Singapore and Malaysia. Next, the Japan region. As previously mentioned, we imposed order restrictions in Q1 due to the core system transition. In addition, there was a recoil from the strong performance in Hematology during the previous year, leading to a revenue decline. While we had anticipated the impact of these order restrictions, the pace of recovery following the system transition has been somewhat weaker than initially expected. Factors Affecting Operating Profit Apologies for the repetition, but as mentioned earlier, the core system transition, increased amortization from the system launch in Japan, and the reassessment of consolidated inventories were special factors that had a negative YoY impact of JPY4.8 billion on operating profit. The cost of sales ratio deteriorated by 0.9 percentage points, mainly due to higher service costs, which in turn were impacted by lower revenue. We expect this to improve as revenue recovers going forward. Selling, general, and administrative expenses increased by approximately JPY2.9 billion, primarily due to headcount growth and expansion costs in direct sales areas. However, this is progressing largely in line with our plan. As for R&D expenses, as noted in the slide, we recorded a JPY940 million decrease, mainly due to the completion of projects in the coagulation field and a reevaluation of expenses in the life science segment. That said, we will continue to strategically and consistently invest in innovation. Including positive contributions from other operating income/loss and currency exchange effects, total operating profit came in at JPY10 billion. Now, I will explain the progress of our three growth strategies. Please refer to page 19. First, strengthening our existing business. Our flagship models, XR and CN, received U.S. regulatory approval in June. With these new products now ready to be launched in the U.S.—our largest market—we have high expectations for their future performance. In Europe, where rollout has already begun, installations of XR are progressing smoothly, and we understand that the CN model has also been achieving a high win rate. Progress in Alzheimer’s-Related Initiatives We have received Japan’s first regulatory approval for ApoE, a reagent used to test for side effects of Alzheimer’s treatments. We are currently working in collaboration with relevant academic societies to secure insurance coverage as early as possible. Regarding amyloid-beta, our reagent was the only amyloid-beta reagent included in the screening guidelines presented at a recent international conference. According to the Alzheimer’s Association's guidelines, the required sensitivity is over 90%, and specificity over 75%—both of which our reagent meets, making it the only reagent listed. Furthermore, p-tau217 and p-tau205 are also progressing well. In particular, p-tau205 has demonstrated a very strong correlation with the reference standard. These findings were presented at the recent International Conference on Alzheimer’s and Parkinson’s Diseases. Emerging Markets Strategy In India, our new plant is now fully operational. We are beginning to see an increase in bids for products manufactured under the "Made in India" initiative, and we are steadily expanding our sales territory by enhancing our support infrastructure. In Brazil, we have secured participation in government-led healthcare infrastructure investments, and construction of our new plant has already commenced smoothly. We are advancing our strategy to capture the rapidly growing demand in this market. In the META region, while some geopolitical risks remain, medium- to long-term growth in healthcare infrastructure investment is expected. To align with this, we are continuing to expand our direct sales areas. Most recently, we launched direct sales operations in Kenya, and we aim to further strengthen our presence in the East African region and beyond. Please refer to page 22 – Medical Robotics Business We believe this fiscal year represents a turning point as we enter a new growth phase. Naturally, our focus is not limited to Japan— we are also accelerating our overseas expansion, particularly in Asia, where we already operate, as well as in new markets such as Europe. We are making progress with remote surgery demonstration trials. Last year, trials were conducted in Singapore and Japan, and this year, as shown, we successfully conducted trials in France and Japan in June. We are aiming to reach 100 units this fiscal year, and the number of procedures has already exceeded 10,000. As the share of revenue from consumables and service support increases, we also anticipate improvements in profitability. We are also aiming for MedicaLroid to achieve a single-year operating profit on a standalone basis. Lastly, progress in new businesses, including regenerative and cellular medicine. As you may know, our regenerative and cellular medicine initiatives focus on three key areas: quality control, process automation, and regenerative medicine products. All three areas are making steady progress. In particular, in quality control, we are leveraging our existing technologies and products—some of which are shown in the accompanying images—and these are receiving high praise from research institutions, especially those previously used in IVD applications. In digital solutions, we announced a collaboration with Nippon Life Insurance in June. Together, we are developing disease risk assessment models for chronic illnesses and cancers. A feasibility study has been conducted with positive results. We will continue to advance the development of these disease risk assessment models, and we hope to share more details with you at an appropriate time in the future. Lastly, let’s move on to our earnings forecast. Please refer to page 25. First, regarding the U.S. reciprocal tariffs: we expect the impact to remain within our initial estimate of approximately JPY3 to 4 billion for the full year. In fact, the impact in Q1 was minimal. We had already taken countermeasures such as building up inventory and reviewing our supply chain, and we are now also partially revising our manufacturing methods. Additionally, we are implementing price adjustments, and overall, we expect the impact to remain within the originally anticipated range of JPY3 to 4 billion. Now, turning to our earnings forecast. As explained by Asano at the beginning, we have revised our H1 outlook to reflect the delayed recovery in Japan and downside risks in China. We now forecast revenue to decrease by JPY12.5 billion to JPY240 billion, and operating profit to decrease by JPY8.5 billion to JPY36 billion. However, regarding the full-year forecast, we are actively implementing various measures to recover. For example, in the Americas, we expect a stronger contribution from new products in the second half. In China, we are adding to our product portfolio and reinforcing sales strategies, aiming to maintain performance at around the same level as the previous year. In Japan as well, we plan to strengthen our product portfolio and steadily execute the new growth initiatives outlined in our recent guidance, in order to achieve our initial full-year plan. That concludes my presentation.
Operator: Now, we will take the first question from Mr. Hayashi of Morgan Stanley MUFG Securities.
Ryotaro Hayashi: This is Hayashi from Morgan Stanley Securities. Thank you for the opportunity. You have repeatedly mentioned the delayed recovery following the order restrictions due to the system transition in Japan. However, I still don’t fully understand the details and reasons behind the delay. Could you please explain that in more detail?
Kaoru Asano: This is Asano. The impact of the system transition in Japan was a JPY3.3 billion decrease in revenue. We had planned to recover this amount during H1. To achieve that, we had three strategies: first, revenue growth from the medical robotics business; second, additions to our product portfolio; and third, covering the shortfall through growth in other regions. With these three, we believed we could offset the impact during H1. However, the medical robotics business remained sluggish throughout H1, and that became one of the causes of the delayed recovery. Second, the addition of products to our portfolio has also seen a delayed start. We had originally planned to launch in Q2, but that timeline has slipped. We now expect to begin in H2. This delay is another factor. Third, although we hoped other regions would compensate, Q1 was somewhat weak, so those regions were not able to cover the shortfall. As a result, recovery within H1 has become difficult, and we have revised our forecast accordingly. That said, from Q3 onward, these three elements are expected to contribute positively, and we anticipate a recovery.
Ryotaro Hayashi: Thank you. So, regarding the reagents for which orders were restricted in April, should we expect increased orders in July, August, and September, resulting in slightly higher revenue in Q2?
Kaoru Asano: Inventory levels are gradually [unclear audio], so we believe sales will show a slight upward trend. However, we expect revenue to level out through July and August.
Ryotaro Hayashi: Understood. My second question is about the reassessment of overseas inventories, which was cited as a special factor in Q1. You mentioned that this was not originally anticipated. Was this related to unrealized gains/losses, or was it a special type of review that you don’t usually perform? I’d appreciate some background on this.
Kensuke Iizuka: This is Iizuka. Ahead of the system transition in Japan, we had proactively built-up inventory. Additionally, in response to the U.S. tariffs—often referred to as the Trump tariffs—we increased inventory levels in North America as a countermeasure. As a result, we ended up holding more inventory overseas than usual. Given this situation, we took the opportunity to reassess the valuation of consolidated inventories at our overseas affiliates. This was done in collaboration with our auditing firm, and it led to a conclusion that the valuation needed to be revised. We regret that this loss was not anticipated when we formulated our earnings forecast. However, please understand that this is a one- off event and not something that will recur on an ongoing basis.
Ryotaro Hayashi: Understood. Thank you very much. That’s all from me.
Operator: Let’s move on to the next question. Mr. Mori from Nomura Securities, please go ahead.
Takahiro Mori: This is Mori from Nomura Securities. Thank you. My first question is regarding the order restrictions associated with the core system transition in Japan. You mentioned that this had been planned from the beginning of the fiscal year. I apologize if I missed this, but I don’t recall it being presented as something that would affect Q1 specifically. Was this factor included in your full-year guidance but just not explicitly disclosed? I’d appreciate clarification on that point.
Kensuke Iizuka: This is Iizuka. Yes, as you noted, the system transition was scheduled for April, and because any trouble at that time could have caused major issues for our customers, we proceeded with great caution. As mentioned earlier, we built up some inventory in the previous fiscal year, and some of the impact was expected to be deferred to later periods. This was incorporated into our guidance. However, as Asano explained earlier, some of the initiatives we had hoped would offset the impact—such as gains from other areas— started more slowly than expected in Q1. Additionally, as seen in the case of China, Q2 is also expected to be affected to some extent. That’s why we revised our H1 forecast. For the full year, we intend to implement countermeasures and pursue new initiatives to achieve recovery.
Takahiro Mori: Since we build our forecasts on a quarterly basis, if factors like this are going to affect specific quarters, we would appreciate being informed in advance. Even if the full-year number remains unchanged, if you could indicate that “this will happen in this quarter and may cause fluctuations,” that would help prevent surprises when the actual results come out.
Kensuke Iizuka: We provide our forecasts in half-year and full-year increments, but yes—some elements in Q1, including those that affected Q2, resulted in a divergence from what we had initially anticipated for H1, and that led to the current outcome.
Kaoru Asano: This is Asano. I apologize. We recognize that we should have communicated this more clearly. We were aware of the situation at the end of the previous fiscal year and assumed that it could be offset in H1, as Iizuka mentioned. However, we should have disclosed this in advance as a potential issue. We sincerely apologize. Moving forward, we will make a concerted effort to improve communication.
Takahiro Mori: Thank you, Mr. Asano. My second question is about China. Regarding the impact of the government’s medical cost containment policies—other clinical testing companies have also been heavily affected. I understand Sysmex is also feeling the effects, but could you explain more specifically which types of tests or product categories are being impacted? Are there differences in how instruments and reagents are affected? I’d appreciate a more detailed explanation of which parts of your business are more or less vulnerable in China.
South: Let me answer this—this is Minami. First, regarding the external environment, the main area of impact has been immunochemistry, which has been significantly affected by centralized procurement and related policies. These have influenced the end-user prices for patients. Therefore, we believe that our core business, Hematology, has been relatively less affected overall. That said, we did experience a decline in revenue this time. Within the Hematology category, as mentioned earlier, CRP—which we disclose separately—is included. In our case, CRP is sold as a bundled product alongside Hematology items. Previously, when patients visited hospitals, Hematology and CRP tests were typically conducted together as a set. However, new guidelines from the Chinese government state that these tests should no longer be bundled, which has led to a decline in the number of tests performed. As such, the impact is more on the reagent side. Still, compared to our peers, we believe the overall impact on us is relatively limited.
Takahiro Mori: Thank you. Just to confirm—CRP is generally classified under immunochemistry, correct?
Takuro Minami: No, in our case, CRP has been measured together with Hematology tests, so we classify it under Hematology. The test flow also involves conducting CRP testing right after Hematology. That is why it was subject to the recent regulatory change.
Takahiro Mori: In other regions, is CRP also included under Hematology?
Takuro Minami: There are some differences from region to region, but I hope you understand that especially in China.
Takahiro Mori: In general, in other areas, where are they in?
Takuro Minami: There are many cases of immunity.
Takahiro Mori: Understood. So, in general, CRP is categorized under immunochemistry, but in China, it is bundled with Hematology tests, and therefore counted under Hematology. And it would be accurate to say that immunochemistry is more affected by VBP (volume-based procurement), correct?
Takuro Minami: Yes, that’s correct.
Takahiro Mori: Got it. That’s all from me. Thank you very much.
Operator: Let’s proceed to the next question. Mr. Yoshida from Tokai Tokyo Intelligence Lab, please go ahead.
Masao Yoshida: Thank you. This is Yoshida from Tokai Tokyo Intelligence Lab. I have two questions. First, regarding the downward revision to your H1 forecast—you lowered revenue by JPY12.5 billion and operating profit by JPY8.5 billion. I’m trying to reconcile these numbers with the special factors mentioned earlier by President Asano. For example, revenue had a special factor of JPY3.3 billion. On the profit side, if I add the JPY2.4 billion reduction in gross profit, JPY600 million increase in SG&A, and the JPY1.7 billion inventory valuation adjustment, that comes to about JPY4.7 billion. Could you help clarify how these components add up to the full revisions?
South: This is Minami. Regarding revenue, the JPY12.5 billion downward revision for H1 primarily stems from two factors. First, the situation in China, which we discussed earlier, has been weaker than initially anticipated. We believe the softness seen in Q1 will continue to affect the remainder of H1. Second, in Japan, we had initially expected a recovery within H1, but the pace of that recovery has been slower than projected. These two factors led to the downward revision of revenue. Consequently, we also had to revise down our gross profit. Combined with the Q1 inventory valuation adjustment mentioned earlier, this results in the JPY8.5 billion reduction in operating profit.
Masao Yoshida: Based on slide 6, I estimate the decline in China to be about JPY5 billion for H1, assuming a local-currency revenue drop of 5–10%. Would that be correct?
Takuro Minami: Yes, your understanding is generally correct. We used a range of 5–10%, but that gives you the right sense of scale.
Masao Yoshida: If we consider JPY3.3 billion for the special factor and around JPY5 billion for China, that totals roughly JPY8.3 billion. That still leaves a gap of around JPY4 billion. Are there other factors contributing to this?
Takuro Minami: Yes, you're right. Beyond those two major items, there were some minor slowdowns across multiple regions. There wasn't any single major cause, but rather a collective shortfall. If I had to name one, I’d point to the medical robotics business in Japan. As mentioned earlier, Q1 performance was slower than expected, and budget execution was somewhat delayed.
Masao Yoshida: Understood. I also noticed that revenue in the Americas seemed a bit weak—should I consider that as part of the overall impact?
Takuro Minami: Yes, both the Americas and EMEA were slightly below expectations in terms of local-currency growth. We have factored that into the downward revision.
Kaoru Asano: We do expect a bit of a rebound in Q2, though.
Masao Yoshida: Got it, thank you. As for operating profit, if China accounts for around JPY1–2 billion and the special factors total JPY4.7 billion, it still doesn’t fully explain the JPY8.5 billion revision. But taking into account the broader revenue shortfalls across regions, that makes sense?
Takuro Minami: Yes, that is correct.
Masao Yoshida: Understood. Now, for my second question: On slide 20, you mentioned results from AAIC (Alzheimer’s Association International Conference). The guidelines indicate that if sensitivity and specificity exceed 90%, the reagent can be used as an alternative to CSF and PET tests. You stated that your reagent passes the screening requirements. But in terms of substitution, do any of your current products meet the threshold of 90% sensitivity and specificity?
Kaoru Asano: It depends on the cutoff settings, but currently we are using a cutoff optimized for pre-screening. With this setting, sensitivity exceeds 90%, while specificity is somewhat lower. If we can determine a more suitable cutoff in the future, as you suggested, substitution may become viable. However, at present, our setting prioritizes sensitivity.
Masao Yoshida: Understood. Thank you very much. That’s all from me.
Operator: We will now take the next question. Mr. Saito from JPMorgan Securities, please go ahead.
Naoko Saito: This is Saito from JPMorgan Securities. Thank you. Regarding the decline in CRP testing—excluding that factor, it seems the overall impact would still be negative for the full year. If possible, could you provide a quantitative explanation of how the reduction in CRP test volumes has affected results? Also, I recall that revenue from Hematology in China had already been declining since Q3 and Q4 of the previous fiscal year. At the time, you explained this was due to quarterly fluctuations. Has there been a notable change in external conditions between the second half of last year and Q1 of this year?
Kaoru Asano: This is Asano. CRP testing has been significantly affected by the restrictions on bundled testing. However, since we don’t directly monitor CRP test volumes ourselves, we can only estimate based on data from our distributors. From what we’ve seen, CRP-related reagent sales dropped significantly in Q1. That said, due to fluctuations in distributor activity, we can’t definitively assess the actual number of tests performed. That’s one point. As for Hematology test volumes—based on the graph we’ve presented—we believe there hasn’t been a major change. If anything, it may have declined by a few percentage points. The major factor here appears to be the restriction on bundled testing, such as CRP.
Naoko Saito: It would be fair to say that the impact seen in Q1 may not continue throughout the full year?
Kaoru Asano: As I mentioned, CRP testing historically shows significant seasonal fluctuations depending on distributor activities, so we’ll need more time to assess the trend. However, we do believe there is a clear downward trend in CRP testing overall. While we cannot provide an exact quantitative figure, the impact in Q1 was especially notable. Since CRP is categorized under Hematology reagents in China, we believe it is currently the biggest factor contributing to fluctuations in that category.
Naoko Saito: Thank you. Outside of CRP, were there any significant changes in the external environment between the second half of last year and Q1 of this year?
Kaoru Asano: Another example of bundled testing would be hemoglobin A1c. Though its volume is smaller than CRP, we believe it has been similarly impacted. However, we have very limited sales of A1c, so there’s been no material impact. In urinalysis, we suspect there may be some effects from reduced bundling and from TRG-related factors. Although our sales have been increasing, it's true that volumes have been declining overall since last year, so we believe there is an impact on urinalysis. Immunochemistry continues to be affected by VBP (volume-based procurement).
Naoko Saito: Understood. Thank you very much. That’s all from me.
Operator: We will now take the next question. Mr. Hayashi from Morgan Stanley MUFG Securities, please go ahead.
Ryotaro Hayashi: Thank you. Just one follow-up question on China. I understand it may be difficult to comment on competitor disclosures, but Mindray stated that although their April–June sales dropped significantly, they expect revenue growth to resume in July–September. On the other hand, your outlook anticipates a 5–10% revenue decline for H1, suggesting that Q2 will remain at similar levels to Q1. Could you explain the difference in these views?
Kensuke Iizuka: This is Iizuka. Thank you. Since that’s another company’s disclosure, we can’t speak to the background behind their comments. But as you know, in China, immunochemistry has been heavily affected by VBP—not just recently, but since last year. While we are also impacted, we’ve taken various measures such as starting local production of instruments and adding new reagent items to maintain market share. While we face some negatives, we also have positives in place to offset them. Similarly, in Japan, VBP has affected urinalysis—both sediment and qualitative testing—since last year. However, we’re addressing this by increasing local production, just as we are with immunochemistry. As for Hematology, local production models have been performing well. But as we’ve explained, bundled testing such as CRP and hemoglobin A1c—though the latter is a relatively minor portion for us—has been affected. Also, as shown in the slides, some provinces are moving to share diagnostic data across institutions, which may also influence test volumes. So even with some negative impacts on Hematology, we are combining them with positive measures and aiming to grow overall. We do not expect the current medical cost containment policies in China to be eased in the near future. Rather, we believe the government may even expand its cost-optimization initiatives. With this in mind, we are moving forward on both fronts: managing downside risks while also adding new value.
Ryotaro Hayashi: Understood. Thank you very much.
Operator: As we are now out of time, this concludes today’s financial results presentation. [End] footnote (Where the audio is unclear, the text is marked [unclear audio]. Conversation is indicated by [Q] for a question, [A] for an answer, and [M] for neither