Eiken Chemical : Bridge Report for the Fiscal Year Ended March 31, 2024

Bridge Report (4549) May 21, 2024

https://www.bridge-salon.jp/

President

Tsugunori Notomi

EIKEN CHEMICAL CO.,LTD.(4549)

Company Information

Exchange	TSE Prime
Industry	Pharmaceuticals (manufacturing and sales)
President	Tsugunori Notomi
HQ Address	7 Yamaguchi building, 4-19-9 Taito, Taito-ku, Tokyo, Japan
Year-end	End of March
Homepage	http://www.eiken.co.jp/en/

Stock Information

Share Price	Share Outstanding	Market Cap.	ROE (Act.)	Trading Unit
2,146yen	40,041,438Shares	85,928 million yen	5.6%	100 Shares
DPS (Est.)	Dividend Yield (Est.)	EPS (Est.)	PER (Est.)	BPS (Act.)	PBR (Act.)
53.00yen	2.5%	129.49yen	16.6 times	1,318.38 yen	1.6 times

* Share price is as of the end of May 20. All figures are from the FY March 2024 financial settlement report.

Business Performance Trends

Fiscal Year	Net Sales	Operating Income	Ordinary Income	Net Income	EPS	DPS
March 2021 Act.	38,667	6,612	6,808	5,044	136.65	41.00
March 2022 Act.	42,996	8,387	8,508	6,218	168.28	51.00
March 2023 Act.	43,271	7,457	7,568	5,736	155.17	51.00
March 2024 Act.	40,052	3,377	3,568	2,634	71.69	51.00
March 2025 Est.	43,100	5,660	5,620	4,480	129.49	53.00

* Unit: Million-yen, Yen. The definition for net income means net income attributable to owners of parent.

This Bridge Report presents EIKEN CHEMICAL's earnings results for the fiscal year March 2024 etc.

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Table of Contents

Key Points

1. Company Overview
2. Fiscal Year Ended March 2024 Earnings Results
3. Fiscal Year Ending March 2025 Earnings Estimates
4. Interview with President Notomi
5. Conclusions

："EIKEN ROAD MAP 2030" and New Medium-Term Management Plan>

Key Points

• In the fiscal year ended March 2024, sales declined 7.4% year on year to 40 billion yen. Outside Japan, sales grew thanks to the economic recovery from the COVID-19 pandemic, but inside Japan, the demand for genetic testing shrank in the wake of the reclassification of COVID-19 in the Infectious Disease Law, so the sales of reagents for genetic testing for COVID-19 using the LAMP method decreased significantly. Operating income dropped 54.7% year on year to 3.3 billion yen. Sales of reagents for COVID-19 testing, which are highly profitable, dropped and gross profit margin and gross profit declined due to the change in the product mix such as decrease in revenue from patent royalties of the LAMP method, while SG&A expenses, including expenses for marketing activities and depreciation and commissioned research costs arising out of the operation of new research buildings, augmented 2.3% year on year. The business performance fell below the revised forecast announced in January 2024, because the demand for reagents for genetic testing for COVID-19, which are profitable, shrank, the recovery of some testing businesses, which were first expected to be normalized after the end of the pandemic, was delayed, and costs for procuring raw materials, etc. augmented due to the yen depreciation and the rise in crude oil price.
• For the fiscal year ending March 2025, which is the final fiscal year of the Medium-Term Management Plan, sales are expected to grow 7.6% year on year to 43.1 billion yen and operating income is projected to rise 67.6% year on year to 5.6 billion yen. It is forecast that there will be no longer effects of decline in sales related to the novel coronavirus, and their business will regain a normal growth curve. Gross profit margin is expected to rise 3.8 points year on year, thanks to the improvement of manufacturing processes as well as the change in the product mix. It is projected that profit will grow considerably as the augmentation of SG&A expenses will be offset. Under the basic policy of paying dividends stably and continuously, the company plans to pay a dividend of 53.00 yen/share. The expected payout ratio is 40.9%.
• The company expects that the fluctuations due to COVID-19 pandemic will subside from the fiscal year ending March 2025 and the company will get back on a normal growth track. Before the COVID-19 pandemic, the CAGR of sales was around 4% during the 5-year period from fiscal year ended March 2015 to fiscal year ended March 2020, but the CAGR is projected to be 9.4% during the 7-year period from fiscal year ended March 2024 to fiscal year ending March 2031, showing a grow rate exceeding the pre-pandemic rate. While the cultivation of overseas market is progressing steadily, we would like to expect that the top line will expand in parallel with the improvement in return on capital, which is considered by the company as an issue to be addressed.

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1. Company Overview

EIKEN CHEMICAL is a general manufacturer of clinical diagnostics, including immunological and serological, microbiological, clinical chemistry, urine analysis and genetic screening test. It also develops and sells medical devices.

It offers many products that occupy high market share including fecal immunochemical test that occupy about 60% of the domestic share, Urinalysis test, Microbiological test and so on. Its unique gene amplification technology, "LAMP", is recognized in the world. With the fecal immunochemical test reagents, urinalysis test strips and LAMP, EIKEN is aiming to become a global corporation.

1-1 History

Founded as Koa Kagakukogyo Co., Ltd. in 1939, the company started manufacturing and selling nutritional foods and pharmaceuticals made from livestock organs. In 1949, it was the first company in Japan to successfully commercialize a powdered agar for the detection of bacteria (Salmonella-Shigella [SS] agar). In 1961, it established the Clinical Diagnostics Division and began R&D on in-vitro diagnostics.

In 1989, the company launched "OC-sensor," the world's first fully automated fecal occult blood analyzer. This led to the establishment of its current overwhelming lead in this field.

After that, while expanding its business domains such as reagents for urinalysis testing and microbiological testing, in 1998, the company developed the LAMP method, a new gene amplification technology. It has launched various products using the LAMP method that are simpler, faster, and more accurate than conventional testing methods.

In 2005, the company concluded a joint development contract with FIND (Foundation for Innovative New Diagnostics) for a rapid genetic tuberculosis detection method, based on the LAMP method. It then proceeded with joint development related to testing for malaria, HIV, etc.

In March 2020, the company released COVID-19 detection reagent utilizing the LAMP method to be used against COVID-19, which has been spreading worldwide.

*For further information about the LAMP method and FIND, please refer to "1-6 Characteristics and Strengths (4) Competitive Advantages of the LAMP Method."

1-2 Management Philosophy

"Management Philosophy": Protect the health of the public through health care services.

"Management Vision": EIKEN group is dedicated to leveraging expertise as a medical testing pioneer to increase corporate value by protecting the health of the public with products and services that customers can trust.

"Motto": We EIKEN provide trustworthy quality and develop with technology.

EIKEN group formulates "EIKEN WAY" as its attitude toward each stakeholder, centering these philosophy vision, and motto.

(Source: EIKEN CHEMICAL)

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1-3 Market Environment

Domestic Market

The scale of the market of clinical reagents was about 698.7 billion yen in fiscal year 2022, and if reagents for research and testing equipment are included, it's about 1,047.5 billion yen (surveyed by Japan Association of Clinical Reagents Industries. Data provided by Eiken Chemical), partially due to the growth of sales of reagents for COVID-19. To control rising medical costs, the Japanese government is focusing on preventive medicine such as special health check-ups (metabolic check-ups) and cancer screenings. It is expected that this, along with the aging population, will lead to an increase in the number of samples (number of specimens).

Some negative factors include the impact of population decline because of decreasing birth rates and revision of medical treatment fees (reduction). However, the trends of laboratory test fees which had been subject to revision of insurance (medical laboratory test fees) show that, even though they were cut by some 40% from 1997 to 2006, the fees have been stable or only slightly reduced after 2007. (Laboratory test fee in fiscal 2022: -1.14%)This is the result of industry-wide efforts to emphasize the importance of prevention and testing, and the domestic market is expected to continue to grow modestly by about 2% per year over the medium term, if the impact of COVID-19 is not taken into account.

Out of 140 member companies (as of April 2022) of JACRI mentioned above, about 80 are manufacturers, and there are about 15 companies with over 10 billion yen in sales. Most of them are small to medium sized companies. Because the test items of diagnostic tests range widely, each company has its own field of strength, and business segregation is already established in the industry. As a result, collaboration, such as supplying raw materials and products from other companies and manufacturing and selling them, is often observed. Against such a backdrop, the market is modestly growing. Therefore, there is currently no apparent trend of weeding out uncompetitive corporations.

Overseas Market

The global clinical laboratory test reagent/device market is estimated to be US$ 98.2 billion and, by region, the market is occupied by the USA at 39.8%, followed by Europe at 28.0% and Asia at 22.9% (As of 2021) (Markets and Markets "In Vitro Diagnostics Market" Eiken Chemical Co., Ltd.).

The overseas market is over ten times larger than the domestic market. In developed countries, the number of tests is increasing as aging of population progresses. Furthermore, in emerging countries, the needs for medical services are expanding because of economic and income growth. As a result, the annual growth rate of overseas market is expected to be over 3%, which is much higher than that of the domestic market. Therefore, the Japanese companies in the industry are vigorously undertaking globalization of their businesses.

In the global market, however, large global companies such as Roche, Abbott, SIEMENS, and Danaher are the main players, and in order to survive the competition, Japanese companies must strengthen their competitiveness by, for example, developing unique products or systems.

Fecal occult blood test market

The global market for cancer diagnosis is expanding due to the global increase in the elderly population and the rise in the prevalence of cancer. The cancer diagnosis market is worth approximately 124.3 billion dollars, of which the colorectal cancer diagnosis market is worth approximately 16.3 billion dollars and the fecal occult blood testing market is worth approximately 170 million dollars.

The market is expected to grow at an annual rate of 8.6% and expand to 320 million dollars by 2030, due to factors such as "accelerated spread of contactless FIT due to COVID-19," "lack of testing capacity due to a shortage of endoscopists," "recognition of the high medical economic value of FIT," and "increased recognition of the importance of health checkups (medical examinations) in emerging countries."

The company provides colorectal screening tests in 46 countries around the world and already occupies 70% of the global market. It promotes expansion strategies such as "increasing the rate of undergoing screening," "improving test accuracy," and "receiving new orders for screening," while enhancing its social significance by creating value such as "reducing the risk

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of death from colorectal cancer," "reducing medical costs through early treatment," "improving quality of life," and "extending healthy life expectancy."

The new stool buffer solution, which improves hemoglobin stability and also stabilizes calprotectin through its innovative composition, realized by applying the company's accumulated know-how and newly invented technology and FIT+ (development of a highly accurate testing technology for fecal genetic testing using samples from the same stool collection container) greatly contribute to "improvement of the rate of undergoing screening" and "improvement of testing accuracy."

The company plans to leverage its track record and dominant share of the fecal occult blood test (FIT) market to add value through international standardization and new technologies to attract additional customers.

1-4 Business Description

1. What are Clinical Tests?

One type of clinical tests is the "Biological test" that directly examines the body using medical equipment such as X-ray, CT, MRI, electrocardiogram, and ultrasound. Another type of clinical tests is the "Laboratory test" that examines biological samples (specimens) obtained from people such as blood, urine/feces, and cells.

The clinical test reagents made by EIKEN CHEMICAL are the ones used for medical laboratory tests. For example, they are used to test infectious diseases or to measure small amounts of blood contained in stool. They are made to support diagnosis. Most of these reagents are called in vitro diagnostics (IVD) and are regulated by the Pharmaceutical and Medical Device Act so reagent manufacturers file applications with PMDA (Pharmaceuticals and Medical Devices Agency) and obtain its approval. Users include hospitals, clinics, medical offices, medical test centers that carry out tests commissioned by medical institutions, health screening centers, public health centers, and institutions for health research, and others.

2. Major Products

EIKEN CHEMICAL mainly manufactures and sells the following types of reagents and medical devices.

As they deal with a wide range of reagents, they not only sell their in-house products but also purchase and sell products from other companies.

Major in-house products include fecal immunochemical test reagents, microbiological reagents, immunological and serological reagents, urinalysis test strips, genetic testing reagents, etc. The sales ratio of in-house products to other companies' products is approximately 60:40. The gross profit margin is approximately 55% for in-house products and approximately 35% for other companies' products.

Product Name	Sales	Sales Proportion
Fecal immunochemical test reagents (FIT)	12,315	30.8%
Immunological and serological reagents	9,394	23.5%
(excluding fecal immunochemical test reagents)
Urinalysis test strips	4,401	11.0%
Microbiological test reagents	4,312	10.8%
Biochemical test reagents	575	1.4%
Equipment/Culture medium related to food and	1,961	4.9%
environmental
Related molecular genetics (LAMP), (including	2,625	6.6%
its devices)
Medical Devices (excluding molecular genetics	4,464	11.2%
related devices)
Total sales	40,052	100.0%

*Results for the fiscal year ended March 2024.Unit: Million Yen

Fecal immunochemical test reagents

The major products for EIKEN CHEMICAL are reagents and sampling bottles for fecal immunochemical tests to specifically detect and measure human hemoglobin in feces as a colorectal cancer screening and diagnosis and are sold globally.

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Immunological and serological reagents (excluding Fecal immunochemical test reagents)

EIKEN CHEMICAL develops, manufactures, and sells reagents for various tests, such as LZ Test EIKEN, a reagent for general- purpose automatic analyzers used for diagnosing rheumatism and inflammatory disorders and gastric cancer risk stratification test (the ABC method). The company also procures reagents for fully automated enzyme immunoassay devices and reagents for automatic glycohemoglobin analyzers from Tosoh Corporation, and sells them.

Urinalysis test strips

EIKEN CHEMICAL develops, manufactures, and sells "UROPAPER III 'EIKEN'," a urinalysis test strip for testing various items such as occult blood, protein and glucose, as well as the "UROPAPER α III 'EIKEN'," a specialized test strip for fully automated urine analyzers.

Outside Japan, the company formed a business tie-up with Sysmex Corporation in 2017 and has sales.

Microbiological test reagents

Since its establishment, EIKEN CHEMICAL has been developing biological specimens as well as reagents for microbiological tests for food and environment in order to prevent infectious diseases and food poisoning. Currently, it develops, manufactures, and sells various reagents that are effective for diagnosis and treatment of microorganism infection, such as mediums, powder mediums, antimicrobial susceptibility tests, and rapid test reagents.

Clinical chemistry test reagents

EIKEN CHEMICAL develops, manufactures and sells reagents for clinical chemistry tests including "EXDIA XL 'EIKEN'" series that assist to measure and analyze biological components in blood serum and urine, with a focus on the test items that are related to lifestyle related diseases.

Equipment/ Culture mediums related to food and environment

EIKEN CHEMICAL sells reagents for microbiological tests on food to detect food poisoning bacteria as well as reagents for environmental microbiological tests and equipment and devices to measure contamination of work environments.

Molecular genetics (LAMP)

In 1998, EIKEN CHEMICAL developed and patented an innovative gene amplification technology called "LAMP." The LAMP is "simple, rapid, and accurate" and is a critical tool for Eiken's future domestic and global expansion of its business. (Details are described below)

Medical devices

EIKEN CHEMICAL sells various types of automated analyzers. They contract manufacturing specialized equipment that uses their in-house reagent. Since beginning sales of "OC Sensor" in 1989, they have worked continuously on technological innovation and quality improvement of this fecal immunochemical test analyzer. Also, they offer the "US," an automated urine analysis device that uses Eiken's proprietary image processing system, the "BLEIA-1200," a fully automated biochemistry photogenetic immunoassay device that was the world's first of its kind in the clinical testing field, and "Loopamp EXIA," a LAMP-based real time turbidity measuring device.

3. Sales structure

EIKEN CHEMICAL has 10 sales divisions in Japan. Its academic department supports sales promotion.

Out of 757 employees (consolidated) during fiscal year ended March 2024, about 350 belong to the sales department.

As for the sales channels for medical institutions such as hospitals, the Company's direct sales partners are medical wholesale companies, and it has businesses with almost all the wholesale companies in the medical industry.

For overseas sales, EIKEN CHEMICAL has basically 1 agency per country, and the sales and maintenance are commissioned to the agencies and managed by the overseas business division of the head office. EIKEN's products are exported to 40 countries. The high proportion of overseas sales is occupied by the sales in the USA, Germany, Italy, Spain, England, France, Australia, South Korea, and Taiwan. In addition to the Europe Branch in Amsterdam (the Netherlands), the Company is strengthening its

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manufacturing and sales structure through its consolidated subsidiary, "EIKEN CHINA CO., LTD.," as well as aiming to expand its businesses by setting a business office in China. In November 2023, the company established a U.S. corporation, and plans to establish a direct selling system.

In the fiscal year ended March 2024, overseas sales exceeded 10 billion yen for the first time, reaching 10,115 million yen, out of which 5,972 million yen is from the sales of fecal immunochemical test reagents.

1-5 ROE Analysis

	FY 3/14	FY 3/15	FY 3/16	FY 3/17	FY 3/18	FY 3/19	FY 3/20	FY 3/21	FY 3/22	FY 3/23	FY 3/24
ROE (%)	8.3	8.3	8.9	10.0	8.3	10.3	9.9	12.9	14.3	12.1	5.6
Net Profit Margin	6.61	6.77	7.55	8.77	7.45	9.64	9.67	13.04	14.46	13.26	6.58
Asset Turnover Ratio	0.84	0.83	0.83	0.80	0.78	0.77	0.75	0.73	0.73	0.67	0.63
Leverage	1.50	1.47	1.42	1.43	1.43	1.38	1.36	1.35	1.36	1.36	1.35

*Unit: %, times, x

In the fiscal year ended March 2024, ROE fell below 8%, which is the value Japanese enterprises should aim to achieve, mainly due to the decline in the net profit margin. For this fiscal year, the net profit margin is projected to be 10.4%. If the other two factors are unchanged, ROE will recover to the order of 8% in the fiscal year ending March 2025. In order to maintain or increase ROE, it is indispensable to improve total asset turnover, which dropped 0.2 points in the past 10 years, while developing high value-added products, creating new businesses and markets, raising profit margin by reducing the ratios of cost of sales and SG&A expenses, and improving productivity.

1-6 Characteristics and Strengths

(1) Products that Occupy High Share in the Market

The share of Eiken's fecal immunochemical test reagents is ranked top (64%) in the domestic market. Furthermore, many of their in-house products occupy high market share in the market, for example, urinalysis test strips occupying approximately 29% (ranked top) of the market, and microbiological reagents occupying approximately 14% (ranked fourth) of the market.

The background to how Eiken's fecal immunochemical test reagents have come to hold such a high share of the market includes that in 1987, Eiken began sales of "OC-Hemodia," a visual determination method fecal immunochemical test reagents, a product that more closely conformed to user needs when compared to competitor's products, and that in 1989 they adopted the latex photometric immunoassay method and began sales of "OC-Sensor," the world's first fully automated analyzer.

Also, the Health and Medical Service Act for the Aged was revised in 1992, making it possible to have fecal immunochemical test reagents as a method in colon cancer screening and diagnosis using public funds (no cost to the patient) which led to an accelerated spread and increased competition. But in 2001, Eiken began sales of the "OC-Sensor neo," with completely remodeled functions, which increased its market share.

(Source: EIKEN CHRMICAL)

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As for fecal immunochemical tests, Eiken will expand its business globally based on the above characteristics.

The immunochemical method used in Japan applies reagents that react only to human hemoglobin and can process a large volume simultaneously.

Meanwhile, in other countries, reagents for the chemical method (Guaiac method) based on old measuring principles are still used, which presents accuracy challenges. In 2011, the test guidelines in Europe have finally begun recommending automated analyzers that use the immunochemical method. As a result, the market is beginning to undergo a dramatic change.

Furthermore, although the chemical method is also still common in the United States, which has the largest potential market, trends show a gradual shift toward the immunochemical method. Additionally, new guidelines on colorectal cancer screening by USPSTF (US Preventive Medicine Special Committee) was published in June 2016. These guidelines pointed that the immunization method is superior to the conventional chemical method and pursuantly, and assessed Eiken's fecal immunochemical test product, "the OC FIT-CHEK family of FITs" has the utmost inspection performance with high sensitivity and specificity. Besides, the large markets which are under developing exist on the leading and emerging countries in Asia and South America.

Because the fecal immunochemical test market is a niche market, Japanese companies, the forerunners of the immunochemical method, own the most advanced technique, and hence Eiken's reagents and equipment are the global standard.

(2) Focusing on research and development

EIKEN CHEMICAL is focusing on research and development of unique technologies as a research and development corporation, and the development of original products that respond to customers' needs, using the unique technologies. The number of staff assigned for research and development is about 160.

The demand from the customers is higher quality of medicine. Specifically, they demand for higher differential diagnosis accuracy with high sensitivity and high quality and improved detection rate. In addition, easier usage will lead to reduction in the work of medical staff. Responding to such needs is critical.

Since its establishment in 1939, EIKEN CHEMICAL has accumulated unique technologies for manufacturing reagents. Their unique technologies are applied to the measuring principles of their devices such as fecal occult blood test analyzer, automated urine analyzer, biochemiluminescent immunoassay analyzer "BLEIA," and genetic testing that are designed to optimize the performance of the reagents.

(3) Development of various types of products in various fields through alliance strategy

Because clinical test reagents have wide range of subjects and items, it is not possible for one company to develop, manufacture and sell all types of reagents. The other companies in the industry are focusing on the technologies and products that they are specialized in. However, as an integrated manufacturer of clinical test reagents, EIKEN CHEMICAL aims at stabilizing profit structure, expanding their own strengths through alliance strategy, and pursuing synergy effects such as complementing functions and acquiring new technologies, while dealing with a wide range of products and responding to the needs of customers and users such as medical institutions.

Another reason why they cover various types of products in various fields is that they believe that covering wide range of clinical tests is their social responsibility to protect the health of the public, as is stated in their management philosophy: "protect the health of the public through health care services."

(4) Competitive Advantages of the "LAMP"

Thus, far the mainstream technology for amplifying genes as a process of gene tests has been what is called "PCR" Under such circumstances, in 1998, EIKEN CHEMICAL developed a unique technology called the "LAMP."

Compared to the PCR, the "LAMP" offers the following superior characteristics and allows users to carry out simple, rapid, and accurate gene tests.

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Simple	Amplification response occurs at a constant temperature (with the PCR, the temperature needs
	to be changed for amplification).
Rapid	High amplification efficiency, with genes being detected within 30 to 60 minutes (with the
	general PCR, it takes 2 to 3 hours).
Accurate	Extremely high specificity.

Currently in the medical field, the LAMP is used to diagnose infectious diseases such as COVID-19, tuberculosis, mycoplasma (a genus of bacteria, it can also cause pneumonia), legionella, pertussis, etc.

EIKEN CHEMICAL is making focused efforts on infectious disease diagnostic test in order to establish the status of the LAMP. At the same time, it is promoting the use of the LAMP in other fields such as food production and processing, environment, agriculture/veterinary to spread and enhance recognition of the LAMP. In fact, the LAMP-based products have been commercialized one after another since 2002.

Furthermore, for the same purposes, EIKEN CHEMICAL is actively giving licenses to external companies to build the LAMP camp.

One of the major actions to spread the LAMP in the world is an alliance with "FIND."

"FIND" stands for "Foundation for Innovative New Diagnostics" and is a non-profit organization recognized by the Swiss government, launched at a meeting of the United Nations World Health Assembly in May 2003. In its initial five years of existence, it received a grant from the Bill & Melinda Gates Foundation to start up their activities. Their goal is to develop and introduce affordable, simple, and advanced diagnostic tests to eradicate infectious diseases in developing countries.

FIND's scope of activities includes tuberculosis, malaria, and African sleeping disease. With tuberculosis, collaborative research between EIKEN CHEMICAL and FIND for a tuberculosis test using the LAMP began in July 2005. The purpose of this research is to improve the accuracy of tests by replacing the microscopy test (sputum smear test), which is the current practice in developing countries.

As a result of this collaboration, improvements which are not possible with the conventional PCR such as simplified pretreatment (PURE), improved reagents storage (store at room temperature) and simplified devices have been made to enable the developing countries to carry out the procedure (TB-LAMP). This LAMP-based product was already launched in Japan in 2011. After that, in order to obtain endorsement from the WHO (World Health Organization), FIND has completed its clinical evaluation in 14 developing countries and submitted this information to the WHO. In consequence, the company has acquired the recommendation by WHO as an evaluation replaces with microscopic examination or as an inspection reinforcing microscopic examination in August 2016.

According to a report on global tuberculosis announced by WHO in November 2017, the number of patients suffering from tuberculosis in 202 countries all over the world in 2016 was 10.4 million, an increase of 0.8 million from 9.6 million in 2014. Additionally, the number of deceases was 1.7 million, an increase of 0.2 million from 1.5 million in 2014. Most of them are inferred as matters of undiagnosed or untreated, and WHO indicates "the enforcement of countermeasures for the countries where access to diagnosis and treatment is not yet maintained is demanded." Following these situations, the company expects that dissemination and penetration of TB-LAMP contribute greatly to solve these problems.

In addition to the aforementioned diseases other than tuberculosis, the company is collaborating with FIND on a reagent for neglected tropical diseases (NTDs) such as Leishmaniasis and Chagas diseases.

EIKEN CHEMICAL completed the development of a testing system "Simprova" that uses a next-generation compact fully automated genetic testing device and multi-item testing chip using the LAMP. Since they relocated their manufacturing site from overseas to Japan, to cope with the issues with supply at overseas outsources for manufacturing the device, and partially revised the system, sale was still to be started, but the system has been completed, and they are preparing for production. They plan to release products in the first half of the fiscal year ending March 2025.

This equipment fully automates the process from specimen preprocessing (nucleic acid extraction and purification) to amplification and detection. By developing the unique protocol that exploits the LAMP's characteristics, the operation time that used to take over 2 hours with a conventional high purity nucleic acid extraction and purification device and an amplification and detection device combined, is now shortened to less than an hour. At first, the company plans to release the respiratory organ infections panel and then the acid-fast bacterium disease panel and respiratory viruses panel, and will

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gradually increase the number of test items.

It is anticipated that "Simprova" will accelerate the spread of the LAMP and establish its position as the global standard in a newly created market.

＊Gene amplification technology

Since the number of genes found in a genetic test sample is extremely small, to detect genes, the targeted gene must be amplified first. Gene amplification technology, therefore, is crucially important for genetic testing.

＊African trypanosomiasis

An endemic found in tropical Africa; African trypanosomiasis is a serious tropical disease transmitted to HUMAN mbH by a protozoa called Trypanosoma brucei. The disease is transmitted by a tsetse fly. Trypanosoma in HUMAN mbH blood sucked by a tsetse fly develops and propagates inside the HUMAN mbH body in 2 to 5 weeks, before turning itself into a terminal Trypanosoma-type, which becomes a source of next round of infection. The disease causes fever, headache, and vomiting, and the patient falls into constant sleep. Since the patient cannot take meals, he or she becomes thin and complain of generalized weakness and, in many cases, leads to a complication and dies.

＊Leishmaniasis

Leishmaniasis is a disease transmitted by a protozoon called leishmania, and has various types such as visceral leishmaniasis (also known as black fever), Brazilian leishmaniasis that affects skin and mucous membranes, and tropical leishmaniasis which affects skin. All these types are transmitted by blood-sucking insects, especially sandflies. Visceral leishmaniasis, after about three months incubation period, causes fever, sweating, diarrhea, etc. and, in about one month, causes a swollen liver and spleen, the patient develops an anemia and becomes weak if untreated, and may die in half a year to two years.

＊Chagas disease

Found in southern U.S. as well as Central and South America, Chagas disease is an infectious disease transmitted by Reduviidae, a kind of bloodsucking Triatominae. The disease does not develop symptoms immediately after infection; it usually has a latency period of about 30 years. It causes symptoms such as inflammation of sinews, liver and spleen, myalgia, myocarditis, cardiomegalia encephalomyelitis, cardiac disturbance.

1-7 Adopting a management approach that is conscious of the cost of capital and stock price

1. Analysis of the current situation

As shown in [1-5 ROE Analysis], the company's ROE had been above 8% until the previous fiscal year, but in the fiscal year ended March 2024, profit decreased due to a change in the sales mix, resulting in a lower return on sales and a significant drop in ROE to 5.6%.

In response to this situation, the Board of Directors is discussing policies and specific initiatives for improvement based on an assessment of the current situation, which has resulted in a decline in P/B ratio to the low 1x range.

1. Efforts

① Improvement of capital profitability

After comprehensively assessing financial soundness and business growth potential, the company will implement capital policies aimed at improving capital profitability and the current balance sheet in order to realize "further creation of corporate value."

(Source: EIKEN CHRMICAL)

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