Consolidated Financial Statements For the year ended September 30, 2009

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Consolidated Financial Statements
November 6, 2009
(For the year ended September 30, 2009)

Name of Company Listed: CMIC Co., Ltd.
Stock Listing: First Section of Tokyo Stock Exchange
Code Number: 2309

URL: http://www.cmic.co.jp
Representative:
Position: Chairman and CEO
Name: Kazuo Nakamura
Name of Contact Person:
Position: Managing Director Chief Disclosure Officer Name: Masao Wakai
Telephone: +81-3-5745-7070
Scheduled Date of Annual Meeting of Stockholders: December 15, 2009 Scheduled Date of Filing of Securities Report: December 15, 2009 Scheduled Date of Commencement of Dividend Payments: December 16, 2009 1. Results of FY 2009 (October 1, 2008 through September 30, 2009) (1) Consolidated financial results
(Amounts less than one million yen are omitted)

(% indicates rate of gain or loss compared with the previous FY)

Net sales
Operating income
Ordinary profits
Net income
FY ended September 2009
Million yen
28,784

%
11.7

Million yen
2,514

%
10.5

Million yen
2,400

%
9.7

Million yen
1,059

%
27.7

FY ended September 2008
25,777
19.2
2,275
5.3
2,187
1.6
829
(30.7)

Net income per
share
Diluted net income
per share
Return on equity
Ordinary profits/
total capital
Operating income/
net sales
FY ended September 2009
Yen
1,205.63

Yen
–

%
8.0

%
10.6

%
8.7

FY ended September 2008
1,003.94
–
7.1
11.1
8.8
R

eference: Equity in earnings of affiliates in FY ended September 2009: 1 million yen, FY ended September 2008: 1 million yen
(2) Consolidated financial position
(Amounts less than one million yen are omitted)

Total assets
Net assets
Equity ratio
Equity per share
September 2009
Million yen
23,355
Million yen
14,486
%
57.8
Yen
15,369.33
September 2008
22,073
14,051
59.5
14,693.16
R

eference: Shareholders’ equity: September 2009: 13,508 million yen, September 2008: 13,135 million yen
(3) Consolidated cash flows
(Amounts less than one million yen are omitted)

Cash flows from
operating activities
Cash flows from
investing activities
Cash flows from
financing activities
Cash and cash
equivalents
at end of year
FY ended September 2009
Million yen
1,468
Million yen
(1,360)
Million yen
(632)
Million yen
5,512
FY ended September 2008
1,632
(1,572)
(733)
6,070

2. Dividend Status

Dividend per share
(Base date)
End of first
quarter
End of
second quarter
End of
third
quarter
End of FY
Total
Total cash
dividends
(annual)
Dividend
payout ratio
(consolidated)

Dividend on
equity ratio
(consolidated)

FY ended September 2008
Yen

–
Yen

133.00
Yen

–
Yen

133.00
Yen

266.00
Million yen

219
%

26.5
%

1.9
FY ended September 2009

– 167.00 – 167.00
334.00 293 27.7 2.2
FY ending September 2010
(Estimated)
– 190.00 – 190.00
380.00 – 27.8 –

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3. Estimation of Business Results for the Fiscal Year Ending September 2010 (October 1, 2009 through September 30, 2010)
(Percentages presented refer to changes compared with the previous full-year and interim period results, respectively)

Net sales
Operating income
Ordinary profits
Net income
Net income
per share
Six months ending March 2010
Million yen

15,000
%

5.5
Million yen

1,350
%

0.3
Million yen

1,100
%

(14.7)
Million yen
500
%

(19.2)
Yen

568.86
FY ending September 2010
34,000
18.1
3,000
19.3
2,600
8.3
1,200
13.2
1,365.27

4. Other
(1)

Changes in major subsidiaries during the FY (Change in specific subsidiaries as a result of a change in the scope of consolidation): No

New:
-
Eliminated:
-
(2)

Changes in accounting principles, procedures or reporting methods used in preparation of financial statements (changes in important
items concerning preparation of financial statements)

(i) Changes accompanying revision of accounting standards, etc.: Yes

(ii) Changes other than (i) above: None Note: For details, please refer to “Significant Matters that Serve as the Basis for Preparation of Consolidated Financial Statements” on

page
23.
(3) Total number of outstanding shares (common stock)

(i) Total number of outstanding shares at the end of the FY (including treasury stock)

FY ended September 2009: 894,957 shares, FY ended September 2008: 894,957 shares

(ii) Total treasury stock at the end of the FY

FY ended September 2009: 16,013 shares, FY ended September 2008: 1,002 shares
Note: For details on the basis for calculation of net income per share (consolidated), please refer to “Per Share Information” on page
26.
(Reference) Summary of Non-Consolidated Financial Statements 1. Results of FY 2009 (October 1, 2008 through September 30, 2009) (1) Non-consolidated financial results
(Amounts less than one million yen are omitted)
(% indicates rate of gain or loss compared with the previous FY)

Net sales
Operating income
Ordinary profits
Net income
FY ended September 2009
Million yen
14,301

%
9.6

Million yen
642

%
(48.7)

Million yen
585

%
(57.0)

Million yen
292

%
(60.3)

FY ended September 2008
13,048
14.3
1,251
7.4
1,360
16.8
735
37.7

Net income per share
Diluted net income
per share
FY ended September 2009
Yen
332.30

Yen
–

FY ended September 2008
890.50
–
(2) Non-consolidated financial position
(Amounts less than one million yen are omitted)

Total assets
Net assets
Equity ratio
Equity per share
September 2009
Million yen
16,855
Million yen
11,710
%
69.5
Yen
13,322.96
September 2008
16,435
12,063
73.4
13,494.39
Reference: Shareholders’ equity: September 2009: 11,710 million yen, September 2008: 12,063 million yen

Note on the proper use of the business forecasts contained in this report, and other disclaimers.
(1)

Earnings forecasts and other forward-looking statements contained in this report are based on information currently available to the Company and certain assumptions that the Company has judged to be reasonable. Actual results may vary significantly from forecasts due to a variety of factors. For assumptions underpinning earnings forecasts and notes on the use of earnings forecasts, see page 4-5, “operating results forecast for the fiscal year ending September 30, 2010”

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1. Business Results and Financial Position (1) Business Results
i. Summary of business results for the fiscal year under review
In the fiscal year ended September 30, 2009, the Japanese economy remained in a downturn triggered by the global financial and economic crisis, with any recovery likely to be protracted. In the pharmaceutical industry, against a background of continued government policy to curb medical expenditures and the imminent expiry of patents on certain major pharmaceutical products, pharmaceuticals companies adapted their product development activities to the changing operating environment by tightening their focus on priority products. Pharmaceuticals companies also moved to strengthen their new-drug development capabilities, through acquisitions of bio-ventures and reinforcement of global development systems. Meanwhile, the CRO (drug development support) industry and the SMO (site management organization) industry—in which the CMIC Group operates—maintained a moderate rate of market growth. This was underpinned by such factors as shortened drug development cycles and increasing use of outsourcing as a means of enhancing efficiency.
In this environment, the CMIC Group pursued its unique business model as a Pharmaceutical Value Creator (PVC) contributing to
the enhancement of pharmaceuticals companies’ added value. In the Group’s five business segments comprising the CRO business, the contract manufacturing organization (CMO) business, the contract sales organization (CSO) business, the Healthcare business and Other business, the Group comprehensively supported pharmaceuticals companies’ value chain, from development and manufacturing to sales and marketing.
In the fiscal year under review, the CMIC Group steadily carried out new-drug development support services related to project
orders received from clients in Japan and overseas. In addition, to further develop its PVC business model, the Group implemented a range of strategies designed to bolster the profitability and operational capabilities of each of its businesses. Significant moves during the fiscal year under review included the acquisition of SMO service provider Medical Trials, Inc., and the acquisition of a large pharmaceutical formulations manufacturing plant in Shizuoka, Japan.
As a result, on a consolidated basis, business results for the fiscal year ended September 30, 2009, were as follows. Net sales
increased 11.7% compared with the previous fiscal year, to ¥28,784 million, operating income rose 10.5%, to ¥2,514 million, ordinary profits grew 9.7%, to ¥2,400 million, and net income increased 27.7%, to ¥1,059 million.
From the fiscal year under review, classifications for consolidated business segments have been changed. Consequently, results
for the previous fiscal year have been restated in line with the new segment classifications for comparison purposes. Information relating to comparisons with the corresponding period of the previous fiscal year is included for reference purposes.

ii. Summary of business results by business segment
Increase/decrease percentages are in comparison with the previous fiscal year.
CRO Business
Sales

¥16,806 million (3.3% increase)
Operating income
¥1,945 million (16.0% decrease)

The CRO business principally comprises services provided to pharmaceuticals companies related to support for drug development.
Sales from monitoring services decreased slightly compared with the previous fiscal year. Although the Group was involved in the
ongoing implementation of large-scale, global clinical trials, which were launched in the previous fiscal year; saw the continuation of existing projects; and won new projects, certain clients delayed the start of projects and reduced the number of products under development, leading to an overall decline in monitoring services sales.
In data management services, sales were in line with the level achieved in the previous fiscal year. Although overall there were few
projects contributing to sales in the fiscal year under review, electronic data capture (EDC)-related sales increased and services related to the provision of drug safety information also recorded steady sales growth.
In pre-clinical work, the Institute of Applied Medicine, Inc., implemented measures to enhance the quality of its testing, such as
carrying out investment in testing equipment and IT infrastructure. The Institute of Applied Medicine achieved an increase in sales compared with the previous fiscal year by winning new customers and gaining increased orders and larger orders from existing customers.
In pharmaceutical affairs consulting services, sales grew significantly owing to such factors as the winning of new project orders in
the healthcare field.
As a result, sales by the CRO business increased ¥529 million, or 3.3%, to ¥16,806 million. Operating income for the segment
decreased ¥369 million, or 16.0%, to ¥1,945 million. This fall in operating income was attributable to such factors as a decline in the capacity utilization ratio in data management services and certain clients delaying the start of projects in monitoring services. CMO Business
Sales

¥2,762 million (12.5% increase)
Operating loss
¥59 million (previous fiscal year: operating loss of ¥62 million)
The CMO business principally comprises services provided to pharmaceuticals companies related to support for drug manufacturing. CMIC SS CMO Co., Ltd., and CMIC CMO Korea Co., Ltd., undertake contract manufacturing of ethical drugs, over-the-counter (OTC)

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drugs and other products. CMIC-VPS Corporation of the United States manufactures ethical drugs under contract. In the fiscal year under review, CMIC-VPS Corporation commenced a large contract for the manufacture of ethical drugs, leading to an increase in sales. In the second year since CMIC-VPS Corporation was included in the scope of consolidation, the Company achieved an operating income. However, owing to an increase in head office personnel aimed at strengthening CMO business infrastructure in Japan, the CMO business as a whole posted an operating loss similar to the previous fiscal year. As a result, sales by the CMO business increased ¥307 million, or 12.5%, to ¥2,762 million, and operating loss amounted to ¥59 million, compared with an operating loss of ¥62 million in the previous fiscal year. CSO Business
Sales

¥1,962 million (3.2% increase)
Operating income
¥22 million (66.4% increase)

The CSO business principally comprises services provided to pharmaceuticals companies related to support for drug sales and marketing. In the fiscal year under review, sales at MDS Co., Ltd., declined owing to the impact of cost cutting by clients. MDS mainly carries out medical communication services (planning and production of promotional materials). However, steady growth in medical representative (MR) dispatch services conducted by CMIC MPSS Co., Ltd., led to an increase in sales for the CSO business overall. Consequently, sales in this segment increased ¥60 million, or 3.2%, to ¥1,962 million, and operating income grew ¥8 million, or 66.4%, to ¥22 million. Healthcare Business
Sales

¥6,580 million (52.0% increase)
Operating income
¥908 million (251.4% increase)
The Healthcare business comprises medical services provided to medical institutions and pharmaceuticals companies (for clinical trials, etc.), and services to support health maintenance and enhancement provided to patients and consumers. In the fiscal year under review, sales grew significantly owing to the addition of full-year operating results from Site Support Institute Co., Ltd. (SSI), which was converted into a consolidated subsidiary in April 2008. SSI completed the integration of its operations with CMIC-CRC Co., Ltd., at the start of the fiscal year under review, and in June 2009 SSI integrated its operations with Medical Trials, Inc., which it acquired with the aim of reinforcing SSI’s network of medical institutions in the Kanto region. Furthermore, through aggressive business expansion, including the opening of new sales offices, SSI steadily strengthened its business infrastructure. Sales in the healthcare information service operated by Healthclick Co., Ltd., declined as falling sales in the Company’s existing operations were not offset by new orders. As a result, sales by the Healthcare business increased ¥2,251 million, or 52.0%, to ¥6,580 million, and operating income grew ¥650 million, or 251.4%, to ¥908 million. Other Business
Sales

¥1,094 million (7.1% decrease)
Operating loss
¥313 million (previous fiscal year: operating loss of ¥249 million)

Other business mainly comprises new businesses and R&D-related services. In the fiscal year under review, sales increased at new businesses driven by the growth of such businesses. The Company also reinforced its R&D activities and the sales infrastructure of its overseas subsidiaries. Specifically, the Company carried out development work on a diagnostic drug and commenced preparations for the clinical development in Japan for Normosang®, a drug not yet approved in Japan for the treatment of the rare condition acute porphyria. Consequently, sales by the Other business segment declined ¥84 million, or 7.1%, to ¥1,094 million, and operating loss amounted to ¥313 million compared with an operating loss of ¥249 million in the previous fiscal year. The segment sales and operating income (loss) presented above include internal Group transactions. Total consolidated results excluding internal Group transactions were net sales of ¥28,784 million (up 11.7% compared with the previous fiscal year), operating income of ¥2,514 million (up 10.5%), ordinary profits of ¥2,400 million (up 9.7%), and net income of ¥1,059 million (up 27.7%).
iii. Consolidated operating results forecast for the fiscal year ending September 30, 2010
In the pharmaceutical industry, harsh business conditions are expected to persist as the government continues its policy of curbing medical expenditures and patents relating to a number of major products are due to expire in the near future. Against this background, we anticipate an increasingly severe environment for winning orders as pharmaceuticals companies focus their development resources on more tightly focused ranges of products, the average size of development projects becomes smaller and competition intensifies owing to the growth of competitors. Nevertheless, we expect the overall level of R&D expenditures by the pharmaceutical industry to continue growing at a modest pace and anticipate that the use of outsourcing and divestiture of manufacturing operations (fabless model) as strategies to speed up—and bolster the efficiency of—development and production will become more prevalent among pharmaceuticals companies.
In light of the conditions outlined above, the Group will work to further reinforce the infrastructure of each of its business segments
and bolster individual service offerings based on its unique PVC business model. The Group will also aim to increase business

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profitability and productivity through expeditious decision-making and rapid implementation made possible by its autonomous business-unit structure.
In our forecasts for the fiscal year ending September 30, 2010, we are projecting a continuation of growth in existing businesses,
and, in the CMO business, expect the operating results from the large manufacturing plant in Shizuoka to contribute to consolidated results from the second half of the fiscal year. Overall operating results forecasts are as follows.
Net sales

¥34,000 million (18.1% increase)
Operating income
¥3,000 million (19.3% increase)
Ordinary profits
¥2,600 million (8.3% increase)
Net income
¥1,200 million (13.2% increase)
(Increase/decrease percentages are in comparison with the previous fiscal year.)
The outlook for each business segment for the fiscal year ending September 30, 2010, is as follows. CRO Business
Sales
¥17,200 million (2.3% increase)
In monitoring services, we are projecting a continuation of brisk new-drug clinical trials and post-marketing clinical trials and surveillance by pharmaceuticals companies. Based on this outlook, we are aiming to bolster our monitor numbers to enhance the service speed of our clinical trial support and increase productivity by pursuing synergies with the SMO business. We will also work to steadily carry out global clinical trial projects, such as Asian studies.
In data management services, we will work to increase operational productivity and strive to bolster capabilities for winning new
contracts by proposing the use of EDC solutions for global clinical trials. We also plan to continue promoting eClinical Trials (clinical data digitization) through the introduction of such technologies as electronic Patient-Reported Outcome (ePRO).In pre-clinical work, we will aim to expand sales of quality assurance services by working to win larger projects and new domestic and overseas-based clients. We will also work to expand orders by winning increased orders relating to biotechnology-based drugs and winning orders for pharmaceutical analysis clinical trials. In pharmacokinetics services, we will work to expand orders from domestic and overseas-based generic drug manufacturers through direct sales activities and by utilizing marketing synergies within the Group. In this area we will also strive to win orders for drug concentration tests on biological samples, which are conducted as part of new-drug clinical trials.
In pharmaceutical affairs consulting services, we will work to reinforce our capabilities for undertaking comprehensive consulting
projects on behalf of overseas pharmaceuticals companies and medical manufacturers that do not have their own presence in Japan. Such projects may encompass all aspects from feasibility studies to development, approval applications and marketing. In overseas operations, in the area of support services for global clinical trials, including Asian studies, we will steadily implement existing projects and strive to strengthen our capabilities for winning new contracts. CMO Business
Sales
¥7,000 million (153.4% increase)
In the CMO business, while working to manufacture high-quality products with a high level of production efficiency, we will aim to win new contracts. At the large-scale pharmaceutical formulations manufacturing plant in Shizuoka that we are acquiring from the DAIICHI SANKYO Group, we will commence contract manufacturing operations for the DAIICHI SANKYO Group and strengthen sales activities aimed at winning new contracts from other pharmaceuticals companies. CSO Business
Sales
¥2,300 million (17.2% increase)
In the medical communication services business, we anticipate a continuation of cost-cutting measures by clients. While working to reinforce our sales system we will strive to develop relationships with existing clients, win larger project orders and win new contracts. In the dispatch of MR, we are focusing on increasing MR numbers, winning new contracts and expanding our lineup of services to increase differentiation from competitors and thereby bolster operating results. Healthcare Business
Sales
¥6,900 million (4.9% increase)
In the SMO business, we are working to strengthen our competitive capabilities for winning new orders by increasing the number of medical institutions with whom we collaborate. In healthcare information services, we are striving to improve our cost structure through more tightly focused operations. Other Business
Sales
¥1,100 million (0.5% increase)