Sumitomo Dainippon Pharma Annual Report 2017

The customary allocation of a portion of the Company’s profits to its shareholders in an appropriate manner is one of the Company’s most important management policies.The Company’s basic policy is to make dividend payments twice each year from retained earnings, including an interim dividend, as determined by the Company’s Board of Directors, and a year-end dividend, as determined by the general meeting of shareholders.In addition to placing high importance on distribution of surplus in a manner that reflects the Company’s performance, the Company seeks to make decisions on dividends from a comprehensive perspective, while actively investing in its future growth, ensuring a solid management base, and enhancing its Forecasts for the Year Ending March 31, 2018In Japan, the Company will attempt to maximize sales of TRERIEF®, LONASEN®, and Trulicity®, but it expects net sales to remain flat year-on-year due to the ongoing decline in sales of long-listed drugs. In North America, on the other hand, net sales are expected to increase, owing primarily to a scheduled launch of glycopyrronium bromide (product code: SUN-101) and contributions from the three treatment options for patients with chronic obstructive pulmonary disease (COPD), which were in-licensed last year from Novartis, in addition to sales expansion of LATUDA® and APTIOM®. All things considered, net sales are expected to reach 464.0 billion yen, up by 52.4 billion yen from the previous fiscal year.The Company expects gross profit to advance as net sales increase. Meanwhile, selling, general and administrative expenses are likely to increase due to a new launch in North America and progress in clinical studies of Cynapsus’s apomorphine hydrochloride (product code: APL-130277) and Tolero’s alvocidib, both of which were acquired in the previous fiscal year. As a result, the Company expects operating income of 65.0 billion yen, up by 12.2 billion yen year-on-year, and net income attributable to owners of the parent company of 44.0 billion yen, up by 15.0 billion yen.Allocation of the Company’s ProtsStatus of cash flows-Net cash provided by operating activitiesCash flows provided by operating activities decreased by 27,790 million yen from the previous fiscal year to 21,625 million yen, owing to a major increase in business structure improvement expenses, income taxes, and other payments, although there were factors that contributed to an increase in cash, including a rise in notes and accounts payable, accounts payable-other, and reserves, in addition to an increase in income before income taxes.-Net cash used in investing activitiesCash flows used in investing activities increased by 75,617 million yen from the previous fiscal year to 59,730 million yen, due to the purchase of shares of subsidiaries following the acquisition of Cynapsus (current Sunovion CNS Development Canada ULC) and Tolero, even though there were proceeds from collection of short-term loans receivable and sales of investment securities. -Net cash provided by financing activitiesCash flows provided by financial activities increased by 52,487 million yen from the previous fiscal year to 9,882 million yen, as the Company took out short-term loans for acquisitions while repaying long-term loans payable and redeeming bonds.-Cash and cash equivalentsAfter factoring in the impact of foreign currency translations applied to cash and cash equivalents, the balance of cash and cash equivalents as of March 31, 2017 amounted to 105,604 million yen, a decrease of 29,972 million yen from the end of the previous fiscal year.Note: Foreign currency exchange rates used for the forecasts are: 1 USD = 110 JPY, 1 RMB = 16.5 JPYincrease in retained earnings, despite a decrease in unrealized gains on available-for-sale securities. The shareholders’ equity ratio as of the end of the fiscal year under review was status in order to further increase its corporate value. The Company believes that it is important to allocate profits to its shareholders consistently.In FY2016 (year ended March 31, 2017), the Company achieved a record-high operating income of 50.0 billion yen, owing primarily to expanded sales of LATUDA® , thereby meeting the target for the FY2017 (year ending March, 2018), which was laid out in the 3rd Mid-Term Business Plan(MTBP), one year ahead of schedule.Given the abovementioned basic policy on profit distribution to shareholders and earnings results of the FY2016, the Company paid a year-end dividend of 11 yen per share, which comprises an ordinary dividend of 9 yen and a special dividend of 2 yen, thus making the annual dividend of 20 yen per share.Since the level of operating income is expected to surpass 50.0 billion yen, a target laid out in the 3rd MTBP, for the fiscal year ending March 2018, the Company plans to pay an annual dividend of 20 yen per share for the next term , the same amount as declared for the fiscal year ended March 2017, with an ordinary dividend of 9 yen being paid at the interim and an ordinary dividend of 9 yen and a special dividend of 2 yen being paid at the year end.64Sumitomo Dainippon Pharma Co., Ltd. Annual Report 2017

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