Hello, everyone. This is Betty of Benefit Schedule. Thank you very much for participating in Terumo's Earnings Calls for the Second Quarter of the Fiscal Year ending March 31st, 2025. Thank you. So we are going to start with the financial result overview by CFO Hagimoto. Then, followed by the President, CEO Samejima, is going to explain the innovation strategy looking at Beyond GS26. Then we are going to have a question and answer. In total, we are going to spend the next 60 minutes. This webinar, we are utilizing simultaneous interpretation function in Zoom, so you can ask questions either in Japanese or English. So please utilize the language button as needed. Then only the Japanese presentation will be shared on the screen. For the English material, you can check from our website.
So if you have any issues for the streaming, we are going to inform you via email, and we'll try to tell you in advance that the presentation we are going to do now is based on the current forecast, and those are the forecasts we probably will share, and this has risks as well as uncertainty, so please, we would like you to understand that there are some different results compared against the current forecast. Now, Hagimoto is going to explain the financial results. Please, Hagimoto-san.
Yes. Thank you very much for participating in our earnings calls today. I'm CFO. I'm Hagimoto. I will give an overview of the financial results for the first half of the fiscal year ending March 31st, 2025. Here are the highlights of this financial statement.
In the first half of the year, we were able to achieve record half-year highs in all areas: net sales, operating income, adjusted operating income, and net income. Revenue growth was 15% against the previous year as a result of continued demand in all companies and the contribution of foreign exchange efforts. Profit grew faster than sales growth due in part to ongoing cost control efforts. Free cash flow has also been added to the disclosure in this report, and it too has reached a record half-year high. Taking into account the strong performance in the first half of the year, we have also revised our full-year forecast upward. As a result, we expect to achieve record highs in sales and profit, and we believe that we are making steady progress toward achieving the financial targets of GS26. Next slide, please. These are our P&L results.
All companies saw double-digit revenue growth, which reached a record high of JPY 508.7 billion . In addition to continued demand amid a generally favorable business environment, the effect of the pricing measures also contributed. More details will be provided later in the region and company pages. Operating income and adjusted operating income also grew significantly faster than sales growth, reaching record highs of JPY 87.7 billion and JPY 104.0 billion , respectively. This was due to improved profit margins achieved through appropriate cost control relative to sales growth. We will continue to closely monitor changes in the macro environment, such as increased raw material prices and transportation costs, as we recognize that the situation remains unpredictable. Next slide, please. This is an analysis of changes in profit in the second quarter compared to the same period of the previous year.
First, increased gross profit from higher sales was driven by TIS and blood center business. The gross margin effect benefited from the effects of easing inflation and cost reduction measures such as streamlining production. Turning to price, the effects of revised pricing measures, which were expanded in the previous fiscal year, is evident. The price revision was implemented in Japan in the second half of last year and has contributed to the increase in profit up to the first half of this fiscal year. The increased SG&A and R&D expenses are due to business expansion and are generally as planned. Foreign exchange effects were JPY +2.2 billion for flow and JPY +3.0 billion for stock. Next slide, please. The following is an analysis of changes in profit for the first half of the fiscal year. Overall, the increase in sales was largely due to continued demand.
The trend is almost the same, as I explained earlier, as a factor influencing Q2. But the cardiovascular company, especially TIS, has been making a larger contribution to sales. Foreign exchange effects consisted of JPY +6.0 billion in flow and JPY +5.5 billion in stock. Next slide, please. This shows revenue by region. Steady progress is being made in all regions, particularly in the U.S. and Europe. In the U.S., all companies posted double-digit growth, even on the local currency basis, with the largest growth rate of all regions. In cardiovascular, TIS, which had been experiencing supply issues with some products in the same period of the previous year, saw a recovery in sales, and neuro sales were strong. In blood and cell technologies, growth was driven by the blood center business. In Japan, Medical Care Solutions grew substantially.
This was due to the effect of pricing measures implemented in Hospital Care Solutions and solid progress in Pharmaceutical Solutions. In Europe, cardiovascular grew by double digits on a local currency basis. At TMCS, Pharmaceutical Solutions performed well, and in Blood and Cell Technologies, Therapeutic Apheresis performed well. In China, TIS sales declined due to the effects of centralized purchasing, but this was offset by strong growth in Europe. In emerging markets such as Asia and the Middle East, the blood center business, which performed well in the same period of the previous year, saw a decline in sales, while cardiovascular sales were driven by cardiology and Medical Care Solutions by double-digit growth in Pharmaceutical Solutions, even on a local currency basis. Next slide, please. I will now review our business performance by company. First is the Cardiovascular Company.
Sales revenue grew by 8% on a local currency basis and was strong globally, especially in Europe and the U.S. In terms of growth by division, Neurovascular and Vascular led the way. Neurovascular was driven by continued strong demand, especially in the U.S. and China, which saw double-digit growth. Profits increased significantly due to higher revenues, the effects of profit improvement measures, and steady progress in controlling SG&A expenses. Next slide, please. This is TMCS, Medical Care Solutions. Revenue was driven by Hospital Care Solutions and Pharmaceutical Solutions. In hospital care, the effects of pricing measures and strong sales of infusion sets contributed. The price revision in Japan implemented last year, together with increased demand in the U.S., were the main contributing factors. In pharmaceuticals, the CDMO business is making good progress. Overseas, PLAJEX performed well in Europe, the U.S., and Asia.
These increases in sales and the effects of pricing measures resulted in increased income. Next slide, please. This is TBCT, Terumo Blood and Cell Technologies. Revenue was driven by the blood center business and Therapeutic Apheresis. In the blood center business, sales of whole blood collection systems and blood component collection-related products were strong in Europe and the U.S. Rika is also developing well. Therapeutic Apheresis sales were strong, mainly in the U.S. and Europe, due to growing demand for cell collection for cell and gene therapies. Profits were boosted by higher sales in core business and improved profitability accompanying the rollout of Rika. Next slide, please. The above is an explanation of sales and revenues. As I mentioned at the beginning of this report, we also intend to strengthen our cash flow management from this fiscal year. This is our free cash flow.
This increased by JPY 44.6 billion from the same period last year, also reaching a record half-year high. In addition to the increase in profits, operating cash flows have increased significantly despite the increased scale of business due to successful working capital management and timing. There was also a reduction in capital investment due to differences in the timing compared to the previous year, which contributed to improved free cash flow. Next slide, please. I'd now like to look at forecast earnings. We have revised our full-year forecast upwards to reflect the strong performance seen in the first half of the year. As a result, we expected to see record highs in sales and profits. Each company is making upward revisions to both sales and profits. Next slide, please.
We have revised our adjusted operating income forecast upward from JPY 185 billion at the beginning of the year to JPY 200 billion . This revision takes into account the favorable foreign exchange rate compared to that assumed at the start of the year, as well as steady business operations and business expansion. The value of adjustment is being increased by JPY 8.0 billion . This was a provision for restructuring expenses to improve efficiency in the cardiovascular company, but there are still ongoing aspects of subsequent reforms. So I would like to refrain from explaining further details at this time. We must continue to monitor changes in the business environment closely and promptly consider corrective measures if required.
Nonetheless, we recognize that business fundamentals have been stable since the first quarter, and we will continue management efforts to reach our financial target of 19.8% adjusted operating income this year, as well as the target set out in GS26. That's all from me. Thank you for your time.
[Foreing language]. Thank you very much. Next, we'll hear from the CEO, Mr. Samejima.
Hello, thank you very much for coming. This is Samejima, Terumo's CEO. At the FY 2023 Q4 financial results meeting on May 14th, we talked about our big vision, the future of Terumo, our vision and the path to it. Today, I would like to break this down a bit more and focus on one of its key components, our innovation strategy. Terumo's ultimate goal is to provide innovative and comprehensive solutions to medical issues. I believe innovation to be essential to achieving this goal.
All Terumo associates value the pursuit of innovation, and this has formed the foundation of our efforts to solve medical issues to date. However, in order to rapidly respond to increasingly diverse and complex medical issues and needs, we must further energize innovation. Strong will and commitment from management is essential to achieving this. This includes organizational reforms geared toward creating innovation, company culture, and leadership in the creation and promotion of innovation strategies. This year, we have created a new position, the Director of Innovation, and this is an expression of my commitment to innovation. All related departments, including R&D, intellectual property, clinical development, promotion, medical training facilities, and venture investment, are now overseen by Osada, our Director of Innovation. This will make it possible to encourage innovation in a more organic way.
In parallel with promotion of our mid-to-long-term innovation strategy, our current five-year management strategy, GS26, defines sales growth drivers up to FY 2026. This year marks the midpoint of GS26. As you can see, all Terumo's companies are making steady progress toward achieving their goals. I'm proud that this has been the result of our accumulated technological capabilities and research and development, but this is not the end. With its solid management foundation and robust technology, Terumo will achieve even greater results by linking its innovation and management strategies. We are also emphasizing research and development in line with management strategies and the optimal allocation of valuable management resources. For example, we are currently running several hundred development teams globally across a wide range of domains, development timelines, project sizes, and sales areas.
During this fiscal year, we will visualize the entire R&D picture, construct an optimal portfolio, and expand our pipeline for top-line growth. In terms of the way we think about innovation, Terumo no longer has barriers such as that between internal and external development. We will combine internal development with external partnerships and acquisitions to leverage all available resources to nurture innovation. To us, innovation not only means developing devices in existing markets, but also creating new markets, value, and solutions with new ideas. This is our main pipeline, but we will continue to adopt flexible and bold ideas to determine the potential of new technologies and take on challenges in adjacent fields and areas where synergies can be expected. As one example of our taking on challenge of new fields, I would like to introduce you to our innovation with venous products.
Terumo is undertaking development to make a full-scale entry into the venous intervention. Venous thromboembolism is a serious life-threatening disease and is the third leading cause of cardiovascular disease-related death in the U.S. , the largest market for this product. With a wide range of risk factors, this disease has a large potential patient population, and the number of patients is increasing at the rate of approximately 10% per year. Looking at the market for venous thromboembolism interventions, it is easy to see that the market is growing steadily as populations age and lifestyle deteriorate. Our values, which are also at the core of our business strategy in the venous field, are unwavering. We will provide end-to-end solutions from access to closure to achieve minimally invasive Vascular treatment and improve patients' quality of life.
In the access field, we have already gained a high market share with our existing products and will use this as a springboard to launch innovative new therapeutic device products for thrombectomy and stents. Arteries and veins actually differ considerably in their characteristics. For example, vessel elasticity, size, and hardness of clots, and also the size of the device. There remain many unmet needs in the venous field, which is a late-comer market compared to the arterial field. Terumo will meet these unmet needs not by developing from scratch, but instead by developing technologies originally developed for arteries, and we believe this is our strength. Even in the access field, we have many people saying, "We want a dedicated venous product.
We still need it." I believe that this is an unmet need that can only be met by Terumo, which already has unrivaled product strength in the access market, and we are in the process of developing a product that will make people say, "Of course, that's a Terumo product." Here are a few specific examples of venous R&D that is already underway. Each of the products for arteries listed on the left has its own base technology. By evolving these, we will fulfill unmet needs specific to venous applications and in so doing, create innovative vein-specific devices. Unmet needs are met by Terumo's renowned coating, tube forming, and metal fabrication technologies. These will enhance features such as transit flexibility, dilation, adherence, and aspiration efficiency, which are essential for venous treatments.
Next are our sales forecasts for our venous pipeline and venous business, focusing on therapeutic devices that have a large market size and high growth potential. Taking into consideration the short to mid-to-long-term timeframe, we are promoting development spanning access to closure. Although I have introduced our internal development for venous, we are simultaneously using external investment to strengthen innovation for venous treatments. In August of this year, Terumo created a corporate venture capital firm, or CVC, called Terumo Ventures. The presence of startups in the medical device industry cannot be overlooked. In the past, we have made venture investments through participation in funds managed by venture capital firms. Now, in answer to the question of what changes with CVC, the answer is ownership. With the launch of our CVC, we have also clarified its role to give it greater independence.
The role of Terumo's CVC is to stimulate innovation through venture investment. The scale of investment is expected to be $75 million over the next five years. With a sense of mission, Terumo Ventures will accelerate the speed at which we acquire new technologies and build our M&A pipeline. We've already received many inquiries from many venture companies. The pie chart on the left shows a breakdown by field of more than 500 deals in the venture investment market over the past six months. From such a diverse range of projects, Terumo is narrowing down its investment targets and carefully selecting areas consistent with its business strategy. The table on the right shows our venture investment portfolio. Arrows indicate progression of growth stage since our initial investment. We have already exited some investments and recovered our investment.
Others have been terminated as external investments and transferred to internal development. We are creating an optimal portfolio that is well-balanced and unbiased in terms of area and growth stage. Finally, I would like to give an example of Terumo's thinking on the use of digital technology, taking external investment in the field of digital diagnostics at the bottom of the portfolio as an example. One of the optimal healthcare solutions offered by Terumo is minimally invasive Vascular treatment. With an eye to possibilities beyond that, we are focusing on the field of Vascular diagnostics, utilizing AI and other digital technologies. While diagnostic imaging usually involves visual interpretation, analysis of diagnostic images using digital technology enables objective quantification of risk, something that has historically been difficult to achieve. This will also allow for more accurate determination of treatment urgency and necessity.
When I think about just what an optimal healthcare solution is, I came to the conclusion or realization that if advanced diagnostic technology can show that there's no need for treatment, isn't that the most minimally invasive healthcare solution? However, the number of acutely ill patients requiring treatment continues to increase due to global population growth, aging, and deteriorating lifestyles, and we will continue to deliver minimally invasive Vascular treatment that is less burdensome. Providing both is one form of Terumo's vision for optimal healthcare solutions utilizing digital technology. The pursuit of innovation has been and will continue to be one of Terumo's core values, and taking on the challenge of entering new fields such as venous treatment is also an expression of this innovative mindset. What Terumo must do for healthcare and patients around the world is to provide innovative healthcare solutions.
There must be something that only we can do. We will provide new value in healthcare using bold and flexible ideas that are close to patients and medical settings, and deliver a great deal of wow, reaching new frontiers for healthcare through innovation. I am very much excited about Terumo's potential. Thank you very much for your time.
Now, we are going to start question-and-answer sessions. We have the hybrid model. So please raise your hand if you have questions, if you are in the venue, and if you are participating through the Zoom, please click the hand-raising button, and if you are going to cancel it, please click that cancel button again, and in order to have many people to be able to ask questions, please have only two questions per person.
So we have Hagimoto, Samejima, Miyoshi, and Osada, who is an innovation director, also responding to the questions today.
I'm Kotani from Mizuho Securities. Thank you very much for the presentation. I have two questions. The first question is about the slide 13 for the adjusted operating income approach revision. Against the forecast, you are. This is incremental numbers. So that means the total gross margin, I think it was JPY 7 billion in the beginning. So now you added JPY 4 billion, so JPY 1.1 billion at this moment, JPY 11 billion at this moment. And the drug price changes are still remaining the same.
Yes, yes, your understanding is correct. If that is the case, the price impact of the price increase is already finished for the first half. In the second half, you already increased the price.
So, you are not going to expect the additional other impact for the second half. And I feel that the raw material price increase and the transportation cost increase will be appearing for the second half, so could you explain that? This is the first question.
Yes, thank you very much for the question. As we asked now for pricing for the second half, we actually increased the price the second half in the last year. So that impact, we do not have significant impact for this fiscal year. However, for the VBP impact, it continued for the second half. Therefore, overall, the optimum price is what we would like the customers to understand. So we are going to have the price increase globally in the pharma areas. But our assumption, we do not see that as numbers.
The second one about the cost and the cost ratio, we will continue to work on improvement for the productivity, such as in Vietnam or Costa Rica, where we are going to transfer some of the manufacturing site. So that's the area we can expect to have the improvement for the cost. So other than the price and the raw material cost, we try to deliver impact.
What you mentioned, the CVC. So CVC's impact is also reflected here. So JPY 3 billion, that's what we expected for this fiscal year. But is it even higher?
Yes, as you pointed out, at this moment, around JPY 3 billion. It's what we assumed from the beginning of this fiscal year. However, what is increasing, how it is difficult for us to identify.
But for what we are working on, VC 2, which includes transferring the production site, it is as planned. It's slightly higher, but it is almost as planned.
Okay, thank you very much. I have a question to Samejima for the Beyond GS26. Thank you very much for sharing this slide 6, because last time for the GS26, you did not have anything what you shared for the slide 6. I was trying to think what you meant, but it really helped me to understand it. I have two questions, actually, but I have to summarize in one question. So for Beyond GS26, which one is the most exciting product? What are you really excited about? And for the venous device, I do not have any objections, but it's slightly different from artery. However, you can utilize the expertise in the artery.
So, I can understand you added the venous, but Penumbra and Inari, there are so many companies. They are already playing in the venous market. So your companies, you're going to have the competitive advantage for all the products in this portfolio. Is my understanding correct? Or you are going to have the entire portfolio or lineup for that portfolio. That's why you are able to explore the market. So these are the two points. So Beyond GS26, which is the most exciting product for you, and also the strategy for the veins or venous?
Yes. So I'll try to respond first. And if there's any additional comments from Osada, he's also going to add the comments. Yes, for Beyond 26, we thought about the scale. And apheresis, it's a very major area for the drugs in Rika. It's going to expand the customer base.
In this area, as a platform, how much we can achieve? Yes, we have counterparts for this area, so I cannot say anything definitively. But considering the growth driver, those are the ones we are really focusing on.
Yes, I'm Osada speaking. And in addition to that, the biggest impact is also in the GS26 area. So Terumo Neuro and Terumo Aortic, those are the new products those two companies are going to launch. So that sales contribution is quite significant. For venous, as you mentioned, in addition to Inari, there are other companies who also are playing in this market. And one product and two products are not the only products we are going to play as a part of our strategy. We are going to have the extensive pipeline for the DVT and PE. Those are two markets we will try to enter.
In addition to that, for a few years ago, we've been developing on that product. And so one of the factors we built up the confidence is that we are very strong in access products for a long time. And that is a need we still see in the market. So the access product for the veins is what we are going to add so that we can have the full lineup to enter that market. Access and therapeutic devices could be combined in an effective manner. So that is a solution we can provide. So in that way, under our capabilities and expertise we nurtured in the artery could be utilized. So that's the confidence we have at this moment. So entering that market, we are slightly behind against the competitors, but we are still confident that we can win. So we are preparing for the final preparation.
Launch timing, it will be in GS26 maybe.
Well, we cannot say in a specific date.
Okay, thank you very much.
[Foreign language]. Thank you very much.
Yes, this is Tokumoto from Nikko Securities. Do you hear me?
Yes, we hear you. Hello. [Foreign language]. Y es, hello. [Foreign language]. So on page 13 of the financial results, the cardiovascular business-related details, you said that you would refrain from explaining that. So maybe if you could add some information as to what type of one this is. Is it one of cost or when you have production operation improvement, it's more of a continuous change so that you will have this type of topic that would keep coming up for a better profit or revenue. So Hagimoto, I think, will answer the question.
So of course, regarding the actual details, I would like to refrain from mentioning that. But regarding whether this is one-off, based on what we understand, we actually allocated for reserves. So in terms of what kind of structural reforms we have from now on, these items, et cetera, may change slightly. But it's not that this will continue forever. So based on this provisional accrual, what level of positives or minuses will we see? That's the type of viewpoint I would like to have. And this was not in the plan at the beginning of this fiscal year, correct?
Correct. We did not book this originally. Yes.
My second question regarding the venous discussion, I very much see it as a new challenge for you. So there's this artery access, and then you would be able to transfer some of the technology, and that's understandable.
Now, when you are moving on with the internal development, I wonder what kind of resources you lack so that you would like to acquire. You talked about you will work on internally and externally and may have necessary acquisition. So if you look at the venous business and what you are lacking, what are the type of issues or challenges do you see?
Thank you very much for your question. Osada-san, can you answer?
Yes. The area that we are going into, what's missing or lacking, we really don't have that as an item, but I would say speed, because it's mostly internally developed. Rather than just internally developing and waiting until it's done, even if it's a competing technology, we may take something in, including startup. And by doing so, if you can get speed as a trade-off, then we even accept the idea of utilizing external resources.
So we are also looking at external resources, and it's possible that an externally developed product replaces internally developed products, and we would like to speed up our entire process. So I don't believe product-wise we are lacking something, but this is a late-coming thing. So I believe we still have room to improve our speed.
Okay, thank you very much.
Thank you very much. So now, UBS Securities, Yoshihara-san, please.
I'm Yoshihara from UBS Securities. Thank you very much. Yes, Yoshihara-san, thank you.
First question is about GP changes, gross profit change. And you already explained, but compared with the first quarter and second quarter, it seems like you improved significantly GP for the second quarter. It's close to 55%, so you have a very good GP. Could you explain the factor for this?
Maybe the unachieved on the inventory may be having the positive impact for the second quarter, but if there are any other factors, could you explain?
Yes, Yoshihara-san, thank you very much.
So for GP improvement in the second quarter, could you?
Yes. Thank you very much for the question. As for GP, overall, the product mix has been improved. So that is one of the main factors. Compared with first quarter, TIS business, which has the quite high GP ratio business, and it's improving. So that's why the entire overall ratio is improved. And additional question for that. For the second half and on, should we assume this situation continues? Or when we look at the second quarter, I think the GP for these three months may be too good.
Yes, so for the third quarter and fourth quarter, as a business fundamentals, we will be able to maintain the strong fundamentals. However, as I mentioned in the beginning, the inflation; it's slightly settled. However, we still have the impact of the inbound freight cost because of the world situation, which is slightly increasing. Therefore, I cannot definitely say that the second quarter situation will be continued. So we are not looking at this in an optimistic manner.
Okay, thank you very much. My second question is about innovation ideas, a concept. If my understanding is right, U.S. big players, medical device players, you are going to compete against them. So if you are successful, you will have the high return. But up to today, we have an intention to avoid the high-risk development, such as the U.S. companies are doing.
But at least in Samejima-san's comment, I think the idea, a mindset has been changing. So depending on the situation, you will launch something that's unprecedented, and you will be the top player in the business. So that is something maybe we can expect for the midterm. Therefore, I would like to hear your innovation definition.
Yes, thank you very much, Yoshihara-san. So as Samejima, it's going to answer. Yes, innovation is a big word. So there are a lot of interpretations for that word. In general, disruptive technology is something everyone assumes. However, maybe user-friendly or more accurate or more precise or more safe. So those incremental values is what we are going to offer, and we believe those are part of innovation. And in the medical field, those are highly evaluated, actually. So through Terumo Ventures, new innovation is what we will seek for.
However, just like before, incremental innovation is what we will place in focus on at the same manner. So we will focus on these two areas. That means including acquisition, you are also thinking about innovation. So maybe continued, you will have completely new areas for your companies. May not be the case you will consider the acquisition. Yes, basically, existing very closely related to the existing business or maybe either enhancing the existing business. Those are the areas we are going to think about the acquisition.
Okay, thank you very much.
Thank you very much, Yoshihara-san.
Thank you very much. From Morgan Stanley MUFG Securities, Hayashi-san, please.
Yes, this is Hayashi. Do you hear me?
Yes, Hayashi-san, hello. We do hear you.
So my first question, this fiscal year's guidance correction, and the second point is innovation and VC.
Going back to the first point, so your net sales guidance has been revised upward, and then you excluded currencies impact, and then the C&V Company number has been corrected. And also TBCT, you also excluded currency impact. So based on the first half's good progress, you then changed the full year numbers, I'm assuming. But in terms of quantitative viewpoint, what product segments' numbers are going up so that you raised the full year numbers up? Would you be able to provide that kind of explanation?
Okay, so let me add some information. You are correct. C&V and TBCT increased ratio have been higher than others. Starting from the first half, VA and neuro areas are progressing quite well. Based on that, we believe that trend will continue, hence the upward revision. And also TBCT-wise, our core business has been very solid in the first half.
So cardiovascular and TBCT became the main ones to drive the top-line revision.
May I ask you about the background of that solid situation?
So for Neuro vascular, and TA, we have more patients or cases coming back in Europe and the States. And also core business-wise, Europe and America, have very blood-related areas business going solid. So those are the drivers.
Thank you very much. My second point, I would like to ask about the solution related to innovation. So you announced the start of CVC back in August. When it comes to this kind of venture investment or operation of CVC, it may require different types of skills or capabilities of your existing employees' capabilities. And I believe that's the type of team that you need to form.
So when it comes to CVC or venture investment, when you manage those things, do you mostly consider moving people from your current pool, or do you hire from an external pool and try to form the team? So I was hoping to ask about that. And also when you form a team, is it mostly Americans? I mean, if you have specific nationality profile, for example, of the team, please provide.
Thank you for the question. Osada-san, please go ahead.
Yes, thank you very much for your question. So this is the as-of-now answer. We are actually forming the team with existing employees. Of course, these are not laypeople. Starting from eight, nine years ago, we've been sending people to venture capital in the States, and they actually work there full-time. So those people actually accumulated experiences.
We actually currently have two members that are working in the venture capital in the States. People with knowledge and insight are now in the CVC team. Unlike regular venture capital, our ultimate goal is to make this into a business. Of course, it should not give financial deficit, but this is not a capital gain. Among these members, we have certain members who have judging eyes for technologies. Of course, we've had successful and not so successful investments, but we have more discerning eyes overall as a team. We have people with financial background. We have people who have actual venture capital experiences, and we now have the technologically discerning people, plus people who used to work on business development in our business department. Although they are internal members, their specific subject matter type of capabilities are quite high.
Okay, thank you very much. That is all.
Thank you very much.
Thank you. Now, Citigroup Securities, Yamaguchi-san, please.
Can you hear me?
Yes, we can hear you.
Thank you very much. Yes, thank you. I'm Yamaguchi from Citigroup. My first question, you already mentioned for Rika rollout. At the last time, 100 centers was explained, but at this moment, how many centers are you planning? And you are going to complete in 2025. So if you have any quantitative follow-up, that's what I'd like to hear. This is the first question.
Okay, so I will answer that then. At this moment, 150 centers are what we reached at rollout at this moment. As we mentioned from the beginning, in FY 2025, from spring to summer, we are going to complete the full rollout, and then we are making very good progress for that plan.
Okay, thank you very much. My second question is about VTE or venous business. In the interventional market, and you have the millions, I cannot read the units of measure, but what is the market size? And I think you had a bar chart for that business, slide 10. And what is the unit of measure? And I think it will be easier to understand if you can explain from the top-down perspective. You have questions about the market, market size, and business size that you expect from your business. For the market size, roughly $80 million. So that's what you can probably expect. And for the expected sales, we cannot disclose the numbers at this moment, but launching these new products and enable us to enter this market with more products. That's what we try to show in this graph.
Yes, you are aiming to achieve the top player in this market as you are going to enter this market. Yes? Osada will give additional comment.
Yes, of course. As I mentioned earlier, for the venous market and the clinical side users are not satisfied with the currently available products. Therefore, we will try to make sure to respond to their needs. That's what we can do. So at the top layer, we are going to enter the venous market.
Okay, thank you very much. That's all from me.
Thank you.
Thank you very much. From Nomura Securities, Mori, please ask your question.
This is Mori from Nomura Securities. Do you hear me?
Yes, we do hear you.
First question. If you compare different quarters, you sometimes see cardiovascular sales going down.
So, July to September, the reason for that decline, of course, there's a currency, I believe, but if there are any other reasons. You're talking about cardiovascular? May I clarify?
Yes. For example, JPY 156 point something billion. And also I see this decline to 984. So, I'm comparing basically April, June, and July, September terms. I interpret that as you're asking the currency one. I mean, except for that currency impact, we are basically growing solidly. Month-wise, 46 something went up, or from 7 to 9, something came down, well, in China, VBP impact was there. I mean, Jan to Sep, that was a VBP impact. So there was the VBP impact, as we also said. But we didn't have that in the latest quarter. So cardiovascular-wise, there was that currency impact and VBP impact, hence the numbers.
If that's the case, rather than thinking about this quarter starting April, you should think about the quarter starting in July and then see the next two quarters. Right. We will not have the primary driver in quarter two.
Okay. My second question for Medical Care in GS26. Diabetes and Alzheimer projects, I think, are somewhat struggling areas. For diabetes in GS26, you are talking about growth, but Dexcom Alliance has ended, and insulin pump is struggling. If that's the case, then how you are going to, or are you going to somehow rework on this diabetes? Samejima-san, as you rightly pointed out, Dexcom CGM Alliance has ended. As for the diabetes business, we are actually re-verifying the diabetes business. We are right in the middle of that. But this is a very important business area.
In Japan, especially, we have a very high presence. We would like to start a revival business. In Japan, the BGM, I think, is kept because of the medical reimbursement benefit. Going towards the future, how many remaining years do you think BGM has to survive? We don't expect a specific number of years, but as you pointed out, we are definitely slowly shifting to CGM. In addition to domestic one, in emerging countries, what type of growth strategy we can draw with BGM? That's also part of our verification. Your competitors working on BGM in emerging countries, they were not very successful. I don't think it's a very easy way. Would you still like to do Medical Care Solutions in emerging countries? That is also part of what we are verifying currently.
Okay. Thank you very much.
Thank you.
Thank you very much. Now, Tomoko Watanabe-san, please.
Yes, I'm Watanabe speaking. And congratulations, Yuki-san. So I have two questions. The first one's related to numbers. I may have overheard, but first, how funding adjusts that operating profit when you compare that with the internal goal? How much higher? How much you exceeded from the internal? Are there anything you can share specifically?
Yes. Hagimoto is going to answer.
Yes, thank you very much. For this one, initially, we assumed AOP as an annual and disclosed number. That was the base we were assuming. So the ratio is almost the same for the first half. So compared with that number, maybe the improvement is that ratio we can read from that number. That means the higher portion of the first half, it's actually nominal.
And then that is also reflected to the second half, excluding the foreign exchange. Yes. For the actual result for the first half, it's the main factors for the upward revision for the second half. For the second half, we expect that this trend will continue. But as I mentioned earlier, we still have the freight cost issues and uncertain VBP directions. Therefore, not exactly on the numbers of the second first half is reflected to the second half.
Okay, thank you very much. For the second question, it's related to Samejima-san's presentation. You had the innovation pipeline expansion drawings in slide 6. I have a conceptual question on this. You explained the venous business today, but there are so many products, several hundreds of projects, and try to visualize and try to improve it. And venous is a very exciting arena, but maybe that's not it. That means Terumo.
Venous is the last one for Terumo. I think you will come up with more areas you are going to enter, and based on that understanding, I have a question. Maybe three months ago, not only the innovative products, but maybe improving the hospital in hospital operations was what Terumo is also thinking. I think that's what you explained in the slide 6 for creating the new areas. I'm not quite sure what this implies in the future. Visualize portfolio for the future. What are the things you are going to stop, and what are the things you are going to keep? And the venous, maybe that could be one of the five that you are going to launch in the future. But actually, venous is a main area as a part of your strategy, so considering the future potential, it's what I would like to understand better.
Okay, thank you very much. Then Samejima-san, then maybe Osada-san give additional comments.
Yes. We have several hundreds of projects ongoing, and we are visualizing all those projects. That's what I explained. We tried to, we are in the process of listing up everything. Maybe we have to think about the priority. Also, we have to think about the allocation of the resources, and we have to select and stop. That's what we are going to work on as a next step. In addition to venous, I cannot say what will be added to venous, but when we think about the Beyond GS26, what are the areas we can find opportunity where we discuss with me and Osada and have an even deeper discussion?
Yes, if I'm going to add, venous is just one of many potentials.
For R&D visualization, enable us to actually, that's been excellent. Now we are reaching JPY 1 trillion. Looking beyond JPY 1 trillion, and the R&D need to contribute. In order to do so, we should focus on something that has a major impact. Even though we are going to invest for R&D, we have the small scale to larger scale. The expenses or the investment for the R&D will be allocated for the major areas, the bigger business in order to achieve it. We are trying to visualize all the R&D projects that are ongoing in the company. Then we are almost completing that review. Therefore, how we are going to invest, where we are going to invest for the R&D will be different. That's what I would like you to understand.
Okay, thank you very much.
Then in the future, I'm looking forward to hear the update in the future, but after your review, then maybe you will come up with the new arena that you are going to enter. So that will probably be presented in the future. That's may I assume that. Is that right?
Yes, you are right.
Okay, thank you very much.
So we are going to update in the future. Yes, thank you very much.
Now, I guess we can get questions from one more person. From JP Morgan Securities, Saito-san.
Thank you very much. This is Saito from JP Morgan Securities. Regarding Rika's profitability is going up, I saw in the presentation. If possible, can you talk about some quantitatives as to actual or outlook? Maybe you can give me specific numbers or specific timing, whatever you could disclose. Saito-san, thank you very much.
So I apologize, but I cannot give you specific numbers. But as we've been saying, as the rollout completes, we will see our shift to more positives. And what we are improving means that we are doing rollouts well so that the disposable is cycling greatly. And that's actually working quite well on our revenue. So if you could see that, that would be good.
Okay, thank you very much. That was my question. And thank you very much.
So it's time to finish the Q&A session. The questions that we could not answer today, please talk to our IR person. With this, I would like to finish the 2025 Q2 financial result explanation meeting. Thank you very much for your participation and have a great day.