Good evening. This is the CEO, Sato. My remarks will focus on the Alliance business, which is one area of effort in our growth strategy. Why? One, because we have received many questions about what will support Terumo's growth after COVID nineteen.
Two, to this point, the state of the business has been somewhat hidden in the shadow of the cardiac and vascular business. Three, we have high expectations that the alliance business will be a new growth driver going forward. Four, the business's performance has now grown to a size that merits some discussion. Five, it is also a new business model which can be strategically applied to others. That's some of the background for why I will speak about the alliance business.
Next slide, please. First, I will define what the alliance business is within Terumo. In Terumo, the b to b business of supplying medical devices to and manufacturing on consignment for pharmaceutical companies is referred to as the alliance business. Because it is related to providing pharmaceutical companies with core technologies of the general hospital company, delivery products like needles and syringes, the Alliance business belongs to that company. Next slide, please.
This business traces its origins to more than twenty years ago. Previously, Terumo referred to the business as drug and device. In the form of prefilled syringes, this business made it possible to eliminate the filling of syringes in medical settings by instead filling them in the factory and providing the product already filled. The most important aim of doing this was to make health care safer. As demand for drug kits and biopharmaceuticals began to increase around ten years ago, Terumo Technologies began to garner attention not only for safety, but also for the optional added value they provided.
That was the second step. We now see a third step built upon the results of these first two steps. With the diversification of drugs, the technologies that deliver them also need to diversify. This has further strengthened demand for delivery technologies that are customized for specific drugs. In the next mid to long term growth strategy, we intend to further develop diverse delivery technologies and globalize in order to make continuous growth possible.
Next slide, please. This slide shows the Alliance business sales trend from 2016 to now. It has averaged 18% growth over these three years to approach a scale of 23,000,000,000 yen. Currently, the main products for Japan and markets outside Japan still differ. Outside Japan, it is syringes for drug kits, and these are shipped from our Belgium factory in Europe.
The fact is that we have a record of supplying to most of the large pharmaceutical companies outside Japan, and our global market share is number one in this field. In Japan, there are two main models. First, cases where Terumo supplies high quality plastic syringes alone, And second, cases in which we are also consigned to fill drug product into the syringe at a Terumo factory in a so called CDMO arrangement. Today, I will focus on the CDMO arrangement, which is the bigger growth driver of the two. In any event, because we have built capabilities for a continuing business unit, including dedicated sales, development, and production, as opposed to building on separate projects, we are now in a stage where we can expect continuously high growth.
Next slide, please. The business model of the Terumo Alliance business is much different from the traditional CMO or CDMO model in the content of work and value it brings. Normally, in Europe and The US in particular, the pharmaceutical value chain is separating out work processes. For drugs that use a device, there are dedicated filler companies separate from the manufacturer that supplies the medical device. This model prioritizes efficiency by focusing the work in one place to utilize economies of scale.
However, when Terumo takes on a project of this kind, the aim is to increase the added value through drug delivery, so we collaborate with the pharmaceutical company from early in the development process. We provide support for customized combination products from the development stage through approval. This is the unique feature of our business that differs from CMO or CDMO models. The key to being able to do this is development capability, particularly the expertise and experience to match the right container with the drug. This capability is a strength that Terumo has built up over twenty years of doing this work.
Next slide, please. Changing times gave our model momentum. As shown here, in the pharmaceutical world, we are seeing a transition from the era where small molecule drugs were most prominent to one with more large molecule drugs and biopharmaceuticals. This, of course, means that delivery needs to change too. When drugs were primarily administered orally, Terumo was not involved in the process.
However, with biopharmaceuticals, there is a movement toward requiring delivery containers that meet new needs. One, the delicate biochemistry of biopharmaceuticals, materials, etcetera. Two, capability to make small volume, highly viscous drugs function as an injection. Three, there is also a need for capability to evaluate the drug and container for regulatory purposes. Four, capability to handle diverse delivery methods, not just the traditional muscle injection.
Terumo has accumulated and improved the capability to meet these needs. One, silicone oil free, two, aseptic filling, three, high viscosity drug filling technology, four, regulatory affairs capability including The US, Europe, and Japan, Five, customized development capability to handle diverse drug options. Next slide, please. Looking ahead, we are focused on two major drivers that will further grow this business. The first is new drug delivery.
For example, patch style self injection and intradermal administration. Diverse needs are emerging in the self injection market as the drugs themselves require greater care. The other driver is pioneering global markets. Frankly, our CDMO model business has been centered with customers in Japan as it has grown. In recent years, however, pharmaceutical companies from outside Japan have taken notice of our successes and become interested.
As I mentioned at the beginning, we already have relationships with many large global pharmaceutical companies through having supplied them with injection products for drug kits. These have given us a foot in the door. It is important that our value proposition is not simply low cost and efficiency, but rather that we address new delivery needs to improve added value and increase competitiveness. Next slide, please. An important aspect of this business is the need to respect the strict disclosure policies of pharmaceutical companies.
This means that we are often unable to share with you about our alliance projects during the development process. Speaking in terms of number of project agreements, we have concluded a total of 12 contracts up to last year. We anticipate that products from 10 of these will enter the market in the next five years. There is a possibility that this number will increase, but some drugs, of course, do not make it to market. So there is also the possibility that the number will decrease.
However, the number of agreements in place is a good indicator. Next slide, please. Another important aspect is our investment in manufacturing capacity. While we cannot share details of specific projects, our investment in manufacturing capacity is a sure sign of growth. Equipment capacity, stable operations, and quality management systems are at the heart of this business.
Starting in FY '11, you can see the investment increasing. In five years, our investment scale has grown to the range of 20,000,000,000 to 30,000,000,000 yen. Equipment has been focused in the Yamaguchi factory and Kofu East factory and in the future, we will look into its deployment to other factories. Next slide please. Will CMOs make a comeback?
Sometimes we are asked if our business is sufficiently differentiated or competitive. I want to share five points or strategies that we are enhancing to fulfill KSF. One, diversify and enhance delivery technologies. Two, improve our technological filling and sterilization capabilities. Three, further advance our drug device combination product evaluation, regulatory and clinical capabilities.
Four, our record of reliability and mid to long term commitment. Next slide, please. This is the last slide. In the past, Terumo has developed and accumulated diverse technologies, commercialized them, and expanded its business through the model of delivering directly to hospitals. However, this direct manufacturer model alone cannot capture all of the business opportunities of this new era.
By teaming Terumo's diverse core technologies with collaborator firms, we become able to create markets. That is the strategic value of the alliance model. As we enter an era in which we anticipate the spread of home care, community care, self treatment by patients, and even health care products for healthy people, we strongly believe that there will be further opportunities for Terumo to effectively use its diverse core technologies. Terumo will continue to bring new developments to existing markets, but it will also learn from the past to discover new ways to meet the diverse needs of customers in the healthcare market and further improve its technologies to create new growth drivers. We ask for your continued understanding and support in this endeavor.
Thank you. I am the CAFO, Muto. I will now explain the first half results for the fiscal year ending March 2021. Next slide, please. First, a summary of the overall results.
Sales revenue of the cardiac and vascular company was negatively affected by a drop in demand in the first quarter, but we saw a significant recovery in the second quarter. Impact on the general hospital and blood and cell technologies companies remained minor, resulting in a recovery to minus 8% in sales for the group as a whole, minus 6% when excluding FX impact. Adjusted operating profit was impacted by decreased sales revenue in the high profitability cardiac and vascular company, but we evaluated each expenditure and limited spending to urgent matters or those contributing to mid to long term growth even while gradually restoring sales activities leading to a 19% decline in adjusted operating profit and 24% in operating profit when excluding FX impact. Profit for the year was minus 30% year on year. We announced our annual guidance in August, but the recovery of the Cardiac and Vascular Company exceeded expectations in the second quarter, so progress is ahead of schedule in restoring both sales revenue and profit.
Next slide, please. This is the variance analysis of adjusted operating profit compared to the previous year. GP decrement by sales decrease had a 9,800,000,000.0 yen negative impact largely due to the decreased sales of the Cardiac and Vascular Company. However, a marked recovery in sales closed much more of the year on year gap of the second quarter compared to that of the first quarter. Gross margin accounted for JPY4.2 billion negative impact.
The Cardiac and Vascular Company sales decrease was improved in the second quarter, but the mix remained poor for the full first half. As some countries saw increases in COVID-nineteen or enacted lockdowns, we managed to maintain high production and inventory levels, which slightly pushed down manufacturing costs similarly to the first quarter. This had the effect of somewhat lessening negative impact on gross profitability. In price, decreased cardiac and vascular sales moderated negative impact to 500,000,000 yen. The reimbursement price revision negative impact was 2,100,000,000.0 yen because the first half of the previous year did not have a price revision in conjunction with the increase in consumption tax rate.
Work related to European MDR and IT investment progressed as planned, resulting in 600,000,000 and 500,000,000 yen negative impacts respectively as progress led to increased spending year on year. SG and A decrease was due to lower promotional and travel costs as limitations on access to hospitals and remote holding of academic conferences continued in the second quarter. Further, we carefully evaluated each proposed expenditure for its urgency to control expenses on a pinpoint basis, resulting in a JPY4.5 billion positive year on year impact for the first half. R and D decrease resulted from reconfirming the level of priority for each project while largely maintaining R and D investment, yielding a 900,000,000 yen positive year on year impact. FX impact was the result of yen appreciation against emerging market currencies for a 3,400,000,000.0 yen negative year on year impact.
Next slide, please. Next is revenue by region. In addition to the second quarter recovery trend of the cardiac and vascular company in Japan, the general hospital company, which accounts for the largest percentage of sales there, returned to the levels of the previous year, reducing the gap between year on year sales levels. In Europe and The United States, the Cardiac and Vascular Company saw a market recovery reducing the sales gap there. In China, when excluding the impact of distributor order timing in the neurovascular business, Q2 alone returned to the previous year level.
In Asia and others, the recovery of demand in The Philippines and India is happening slowly. Next slide, please. Next is revenue by company. In the first half as a whole, the cardiac and vascular company was negatively impacted by decreased demand due to the postponement of elective procedures using its products. However, looking at just the second quarter, we can see a significant recovery in all segments.
The general hospital company saw a decrease in demand for general hospital products overall, but double digit growth in the alliance business and pain management products and increased demand for infection prevention products. This enabled the company to maintain the same level as the previous year. The Blood and Cell Technologies company was impacted by decreased demand for whole blood collection in Asia especially and the postponement of therapeutic apheresis, but increased sales of component collection systems drove stable growth for the company as a whole. I will give more detail by company in the next slides. Next slide, please.
Here is the cardiac and vascular company. Sales revenue was minus 13% for the first half. On its own, the second quarter alone recovered to just minus 2%. TIS and CV grew in the low single digits. Neurovascular was approximately the same as the previous year and Cardiovascular saw positive growth, resulting in the company as a whole showing a recovery in the second quarter alone as a backlog of postponed elective procedures in all businesses has begun to be cleared.
Profit grew negatively due to decreased sales revenue, but the severe drop of highly profitable TIS and neurovascular businesses in the first quarter was replaced in the second quarter by a notable recovery that reduced the year on year drop in profit while improving profitability. Next slide, please. Next, the general hospital company. Sales revenue was impacted in the general hospital and pharmaceutical products by decreased demand caused by limitations on patient hospital visits. However, pain management products and the Alliance business posted double digit growth, while demand increased for thermometers, disinfectant, and other infection prevention products, resulting in an overall result on par with the previous year.
In profit, there was impact from reduced production activity at The Philippines factory due to lockdown, but careful expense control helped to minimize that impact. Next slide, please. Next is Blood and Cell Technologies company. In sales revenue, the blood center oriented business experienced decreased demand for whole blood collection in Asia, but a first quarter software update to raise efficiency in component collection systems continued to be well received in the second quarter. Further, demand increased for convalescent plasma used in COVID-nineteen related treatment.
These factors resulted in steady growth overall. Because therapeutic apheresis is elective, many patients' therapies have been postponed amid COVID nineteen impact. As a whole, the Blood and Cell Technologies company saw a 3% year on year increase in sales revenue when excluding FX impact. Profit increased significantly due to improved mix as the ratio of high margin component collection grew and thanks to efforts to control SG and A and other expenditures. Next slide please.
Next is our revision of guidance. As I mentioned at the beginning, the Cardiac and Vascular Company recovery in the second quarter exceeded expectations. As a result, the progress toward recovery of both sales revenue and profit are ahead of the guidance we announced in August. Therefore, we have decided to add the profit amount of the first half that exceeded guidance into our full year guidance, revising adjusted operating profit and operating profit upward by 5,000,000,000 yen and profit for the year upward by 3,000,000,000 yen Also regarding dividends, in light of the renewed spread of COVID-nineteen in some countries and the risk and lack of visibility in the second half, we have decided to maintain our dividend amount as announced in May. Next slide, please.
Now I will explain about our thinking regarding the second half outlook. First, sales revenue. As I mentioned earlier, cardiac and vascular company related elective procedures began to recover in the second quarter, leading to a notable sales recovery. We estimate that there was significant effect as the backlog of these procedures was addressed. Looking at our latest numbers from October, we are not seeing a drop off of elective procedures following the elimination of this backlog, which is something about which we had been concerned.
Therefore, we anticipate that we will recover to the level of the previous year within this year. On the other hand, the risk remains of a renewed spread of COVID nineteen in certain countries outside Japan. Because medical settings now have protocols and systems in place to handle COVID nineteen impacts better than the first wave of infections that happened early this year, we do not expect the same degree of stoppage in healthcare even if there is another rise in infections. However, we cannot deny that limitations on patient visits could continue and that there is a possibility of slow recovery of new procedures. Therefore, regarding sales revenue, we revised our thinking to be that the recovery trend will continue into the second half, but that the recovery trajectory will level off more than initially anticipated, reaching the level of the previous year in the fourth quarter.
Although first half sales were stronger than guidance, we are taking into account the possibility of some weakness in the second half and we will therefore maintain our existing annual guidance regarding sales. Having built up extra inventory in the first quarter for business continuity purposes, we will adjust our production volume in the second half to return inventory to appropriate normal levels. If there is more weakness in second half sales than anticipated, there will be a strong need to adjust production more than scheduled, which will place pressure on gross profit. In expenses, we continue to expect that as access to hospitals is restored, sales activities will resume. However, in order to push back potential weakness of sales and downward pressure on gross profit, we will further review our SG and A and R and D spending to achieve our profit guidance for the second half.
Next slide please. Here are the major topics for the second quarter. As a Terumo Group, we donated goods and funds through the Japan Red Cross to support relief efforts for heavy rains in July 2020 in Japan. Company topics include interventional oncology and peripheral intervention items for the Cardiac and Vascular Company, DM Healthcare and Alliance for General Hospital, and pathogen reduction systems for blood and cell technologies showing good progress on the mid to long term growth drivers. Next slide, please.
This is the final slide and shows our pipeline status for the fiscal year. I will omit the details, but new product launches are generally on schedule. We will continue to watch for any impact from COVID nineteen on those schedules. The possibility of a renewed spread of COVID nineteen remains in the second half. However, we will exercise vigilance in our management efforts in ways that include maintaining our pinpoint control of expenses in order to work toward achieving our guidance.
Thank you.