Good evening. Thank you for joining us. I'm Naoki Sato from J.P. Morgan. Welcome to J.P. Morgan Healthcare Conference, Terumo's presentation. Again, it's my pleasure to be introducing Terumo. From the company, we have CEO Hikaru Samejima for the presentation, and after that, we'll have a Q&A session. With that, I will pass on to Mr. Samejima. Thank you.
Thank you for the kind introduction. Good afternoon, everyone, and thank you for joining us today. I'm Hikaru Samejima, CEO of Terumo. I'm at the company from Japan, and it's my great honor to have this first opportunity making a presentation at the J.P. Morgan Healthcare Conference. This is our forward-looking kind of statement. Can you imagine how crucial the very first step of a medical procedure can be? It can make all the difference in the patient's journey to recovery. One indispensable device in vascular access is the guidewire you see here. At first glance, it may look like a simple commoditized product, but it is far from that. By consistently delivering reliable quality and seamless procedures, this guidewire has become the gold standard in vascular access.
Since its introduction 40 years ago, this wire has been used in the largest number of procedures and is saving lives of most patients around the world. Quality is essential for medical devices, which, you know, are used daily in the medical settings, and we, Terumo, can ensure this through our robust operations and advanced technology. For healthcare professionals who face countless patients every day, dependable devices give them confidence to start their procedures, and for patients and families suffering from illness, treatment with trusted devices brings reassurance. We, Terumo, are committed to guiding our mission to contribute to society through healthcare. Today, we have $7 billion sales worldwide with three business segments: cardiac and vascular, C&V company. This company manufactures and sells catheters to show vascular grafts or vascular therapeutic devices.
Terumo Medical Care Solutions, TMCS company, supplies fundamental medical devices such as infusion pumps and syringes necessary for hospitals and clinics. This company also includes our CDMO business, which actually provides the drug administration devices designed to maximize the drug value. Terumo Blood and Cell Technologies, TBCT company, again, supplies products and services such as blood collection and the plasmapheresis system for the blood treatment and cell therapy community. We have grown into a global medtech company delivering products to over 160 countries and regions and driving innovation through our R&D centers in Japan and across the globe. Let me highlight our strong track record of growth. You can see how we've consistently expanded our revenue year after year. This growth has been powered by two engines. First, robust organic growth, and second, strategic acquisitions.
These acquisitions didn't simply add scale, but they actually became a true growth driver by creating synergy with our existing businesses. Regarding profitability, we've delivered significant AOP margin expansion over the last three years, and we are on track to hit 20% this fiscal year. This is a result of our disciplined approach with robust revenue growth, successful price adjustment, and operational excellence. We've also transformed and streamlined our portfolio by divesting businesses outside of our core strength. This is a strong foundation for continued growth to create long-term value for our shareholders. Let me briefly walk you through what you can expect from Terumo in 2026. Our fiscal year 2025 is progressing as planned, with a revenue growth of 8% and a robust operating profit expansion of 24% growth. This strong foundation sets the stage for FY 2026 from April this year.
In FY 2026, the key theme is to achieve our kind of a growth strategy, 2026 financial target of operating profit margin of 20%. And we expect high single-digit kind of revenue growth to continue. And importantly, we are projected to hit 20% OP margin this next fiscal year before adjustments. And this is supported by the strong double-digit growth of profitability growth. So, this will mark a significant milestone for Terumo. Our core strength actually lies in developing and maintaining the category-leading products. As I mentioned earlier, we are the market leader in vascular access devices. Beyond that, in each business category, we take pride in offering some category-leading products and then to serve the broad spectrum of medical settings. Now, let's look at what drives growth in core businesses. Let me first begin with the cardiac and vascular company. This company has a unique portfolio.
The revenue from vascular access-related products accounts for more than 70%. These products are essential for vascular interventions, and we have successfully transformed these devices, often seen as commodities, into high-value offerings. With a strong presence in the vascular access segment, our business will continue to grow as our vascular intervention market expands. Our technology enables very seamless procedures. At the same time, our large-scale multi-product manufacturing ensures price competitiveness and reliable quality. This gives physicians confidence in Terumo products. Beyond supplying products, we also provide comprehensive solutions for the medical challenges. We pioneered the radial access, and this kind of technology ensures safer procedures, less complications, and a shorter hemostasis time than the conventional femoral approach, which actually uses the kind of lower limb artery.
The patients and healthcare professionals and hospitals and even society can benefit from the kind of reduc noed clinical burden. Today, radial access is widely accepted, and this becomes the kind of gold standard in vascular intervention. Twenty years ago, less than 20% of percutaneous coronary interventions, PCI, used the radial artery. But today, around 80% of the cases are done through radial. Even in the United States, once considered unlikely to adopt this access, but now these radial procedures account for 60% of total PCI. This is a prime example of how we solve healthcare challenges at the same time reinforcing our leadership position in the competitive marketplace. We also actually try to focus on accelerating the field of the therapeutic area. Two key innovations representing this effort. The first, the Dual Sensor System, DSS, for intravascular imaging.
This system features a catheter equipped with both IVUS and OFDI sensors, enabling simultaneous acquisition of both images. By combining the strength of IVUS and OFDI, this gives you a better and accurate view on intravascular conditions, which enables physicians in achieving optimal treatment strategies. Second, the WEB system for neurovascular interventions. This is an innovative device for treating cerebral aneurysms. This is a truly innovative product and setting a new target, new standard for the treatment, and then ever since its launch, they have replaced the conventional coil market, and then the expansion and the remarkable growth. We can expect a strong double-digit growth of this kind of product to continue, driven by market share expansion and geographical reach. Moving on to TMCS Medical Care Solutions, one of the focuses of this company is the CDMO business.
Unlike CDMOs that focus on drug substances, our strength actually centers on developing the drug administration devices. The defining feature of our model is its one-stop shopping solution, which actually covers everything from device development and manufacturing to fill and finish. To develop these devices, we typically form alliances with pharmaceutical companies in the early stage of drug development. And this early engagement gives us a very unique positioning in this CDMO market. We also have a capability to develop very unique, innovative administration devices. Our expertise spans device development, manufacturing, and quality control, backed by our strong track record as a device manufacturer. We also have over 50 years of experience handling pharmaceuticals. This unique combination, device know-how and pharmaceutical kind of expertise, gives us a very unique position and gives a strong competitive advantage.
By combining one-stop kind of a service, one-stop shop service, and world-class development capabilities, we have established a very unique and differentiated business model unrivaled in the industry. The CDMO market is highly attractive with robust growth potential. Among injectable drugs, which make up a large portion of pharmaceuticals these days, self-administered drugs are growing twice as fast as in-hospital drugs. And the success of this segment depends on developing creative and innovative devices. And then this is exactly where our kind of strength lies. Since launching our CDMO, we've grown the market business significantly over years. But now we are prepared for the next big leap, aiming to reach $1 billion in the 2030s. To achieve this goal, we keep expanding our capacity to even accelerate this positive momentum further. And I'm proud to share a major milestone today.
We have just begun shipping our auto injectors for Aziz anti-Alzheimer's disease drug. And this achievement underscores our commitment to innovation and leadership in the CDMO market. Let's move on to TBCT, Blood and Cell Technologies. Currently, we are focusing on the source plasma collection business. Our plasma collection system, Rika, is a growth driver for TBCT and providing a kind of a more efficient and comfortable plasma collection experience through the advanced technologies. This business has seen rapid growth in the U.S. market. And we, the partner with CSL and the industry leader, and then all their kind of plasma collection centers have now adopted machines. So, revenue from those collection centers is expected to continue, there is no doubt, alongside the expansion of a plasma-derived therapy market.
Beyond CSL, we actively are seeking additional customers, additional partnerships, and are confident that our technology and operational strength would attract some more customers. Our aspiration is very clear: to be one of the leading kind of medtech companies in the world. We do have kind of a robust, sustainable kind of portfolio to grow, but we don't stop there. We actively seek external opportunities. And we are not just thinking about the next few years, but we have a long-term vision to even create greater value and to achieve our aspiration. When it comes to M&A, we are very disciplined. And then we have five criteria that guide every decision. First, technological excellence, the solutions that truly contribute to society and healthcare. And two, competitive advantage, so unique strengths that set the target apart. And third, synergy, the ability to create value alongside our existing businesses.
And fourth, an attractive financial profile. And last but not least, cultural fit, shared dedication and commitment to the healthcare community. These principles ensure that every acquisition strengthens Terumo and supports our mission. And OrganOx meets those five criteria perfectly. And then, which is a truly rare case, and we are very proud of that. OrganOx is revolutionizing healthcare through its advanced perfusion technology. And the company is boldly tackling its mission to maximize the supply of kind of donor organs, which is an invaluable kind of medical resource, and try to save as many kind of patient savings as possible. By enabling the collection of those organs from the circulatory death donors and also increasing the number of usable organs and improving the quality of life for professional healthcare professionals, OrganOx is providing a true benefit to the entire healthcare ecosystem.
As its technology gains widespread adoption in the liver transplant market, the company is experiencing very rapid growth. After establishing normothermic machine perfusion, NMP, as a standard in the liver preservation, OrganOx plans to expand into the kidney domain. A significant number of those recovered kidneys are still discarded today, and then NMP-based functional assessment has the possibility to make many of those organs viable for organ transplantation. In fact, OrganOx has a huge opportunity through perfusion technology, even going beyond transplantation. The extracorporeal liver cross-circulation system, or ELC, is one example. This treatment temporarily replaces liver function, such as detoxification and metabolic regulation, and by putting and circulating the patient's blood in the auxiliary liver outside the body. This is a true breakthrough for those kind of acute liver failure patients to provide their life support and treatment. The potential market is significant. The U.S.
alone, more than 33,000 patients annually enter hospitals with acute liver failure or acute and chronic liver failure with a survival rate of less than 50%. This is a huge unmet need that OrganOx positions us to address it. The opportunity doesn't stop there. Their technology can help pharmaceutical kind of companies to develop new drugs. By kind of enabling the human liver perfusion with clinical trials, the pharmaceutical companies may accelerate and boost the success rate of new drug development, which is actually a critical challenge in the industry. So, OrganOx is not just saving lives today, but it's about shaping the future for the liver care and innovation. This is why we are so excited about OrganOx. And this acquisition perfectly illustrates how Terumo combines innovation and a strategic vision to sustain long-term growth. The heart of everything I've shared today is our unwavering commitment to patients.
We listen sincerely to their needs, deepen our understanding of their hopes and aspirations, and uncover what truly benefits them. Together with healthcare professionals and partners, we pursue innovation and solutions and new ways to advance patient care. Keeping patients' thoughts and feelings at the center, we will continue to expand our activities and embrace new challenges. I invite you to look forward to the new value we create, so as I wrap up, I would like to leave you with a long-term outlook. Beyond Growth Strategy 26, our focus is accelerating innovation and sustaining strong growth momentum to become a global top-tier medtech leader. This evolution will be driven by three clear pillars. One is maintaining robust sales growth, and two, the margin expansion that outpaces the revenue, and then we're reinforcing our leadership position through R&D and M&A.
Powered by innovation, we will deliver new value to patients' care worldwide and transform the future of healthcare. We really look forward to walking this path together with you. That concludes my presentation. Thank you for your attention.
Thank you so much for the great presentation, Samejima-san. So, let me open up the Q&A session. From Terumo, CEO Mr. Samejima, CFO Mr. Hagimoto will provide the answers. Does anyone have any questions? Please raise your hand. So, let's start with my first question. Terumo has been actively reviewing and reshuffling its portfolio, including low-profit businesses. I think this has contributed to your margin expansion. What are your main criteria when deciding to review or exit a business?
Okay, well, so first, we definitely look at the kind of financial performance over years, and if they're not growing or they're not contributing to the kind of profitability, yes, that's one of the kind of angles that we look at, but not only financial kind of evaluation, we also investigate whether we are the best owner or not. If there is someone who could possibly do better than us, then that's another criteria that we screen out those kind of, well, let's see, non-performing kind of businesses.
Thank you. So, actually, Terumo has a strong track record of successfully expanding businesses acquired through M&A. And you mentioned that you have five criteria for making an acquisition. So, what do you focus on after the acquisition? So, why is your track record so great?
Okay. Well, thank you for the compliment. Again, we are very proud of the very successful track record of the cross-border M&As, including MicroVention and the Vascutek and BCT and so forth. Well, usually, the way we do kind of post-merger integration is, while we respect their culture, what they do business with, because the reason why kind of we acquire those companies is they already establish a strong kind of financial kind of record. And then they have established a good culture and everything. So, we try to kind of respect what they do. But at the same time, we try to influence them by introducing some of the ways that we do business with. But again, it's not the one way. It's always try to have a mutual communication so that we try to kind of maximize the value that both organizations have.
So, that's probably the synergy we can create. And so, it's not too overly kind of controlling or maybe too centralized, but while giving a reasonable autonomy to them, but at the same time, we try to kind of have a close communication with each other to create the mutual kind of synergy opportunities. That's probably the kind of recipe we have in a PMI process.
Great. Thank you. So, regarding the newly acquired OrganOx liver transplant business, I think your strength compared to the U.S. competitor is your lower price. And on the other hand, the competitor is strong in logistics services. So, I imagine hospitals will choose between OrganOx and the competitor depending on transport distance and hospital budget and staff availability. OrganOx's sales grew 60% Y on Y in 2025. So, what kind of growth rate do you expect over the medium term? And it was a large acquisition. And how do you view the risk of future impairment?
Okay. Before touching kind of a comparison with OrganOx with their competitor, well, NMP alone has a truly breakthrough technology, truly kind of transformed the organ transplantation completely when compared to the conventional way of doing it. So, the market has a huge potential to grow. So, we are very confident that OrganOx can maintain a very robust, high double-digit kind of growth in coming years. So, meaning that I don't see any risk of impairment at all with that business.
Excellent. Thank you. Does anyone have any questions? Thank you.
Just a follow-up.
So, someone will.
Microphone, right? Yes, because it's working.
Just for a follow-up on the OrganOx, you just mentioned you say the market is large enough. You don't need to necessarily just compete for market share with, let's say, local U.S. transplant centers or other things. So, why do you think the market is big enough given the limited supply for organs, especially for liver? I think that's what OrganOx is like a mainly dominant thing, right?
Okay. Yes, the conventional way, I mean, the supply side has been always a bottleneck. Again, this NMP system technology actually unlocks that bottleneck. Because they can use those kind of organs from a circulatory death kind of donors, and also because of their kind of real-time automated kind of perfusion technology can maintain the kind of liver function as healthy as possible so that the kind of discarded ratio of those livers are actually reduced. Supply side not perfectly, but they can kind of relax that bottleneck significantly. That's why we see the huge potential in the liver transplant market.
Thanks for the time. Two from me. I'm going to do my best sell-side impression here. The first is, after the acquisition of OrganOx, has Terumo made any internal investments or adjustments to the product itself, including commercial reach that would kind of accelerate the growth profile from 60% year over year? And then the follow-up to that is, are there any expectations to branch out into heart, liver, sorry, heart, lung, kidney, or any other organs?
Okay. Yes. So, OrganOx is a highly effective organization in their commercial effort. And then.
I'm sorry.
Yeah. Oh, okay. Yeah. So, again, their call points are kind of transplant surgeons, which are not our kind of existing kind of customer base. So, we haven't done any significant investment in their commercial effort. But again, we try to help from the kind of product development kind of wise and some other kind of categories. We've done the kind of thorough kind of PMI process, I mean, ongoing at the moment. The second question is that.
Okay.
Yeah, that's right. Yes. They do have a kind of plan going into the kidney domain, yeah, in 2030. So, the liver plus kidney and some other applications utilizing their perfusion technology.
Hello. Thank you. I have a question regarding your blood business. You mentioned you're expected to grow in the plasma collection. And what about the whole blood and in particular your Reveos machine, this new technology? What do you expect in the future for that? And how disruptive do you think this technology is also in the global whole blood market?
Right. So, this plasma collection system, Rika, is very, very kind of efficient collecting kind of plasma, very high yield. So, that's one of the technological advantages that we have. And based upon that, we are very confident that we probably have additional customers. And we actually did have the contract with a smaller kind of player, Joint Parachute, kind of last year. So, I mean, again, they actually appreciate our technological kind of advance. So, utilizing that, we are very confident that we can make additional kind of customers in the future.
I'd like to ask a little bit about your regional strategy. So, even before OrganOx, you've made some of your most seminal acquisitions in the U.S.
Right.
Whether it's BCT or some of the others.
Right.
I think a lot of people here in the room know how incredibly competitive medtech is here in the U.S.
Sure.
So, can you talk about how you sought to differentiate yourselves as a Japanese company over the years in the U.S.?
Sure.
What are your prospects going forward?
Yeah. Okay. Well, the first and foremost, the United States remains as the most strategically important market for Terumo. And then our kind of core strength kind of resides in those kind of fundamental devices such as vascular kind of access devices like guidewires and the introducer sheath, etc., which are now very core focus of their kind of larger competitors. And again, looking forward, talking about next maybe five-year growth strategy, we may have to kind of reinforce our kind of therapeutic side of the business more, although we do have a strong franchise of a neurovascular space leveraging the kind of MicroVention's and the ex-MicroVention, now Terumo Neuro is kind of the organizational capabilities. Maybe in the next few years, we probably make some effort to reinforce the therapeutic side of the business more.
Based in Japan, I mean, the Japan market is a little bit of a tough situation at the moment. As you probably know, the reimbursement price keeps coming down. But again, if you do business only with acute kind of care settings under the control of kind of a reimbursement kind of a system, yes, you may have a little difficult time. But again, leveraging kind of our good access to the in-hospital, outside of hospital communities, we start looking at the outside of the reimbursement price system, what kind of service and solutions we can provide to the entire healthcare system of Japan. And then China and India, those two emerging countries, we probably keep focusing on as the total number of population and medical access is widely spreading. So, those two countries also have a kind of large kind of potential toward the future.
That's it. Oh, one more. Sorry for another question.
Sure.
Have you guys evaluated any impacts from potential ACA-enhanced subsidy loss or Medicaid redeterminations in 2027?
Yes, but we are aware of that. We haven't done a thorough analysis of that. Again, knowing that some of the cases are shifting from the kind of acute care settings to kind of ACA and some other things. Overall, knowing that our technological advantage and a consistent quality that has been replicated and accepted by the marketplace so well that we are very confident that we can maintain kind of the momentum going forward, at least for the foreseeable future.
Thank you for the great question. So, from me, regarding CDMO businesses, for your fiscal year 2030, CDMO business sales target of JPY 100 billion. Will most of the projects come from domestic pharmaceutical companies? How much are you factoring in sales from overseas pharmaceutical companies? And also, since you are still in a phase of increasing CapEx and depreciation, so what's your outlook for OP margin?
Okay. Okay. Thanks. I cannot give you the exact kind of ratio between the domestic versus international, but I would say still in 2030, our fiscal year 2030, the majority of revenue probably will come from the domestic business. But again, next few years, we try to leverage the capacity we just acquired from WuXi Biologics and try to get the contract or two at least next to a month or maybe even less so that revenue from this facility will contribute to our kind of financials. Profitability-wise, perhaps next few years is the kind of, I would say, the harvest period so that we can leverage the capacity, not only Uchi kind of facility, but we do have actually another new facility being built in Japan, well, in the full operation mode in 2027. So, next few years, we try to fill those capacity that we have.
I mean, after that, of course, depending upon how successful our business will grow, we may have another look at other opportunities. Yeah.
Thank you. So, how is your sales activity going in terms of winning projects, CDMO projects from pharmaceutical companies? So, it's just taking a bit more time to win projects?
Okay. So, our unique value proposition is our capabilities of developing innovative kind of administration devices, not just that, but we can do manufacturing and fill and finish, and so one-stop kind of service. And particularly based upon our polymer injectable technology, which is a very unique kind of the player in the markets. As far as I'm concerned, there's no other company who can provide the same level of service. That's the reason why we are so well kind of appreciated by the Japanese pharma companies up until today. And then the same sales pitch is applied to the non-Japanese pharma companies. And we actually have been contacted by multiple European-based pharma companies as of today.
Thank you. So, the last question from me. So, you are planning for an adjusted AOP margin of 20% in fiscal year 2025. And over the medium to longer term, how high do you aim to raise your adjusted AOP margin?
Okay. So, I don't want to keep my CFO being bored, so let me hand over to him. So, thank you for the question. So, what we are targeting right now is the 20% adjusted operating profit for this fiscal year. What we aim to do in the midterm is also be able to compete with the Western medtech companies. So, in the next kind of revision that we make for midterm, I do hope to be able to say that we will be trying to go head-to-head with the Western competitors in this area. So, that's sort of our statement for today.
Thank you very much. Does anyone have any other questions? So, from me, I'd like to know your very aggressive OrganOx business target in longer term. So, could you explain more detailed point?
Okay. Well, so we are very confident that the OrganOx kind of revenue can reach 100 billion yen. Oh, let's see. Let's say it's a 100 billion yen, right? Yeah, within 10 years. There's no doubt.
Thank you. So, that concludes this session. Thank you so much for joining this session today. Thank you.