Koji Nakao, Chairman, Terumo Group
Yutaro Shintaku, President, Terumo Group
Hiroshi Matsumura, Group President, General Hospital Business Group
Hideo Arase, President & CEO, Terumo Americas Holding Inc.
Shinjiro Sato, Group President, Cardiac & Vascular Business Group
David Perez, President & CEO, Terumo BCT Holding Corp., Chairman of Blood Management Business Group
Tsuyoshi Tomita, President of Diabetes Management and Consumer Healthcare Business, General Hospital Business Group
Mark Sutter, President & CEO, Terumo Cardiovascular Systems Corporation, President of CV Systems Business Global Headquarters, Cardiac & Vascular Business Group
Seiji Kawabata, President, General Hospital Products Business (Japan), General Hospital Business Group
Maki Takizawa, President, General Hospital Products Business (Outside Japan), General Hospital Business Group
Jim Rushworth, President, Interventional Systems Business (U.S.), Cardiac & Vascular Business Group
NO. OF EMPLOYEES: 18,893
GLOBAL HEADQUARTERS: Tokyo, Japan
“Achievement is largely the product of steadily raising one’s levels of aspirations and expectation.”
— Jack Nicklaus
Terumo Corp. executives certainly are an ambitious bunch. At the dawn of the millennium, company leaders devised a three-year plan to raise the firm’s annual operating income by nearly 20 percent.
Upon achieving that goal, officials set their sights on a bigger target: 300 billion yen in net sales and 63 billion yen in operating income by the end of fiscal 2007. Then, after reaching that milestone, management really upped the stakes, aiming for 400 billion yen in net sales/85 billion yen in operating income by fiscal 2011, half a trillion yen in net sales by the start of fiscal 2013, and an unprecedented 1 trillion yen in net sales by 2020 with an operating ratio of more than 20 percent.
Though their plans were obliterated by the Great Recession, Terumo’s top brass maintains big aspirations for growth. Their newest blueprint for near-term prosperity—unveiled in May—scales back a bit on the sales pool, obviously reflective of the governmental funding cutbacks, shrinking reimbursement rates, regulatory rigmarole, American healthcare reform and other forces that have reshaped the global medtech industry in recent years. Terumo’s higher-ups are still dreaming big—but setting more realistic goals.
“Market growth is slowing down and tighter regulations have been introduced in key regions,” Shoji Hatano, an executive officer with Terumo’s Strategy Planning department, explained in a Power Point presentation that outlined the company’s new growth strategy. “In developed markets, demand is weakening…in the U.S., QSR [quality system regulation] and its related inspections are becoming tighter. In China, unique regulations and standards have been introduced. Also, distribution reforms as well as domestic preferential policies are conducted by the government. Despite these factors, we believe there is still room for growth…”
Whether enough room exists to achieve 1 trillion yen in sales over the next eight years remains to be seen (Hatano made no mention of that goal in his presentation). Executives, however, are confident of their chance of fulfilling their next objective—580 billion yen in sales and 120 billion yen in operating profit in fiscal 2016 (using an exchange rate of 95 yen to the dollar and 123 yen to the euro).
The company is off to a decent start, having grown sales 4 percent to 402.3 billion yen ($4.27 billion) in fiscal 2012 (ended March 31). Gross profit inched up 0.5 percent to 205.7 billion yen ($2.18 billion) and net income nearly doubled to 47 billion yen ($498.6 million).
Sales rose in all product segments, with Cardiac & Vascular posting the largest gain despite the impact of revised domestic drug price standards and a decrease in Nobori drug-eluting stent revenue. Strong international demand for transradial coronary catheterization systems, particularly in China and North America, offset the disappointing Nobori stent sales and 13 percent loss in domestic cardiac/vascular revenue to boost segment proceeds 6 percent to 169.7 billion yen ($1.8 billion).
Terumo’s Blood Management business performed a similar balancing act in fiscal 2012, counteracting declining blood transfusion volume in North America with solid sales of therapeutic apheresis systems and an increase in domestic market share for automated blood component collection systems. The company also bolstered its presence in eastern Europe with the March acquisition of Polish blood product distributor Medservice, but the deal did not impact earnings. Nonetheless, the segment grew sales 4.1 percent to 74.7 billion yen ($792.5 million), with domestic revenue sustaining a 2.8 percent loss and overseas dividends climbing 5.7 percent to 61.9 billion yen ($656.9 million).
The General Hospital segment, which ingested the company’s Consumer Healthcare business in the first fiscal quarter, gained some extra cash with the February sale of its home oxygen therapy system and home infusion pump businesses, though it was unclear from Terumo’s fiscal 2013 earnings analysis whether the transaction impacted growth. The unit posted a 2.3 percent increase in net sales to 157.8 billion yen ($1.67 billion), thanks mostly to steady demand for electrolyte infusion solutions, semi-solid nutritious foods for the chronic care market, and contrast media/business services in the Drug and Device product division. Strong performances from Japan and China offset weak sales in Europe and the Americas.
Emerging markets like China, Brazil, India and Poland are a key component of Terumo’s near-term growth strategy. Executives spent 32.2 billion yen, or 8 percent of the company’s fiscal 2012 earnings, on capital improvements, expanding production capacity in the Philippines and Vietnam, and opening an 80,000-square-foot neurovascular manufacturing plant in Costa Rica.
Terumo, however, isn’t giving up on established markets, though. During fiscal 2012, the firm expanded production at its factories in Ashitaka, Fujinomiya and Kofu, and began building a new facility in Yamaguchi. In addition, the company completed enrollment in a safety/efficacy study of its Misago self-expanding stent, taking advantage of a pilot program that unites the U.S. Food and Drug Administration (FDA) and Japan’s Pharmaceuticals Medical Devices Agency.
Under the FDA’s Harmonization by Doing program, Terumo enrolled 200 patients in the United States and 100 in Japan to test the stent’s ability to treat atherosclerotic stenosis and occlusions of the superficial femoral artery. Launched in 2010, the initiative is designed to expedite approvals in both countries.
Available in Europe, Misago is a nitinol stent pre-mounted into a rapid-exchange delivery catheter system. The device has three radiopaque markers located on each of its ends, allowing for accurate placement in lesions. The study’s primary endpoints are patency after one year and freedom from major adverse events.
“Peripheral vascular disease is a leading cause of disability in the U.S. It is critical that physicians and their patients have faster access to the latest technologies to maximize treatment options,” said J. Fritz Angle, M.D., professor of radiology at the University of Virginia and principal U.S. investigator in the Misago study. “I look forward to analyzing and discussing the data with all of the trial investigators. The international experience and testing efficiencies obtained from our collective participation in this HBD initiative could have a dramatic effect on the way important medical devices reach the market in the future.”