bridge report a&t corporation (6722)of clinical chemistry and hematology tests are 175.9 billion...

Bridge Report (6722) August. 17, 2017 http://www.bridge-salon.jp/company_e/

1

Bridge Report A&T Corporation (6722)

－ Stock Information －

Share Price Number of shares issued Total market cap ROE(Actual) Trading Unit

¥876 6,257,900 Shares ¥5,481 million 10.9% 100 shares

DPS (Est.) Dividend yield

(Est.) EPS (Est.) PER (Est.) BPS (Actual) PBR (Actual)

¥20.00 2.3% ¥89.50 9.8 times ¥1,013.21 0.9 times

*The share price is the closing price on August 16, 2017. The number of shares issued was taken from the brief financial report for the latest

period. ROE and BPS are those for the previous term.

－ Earnings Trends － (Unit: Million yen or yen)

Fiscal Year Net Sales Operating Income Ordinary Income Net Income EPS DPS

Dec. 2011 (Actual) 8,485 823 803 477 76.34 12.00

Dec. 2012 (Actual) 8,663 757 738 484 77.51 12.00

Dec. 2013 (Actual) 9,221 742 716 471 75.29 16.00

Dec. 2014 (Actual) 9,569 856 832 455 72.80 16.00

Dec. 2015 (Actual) 10,138 1,202 1,183 839 134.18 20.00

Dec. 2016 (Actual) 10,234 1,015 1,004 651 104.14 20.00

Dec. 2017 (Forecast) 10,400 820 800 560 89.50 20.00

*The forecasted values were provided by the company.

This report outlines A&T Corporation, briefly reports the results for the term ending Dec. 2016, and so on.

― Table of Contents ―

1. Company Overview

2. First Half of Fiscal Year December 2017 Earnings Results

3. Fiscal Year December 2017 Earnings Estimates

4. Future Business Operation

5. Conclusions

<Reference: Regarding corporate governance>

President Shigetaka

Misaka

Company A&T Corporation

Code No. 6722

Exchange JASDAQ

Industry Electrical equipment

(manufacturing industry)

President Shigetaka Misaka

Address Yokohama Plaza Bldg. 2-6 Kinko-cho, Kanagawa-ku, Yokohama-shi

Business

A manufacturer of In Vitro Diagnostics (IVD) products and system. It is fully

engaged in the process from development, manufacturing and marketing to

customer support. Its products are used in over 3,000 hospitals. It concentrates

on the cultivation of overseas market. It aims to grow to a global enterprise.

Year-end End of December

URL http://www.aandt.co.jp/eng/index.htm

http://www.bridge-salon.jp/company_e/


2

Key Points

・The core businesses of A&T Corporation are the “blood testing business,” in which the company develops,

manufactures, and sells IVD devices, reagents, etc. mainly for electrolyte and glucose tests, and the “IT and

automation support business,” which facilitates the streamlining of clinical tests. The company excels at proposing

an optimal one-stop solution for preparing necessary products in a laboratory, installing and operating equipment

while proposing a layout, and possesses advanced technologies that are highly evaluated by leading overseas OEM

clients.

・The sales for the second quarter of the term ending Dec. 2017 were 4,608 million yen, down 2.9% year on year.

The number of large-scale transactions for Laboratory Automation System inside and outside Japan increased,

but the OEM sales of Analyzers were weak, and the OEM and direct sales of Diagnostic reagents were sluggish.

Operating income was 314 million yen, down 46.3% year on year. As the overseas transactions for Laboratory

Automation System increased, cost of sales rose. In addition, the augmentation of SG&A expenses due to the

growth of R&D cost (investment in the development of subsystems for Laboratory Information Systems) was not

offset. Neither sales nor profit reached the estimate.

・There is no revision to the full-year earnings forecast. Sales are estimated to be 10.4 billion yen, up 1.6% year on

year. The OEM sales of the blood testing business and the Laboratory Information System, CLINILAN GL-3,

which were sluggish in the first half, are expected to recover in the second half. Gross profit rate is forecasted to

decline 0.2 points, because of the augmentation of cost due to the equipment investment for the factory relocation.

Operating income is projected to be 820 million yen, down 19.3% year on year, because SG&A expenses are

estimated to increase due to the upfront investment in the development of subsystems for Laboratory Information

Systems and large-scale modules for Laboratory Automation Systems. The development cost of the clinical test

information system will be a concentrated investment only for this term. The dividend amount is expected to be 20

yen/share, unchanged from the previous term. The estimated payout ratio is 22.3%.

・One of main OEM partners for the electrolyte unit has changed strategy for its key driver. This surprised

shareholders negatively, and its share price, which had been recovering, returned to stagnation. Fortunately, there

is no revision to the earnings forecast, and the company expects to recover in the second half. The progress of the

cultivation of new OEM partners is noteworthy. Meanwhile, we would like to pay attention to the release of the

second Laboratory Automation System in the Chinese market.

1. Company Overview

The core businesses of A&T Corporation are the “blood testing business,” in which the company develops, manufactures,

and sells IVD devices, reagents, etc. mainly for electrolyte and glucose tests, and the “IT and automation support

business,” which facilitates the streamlining of clinical tests.

The company excels at proposing an optimal one-stop solution for preparing necessary products in a laboratory, installing

and operating equipment while proposing a layout, and possesses advanced technologies that are highly evaluated by

leading overseas OEM clients.

【1-1 Corporate history】

In the 1980s, the general chemical manufacturer Tokuyama Corporation (4043, 1st section of Tokyo Stock Exchange) was

expanding its business scope from materials to fine chemicals. While taking inventory of various technologies and items,

Tokuyama Corporation decided to develop latex (rubber material; one of the chemical products) reagents for testing

antigen-antibody reactions.

In the development process, Tokuyama Corporation formed a business tie-up with Analytical Instruments Inc., which



3

develops, manufactures, and sells clinical test equipment and had been leading the industry by releasing such products as

fully automatic blood sugar analyzer in 1978, and in Apr. 1988, they founded a joint venture for distributing their

products, A&T Corporation. (“A” of Analytical Instruments and “T” of Tokuyama were combined.)

In November 1990, the company established Esashi Factory, which is now the primary production site, in Iwate

Prefecture.

In 1994, A&T Corporation underwent an absorption-type merger, integrating the diagnosis system division of Tokuyama

Corporation. The period from the 1980s to the 1990s was the growth period of the clinical testing industry, in which

many core technologies were developed, and the company expanded its business steadily while taking advantage of that

trend.

In Jul. 2003, the company issued over-the-counter shares. It is now listed in the JASDAQ market of Tokyo Stock

Exchange.

【1-2 Corporate ethos, etc.】

A&T Corporation upholds its corporate ethos: “Support medical care and contribute to people’s health around the

world,” and aims to improve the quality of medical care and reduce cost, under following three management policies.

1. C.A.C.L. Commit to research and development of unique products and technologies in all areas’ of “C.A.C.L.” in

clinical laboratory testing.

2. Consistent

Framework

Increase market value and reduce the cost of products through an integrated system of development,

manufacture, distribution and customer support.

3. Alliance Promote market expansion and quality improvement of products with business partners domestic and

overseas.

* C.A.C.L.: Acronym of “Chemicals (diagnostic reagents),” “Analyzers (Analyzers),” “Computers (laboratory information system),” and

“Lab-Logistics (laboratory automation system)” in the field of products required for operating a clinical test room

【1-3 Market environment】

◎ Market scale

(Domestic and global markets)

According to the Fuji Research Institute Corporation, the scale of the Japanese clinical testing market was 463.9 billion

yen in 2015, accounting for 6.0% of the scale of the global market, but the market growth is slight, because the growth of

immunoserological tests became sluggish. The market scale is estimated to be 489 billion yen in 2020, with average

annual growth rate being only 1.1%.

Based on the information in the website of the Japan Association of Clinical Reagents Industries, A&T Corporation

estimated that the scale of the Japanese market of related devices and reagents is about 530 billion yen. The market scales

of clinical chemistry and hematology tests are 175.9 billion yen and 27.5 billion yen, respectively.

On the other hand, also according to the Fuji Research Institute, the global market scale reached about 62.3 billion US

dollars (6.23 trillion yen under the assumption that 1 dollar is equivalent to 100 yen) in 2015, and is projected to keep

growing at an annual rate of 2.4%, and reach about 70.4 billion US dollars (7.04 trillion yen under the assumption that 1

dollar is equivalent to 100 yen). It is expected that Eastern Europe, Russia, Asia, South America, and Africa, where the

testing environment is still to be developed, will lead the growth. It was mentioned that as the Japanese market was

already saturated, Japanese manufacturers would try to operate their business in the global market by utilizing their

advanced technology and quality based on their stable business bases in Japan.



4

(Trend in each testing field)

Immunoserological testing formed the largest market (37.1%; about 23.1 billion US dollars; about 2.31 trillion yen), and

the market of tests mainly for infectious diseases is growing.

The blood testing market, in which A&T Corporation operates business, accounts for 7.5% and has a scale of about 4.7

billion US dollars (about 470 billion yen). In North America, Europe (especially western Europe), and Japan, blood

testing has been already diffused, and the market growth is stagnant or slightly increasing. In Asia and other regions, the

market is growing, and expected to keep growing steadily, according to the survey.

(Trend of IVD devices)

According to “Statistical Survey on Trends in Pharmaceutical Production” by the Ministry of Health, Labour and Welfare,

the scale of the Japanese medical products market (domestic production amount) in 2015 was about 1.9 trillion yen.

Products for medical treatment is dominant, and medical Analyzers, which is handled by A&T Corporation, has a market

scale of about 180 billion yen.

While there is a significant excess of imports of the overall medical product, there is an excess of exports of IVD devices.

This indicates how competitive Japanese companies are. Hitachi and Toshiba supply testing equipment to Roche in

Switzerland and Abbott in the U.S., respectively. Likewise, A&T Corporation supplies OEM products to Siemens.

Namely, testing equipment made in Japan is now indispensable in the global clinical testing field.



5

2009 2010 2011 2012 2013 2014 2015

Total amount

Production 15,760 17,130 18,080 18,950 19,050 19,890 19,450

Import 10,740 10,550 10,580 11,880 13,000 13,680 14,240

Export 4,750 4,530 4,800 4,900 5,300 5,720 6,220

Export - Import -5,998 -6,021 -5,775 -6,983 -7,703 -7,962 -8,023

IVD devices

Production 1,100 1,030 1,450 1,580 1,470 1,690 1,800

Import N.A. N.A. N.A. N.A. 210 200 N.A.

Export 750 620 980 1,100 1,060 1,320 1,420

Export - Import N.A. N.A. N.A. N.A. +855 +1,121 N.A.

*Unit: 100 million yen. The import amounts of medical Analyzers from 2009 to 2012 and 2015 are N.A., because they were not in the top 10.

◎Companies in the same field

Code Corporate name Sales

Sales

growth

rate

Operating

income

Profit

growth

rate

Operating

income

margin

ROE Market

cap PER PBR

4549 Eiken Chemical 35,840 +7.7 3,070 -22.8 8.6% 10.0 77,613 30.0 2.1

6678 Techno Medica 8,500 +0.5 1,150 -18.9 13.5% 3.8 17,038 22.3 1.4

6722 A&T 10,400 +1.6 820 -19.3 7.9% 10.9 5,481 9.8 0.9

6869 Sysmex 275,000 +10.0 57,000 +10.2 20.7% 20.7 1,398,011 34.0 6.7

6951 JEOL 105,000 +5.3 3,000 +44.5 2.9% 13.1 51,105 36.1 1.7

8036 Hitachi High-Technologies 680,000 +5.5 46,000 -19.7 6.8% 11.9 533,738 15.2 1.5

*The results for this term were forecasted by the company. The units are million yen, %, and times. Share price-related indices are based on the closing prices on

August 16, 2017.

* Sysmex, Hitachi High-Technologies adopted IFRS. Hitachi High-Technologies' operating income is "adjusted operating income" which is calculated by

subtracting the cost of sales and selling, general and administrative expenses from sales revenue.

We compared major listed clinical testing device manufacturers. A&T Corporation has the smallest business scale among

them and the share price evaluation is the lowest as its price-to-book ratio is under one. It would be necessary to manifest

its strategies to enhance popularity and expand business as well as promoting understanding.

【1-4 Business contents】

In addition to the development, manufacturing, and sale of products, including testing devices and reagents used in the

clinical testing rooms of hospitals, A&T Corporation offers customer support. The company also offers comprehensive

consulting services, including the proposal for the layout of a laboratory, installation and operation.



6

(Source: The company)

(What is clinical testing?)

Clinical tests can be classified into “biopsies” for directly examining the body with medical equipment, such as X-ray

equipment, CT, MRI, electrocardiographic and ultrasonic equipment, and “laboratory tests” for examining biological

samples (specimens), such as blood, urine, stool, and cells, collected from patients.

A&T Corporation handles products used for laboratory testing, especially blood tests.

There are a variety of blood tests conducted at hospitals and in comprehensive medical checkups, including the tests of

the hepatic system, the renal system, uric acid, the lipid system, glucose metabolism, blood cells, and infectious diseases.

A&T Corporation mainly conducts business related to “electrolyte tests” and “glucose tests.”

“Electrolyte tests”

The water content constitutes about 60% of the human body, as body fluids, including intracellular fluid and blood

plasma. Body fluids are classified into electrolytes, which are mineral ions that dissolve in water and conduct electricity

(such as sodium, potassium, calcium, and chlorine), and non-electrolytes, which dissolve in water, but do not conduct

electricity (such as glucose and urea).

Each electrolyte takes important roles for keeping human beings alive while maintaining a healthy balance —“sodium”

adjusts the water content of the body, “potassium” controls muscles and nerves, “calcium” forms bones and teeth,

conveys nervous stimuli, and coagulates blood, and “chlorine” supplies oxygen to the inside of the body. If the

concentration of electrolytes in blood is abnormal, there is a possibility that the kidneys or hormones are malfunctioning.

The purpose of electrolyte tests is to measure the concentration of each electrolyte ion in body fluid, detect the disruption

of a balance, and then diagnose a disorder in the body. Sampled blood and urine are examined with testing device.

*Major diseases

Sodium Diabetic coma, dehydration, acute nephritis, chronic renal failure, nephrotic syndrome, heart failure,

hypothyroidism, Addison disease, diabetic acidosis, etc.

Potassium Acute renal failure, chronic renal failure, respiratory insufficiency syndrome, etc.

Calcium Malignant tumor, multiple myeloma, hyperparathyroidism, renal failure, hypoparathyroidism, vitamin D

deficiency, etc.

Chlorine Dehydration, renal failure, chronic nephritis, emphysema, etc.



7

“Glucose tests”

The sugar in blood plasma (blood sugar) is composed mostly of glucose, which is the only energy source for the central

nervous system, including the cerebrum. When the stomach is empty (over 5 hours after eating), the liver emits about 8

grams of glucose per hour, and the brain consumes about half of them, and muscles and red blood cells consume one

fourth of them, respectively.

Blood sugar level in its normal condition is strictly controlled while keeping a balance between the increase through the

absorption from the intestine and the generation in the liver and the decrease through the consumption in the muscles. If

this control does not work properly, hyperglycemia or hypoglycemia will occur.

A glucose test is conducted for measuring the concentration of glucose in blood or urine.

*Major diseases

Hyperglycemia Diabetes (insulin, which is a hormone secreted from the pancreas, does not work, and so cells cannot use

glucose in blood), pancreatitis, thyroid disease, postgastrectomy dumping syndrome, etc.

Hypoglycemia Liver damage, hypopituitarism, adrenal hypofunction, etc.

1. Business Field

The business of A&T Corporation is composed of the “blood testing business,” in which the company develops,

manufactures, and sells clinical testing devices, reagents, supplies, etc. for blood tests, and the “IT and automation

support business,” which facilitates the streamlining of manual work in hospital laboratories with IT and automated

systems. The company comprehensively supports hospital laboratories.

(Since this company conducts this business only, neither its brief financial reports nor securities reports contain segment

information. It should be noted that the company discloses the sales of each product series in reference materials for

briefing results, etc., but not the sales of each type of business.)



8

(1) Blood testing business

(Outline)

The company works on developing, manufacturing, and selling Analyzers for “electrolyte tests” and “glucose tests,”

reagents for clinical tests (for measuring the concentrations of electrolytes, blood sugar, etc.), and supplies (such as

sensors installed in analyzer), and offers customer support.



9

(Source: A&T’s website)

(Commercial distribution)

*Inside Japan

The company directly sells analyzers, reagents, and supplies to small and medium-sized hospitals via 8 branches

nationwide. As of now, about 4,000 units of equipment are in operation.

*Outside Japan

The company sells analyzers as an OEM. It supplies electrolyte units, which are the specialty products of the company, to

other Japanese manufacturers, including JEOL (6951, 1st section of TSE). The OEM clients combine the unit with

large-size clinical chemistry analyzers and sell them. As an OEM, JEOL supplies products to Siemens, which is one of

global enterprises handling large-size clinical chemistry analyzers.

(Business model)

Once Analyzers is newly installed, clinical reagents and supplies will be continuously delivered, and the maintenance

service for the equipment will be offered.

Once adopted, it is rare for client hospitals to change manufacturers considering the continuity of test data and usability,

and so it is difficult for new manufacturers to enter the market. 7 to 10 years later, upgraded models will replace them.

This characterizes this business field.

(Major enterprises in this field)

Sysmex (6869, 1st section of TSE), Hitachi High-Technologies (8036, 1st section of TSE), JEOL (6951, 1st section of

TSE), Wako Pure Chemical Industries (unlisted), ARKRAY (unlisted)

(2) IT and automation support business

(Outline)

In the case of blood tests, it is necessary to convey patient’s blood (specimen) sampled in a blood collection room to a

clinical laboratory and manually set the specimen at testing equipment.

As several kinds of tests need to be conducted for many specimens at the same time, this work is extremely

labor-intensive and inefficient, and the human error of taking a wrong specimen is difficult to avoid.

In these circumstances, A&T Corporation supports the streamlining of the testing process with the following 2 systems.



10

(Source: A&T’s website)

Laboratory Information System (LIS) Software for a clinical laboratory, which receives requests for tests from medical doctors,

sends a command for testing to Analyzers, and inputs test results in electronic medical charts,

etc. accurately and swiftly. This also manages cost, etc. and serves as a core system of a

laboratory.

Laboratory Automation System (LAS) The specimens delivered to a laboratory are automatically conveyed to Analyzers via a

computer-controlled conveyor line, and then undergo measurement. Blood tests, which had

been manually conducted, are fully automated, to streamline and speed up the testing process.

It is expected that the installation of LAS will decrease the necessary number of workers from 7-8 to about 2, and the

necessary time of testing from 90 min. to 30-40 min.

Through the introduction of LIS, it became possible to put together the data of test results, which had been printed out for

each test item, and give feedback to medical doctors swiftly and accurately. In addition, the data mining function is

helpful for reducing the number of times of abnormal value retesting and the duration of testing.

(Commercial distribution)

*Inside Japan

Targeting the laboratories of medium and large-sized hospitals, the sales division of A&T Corporation sells LIS in

cooperation with hospital information system manufacturers, including Hitachi, IBM, and Fujitsu, and LAS in

cooperation with large-size clinical chemistry and immunoassay analyzer manufacturers, including Hitachi, Toshiba, and

JEOL, as comprehensive solutions *.

*For the details of comprehensive solutions, see the section “1-5 Characteristics and Strengths.”

*Outside Japan

The company sells LAS directly to Asia, including South Korea and China. In the U.S., the company sells blood

aliquotting instruments to business partners as an OEM.

(Business model)

In addition to the maintenance service of LIS and LAS after their installation, the company can connect additional

systems, customize the system, and so on for LIS, and can offer maintenance services, sell supplies, and so on for LAS.

For both of the systems, stable sales can be expected.

Like Analyzers, clients are rarely motivated to shift to other manufacturer’s equipment, considering usability, data

continuity, etc. The price range per transaction is 10 to 50 million yen for LIS, and 10 to 100 million yen for LAS.



11

(Major enterprises in this field)

LIS: Sysmex CNA (subsidiary of Sysmex), local vendors, etc.

LAS: IDS (unlisted), Hitachi-Aloka (unlisted), Siemens, etc.

2. Development systems

A&T Corporation adopted matrix management combining a wide array of products and element technologies for

electrical, mechanical, chemical, and information systems that have been nurtured for many years.

The company is developing products for offering comprehensive solutions related to C.A.C.L. beyond product categories.

About 80 staff members are employed at the headquarters and Shonan Office.

R&D cost for the term ended Dec. 2016 was 989 million yen and the ratio of R&D cost to sales was 9.7%.

The company will continue active R&D with the ratio of R&D cost being around 10%.

3. Production systems

There are two production sites: Shonan Factory, in Kanagawa Prefecture, for manufacturing clinical reagents and supplies

and Esashi Factory, in Iwate Prefecture, for producing equipment and Laboratory Automation System (LAS).

The company manufactures high-quality, safe products with advanced equipment under rigorous management. In

cooperation with the development section, the company is striving to improve quality and streamline operation.

In order to develop the foundation for expanding sales further, the company will construct a new building with a total

floor area of 7,300 m2 at Esashi Factory by investing 1.7 billion yen, and strengthen capabilities considerably.

4. Sales routes and methods

As mentioned above, A&T Corporation sells its products to client hospitals via 8 branches in Japan, by utilizing its

capability of proposing comprehensive solutions.

Outside Japan, the company supplies products to overseas clients and dealers including Siemens through domestic OEM

partners such as JEOL.

To expand its business scale by supplying products as an OEM like this is the basic strategy, and the company

concentrates on the diversification of OEM clients.

The direct overseas sales to overseas clients and dealers and its ratio for the term ended Dec. 2016 were about 800 million

yen and 7.4%, respectively.

But, as the ratio of virtual overseas sales, including the (estimated) overseas sales via domestic OEM clients, for the term

ended Dec. 2015 and for the term ended Dec. 2016 was 23.4%, 24.7% respectively, the ratio of overseas sales is in

upward momentum

（The ratio of overseas sales, unit: %）

FY12/12 FY12/13 FY12/14 FY12/15 FY12/16 FY12/17

(Est.)

Direct 3.3 5.7 6.9 5.9 7.4 8.6

Virtual 21.8 23.4 24 23.4 24.7 -

【1-5 Characteristics and strengths】

◎ Capability of proposing comprehensive solutions

A&T Corporation handles products mainly for electrolyte and glucose tests, and does not handle products for other tests.

However, client hospitals need to install a variety of testing instruments in their clinical laboratories.



12

To meet their needs, the Laboratory Automation System (LAS) has an automatic conveyor line that is compatible with

not only its own products, but also other manufacturers’ instruments.

There are few manufacturers that possess technologies for producing systems for connecting their own products and other

manufacturers’ products freely and conveying them. Accordingly, the company occupies about 30% of the Japanese

market.

The sales staff of the company not only delivers equipment, but also proposes a layout for the most efficient testing with

3D CAD or the like, while considering the area and shape of a laboratory.

All above, the company can offer optimal one-stop solutions for preparing necessary products in a laboratory, installing

and operating equipment while proposing a layout. This is highly evaluated by client hospitals.

◎ Advanced technologies in specific fields

A&T Corporation handles products mainly for “electrolyte tests” and “glucose tests.” Especially, its advanced technology

for electrolyte analyzers can be verified by the fact that its products are supplied to JEOL, which is a leading

manufacturer of measurement devices, including medical instruments, and Siemens, which is a large global company.

As mentioned in the section of the market environment, Japanese medical Analyzers is highly competent in the world,

and A&T Corporation contributes to the competitiveness of Japanese products.

【1-6 ROE analysis】

FY 12/12 FY 12/13 FY 12/14 FY 12/15 FY12/16

ROE (%) 12.2 10.7 9.5 15.7 10.9

Ratio of net income to sales [%] 5.60 5.11 4.76 8.28 6.37

Total asset turnover ratio [times] 1.02 0.98 1.00 1.04 1.03

Leverage [times] 2.14 2.13 1.99 1.83 1.67

In the term ended Dec. 2016, as leverage declined, ROE was down but remained 2-digit.

The estimated ratio of net income to sales for this term is 5.4%.

２．First Half of Fiscal Year December 2017 Earnings Results

(1) Consolidated Business Results (Unit: Million yen)

FY 12/16 2Q Ratio to sales FY 12/17 2Q Ratio to sales YOY Compared with

Initial Forecast

Sales 4,746 100.0% 4,608 100.0% -2.9% -5.0%

Gross margin 2,317 48.8% 2,137 46.4% -7.8% -

SG&A expenses 1,732 36.5% 1,823 39.6% +5.2% -

Operating

income 584 12.3% 314 6.8% -46.3% -25.2%

Ordinary

income 573 12.1% 307 6.7% -46.4% -25.1%

Net income 335 7.1% 239 5.2% -28.4% -17.6%

Sales and profit dropped year on year, failing to reach the estimate.

Sales were 4,608 million yen, down 2.9% year on year. The number of large-scale transactions for Laboratory

Automation Systems inside and outside Japan increased, but the OEM sales of Analyzers were weak, and the OEM and

direct sales of Diagnostic reagents were sluggish. Operating income was 314 million yen, down 46.3% year on year. As

the overseas transactions for Laboratory Automation Systems increased, cost of sales rose. In addition, the augmentation

of SG&A expenses due to the growth of R&D cost (investment in the development of subsystems for Laboratory

Information Systems) was not offset. Neither sales nor profit reached the estimate.



13

(2) Sales of each product series

(Unit: Million yen)

Product series FY 12/16 2Q

Composition

Ratio

FY 12/17 2Q Composition

Ratio

YOY

Clinical Testing Equipment and

Systems

2,178 45.9% 2,226 48.3% +2.2%

Analyzers 347 7.3% 291 6.3% -16.2%

Laboratory Information System (LIS) 1,282 27.0% 1,247 27.1% -2.7%

Laboratory Automation System (LAS) 548 11.6% 686 14.9% +25.2%

Diagnostic reagents 1,179 24.9% 1,102 23.9% -6.6%

Supplies 942 19.9% 938 20.4% -0.5%

Others 444 9.3% 342 7.4% -23.1%

Total 4,746 100.0% 4,608 100.0% -2.9%

◎ Clinical Testing Equipment and Systems

Sales grew 2.2% year on year.

The sales of Analyzers dropped because one of main OEM partners for the electrolyte unit has changed strategy for its

key driver. and prices were revised. The OEM sales outside Japan were healthy. The company considers that it is

important to keep seeking new OEM partners for electrolyte, and is approaching two Japanese companies and some

Chinese ones.

The number of large-scale domestic transactions for Laboratory Information System decreased.

As for Laboratory Automation System, the number of large-scale transactions grew inside and outside Japan. Especially,

the OEM sales to business partners in the U.S. were favorable.

◎ Diagnostic reagents

Sales decreased 6.6% year on year.

Overseas sales were healthy, but the OEM sales were sluggish due to price revision, etc., and domestic direct sales

dropped.

◎ Supplies

Sales declined 0.5% year on year.

Quantity sold increased slightly, but sales decreased slightly due to the revision to prices for OEM partners.

◎ Other

Sales dropped 23.1% year on year.

The sales of purchased products accompanying domestic large-scale transactions for Laboratory Information System and

Laboratory Automation Systems decreased.

(3) Major strategies and their progress

◎ Equipment investment

The enlargement of Esashi Factory is progressing healthily. The completion ceremony is to be held in September 2017,

and the production lines for some Diagnostic reagents will be transferred from Shonan Factory to Esashi Factory. In

October, the factory will start manufacturing devices.

In April 2018, the company will start manufacturing Diagnostic reagents after obtaining the approval for applications

pursuant to the Law on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical

devices.

In parallel, the company is planning to improve the Shonan production site by utilizing vacant space of Shonan Factory.

Through a series of strategies, the production capacities of devices and Diagnostic reagents/supplies are estimated to

expand about 1.7 times and 3.4 times, respectively.



14

◎ Product development

The company is investing in the development of subsystems for Laboratory Information System, with the aim of

completing the subsystems by the end of this year and posting their sales from the next term.

In the second half of this term, the company will start the full-scale development of large-scale modules (refrigerators)

accompanying Laboratory Automation Systems. A prototype will be completed at the beginning of the next year, and the

product will be released in the second half of the next term.

◎ Cultivation of new business partners

As mentioned above, the company will seek new OEM partners for electrolyte inside and outside Japan.

In addition, the company is negotiating with a Chinese company for the conclusion of a contract for distributorship, with

the aim of enriching sales channels for Laboratory Automation System mainly in Asia.

◎ Structure reform of the manufacturing system

The company aims to reduce cost and improve yield through the horizontal expansion of manufacturing cost analysis.

In addition, the company launched a project for work-style reforms to improve productivity.

(3) Financial condition and Cash Flow

◎ Main BS

(Unit: million yen)

End of Dec.

2016

End of Jun.

2017

End of Dec.

2016

End of Jun.

2017

Current assets 6,789 6,352 Current liabilities 3,127 2,886

Cash and deposits 1,163 1,639 Trade payables 1,187 1,120

Trade receivable 4,218 3,156 Short-term

interest-bearing debts

960 940

Inventories 1,233 1,319 Noncurrent liabilities 761 1,102

Noncurrent assets 3,320 3,975 Long-term


720 1,060

Property, plant and

equipment

2,891 3,557 Total liabilities 3,888 3,988

Intangible assets 73 62 Net assets 6,222 6,339

Investments and other assets 356 355 Total liabilities and net

assets

10,110 10,328

Total assets 10,110 10,328 Balance of


1,680 2,000

Equity ratio 61.5% 61.4%

Current assets decreased 437 million yen from the end of the previous term, due to the drop in trade receivable, etc.

Noncurrent assets grew 654 million yen from the end of the previous term, due to the rise in construction in progress

through the enlargement of Esashi Factory, etc. Accordingly, total assets increased 217 million yen from the end of the

previous term to 10,328 million yen.

Total liabilities rose 100 million yen from the end of the previous term to 3,988 million yen due to the augmentation of

long-term interest-bearing debts.

Net assets grew 117 million yen from the end of the previous term to 6,339 million yen due to the increase in retained

earnings.

As a result, equity ratio was 61.4%, nearly unchanged from 61.5% at the end of the previous term.



15

◎Cash Flow

(Unit: Million yen)

FY 12/16 2Q FY 12/17 2Q Increase/Decrease

Operating CF 959 1,014 +55

Investing CF -109 -734 -624

Free CF 849 280 -569

Financing CF -555 194 +749

Cash and equivalents 1,371 1,639 +267

Operating CF was nearly unchanged. The deficit of investing CF expanded, as the expenditure for acquiring property,

plant and equipment increased through the enlargement of Esashi Factory, etc. The surplus of free CF shrank. Financing

CF became positive, due to the augmentation of long-term interest-bearing debts. The cash position improved.

3. Fiscal Year December 2017 Earnings Estimates

(1) Consolidated earnings forecast (Unit: Million yen)

FY 12/16

Ratio to

sales

FY 12/17

(forecast)

Ratio to

sales Year on Year FY 12/16

Sales 10,234 100.0% 10,400 100.0% +1.6% 44.3%

Gross margin 4,632 45.3% 4,690 45.1% +1.2% 45.6%

SG&A expenses 3,617 35.3% 3,870 37.2% +7.0% 47.1%

Operating income 1,015 9.9% 820 7.9% -19.3% 38.3%

Ordinary income 1,004 9.8% 800 7.7% -20.4% 38.4%

Net income 651 6.4% 560 5.4% -14.1% 42.7%

*The forecasted values were provided by the company.

No revision to the earnings forecast. Sales are estimated to increase, while profit is forecasted to decline, due to

upfront investment.

There is no revision to the full-year earnings forecast. Sales are estimated to be 10.4 billion yen, up 1.6% year on year.

The OEM sales of the blood testing business and the Laboratory Information System, CLINILAN GL-3, which were

both sluggish in the first half, are expected to recover in the second half. Gross profit rate is forecasted to decline 0.2

points, because of the augmentation of cost due to the equipment investment for the factory relocation.

Operating income is projected to be 820 million yen, down 19.3% year on year, because SG&A expenses are estimated to

increase due to the upfront investment in the development of subsystems for Laboratory Information Systems and

large-scale modules for Laboratory Automation Systems.

The development cost of Laboratory Information Systems is for intensive investment, which is to be posted in this term

only.

The dividend amount is to be 20 yen/share, unchanged from the previous term. The estimated payout ratio is 22.3%.

(2) Sales for each product series

(Unit: Million yen)

Product series FY 12/16 Composition

ratio

FY 12/17

(forecast)

Composition

ratio Year on year

Product

series

Clinical Testing Equipment

and Systems

5,152 50.3% 5,220 50.2% +1.3% 42.6%

Analyzers 744 7.3% 640 6.2% -14.1% 45.5%

Laboratory Information

System (LIS)

2,670 26.1% 2,880 27.7% +7.9% 43.3%



16

Laboratory Automation

System (LAS)

1,737 17.0% 1,700 16.3% -2.2% 40.4%

Diagnostic reagents 2,298 22.5% 2,330 22.4% +1.4% 47.3%

Supplies 1,862 18.2% 1,890 18.2% +1.5% 49.6%

Others 920 9.0% 960 9.2% +4.3% 35.6%

Total 10,234 100.0% 10,400 100.0% +1.6% 44.3%

Sales are estimated to grow thanks to the sales promotion of the Laboratory Information System, CLINILAN GL-3, but

the OEM sales are projected to be sluggish.

The following changes from the previous term are forecasted.

The OEM sales of Analyzers are projected to decline due to the change of products of OEM partners and price

revision.

Sales are estimated to recover in the second half, thanks to the sales promotion of the Laboratory Information

System, CLINILAN GL-3.

The number of large-scale transactions for Laboratory Automation Systems is forecasted to be nearly unchanged

from the previous year. The company will concentrate on the increase of overseas transactions mainly in Asia,

especially China.

The sales of Diagnostic reagents are estimated to increase slightly.

The sales of purchased products accompanying large-scale transactions based on the comprehensive solutions for

Laboratory Information Systems and Laboratory Automation Systems in the second half are forecasted to increase

slightly.

4. Business operation from now on

<Sales strategies>

Domestic To make new transactions for the Laboratory Information System, CLINILAN GL-3, and the Laboratory

Automation Systems, CLINILOG V4 and CLINILOG STraS.

To cement the cooperation with the existing OEM partners for electrolyte, and strive to find new OEM partners

inside and outside Japan.

To introduce coagulation products to new markets (the perinatal field) based on the cooperation with Atom Medical

Corporation

Overseas To boost the OEM sales of Laboratory Automation Systems to business partners in the U.S.

To expand overseas sales channels for Laboratory Automation Systems mainly in Asia

To increase overseas OEM partners for electrolyte

To approach some Chinese manufacturers of biochemical analyzers as major targets.

The company aims to achieve a ratio of direct overseas sales of over 10% stably.

<R&D strategies>

(Blood testing business)

Analyzers To improve OEM products of electrolyte repeatedly, to differentiate them from the aspects of quality and performance

Diagnostic

reagents

To proceed with the development of coagulation products by taking advantage of the tie-up with Atom Medical.

Supplies To improve the quality of sensors, take measures for overseas regulations, differentiate products from the aspects of

quality and performance, and increase the versatility of products

(IT and automation support business)

Laboratory Information Systems To develop the subsystems for CLINILAN GL-3 (blood transfusion, bacteria tests, etc.)

→ Establishment of a brand and advantage (intensive investment in fiscal 2017 only)



17

Laboratory Automation Systems To develop a next-generation pretreatment system (New MPAM)

To develop new large-scale modules

To develop standardization modules for business partners in China, and expand overseas sales

channels

<Major strategies for each product category>

(Blood testing business)

Analyzers To strengthen the OEM business for electrolyte

To increase the ratio of overseas sales and quantity sold

Diagnostic reagents

To enhance the overseas OEM business for electrolyte

To introduce coagulation products to new markets (the perinatal field) based on the cooperation

with Atom Medical Corporation

To redesign direct sales systems and earning structures

Supplies To reinforce the overseas OEM business for electrolyte

To improve the quality of each sensor, observe overseas regulations, and promote sales

Others To introduce coagulation products to new markets (the perinatal field)

To continue the research into tumor markers

(IT and automation support business)

Laboratory Information System To promote the sales of new products, and improve the quality and brand power of products

To increase sales staff members and system engineers

To promote in-house production, and develop personnel who have expertise

To complete the development of subsystems by the end of the year

Laboratory Automation System To expand overseas sales mainly in China, South Korea, Taiwan, Southeast Asia, etc.

To fortify the relations with U.S. business partners and sales

To negotiate with prospective distributors in China, and foster relations with them

<Strategies in China>

(Market environment)

The scale of the clinical examination market in China exceeds 30 billion yuan ( 500 billion yen), and its annual growth

rate is 15-20%.

The company estimates that the scale of the biochemical testing market, which is the major battlefield for the company, is

about 10 billion yuan (= 167 billion yen). The current market scale is nearly equal to that in Japan, but is expected to

grow considerably.

It is considered that there are about 14,300 hospitals in China, and the company targets medium to large-sized hospitals

that have over 100 beds, and the number of such hospitals is about 8,300. The needs for advanced medical care are

growing, and the number of hospitals is increasing year by year.

On the other hand, in the clinical examination market in China, European and U.S. companies have occupied

overwhelming shares so far, but Chinese manufacturers are growing significantly, improving their technological levels

and changing business environments considerably.

(Business strategies)

In 2012, the company established a joint venture, to sell Analyzers (electrolyte units), and has conducted the OEM sales

to one Chinese manufacturer, but considering that it is necessary to operate business in a more multifaceted manner, in

order to cultivate the huge market amid the change in the market environment, the company obtained a new business

license for the joint venture in June 2016, and established a division for promoting the business in China, to develop a

system for carrying out full-scale business in China, and opened an expatriates’ office in Shanghai in September 2016.



18

The expatriates’ office in Shanghai strives to glean information more meticulously. Conducting business only by

themselves in the Chinese testing market is accompanied by significant risk, because the preference to products

manufactured in China is growing and there is a difference in distribution channels. Accordingly, it is difficult to do

business without a partner, such as a joint venture, and so the company is looking for an adequate partner, and about to

find some promising candidates.

*Analyzers, electrolyte units

Currently, the company conducts the OEM sales to a leading Chinese manufacturer, and is approaching some

manufacturers of biochemical analyzers as new OEM partners for alliances.

* Laboratory Automation System

In the previous term, the core product, CLINILOG V4, was installed in a large hospital in China for the first time.

The laboratory of this hospital serves as a showroom, where many hospital personnel and enterprises can see the actual

operation of CLINILOG V4. The company is now negotiating with a candidate distributor for the conclusion of a

contract.

The company possesses the capability of comprehensively offering optimal solutions ranging from installation to

operation, providing laboratories with necessary products and designing layouts. By utilizing this strength also in the

Chinese market, the company plans to cultivate the huge market.

5．Conclusions

One of main OEM partners for the electrolyte unit has changed strategy for its key driver. This surprised shareholders

negatively, and its share price, which had been recovering, returned to stagnation.

Fortunately, there is no revision to the earnings forecast, and the company expects the recovery in the second half. The

progress of the cultivation of new OEM partners is noteworthy.

Meanwhile, we would like to pay attention to the release of the second Laboratory Automation System in the Chinese

market.

(Relative stock price in past one year. Blue: A&T, Red: JASDAQ index)



19

<Reference: Regarding corporate governance>

◎ Organization type and the composition of directors and auditors

Organization type Company with audit and supervisory committee

Directors 11 directors, including 2 external ones

◎ Corporate Governance Report

Last Update: March 29, 2017.

As a JASDAQ listed company, the company fully follows the 5 items of basic principles of the corporate governance

code.

This report is intended solely for information purposes, and is not intended as a solicitation for investment. The information and opinions

contained within this report are made by our company based on data made publicly available, and the information within this report comes

from sources that we judge to be reliable. However we cannot wholly guarantee the accuracy or completeness of the data. This report is not a

guarantee of the accuracy, completeness or validity of said information and opinions, nor do we bear any responsibility for the same. All rights

pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All

investment decisions are the responsibility of the individual and should be made only after proper consideration.

Copyright (C) 2017 Investment Bridge Co., Ltd. All Rights Reserved.


bridge report a&t corporation (6722)of clinical chemistry and hematology tests are 175.9 billion...

Documents