Financial Results FAQ for Mass Communications

Q1. You project 200 billion for Olmetec® as the global target for fiscal 2009,. Would you tell us the expectations for Cravit® and Mevalotin®?

A1. On May 13th, we indicated the numerical targets of the whole company, and those are included in the individual targets. Going forward we will consider the measures and policies for the interim business plan of Daiichi Sankyo and also for these products,. If it is decided best to share the figures with you, we will disclose them accordingly.

Q2. The effectiveness of CS-505 was not proved and we understand this led to the decision to cease it. Does this mean that a review of the Research & Development framework enabled you to reach a decision quicker?

A2. In all projects, we establish Go/ No-Go criteria for each particular time point to conduct our trials. CS-505 became No-Go because results of the effectiveness aspect did not satisfy the criteria for completion of Phase IIb. There will be no change going forward to our projects progressing on basis of pre-set Go/ No-Go criteria.

Q3. Profits of Sankyo Pharma Inc. (SPI) in America have edged downward in the second fiscal half from the first fiscal half. What is the reason for the increase in the Selling, General, and Administrative expenses?

A3. We have an agreement to share the final profits of SPI's Benicar at a fixed ratio with Forest Laboratories, a partner we collaborate with on Sales & Marketing. Profit sharing is accounted for under Sales & Marketing expenses, and when sales exceed projection, the Sales & Marketing expenses increase. Presently SPI is conducting additional clinical trials for another indication, and as we will be proactively promoting these trials and enhancing sales and marketing for Benicar, leading us to forecast a deficit for the second fiscal half.

Q4. Will there be any impact on earnings as a result of the merger of operations overseas?

A4. Special losses, such as penalties associated with office lease contract terminations, are generated by integration of the business operations. Aside from this however, we think the merger will have a positive effect since the integration of the business organizations will bring us a stronger sales capacity.

Q5. The termination of CS-505 clinical trials must have had an impact. What are your thoughts on licensing activities to cover the gap left by it, and corporate acquisitions to enforce pipelines?

A5. We consider our current pipelines inadequate not just simply to fill the gap of CS-505 but for Global Pharma Innovator to grow. We would like to enforce business development activities that work toward technical collaboration, M&A, and product introductions should suitable opportunities arise.

Q6. What is the status on progress of the merger of the healthcare business?

A6. This is in progress with a schedule to merge in April 2006, simultaneously with the business merger overseas.

Q7. You mentioned you consider the pipelines inadequate at present. Which areas will you reinforce going forward?

A7. The areas both companies place focus on are duplicative, so we would like to look into them more closely. We have not identified particular areas for enhancement among them. As per Pharma in Global Pharma Innovator (see p.27 of the slides), there are innovative drugs, that is, First in Class, or pharmaceuticals in those areas at present. However, we would like to think about areas with unmet needs.

Q8. In this interim settlement, there appears to be no impact of the merger of businesses. It will be important that the merger has an effect in the second fiscal half. What should we watch out for?

A8. We are moving forward without waiting until April 2007 in our collaboration in Japan on Olmetec®. We think the sales of Olmetec® in the second fiscal half will serve as an indicator on our decision about the merger effect. On the streamlining of our development pipelines, we think we probably would not see an improvement on the development side in the second fiscal half.

Q9. I believe the growth in Mevalotin® was -5% in the year prior. Has the impact of entering the generic drugs market settled?

A9. We understand that in generics overall the figures were about 6% on a drug price basis and 10% on a volume basis, actually becoming about 15% when direct sales routes to hospitals are considered. The performance from first fiscal half to second fiscal half in 2005 was sluggish, and we think that the impact has settled down.

Q10. What is the level of cost reduction benefits from the overseas merger in the immediate future?

A10. The merger overseas will impact mainly on enhancements and compensations to functionalities relating to development.