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Terumo Announces Strategic Business Alliance with Weigao in Peritoneal Dialysis Business

19/03/2012 - Tokyo, Japan

Terumo Corporation (Head Office: Shibuya-ku, Tokyo; President: Yutaro Shintaku - hereinafter "Terumo") is pleased to announce that a strategic business alliance has been formed with Shandong Weigao Group Medical Polymer Company Limited (hereinafter "Weigao") (Representative: Xueli Chen; Listed on The Stock Exchange of Hong Kong Limited.), a leading medical device provider in China, in peritoneal dialysis business.

Terumo and a subsidiary of Weigao, Weihai Weigao Blood Purification Products Company Limited (hereinafter "Weigao Blood") (Representative: Xia Liebo) will establish a joint venture company called "Wego Terumo JV". It will principally engage in production and sales of dialysate and other PD related devices in China.

In China, approximately 1,500,000 people are suffering from End-Stage Renal Disease (ESRD). The figure is estimated to reach approximately 3,000,000 within the next 10 years. Over 32,000 ESRD patients (estimated by Weigao), are currently receiving Peritoneal Dialysis (PD) therapy forming the world largest PD market. The PD patient population is estimated to reach approximately 300,000 within the next 10 years. In China, the patient population of diabetes, one of the leading cause of ESRD, has already reached 90,000,000 and is estimated to further increase in the future. Chinese Premier Wen Jiabao delivered the government work report at the Fifth Session of the 11th National People's Congress, stating that China will extend the medical insurance to cover more diseases such as uremia (the condition of ESRD) to provide aid for their treatment.

Terumo has been promoting the dissemination and expansion of PD since the company began the development of PD system in 1980. Terumo has been leading this field in Japan by providing innovative technologies including Japan's first neutralized dialysate.

With this strategic business alliance, Terumo aims for further growth of its PD business in the fast growing Chinese dialysis market, by combining the company's technology and expertise in PD and Weigao's strong market presence with nationwide sales network. Additionally, pursuant to the framework agreement, Terumo will enter into certain agreements with the new joint venture company to provide technology and trademark license. Furthermore, Terumo will enter into the marketing support agreement with WPD, a wholly owned subsidiary of Weigao Blood, to provide WPD the support with the sales and the provision of after sale services. Terumo expects Wego Terumo JV will start the sales of its PD systems in 2014 and aims to achieve the revenue of 40 billion yen with 25% of market share in China by 2021.

"This alliance will contribute to improve QOL (Quality of Life) of ESRD patients in China and help Terumo to build a business model along with our China strategy in which we expand the business through contributing to Chinese society," said Hiroshi Matsumura, Director & Executive Vice President of Terumo Corporation.

1. Overview of the new joint venture company

(1)Name Wego Terumo JV(based upon the approval by Chinese authorities)
(2)Head Office No.20, Xingshan Road, Torch Hi-tech Science Park, Weihai, Shandong Province, PRC
(3)Representative To be assigned from Weigao
(4)Main Activities The production and sales of dialysate, related consumables and equipment for peritoneal dialysis
(5)Capital Approximately 2,000 million yen (RMB 160 million)
(6)Establishment To be in the fall of 2012 (based upon the approval by Chinese authorities)
(7)Ownership Terumo (China) Holding Co. Ltd. 50% Weihai Weigao Blood Purified Product Company Limited 50%

2. Overview of the primary alliance partner

(1) Name Shandong Weigao Group Medical Polymer Company Limited
(2) Head Office 312 Shichang Road, Weihai City, Shandong Province, PRC
(3) Representative Mr. Xueli Chen
(4) Main Activities Research and Development, production and sales of single-use medical devices, including disposable consumables (infusion sets, transfusion sets, syringes, medical needles, blood bags and vacuum blood collection sets), orthopedic products and blood purification consumables and machines
(5) Capital Approximately 5,819 million yen (RMB 448 million)
(6) Establishment 28-Dec-00
(7) No. of employee 7,875
(8) Sales Approximately 41,885 million yen (RMB 3,180 million)

* (5)(7)(8) As of 2011/12/31

3. Peritoneal Dialysis (PD)

There are two main types of dialysis, Peritoneal dialysis (PD) and Hemodialysis (HD).

In PD, the inside of patient abdomen – peritoneal cavity – is filled with a dialysis fluid that is introduced through a catheter that is surgically placed in the patient abdomen. Excess water and wastes pass from the blood through the peritoneum into the dialysis fluid. The fluid is then drained from the patient body and discarded. In general, PD is a 24-hour continuous therapy consisting of four dialysis exchanges per day (an exchange lasts 5 to 6 hours). There have been some reports about the disadvantages of PD, such as peritonitis caused by infection and peritoneal sclerosis due to prolonged therapy. These risks, however, have been alleviated by using neutralized dialysate which is gentler to the peritoneum.

In HD, blood is removed from the body and filtered through a membrane called dialyzer to remove excess water and wastes, and then the filtered blood is returned to the body. A dialysis fistula (dialysis shunt) is a surgically created connection between artery and vein to provide enough blood flow at the appropriate pressure to make hemodialysis possible. Most patients go to a dialysis center two or three times a week for 4 to 5 hours per each visit.

Because of its convenience and economic efficiency, PD has been popular around the world. The penetration of PD among the entire dialysis therapy is as high as 90% in Mexico, 50% in United Kingdom, 40% in Canada, and 10 – 20% in EU countries and U.S.A. *2

*2 Toure, F. et al.: Kidney International, 65, 654 2004.

(Notice) Among the information that Terumo discloses, forecasts of financial performance on future projections contain potential risks and uncertainty since these are forecasts on projections made by Terumo based on limited information available at the moment of disclosure. Accordingly, it should be noted that actual results may differ from those forecasts on projections due to various factors. Factors affecting to actual results include, but are not limited to, changes in economic conditions surrounding Terumo, fluctuations of foreign exchange rates, and state of competition. The market share information in this booklet is partly derived from our own independent research.