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President's Letter to Shareholders

President Jun Sasaki
Jun Sasaki,

To our shareholders

I have great pleasure in making this brief report to our shareholders on MBL’s business operations in the financial year ended March 2014.

In FY 2014, the Japanese economy saw some continued upturn. The weak yen and rising stock prices led to better corporate profits and steady consumer spending. However, the weakness of the yen brought with it higher import prices. The emerging economies slowed down in growth, resulting in the stunting of Japanese export growth. In the healthcare sector, there have been new developments, including the revision of the Pharmaceutical Affairs Law and the enactment of the Regenerative Medicine Law in response to advances in medicine and healthcare. However, the general picture remains a tough one, with continued government containment measures of total healthcare costs compounded by price dips because of intensifying market competition due to new foreign pharmaceuticals joining the fray.

Under these circumstances, we at the MEDICAL & BIOLOGICAL LABORATORIES CO., LTD. decided to open up global avenues, out and away from the stifled Japanese market and the established clinical testing market, so as to actively create or reach new markets. To realize our aim, we increased our capital through third-party allocation at the end of FY 2013. During FY 2014, we were able to spend the newly acquired capital on human resource input overseas and strategic leading investment in order to equip ourselves for the next stage of growth in the ensuing business years.

In FY 2014, we directed our effort into developing large laboratory testing devices and their respective reagents, primed to be our growth drivers. Meanwhile, leveraging our comparative advantage in autoimmune disease testing, we devoted ourselves to developing genetic diagnostic agents of the future. We thus aimed to transform into a manufacturer of the entire range of clinical reagents. However, we met market competition that pushed selling prices down and encountered delays in the marketing of new products. These were the main reasons for our business results not being as expected. Our consolidated sales were 7,172 million yen (3.6% up year on year). Our costs increased due to the leading investments we made, resulting in an operative loss of 519 million yen.
I sincerely regret the grave concern this must have created for our shareholders.

We have a line-up of promising products that should contribute to better sales performance in FY 2015. We launched in FY 2013 the autoimmune disease testing reagent series for use with STACIA® for pre-treatment testing. We have auto-immune disease testing reagents including the MESACUP™ anti-ARS test, which is the new diagnostic reagent for polymyositis/dermatomyositis. We have cervical cancer-related testing reagents as well as genomic reagents including male sterility research agents in the perinatal domain. In the basic research reagent sector, we will step up our drive in sales growth by focusing on the global marketing of our MHC tetramer and increasing our sales of epigenomic products, used in domains where research is highly active into determining the causes of disease.

We pledge to deliver further growth for our Group through these activities.
I would like to ask all shareholders to continue in your generous support and guidance.

Jun Sasaki