Business Outline
This segment is active in the in-vitro diagnostics market, which amounts to over ¥2 trillion in annual sales globally. The segment’s business model provides a stable earnings stream due to the sale of replacement reagents following the initial sale of testing equipment. In the past, HORIBA was successful in expanding market share for small- and medium-sized hematology analyzers. In recent years, however, we have expanded our operations by progressively launching large hematology analyzers and new products in the clinical chemistry market. The product development and marketing prowess of HORIBA ABX SAS (France) has been instrumental in these efforts.

Achieving the Goals of the Mid-Long Term Management Plan
The Mid-Long Term Management Plan (MLMAP) targets the net sales of ¥150 billion by the end of December 2010 fiscal year. This would represent growth of 42% compared with the March 2006 fiscal year. However, as the Medical/Diagnostic Instruments & Systems segment is central to the growth and earnings expansion of HORIBA, this segment has been set minimum targets higher than the average growth rate for MLMAP - the sales growth target is at least 61% (average annual rate 10% or more) and the operating income ratio target is at least 10%.

To realize these targets, the segment is steadily rolling out new models - from simple to high-end - of hematology analyzers, new versions of reagents and new products for expanding the line. At the same time, we are developing and supplying a comprehensive management system for a range of testing devices, samples and results. This new management system targets both the clinical laboratory market and the market for POCT/NPT (Point Of Care Testing or Near Patient Testing - simple and quick testing conducted close to the patient). We expect these measures to lead to an increased operating income ratio led by higher sales of reagents which will accompany growth in the number of in-use, high-end hematology analyzers and clinical chemistry analyzers.

Looking ahead, large-scale M&A activity centering on the in-vitro diagnostics analysis market and extending into other business areas will generate fierce competition. In response, the segment will work to increase sales of high-end hematology analyzers to Japanese and Asian markets, as well as to expand our market of clinical chemistry analyzers and reagents to the Americas and Asia, which have been primarily sold in Europe. With these measures the segment is targeting a 10% annual sales growth, as well as higher operating income and an improvement in the operating income ratio.

We are aware that a vital improvement to our operations in the U.S., the largest, most-advanced market in the world, is necessary if we are to achieve the targets of the Mid-Long Term Management Plan. We are therefore focusing investment on U.S. operating centers to improve marketing and product development and to train personnel.

Results for the Fiscal Year Ended December 31, 2006 and Business Strategies
Sales of large hematology analyzers increased in the European and American markets, while sales of testing reagents also expanded, reflecting strong growth in the number of analyzers in use. In the domestic market, last spring revision of the fees for treatment paid to medical institutions under the medical insurance system caused concern about a potential negative impact on the segment’s results. In retrospect, the impact was small. Meanwhile, the shortened fiscal year effect on sales was countered by strong sales of small, automatic blood cell and CRP counters. Resulting consolidated net sales for the segment were up 12%, and the operating income ratio was 1.5 point higher than it was in the previous fiscal year ended March 20, 2006.

Outlook for the Fiscal Year Ending December 31, 2007
The segment will continue to focus on expanding sales of high-end hematology analyzers and clinical chemistry analyzers which will increase the number in use within the market. We also plan to expand reagent manufacturing facilities at HORIBA ABX SAS in France in response to higher demand.

Note: For forecasts of net sales and operating income, etc., please refer to information publicly disclosed by HORIBA, such as earnings releases and revisions of earnings forecasts.

Product Applications
health and diagnostics testing, disease diagnosis

Major Customers
medical testing centers, small- and medium-sized hospitals, medical practitioners