MATERIALITY andSUSTAINABILITYIDENTITY

BUSINESS andSTRATEGIESFINANCIAL INFORMATION /OTHERSGOVERNANCE

Pharmaceutical businessBusiness environment
Worldwide pharmaceutical market*

SWOT analysis of the pharmaceutical business(USD BN)Strengths

Muneaki FujimotoSSenior Vice President,
President of Pharmaceutical Business

SWOT

Quoting our business’s Purpose, “Respecting science, technology and people, we will contribute topatients’ lives” as we pursue research and development. We are proud to have received manufacturing and marketing approval in Japan for CORECTIM® Ointment 0.5% and 0.25% for indications ofatopic dermatitis, and ENAROY® Tablets 2 mg and 4 mg for the treatment of anemia associated withchronic kidney disease. We will continue making steady progress with R&D to help ensure sustainableprofit growth.

A N A L Y S I SWRespecting science, technology and people,
we will contribute to patients’ lives

Intensive allocation of resources to three focus areas: Cardiovascular, Renaland Metabolism (CVRM); immunology; and neuroscience
Investment in latest technologies and development of platform of JT’s
unique proprietary drug discovery technologiesO

Maximal leveraging of intra-Group synergies through functional
specialization between JT (R&D) and consolidated subsidiary Torii
Pharmaceutical (domestic sales)

1,218.1

400

Expediting the drug discovery process

Growth in pharmaceutical demand worldwide driven by societal aging indeveloped countries as well as economic growth in developing countries
Greater difficulty in- and out-licensing

Threats


1,276.6 1,309.2

800

Opportunities

T

1,439.5

1,200 1,179.3

Weaknesses/Challenges



Purpose

1,600

R&D specialization in small-molecule drug discovery02017201820192021

2020* Copyright © 2023 IQVIA.
Calculated based on IQVIA World Review(Data Period, Year 2017-2021)
Reprinted with permission

Possibility of continual drug price reductions in domestic and overseas
markets amid a global trend toward rationalization of drug costs
Increasing difficulty of new drug development and intensification ofits competition
Increasing use of generics and growing global market share for Rx-to-OTC
switched drugs**Drugs previously available only by prescription that have been converted to OTC status

Pharmaceutical business basic strategy
We focus our pharmaceutical business on contribution to stable profits for the entire Group. Its basic strategies are:n Relentless pursuit of better drug discovery;n Focus on R&D investment for next-generation strategic products and out-licensing them with optimal timing; andn Maximizing the value of each product.
The pharmaceutical business focuses its R&D on these areas:
Cardiovascular, Renal and Metabolism (CVRM);
immunology; and neuroscience.

Cardiovascular,Renal andMetabolism

Immunology

Performance over the last five years
Revenue grew by 3.1% year on year, driven by top-linegrowth at consolidated subsidiary Torii Pharmaceutical andpartially offset by a decrease in overseas royalty income.
Torii Pharmaceutical reported major growth in sales ofdrugs for skin diseases and allergies, leading its top-line
growth.
Adjusted operating profit grew by 0.5% year on year as aresult of increased R&D costs offsetting revenue increases.

Revenue and adjusted operating profit (JPY BN)
1,200

114.0
88.5

900

79.0

300

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Japan Tobacco Inc. Integrated Report 2022

82.9600

28.4
15.9

Neuroscience

80.4

17.2

20182019■ Revenue■ Adjusted operating profit

2020

11.1
2021

11.1
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IDENTITY

MATERIALITY andSUSTAINABILITY

BUSINESS andSTRATEGIESGOVERNANCE

FINANCIAL INFORMATION /OTHERS

Pharmaceutical business

Sustainability initiatives through business activities
Case study: Developing original drugs to help people recover from disease
Our pharmaceutical business’s sustainability strategy designates “products and services” as one of the focus areas. We
aim to create innovative, original drugs to support patientsin the shortest time possible. We continue to make furtherstrides in new drug R&D through ongoing investment inthree specific therapeutic areas: Cardiovascular, Renal andMetabolism (CVRM); immunology; and neuroscience. In
2022, we invested 29.8 billion yen in R&D. Our clinical development as of February 14, 2023, can be found here.
As a result of our initiatives, in Japan we launched ENAROY®
Tablets 2 mg and 4 mg (generic name: enarodustat) for anindication of anemia associated with chronic kidney disease,and CORECTIM® Ointment 0.5% (generic name: delgocitinib)
for an indication of atopic dermatitis in 2020, as well as

Our sustainability strategy and focus areas

CORECTIM® Ointment 0.25% for pediatric patients withatopic dermatitis in 2021.

For the pharmaceutical business, we selected three focus areas and set five

From the beginning, we had developed CORECTIM® ointment for pediatric patients in mind since atopic dermatitis
is common among not only adults but also children. In
2022 we completed all clinical trials in Japan with atopic
dermatitis patients under two years of age, and revised
supplemental documentation in January 2023 supporting
extended application of the drug to infants. To enrich thelives of people of all ages suffering from health issues andtheir families, we will continue to seek and develop original
drugs that can be used safely and with peace of mind.

ery year. For details see “KPI progress.”

specific targets for them in 2019, and have been reporting on progress ev-KPI progress

Products and services
Aspirational goals
We will create innovative, original drugs to support patientsin the shortest time possible. As this business has a direct
impact on human health and life, we not only strictly comply with all laws, regulations, and industry standards, but arealso guided by a strong sense of ethics and responsibility.
This is particularly the case in areas such as clinical trials
and promoting drugs, as well as animal experiments andmanaging chemical substances.

Investing in people
Aspirational goals
We will strive to nurture talent development which enables
us to create first-in-class (FIC) drugs. We strictly adhere to
specific processes to ensure that our pharmaceutical business activities are always carried out in a responsible andappropriate way. We provide e-learning to help employees

understand the importance of drug safety and quality assurance. All of the employees in our pharmaceutical businesscomplete a mandatory e-learning course every year. We also
have an internal educational activity to foster employees’
ethical awareness and sense of responsibility towards savingpatients.

Product safety and responsibility
Aspirational goals
We will strictly comply with all relevant laws, regulations,and industry standards in order to deliver safe drugs topatients. We have developed our own guidelines on how toconduct annual inspections to ensure that our production
methods fully comply with government recommendations.
We started annual inspections in accordance with theseguidelines in 2017. Since 2018, we have been operating
inspections at all of our contracted factories. We willcontinue to operate these guidelines. We also have our own
standard on the ethical promotion of prescription drugs,

based on the guidelines on sales information provision
activities by the Ministry of Health, Labour and Welfare.
Medical Representatives of our subsidiary company Torii
Pharmaceutical Co., Ltd. provide and gather informationon pharmaceutical drugs to/from medical professionals
appropriately, and regularly participate in training programs
to ensure adherence to these guidelines. Through internal
communication, we provide relevant and detailed information to our Medical Representatives to keep them up to datewith the latest guidelines.
4Read more on JT.com.

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