COMPANY RESEARCH AND ANALYSIS REPORT

Pharma Foods International Co., Ltd.
2929
Tokyo Stock Exchange Prime Market

16-Jan.-2024
FISCO Ltd. Analyst

Masanobu Mizuta

FISCO Ltd.
https://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Business description. . ..................................................................................................................................

01

2. Significant increase in sales and profit in FY7/23. ........................................................................................

01

3. Forecasting a slight decline in profit in FY7/24 but there is room for upside. ...............................................

02

4. Promoting the creation of new value (new products, new markets, new organization) as a growth strategy....

02

5. High potential for medium- to long-term growth due to drug discovery, eggshell membrane materials
and other factors.........................................................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Company profile.. ................................... ......................................................................................................

03

2. History................................................... ......................................................................................................

04■Business summary--------------------------------------------------------------------------------------------------------------------------------------------------- 06
1. A fabless company focused on R&D . . ... ......................................................................................................

06

2. BtoB business. . ............................................................................................................................................

08

3. BtoC business.. ...................................... ......................................................................................................

10

4. Bio Medical business...................................................................................................................................

12

5. Risk factors, feature of earnings, and countermeasures. .............................................................................

14■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 15
1. Outline of results for consolidated FY7/23. ..................................................................................................

15

2. Trends by business segment. . ......................................................................................................................

16

3. Financial condition................................. ......................................................................................................

18■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 19• Overview of consolidated results forecast for FY7/24 . ................................................................................

19■Growth strategy----------------------------------------------------------------------------------------------------------------------------------------------------------- 20
1. Medium-Term Management Plan 2026.. ......................................................................................................

20

2. Creation of new products. . ...........................................................................................................................

20

3. Creation of new markets........................ ......................................................................................................

21

4. Creation of a new organization. . ...................................................................................................................

22

5. Shareholder return policy....................... ......................................................................................................

23

6. Sustainability management..........................................................................................................................

24

7. FISCO’s opinion..................................... ......................................................................................................

24

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir■ Summary
A biotechnology company aiming to create pharma foods by fusing
pharmaceuticals and foods
Pharma Foods International Co., Ltd. <2929> (hereafter, also “the Company”) is a biotechnology company whosebasic policy is to conduct business that contributes to people’s health by aiming to create pharma foods throughfusing pharmaceuticals and foods. By focusing on raw ingredients derived from nature and providing proprietary
technologies that are based on scientific evidence, it is creating food ingredients that clearly function to improve
both health maintenance and QOL (Quality of Life).
1. Business description
With a mission of advancing food and drug research to help people, the Company seeks to realize a sustainable
society in which people are happy and healthy. To achieve this goal, it performs research on pharmaceuticals andfunctional ingredients that act on immunity, aging, and the nervous system, and broadly provides its proprietary
research results and products to society in three business: the BtoB business; BtoC business; and Bio Medical
business. The BtoB business manufactures and sells functional ingredient products such as PharmaGABA®, andthrough Meiji Yakuhin Co., Ltd., which was made into a subsidiary in August 2021, it manufactures and sells
pharmaceutical and non-pharmaceutical products. The BtoC business conducts e-commerce sales and wholesale
distribution of supplements, non-pharmaceutical products, and cosmetics that blend the Company’s proprietaryfunctional ingredients, including Newmo® Hair Growth Formula, a hair restoration and new growth stimulant. The Bio
Medical business is involved in drug discovery using ALAgene® technology, the Company’s proprietary technology
for producing antibodies from chickens, and also provides a proteome analysis service. Furthermore, as a new
domain, the Company is aiming to create a new market through the advanced utilization of eggshell membranes.
The Company is a fabless company that conducts research and development while contracting out production tooutside partnering production facilities.
2. Significant increase in sales and profit in FY7/23
In the Company’s FY7/23 consolidated results, both sales and profits increased significantly. Net sales increased
13.9% year on year (YoY) to ¥68,572mn, operating profit was up 234.1% to ¥3,610mn, ordinary profit was up
179.9% to ¥3,540mn, and profit attributable to owners of parent was ¥3,081mn (versus a loss of ¥374mn in theprevious year). Sales were driven by the mainstay products PharmaGABA® and Newmo® Hair Growth Formula, as
sales increased and were solid in all segments. Looking at profits, the Company is continuing to actively invest in
R&D and advertising, and in addition to the impact of the increase in sales, revisions to unit prices in CMO (Contract
Manufacturing Organization) in the BtoB business and optimization of advertising investment in the BtoC businessalso contributed to profits. Among SG&A expenses, advertising expenses increased 8.7% YoY to ¥38,865mn, but
the ratio of advertising expenses declined 2.7 percentage points to 56.7%.

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Summary

3. Forecasting a slight decline in profit in FY7/24 but there is room for upside
For its FY7/24 consolidated results, the Company is projecting net sales to increase by 5.1% YoY to ¥72,047mn,
operating profit to decrease 7.5% to ¥3,338mn, ordinary profit to drop 6.8% to ¥3,300mn, and profit attributable toowners of parent fall 9.6% to ¥2,784mn. In terms of net sales, the Company expects sales of its mainstay products
to be solid, and for net sales to grow as new products also contribute, but it is forecasting slight declines for all
profit lines. In addition to an increase in advertising expenses (up 2.9% year on year to ¥40,000mn), expenses
related to the start of full-scale R&D investment and capital investment for the social implementation of new value
creation set forth in the growth strategy are being accounted for. However, overall the Company’s forecasts seemvery conservative, and we at FISCO believe that there is room for upside in the Company’s forecasts, taking into
account factors such as growth in new products and the effects of controlling advertising investment.
4. Promoting the creation of new value (new products, new markets, new organization) as a growth strategy
In its Medium-Term Management Plan 2026 (FY7/22-FY7/26), the Company has established “new value creation
1K” as a goal, and through initiatives to create new value (new products, new markets, and a new organization),seeks to be a company with net sales of ¥100.0bn by FY7/26. Regarding profit levels, the Company will conductbusiness development through FY7/26 without concern over a decline in profit margin each year and intends toexpand in scale while boldly taking on risk. In new product creation, the Company is seeing growth in national
brand (“NB”) products in the BtoB business such as Meiseki Lab and Kinniku Lab, as well as new products in the
BtoC business (such as Eyelash Deluxe WMOA and the medicated whitening gel DRcula series). In new market
creation, the Company is advancing its Agri Nutrition Basic Plan to create an upcycle market for unused resources. In
addition, the Company plans to invest in R&D and make capital investments to develop and mass produce eggshellmembrane materials that have properties suitable for a wide range of industrial uses, including electronic materials
made from eggshell membrane nanofibers.
5. High potential for medium- to long-term growth due to drug discovery, eggshell membrane materials andother factors
The Company’s profit level has changed significantly, driven by the hit product Newmo® Hair Growth Formula, andthere are some people in the market who say it is a company with results that fluctuate depending on hit productsin the BtoC business and advertising expenses. However, considering that in the BtoB business the adoption of
PharmaGABA® is on the rise, the contribution of Meiji Yakuhin’s CMO to profits is increasing, in the BtoB businessthere is growth in NB products such as Meiseki Lab and Kinniku Lab, and there is growth in new products such as
Eyelash Deluxe WMOA and the DRcula series in the BtoC business, at FISCO we positively evaluate the Company asmaking progress in reducing its dependence risk on specific hit products. In the medium to long term, expectations
are high for drug discovery and development in the Bio Medical business, as well as for new businesses that makeadvanced use of eggshell membrane materials. Although the Company’s immediate performance may fluctuate due
to advertising investment, we at FISCO believe that the Company’s medium- to long-term growth potential basedon the creation of new products and new markets is strong.
Key Points
A biotechnology company aiming to create pharma foods by fusing pharmaceuticals and foods
In FY7/23, sales and profits rose significantly• Forecasting a slight decline in profit in FY7/24, but there is room for upside• Promoting the creation of new value (new products, new markets, new organization) as a growth strategy• High potential for medium- to long-term growth due to drug discovery, eggshell membrane materials and otherfactors••

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Summary

Results trends
Net sales (left)(¥mn)
80,000Operating profit (right)(¥mn)
72,047

5,673

68,57270,000

6,400
5,600

60,18560,0004,800
46,75250,0004,000

40,000

3,610

3,200
3,338

30,0002,400
15,35320,0001,600

10,532
10,000576

740

FY7/19FY7/20

0

800

1,080

0
FY7/21

FY7/22

FY7/23

FY7/24 E

Source: Prepared by FISCO from the Company’s financial results■ Company profile
Creates food ingredients that clearly function to improve both healthmaintenance and QOL
1. Company profile
The Company is a biotechnology company whose basic policy is to conduct management that contributes topeople’s health by aiming to create “pharma foods” by fusing pharmaceuticals and foods. With a development
concept of immunity, aging, and the nervous system, three important elements in life activity and health maintenance,
the Company examines everyday foods and ingredients like eggs, milk, green tea, rice, and lactic acid bacteria
for components that act on these three elements, and by providing proprietary technologies and products basedon scientific evidence, it creates food ingredients that clearly have functions helpful to health maintenance andenhancing quality of life.
At the end of FY7/23, the location of the Company’s headquarters was in Nishikyo Ward, Kyoto City, and thePharma Foods International Group consisted of the Company, its five consolidated subsidiaries (PharmaFoods
Communication Inc., FUTURE LABO Inc., medi-labo Co., Ltd., Meiji Yakuhin Co., Ltd., and PF Capital Co., Ltd.) andtwo equity-method affiliates (Benart Co., Ltd., and Onkyo Corporation). PharmaFoods Communication conducts
call center operations for the BtoC business, and FUTURE LABO and medi-labo sell cosmetics, Meiji Yakuhin
manufactures and sells pharmaceuticals and non-pharmaceutical products. PF Capital Co., Ltd. (which becamea subsidiary following acquisition of the CVC operating company in May 2022) manages the PF Visionary Fund, alimited liability investment partnership established in January 2023.

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Company profile

At the end of FY7/23, total assets were ¥36,232mn, net assets were ¥9,630mn, capital was ¥2,043mn, the equity
ratio was 26.6%, and the number of issued shares was 29,079,000 shares (includes 233,994 treasury shares).
2. History
The Company was established as Pharma Foods Research Co., Ltd. in September 1997 in order to develop and sellfunctional food ingredients, and then changed its trade name to Pharma Foods International Co., Ltd. in October
2004. Regarding the functional ingredient products, sales of the GABA-containing ingredient PharmaGABA® began
in September 2001, the e-commerce sales brand Tamagokichi® and the Tamagosamin® with iHA® formulation
supplement were launched in August 2012, and Newmo® Hair Growth Formula, a non-pharmaceutical productformulated with HGP® (Hair Growth Peptide), was launched in December 2018.
In M&As and alliances, the Company concluded capital and business alliance agreements with Sanyo Chemical
Industries, Ltd. <4471> in March 2021, and with ROHTO Pharmaceutical Co., Ltd. <4527> in July 2021, respectively.
In August 2021, it invested in Ai-BrainScience Inc., which develops a cognitive function diagnosis app, while it also
made a wholly owned subsidiary of Meiji Yakuhin. In December 2021, it concluded a business alliance agreementwith Onkyo Corporation (made an equity-method affiliate in May 2022 through third-party allocation of shares) andentered the hearing aid business.
The Company obtained the bioscience business (proteome analysis service) of Intégrale Co., Ltd., which possesses
top-level results and technological capabilities in protein analysis in Japan, via an absorption-type split in April
2022. Additionally, in July 2022, it made joint investments with ENEOS Holdings <5020> in ENEGGO Inc., which
manufactures liquid fertilizers derived from eggs. The Company concluded a memorandum of understanding in
December 2022 regarding the establishment of a joint venture involving three companies with respect to a healthfood factory in Vietnam. The joint venture consists of the Company, FPT Digital Retail Joint Stock Company (“FRT”),
owner of Vietnam’s major pharmacy chain Long Chau Pharmacy, and Sato Connect Gate Joint Stock Company
by VTM Group (“SCG”).
In March 2023, the Company concluded a capital and business alliance agreement with LB Co., Ltd., which has
strengths in manufacturing yogurt and lactic acid beverages (underwriting of third-party allocation of class A preferredshares), while in July 2023 the Company concluded a business tie-up with Takara Bio Inc. <4974>, and in September
2023 the Company took over the healthcare e-commerce business of Daicel Corporation <4202>.
Regarding shares, the Company listed shares on the Tokyo Stock Exchange (TSE) Mothers Market in June 2006,
switched to the TSE Second Section in December 2016, and moved to the TSE First Section in February 2021. It
transitioned to the Prime Market accompanying the change in TSE market categories in April 2022.

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Company profile

History
Date
September 1997
May 2001
September 2001

Event
Pharma Foods Research Co., Ltd. was established in order to develop and sell functional food ingredients
Market launched Ovopron®, a helicobacter pylori chicken egg antibody
Market launched PharmaGABA®, an ingredient containing GABA

October 2003

Market launched Pharma Foods Delicious CatechinTM, an ingredient containing catechin

October 2004

Changed trade name to Pharma Foods International Co., Ltd.

March 2005

Market launched PF Alpha Lipoic AcidTM, an ingredient containing alpha lipoic acid

June 2006

Listed on the TSE Mothers market

October 2006
April 2007
February 2012
July 2012

Market launched Runpep®, an egg white peptides ingredient
Established Hiroshima Bio Medical Co., Ltd. in order to conduct an R&D business in the field of blood purification therapy using
chicken egg antibodies and to conduct a business for test drugs and reagents (Company’s investment ratio: 49%)
Launched the Bio Value business
Market launched iHA®, a hyaluronic acid production-stimulating ingredient
Invested in and made an affiliate of Benart Co., Ltd., which conducts a solar power generation business, in order to enter the
renewable energy field (Company’s ratio of shareholding: 33.3%)

August 2012

Market launched the e-commerce sales brand Tamagokichi® and Tamagosamin with iHA®

October 2012

Sold some of its shares of Benart (Company’s ratio of shareholding: 50%, currently an equity-method affiliate)

September 2013

For the fully fledged development of the drug discovery business, conducted an absorption merger of Hiroshima Bio Medical andestablished the Bio Medical Department

September 2014

Opened the Company’s own call center for the Tamagokichi® e-commerce sales brandMay 2015
August 2015

Acquired the ISO 9001 quality management system certification
Established PharmaFoods Communication Inc. to conduct call center operations for health foods and cosmetics (made a wholly
owned subsidiary in December 2018, currently a consolidated subsidiary)

November 2016

To expand the Bio Value business, made FUTURE LABO Inc. a subsidiary (currently a consolidated subsidiary)

December 2016

Listing was changed to the TSE Second Section

October 2018
December 2018

Concluded a joint research agreement with Mitsubishi Tanabe Pharma Corporation for antibody pharmaceuticals indicated for thetreatment of autoimmune diseases
Market launched Newmo® Hair Growth Formula, a non-pharmaceutical product formulated with HGP®

January 2021

Concluded an exclusive licensing agreement with Mitsubishi Tanabe Pharma for a new therapeutic antibody to treat autoimmune
diseasesFebruary 2021

Listing was upgraded to the TSE First Section

March 2021

Concluded a capital and business alliance agreement with Sanyo Chemical Industries <4471>

July 2021

Concluded a capital and business alliance agreement with ROHTO Pharmaceutical <4527>

August 2021

Invested in Ai-BrainScience Inc., which is developing a cognitive function diagnostic app
Made a wholly owned subsidiary of Meiji Yakuhin Co., Ltd., which manufactures and sells pharmaceuticals and nonpharmaceutical products

September 2021

Formulated the Agriculture and Nutrition Basic Plan with Sanyo Chemical Industries

December 2021

Concluded a business alliance agreement with Onkyo Corporation and entered the hearing aid businessEntered a new upcycle business using eggshell membranes

April 2022

Obtained the bioscience business of Intégrale Co., Ltd. via an absorption-type split
Transitioned to the Prime Market accompanying the change in TSE market categories

May 2022

Made Onkyo an equity-method affiliate

July 2022

Received third-party allocation ENEGGO shares jointly with ENEOS Holdings <5020>

December 2022

Concluded memorandum of understanding related to establishment of a three-company joint venture with respect to a healthfood factory in Vietnam, between the Company, FRT, and SCG

January 2023

Established PF Visionary Fund, a limited liability investment partnership

March 2023

Concluded a capital and business alliance agreement with LB Co., Ltd.

July 2023
September 2023

Business alliance with Takara Bio
Took over the healthcare e-commerce business of Daicel

Source: Prepared by FISCO from the Company’s securities report and press releases

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir■ Business summary
A fabless company focused on R&D that develops BtoB business,
BtoC business, and Bio Medical business
1. A fabless company focused on R&D
With a mission of advancing food and drug research to help people, the Company seeks to realize a sustainable
society in which people are happy and healthy. To achieve this goal, it engages in the BtoB business in which it
researches, develops, and manufactures functional ingredients and pharmaceuticals that act on immunity, aging,and the nervous system, the BtoC business that conducts e-commerce sales and wholesale distribution of supplements, non-pharmaceutical products and cosmetics that blend the Company’s proprietary functional ingredients,
and the Bio Medical business which is involved in drug discovery using ALAgene® technology, the Company’s
proprietary technology for producing antibodies from chickens, and also provides a proteome analysis service.
Furthermore, as a new domain, the Company is aiming to create a new market through the advanced utilization of
eggshell membranes. The Company is a fabless company that conducts research and development, marketing,sales, establishes manufacturing methods and production processes, and confirms sanitation management, while
contracting out production to external partnering production facilities.
Development of pharmaceuticals and functional ingredients that act on immunity, aging, and the nervous system

Source: The Company's results briefing materials

Looking at the trends in net sales and operating profit by business segment, in the BtoB business, net sales andoperating profit grew steadily in conjunction with the increase in the number of companies adopting PharmaGABA®
and other functional ingredients, while Meiji Yakuhin began contributing to results in FY7/22. In the BtoC business,
Newmo® Hair Growth Formula, which was launched on the market in November 2018, has become a hit productand is contributing greatly to overall earnings. In addition, Meiji Yakuhin’s Shiboranaito® GOLD also contributed toresults from FY7/22, while from FY7/23 the new eyelash beauty serum Eyelash Deluxe WMOA and the medicatedwhitening gel DRcula series both also have been contributing to results. The Bio Medical business is at the researchand development stage of its pipeline, and it records lump-sum income related to joint research and licensing sales.

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Business summary

Trends in net sales by business segment
BtoB business

BtoC business

Bio Medical business(¥mn)
70,00068,572343
60,185220

60,00046,75250,000375

40,00059,78851,88630,00043,52420,00015,353
10,532

10,000
8,523
0

231

186

12,591

1,777

FY7/192,575
FY7/202,852
FY7/21

8,079

8,418

FY7/22

FY7/23

Note: Segment classifications and names changed as of FY7/22. The Accounting Standard for Revenue Recognition, etc.
applied as of FY7/22
Source: Prepared by FISCO from the Company’s financial results

Trends in operating profit by business segment
BtoB business(¥mn)

BtoC business

7,000

Bio Medical business

81

6,000
5,000
4,000
5,575

3,746

3,000
2,000

638
21

1,000
0

573

288
713

799

1,660

1,301

-231

-278

FY7/22

FY7/23770-45-1,000FY7/19FY7/20FY7/21

Note: Segment classifications and names changed as of FY7/22. The Accounting Standard for Revenue Recognition, etc.
applied as of FY7/22
Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.

16-Jan.-2024

2929 Tokyo Stock Exchange Prime Market

https://www.pharmafoods.co.jp/ir

Business summary

Mainstay BtoB business product PharmaGABA® holds top share in
GABA production. Contributions also made by Meiji Yakuhin’s CMO
and CHC businesses
2. BtoB business
The BtoB business handles R&D and manufacturing of functional ingredients, health foods, pharmaceuticals, andother products and sells them to food and pharmaceutical manufacturers, distributors, and others. The Company’s
main functional ingredient products are PharmaGABA®, Bonepep®, Cerepron®, Runpep®, Pharma Biomix, HGP®,iHA®, and Moringa. In functional products, in addition to the conventional OEM and cross-border e-commerce,from FY7/23 Meiseki Lab and other NB products are being sold in the BtoB channel. Additionally, from 2Q FY7/22,
as new manufacturing and sales channels, the Company is carrying out Meiji Yakuhin’s CMO business of contract
manufacturing of pharmaceutical products and CHC business*, which sells functional foods, pharmaceuticals, andother products in the drugstore channel and elsewhere.
*	Abbreviation for consumer health care (refers to selling pharmaceuticals, functional foods, and other products at drugstores)

In the BtoB business, in FY7/23 on an itemized basis, net sales of functional ingredients increased 17.2% YoY to¥2,002mn, net sales of functional products rose 47.8% to ¥1,368mn, net sales of Meiji Yakuhin’s CMO grew 15.0%
to ¥4,190mn, while CHC fell 52.4% to ¥857mn. In functional ingredients, sales of PharmaGABA® are expanding,while in functional products, newly added NB products are contributing to net sales.
Searching for food and cosmetic functional ingredients from eggs

Source: The Company’s results briefing materials

Trends in net sales by item(¥mn)
FY7/21

FY7/22

FY7/23Functional ingredients

2,109

1,708

2,002

Functional products

743

925

1,368

CMO

-

3,642

4,190

CHC

-

1,801

857

Total

2,852

8,079

8,418

Note: Meiji Yakuhin was consolidated from 2Q FY7/22
Source: Prepared by FISCO from the Company’s results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Business summary(1) PharmaGABA®
PharmaGABA® is the Company’s mainstay product. GABA is a type of non-protein amino acid found in vegetables, fruits, and grains, and is said to act as a neurotransmitter in the brain’s inhibitory system. The Company
separated the GABA-producing lactic acid bacteria in food and established a method of producing GABA througha fermentation method, which it sells as PharmaGABA®. PharmaGABA® is able to display functional claims,
including relieving stress, reducing fatigue, improving blood pressure, and improving sleep quality, and its adoption
for foods with functional claims is growing. In the number of GABA notifications in the foods with functional claims
system as of September 21, 2023, it ranked highest with 999 notifications (Company data) and is maintaining
the highest level of adoptions.
PharmaGABA® has also been found to have other effects, including increasing muscle mass, improving cognitive
functions, and improving skin elasticity, and the evidence for it is strengthening. The Company is also selling
it overseas and is aggressively expanding sales activities in North America, South Korea, and other regions,and its adoptions are growing. In FY7/23, CENTR in the United States began selling beverages that claim toenhance cognitive function containing PharmaGABA® in California, Texas, and online, thereby marking the firsttime such beverages have been offered in North America. In South Korea, PharmaGABA® has been adopted by
Amorepacific Group’s Vitalbeautie brand of beauty drinks. With PharmaGABA® having acquired halal certification,
the Company intends to fully launch sales in the Southeast Asian region where there are many Muslim people.
(2) Bonepep®
Bonepep® is a functional ingredient derived from egg yolk protein that was developed as a component to stimulatebone growth. A typical product that adopts it is Senobic sold by ROHTO Pharmaceutical.
(3) Cerepron®
Cerepron® is a functional ingredient derived from yeast as a skin whitening ingredient in food (active yeast extract
powder) that can be expected to have skin whitening effects. Demand for skin whitening is increasing particularly
in overseas markets, and its adoptions are growing mainly in Southeast Asia.
(4) Runpep®
Runpep® is a functional ingredient derived from egg white protein that was developed to be a component withblood vessel expansion and blood flow improvement effects. It is being adopted for products relating to improving
blood flow and reducing exercise fatigue, diet-related products, and male-function products.
(5) HGP®
HGP® is a functional ingredient derived from egg yolk protein that was developed as a component that stimulates
hair restoration and growth. Research results have been obtained that demonstrate the effects of taking the oral
formulation, and it is being adopted by Japanese manufacturers and others.
(6) iHA®
iHA® is a functional ingredient derived from egg yolk protein that was developed as a component stimulating
the production of hyaluronic acid. Research results have verified its effects in animal experiments, and it is being
adopted for the Company’s e-commerce sales products and the products of domestic manufacturers.
(7) Functional products
In OEM business, in addition to selling various functional ingredients, the Company not only conducts outsourced
OEM production but also plans and sells products including health foods and supplements that utilize the evidence
cultivated in the development of functional ingredients, both in Japan and overseas, as an OEM business.

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Business summary

Under its policy going forward, the Company aims to shift from sales of functional raw materials to sales of end
products, and seeks to expand the business, positioning NB products as a growth driver. In FY7/23, the Company
began selling its Meiseki Lab product, the first in a series of its own NB products, at major convenience stores.
The drink, which contains 200 mg of GABA, is expected to help maintain people’s ability to think logically, whichis said to decline with age. Subsequently, the Company launched sales of new products including Kinniku Lab,
which facilitates the maintenance of muscle mass, Morning Lab - Energized from the Morning, which reduces
the temporary decline in vigor and sense of vitality that arises during work and study, Sleep-enhancement Drink,which is useful for improving sleep quality, and GABA Green Tea, which is helpful for lessening temporary mental
stress and fatigue while working and studying, as it expands the product lineup.
In March 2023, the Company concluded a capital and business alliance agreement with LB Co., Ltd., which
has strengths in manufacturing long-life yogurt and lactic acid beverages. The Company aims to expand its
NB business, focusing on major convenience stores and drugstores, particularly through joint development ofbeverages and other such products using functional ingredients.
As for the OEM business overseas, the Company has achieved expanded adoption of PharmaGABA® in North
America and South Korea, and in December 2022 it concluded a memorandum of understanding regarding
establishment of a three-company joint venture with respect to a health food factory in Vietnam, with FRT, ownerof Vietnam’s major pharmacy chain Long Chau Pharmacy, and SCG. This entails construction of a health foodfactory in Vietnam with plans to make sales through Long Chau Pharmacy (details to be decided), adjustments areto be made going forward concerning details such as scheduling regarding joint venture company establishment
and factory construction, as well as the investment ratio.
(8) CMO businessIn the CMO business, Meiji Yakuhin receives consignments to manufacture ethical pharmaceuticals and OTC
pharmaceuticals from pharmaceutical companies. Manufacturing inquiries have been trending upward at Meiji
Yakuhin following several business suspensions due to legal violations at multiple companies in the domestic
generic drug industry.
(9) CHC businessIn the CHC business, Meiji Yakuhin is selling its NB products to drugstores and other distribution channels. Sales
to cross-border EC distributors have also risen in recent years.

BtoC business strengthens the product lineup led by NewmoR Hair
Growth Formula, with growth in new products as well
3. BtoC business
As an “invention company’s e-commerce business,” the BtoC business sells non-pharmaceutical products and supplements formulated using the Company’s proprietary functional ingredients and cosmetics. Sales methods comprise
direct sales to consumers through e-commerce and wholesales to dedicated shopping channels. Furthermore, Meiji
Yakuhin’s new repeat e-commerce business has been included from 2Q FY7/22.

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Business summary

Regarding the main products, in the pharmaceutical product and non-pharmaceutical product field, main products
include Newmo® Hair Growth Formula, which promotes hair growth and restoration, the DRcula series of medicatedwhitening gel toothpastes, and Meiji Yakuhin’s Lactron series of intestinal regulation and digestive medicines. In
supplements, the main products include Tamagosamin® (iHA® formulation supplement for knee joints) and Meiji
Yakuhin’s Shiboranaito® GOLD. In cosmetics, the main products include Eyelash Deluxe WMOA and Tamahada
LANSHEL® (cosmetic cream formulated from active eggshell membranes). Regarding Shiboranaito® GOLD, asa successor product, the Company has launched sales of Shiboranaito 2, a food product with functional claims
derived from black ginger.
Looking at net sales by category in FY7/23, net sales of pharmaceutical and non-pharmaceutical products increased
7.6% to ¥34,275mn, sales of cosmetics rose 76.5% to ¥12,167mn, while sales of supplements declined 0.9% to¥11,212mn. Newmo® Hair Growth Formula has become a hit product, reaching No. 1 in sales in the hair care market
in just two years since its launch and contributing greatly to overall earnings. In addition, rapid growth in sales has
occurred with products such as Eyelash Deluxe WMOA, launched in FY7/22, and the DRcula series. Going forward,
the Company intends to expand its product lineup around its mainstay Newmo® Hair Growth Formula.
Net sales by item in the BtoC business(¥mn)

Eyelash beauty serum
L A N S HE L , e t c .

N e wm o H a i r
Growth Formula
Cura series
Lactron, etc.

Shiboranaito
Tamagosamin, etc.

7/2021

7/2022
Supplements

7/2023

Pharmaceutical products/
non-pharmaceuticalproducts

Cosmetics

Other

Steady sales of Newmo® Hair Growth Formula, growth in whitening gel and other new products
Up until now, the Company has disclosed sales by major product, but in order to more appropriately reflect revenue breakdown information and for competitive
considerations, sales disclosures have been divided into “Supplements,” “Pharmaceutical products/non-pharmaceutical products,” and “Cosmetics.”

Source: The Company’s results briefing materials

It is necessary to be aware that the revenue structure of the BtoC business is a structure in which advertisingexpenses and sales occur in different periods. Specifically, advertising expenses are recorded at the time a newcustomer is acquired, but net sales are recorded continuously over the regular course. So, when the Company
focuses on acquiring new customers, this temporarily causes expenses to increase. However, repeat purchases
generated from the base of regular customers give rise to future profits.

We encourage readers to review our complete legal statement on “Disclaimer” page.

11 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Business summary

The BtoC business’ revenue structure

Source: The Company’s results briefing materials

Bio Medical business develops a drug discovery business using its
proprietary ALAgeneR technology
4. Bio Medical business
The Bio Medical business is a drug discovery business that uses ALAgene® technology, the Company’s proprietary
technology to produce antibodies derived from chickens, and a technology to develop bioactive peptides derived
from chicken egg yolk. Also, based on the technologies obtained from R&D relating to functional ingredients overall,the Company is conducting the LSI (Life Science Information) business, in which external companies outsource work
such as analyses and efficacy evaluation tests to the Company, and supports the R&D of various manufacturers,
mainly in the food industry, including by acquiring and analyzing data on functions, analyzing the components ofvarious ingredients, and creating requests for finished products. The proteome analysis service “OLINK,” which theCompany took over from Intégrale Co., Ltd. in April 2022 (started Japan’s first Olink Target contract service in June
2022, and Olink Flex contract service in February 2023), is also steadily growing. In July 2023, the Company formed
a business alliance with Takara Bio with the aim of further expanding the OLINK service. By linking the contracted
services of both companies, the Company will have a system capable of responding to customer needs in a one-stopmanner, and they will collaborate on promotional activities going forward.

We encourage readers to review our complete legal statement on “Disclaimer” page.

12 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Business summary

Producing antibody pharmaceuticals from chickens

Source: The Company’s results briefing materials

ALAgene® technology is a foundational Company technology for producing antibodies with better drug efficacy
than antibodies and existing drugs for treating illnesses that have been untreatable up until now. The Company isusing this technology to conduct R&D into antibody pharmaceuticals indicated for patients with various diseases
such as autoimmune diseases and fibrosis. Moreover, by combining ALAgene® technology and proteome analysis
technology, the Company intends to further strengthen the search for drug discovery targets and their identificationin order to accelerate the development of antibody drugs.
In terms of the business model, the Company progresses development up to the non-clinical trial stage, andthe pharmaceutical company to which the development-candidate antibody has been licensed-out conducts the
manufacture, development and sales. The Company receives license revenue, including joint research lump-sum
payments, lump-sum contract payments, development milestone payments, sales royalties after the market launch,and sales milestone payments.
In the Autoimmune Disease Project*, which primarily addresses rheumatoid arthritis, the Company promoted joint
research with Mitsubishi Tanabe Pharma Corporation on antibody pharmaceuticals for two years beginning in
October 2018, which resulted in concluding an exclusive licensing agreement in January 2021. In addition, in April
2022, the Company was granted a patent in Japan for anti-PAD2 antibodies and in August 2022 was granted apatent by the United States Patent and Trademark Office for anti-PAD4 antibodies (already patented in Japan). The
aim is to start clinical trials quickly. In addition to this, the Company is expanding the drug discovery pipeline throughjoint research with universities throughout Japan.
*	The autoimmune disease therapy market is over ¥5tn (the Company’s estimate).

We encourage readers to review our complete legal statement on “Disclaimer” page.

13 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Business summary

Reducing the risk of dependence on certain products
5. Risk factors, feature of earnings, and countermeasures
The risk factors include competition, delays in responding to product development and technological innovation,
reliance on specific products, laws and regulations including the Pharmaceuticals and Medical Devices Act andFood Sanitation Act, and the protection of personal information.
Regarding competition, PharmaGABA®, which is the mainstay product in the BtoB business, holds the top sharefor GABA production, so it appears that there are very few concerns about competition for the time being.
The risk factors in the BtoC business include the effects of consumer preferences and purchasing trends, the extent
of the reliance on specific products, an increase in advertising expenses and sales that are less than forecast.
Regarding reliance on specific products, the Company is currently highly reliant on the hair restoration and new
growth stimulant Newmo® Hair Growth Formula, but it is actively promoting the development of new products,
including Eyelash Deluxe WMOA and the DRcula series, in an effort to reduce reliance risk by expanding its productlineup. At the same time, with respect to advertising expenses, the Company is working to reduce related risks byresponsively controlling the expenses while observing sales, CPO*1, and LTV*2 trends.
*1	Abbreviation for Cost Per Order. It means the amount of advertising expenses required to acquire one customer.
*2	Abbreviation for Life Time Value.

In the Bio Medical business, a long period of time is required from the development of a new drug until its market
launch, so there is risk relating to future uncertainty (development delays, discontinuations, etc.). To deal with thisrisk, when developing a drug’s business, the Company cautiously determines factors such as its market potential
and the possibility of an actual market launch, and formulates a business plan for it covering a long period of time.

We encourage readers to review our complete legal statement on “Disclaimer” page.

14 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir■ Results trends
Significant increase in sales and profit in FY7/23
1. Outline of results for consolidated FY7/23
In the Company’s FY7/23 consolidated results, both sales and profits increased significantly. Net sales increased
13.9% YoY to ¥68,572mn, operating profit was up 234.1% to ¥3,610mn, ordinary profit was up 179.9% to¥3,540mn, and profit attributable to owners of parent was ¥3,081mn, partly due to a decrease in tax expenses(versus a loss of ¥374mn in the previous year). Sales were driven by the mainstay products PharmaGABA® andNewmo® Hair Growth Formula, as sales increased and were solid in all segments. Looking at profits, the Company
is continuing to actively invest in R&D and advertising, and in addition to the impact of the increase in sales, revisions
to unit prices in CMO in the BtoB business and optimization of advertising investment in the BtoC business also
contributed to profits. On a Company-wide basis, gross profit grew 14.9% YoY, while the gross margin increased
0.7ppt to 80.6%. SG&A expenses were up 9.9% YoY, but the SG&A expense ratio fell 2.8ppt to 75.3%. Among
SG&A expenses, advertising expenses increased 8.7% YoY to ¥38,865mn, but the ratio of advertising expenses
declined 2.7ppt to 56.7%. As a result, the operating margin increased 3.5ppt to 5.3%. Compared to the revised
forecast announced on July 18, 2023 (downward revision of net sales and upward revision of all profit lines), net
sales, operating profit and ordinary profit were all generally in line with the forecast, while profit attributable to ownersof parent was significantly higher than the forecast.
Consolidated results for FY7/23(¥mn)
FY7/22

FY7/23Results% of total

Results% of total

60,185100.0%

68,572100.0%

BtoB business

8,079

13.4%

8,418

12.3%

4.2%

BtoC business

51,88686.2%

59,788

87.2%

15.2%

220

0.4%

343

0.5%

55.8%

-

-

21

0.0%

-

Gross profit

48,10879.9%

55,279

80.6%

14.9%

SG&A expenses

47,02878.1%

51,669

75.3%

9.9%

Operating profit (loss)

1,080

1.8%

3,610

5.3%

234.1%

BtoB business

1,660

20.5%

1,301

15.5%

-21.6%

BtoC business

638

1.2%

3,746

6.3%

486.9%

Bio Medical business

-231

-

-278

-

-

-

-

-5

-

-

-986

-

-1,154--

Ordinary profit (loss)

1,264

2.1%

3,540

5.2%

179.9%

Profit (loss) attributable to owners of parent

-374

-

3,081

4.5%

-

Net sales

Bio Medical business
Other (fund management, etc.)

Other (fund management, etc.)
Adjustment amount

YoY
13.9%

Source: Prepared by FISCO from the Company’s financial results

On a quarterly basis, in 1Q the Company aggressively deployed advertising costs (+90.2% YoY to ¥12,800mn),
and as a result there was an operating loss of ¥2,194mn, but from 2Q operating profit increased significantly(2Q: ¥1,310mn; 3Q: ¥2,518mn; 4Q: ¥1,976mn) due to factors including the increase in net sales as well as the
optimization of advertising investment (2Q: ¥10,035mn; 3Q: ¥8,309mn; 4Q: ¥7,721mn).

We encourage readers to review our complete legal statement on “Disclaimer” page.

15 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.

16-Jan.-2024

2929 Tokyo Stock Exchange Prime Market

https://www.pharmafoods.co.jp/ir

Results trends

Trends in quarterly results
Net sales(¥mn)

Operating profit (loss)

Advertising expenses

21,00018,00016,21515,00012,005

13,355 13,003

15,228

16,135

17,03018,113

17,39016,03912,80012,606
10,54412,000

8,884
8,387
9,000
6,730
6,618 6,539 6,208
5,495
6,000
2,714 3,040
1,575
3,000
1,346
457

9,590

148

10,0358,309 7,721

1,310

2,518 1,976

2Q

3Q

0
-3,000-1,4281Q

2Q

3Q

FY7/21

4Q

1Q

2Q-1,1003Q

4Q-2,1941Q

FY7/22

4Q

FY7/23

Source: Prepared by FISCO from the Company’s results briefing materials

Significant increase in profit in BtoC business2. Trends by business segment(1) BtoB businessNet sales in the BtoB business increased 4.2% YoY to ¥8,418mn and segment profit (operating profit before
Company-wide costs and other adjustments) rose 21.6% to ¥1,301mn. As for net sales by item, sales of functional
ingredients increased 17.2% to ¥2,002mn. Sales of functional products climbed 47.8% to ¥1,368mn, sales of Meiji
Yakuhin’s CMO rose 15.0% to ¥4,190mn, and sales of CHC fell 52.4% to ¥857mn. In functional ingredients, themainstay PharmaGABA® saw an increase in the number of domestic food manufacturers adopting it, as well as anincrease in adoption in the U.S. and South Korea, as sales were a new record high. In functional products, the large
increase in sales was the result of strong cross-border e-commerce as well as the Company’s efforts to expand
the NB product lineup, including Meiseki Lab and Kinniku Lab. In the CMO business, the Company has been
striving to improve profit margins by implementing cost pass-through and narrowing down its range of products
under contract amid mounting demand for substitute products due to quality issues and production-related issues
among generic drug manufacturers. The CHC business encountered a decrease in net sales, but intensified its
focus on new branded products for drugstores. Segment profit declined due to factors including the decline insales in the CHC business.

We encourage readers to review our complete legal statement on “Disclaimer” page.

16 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.

16-Jan.-2024

2929 Tokyo Stock Exchange Prime Market

https://www.pharmafoods.co.jp/ir

Results trends(2) BtoC business
The BtoC business reported ¥59,788mn in net sales (up 15.2% YoY) and a ¥3,746mn segment profit (up 486.9%).
By category, net sales in pharmaceuticals/non-pharmaceuticals increased 7.6% to ¥34,275mn, cosmetics rose
76.5% to ¥12,167mn, and supplements fell 0.9% to ¥11,212mn. The mainstay Newmo® Hair Growth Formula
enjoyed a high level of sales, and there was significant growth in sales of Eyelash Deluxe WMOA and the DRcula
series. In terms of the cumulative number of units shipped, Newmo® Hair Growth Formula topped 22.00 million
units as of July 22, 2023, while Eyelash Deluxe WMOA surpassed the 2.30 million unit mark as of September 8,2023, and DRcula series hit the 1.30 million unit mark on September 8, 2023, and the Lactron series surpassed
the 1.28 million unit mark as of September 20, 2023. In terms of profit, in addition to the increase in sales, theoptimization of advertising investment contributed to the large increase in profit. The number of regular customers
for the overall Group declined from 1,146,889 customers at the end of 1Q to 941,628 customers at the end of
4Q in conjunction with the optimization of advertising investment, but the number was maintained at a relatively
high level. The repeat purchases brought by this regular customer base will lead to profit generation in the future.
Trends in advertising expenses and number of regular customers in the BtoC business
1,200,000
1,100,000

Number of regularcustomers

定期顧客件数

1,000,000
900,000

770,870

800,000
700,000
600,000
500,000
400,000

1,146,889

Advertising expenses
広告宣伝費

791,566

773,844

982,458

802,021991,535
12,764

10,517

10,007

8,229

9,529

(Number)
941,628 11,000

7,665

8,851

576,9416,618

1,001,356

834,139

13,0001,050,880

6,538

6,207

7,000

6,710

5,000

5,495

300,000

3,000

200,000
100,000

9,000
(¥mn)

1Q

2Q

3Q

7/20212021/7期

4Q

1Q

2Q

3Q

4Q

7/20222022/7期

1Q

2Q

3Q

4Q

1,000

7/20232023/7期

Source: Prepared by FISCO from the Company’s results briefing materials(3) Bio Medical business
The Bio Medical business reported ¥343mn in net sales (up 55.8% YoY) and a ¥278mn segment loss (¥231mn
loss in the previous fiscal year). The business posted a loss due to the fact that it is in the R&D stage for products
such as autoimmune disease antibody drug discovery, but on the sales front its Olink Target service for analyzingchanges in trace amounts of proteins in the proteome analysis contract services business performed well.

We encourage readers to review our complete legal statement on “Disclaimer” page.

17 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.

16-Jan.-2024

2929 Tokyo Stock Exchange Prime Market

https://www.pharmafoods.co.jp/ir

Results trends

No concerns about financial soundness
3. Financial condition
At the end of FY7/23, total assets increased ¥5,073mn from the end of the previous fiscal year to ¥36,232mn. Thiswas mainly due to a ¥7,460mn increase in cash and deposits despite a ¥2,644mn decrease in notes and accounts
receivable – trade. Total liabilities at the end of FY7/23 climbed ¥2,517mn to ¥26,601mn. This was mainly becauseof an increase of ¥2,000mn in short-term borrowings following implementation of borrowing based on a commitmentline agreement enlisting the syndicate method, and an increase of ¥1,239mn in long-term borrowings, which offset
a decrease of ¥349mn in accounts payable – other resulting from the optimization of advertising expenses. Total net
assets increased ¥2,556mn to ¥9,630mn, due to a ¥2,492mn increase in retained earnings. As a result, the equity
ratio rose 3.9ppt to 26.6%. The balance of interest-bearing debt (total of long- and short-term borrowings) increased¥3,239mn to ¥20,096mn, but the ratio of interest-bearing debt declined 29.7ppt to 208.7%.
Over the medium to long term, it is desirable to further improve the equity ratio, reduce interest-bearing debt, andlower the interest-bearing debt ratio. However, considering that cash and deposits are currently at a high level, andinterest-bearing debt is not putting pressure on profits, at FISCO we believe there is no cause for concern regarding
the Company’s financial soundness.
Consolidated balance sheet(¥mn)
End of FY7/20

End of FY7/21

End of FY7/22

End of FY7/23

Change10,096

20,944

31,15936,232

5,073

Current assets

7,437

17,93323,513

27,5304,017

Non-current assets

2,659

3,010

7,645

8,701

1,056

5,188

12,47824,08426,601

2,517

Current liabilities

2,837

10,97822,79524,374

1,579

Non-current liabilities

2,350

1,499

1,288

2,227

939

4,907

8,465

7,074

9,630

2,556

Shareholders’ equity

4,895

8,455

7,024

9,306

2,282

Capital stock

2,033

2,038

2,042

2,043

1

48.6%

40.4%

22.7%

26.6%

3.9pptTotal assets

Total liabilities

Total net assets

Equity ratio

Source: Prepared by FISCO from the Company’s financial results

Consolidated cash flows statement(¥mn)
FY7/20FY7/21

FY7/22

Cash flows from operating activities

-547

5,938

-6,065

6,125

Cash flows from investing activities

-860

-442

-2,539-1,013

375

1,030

7,679

2,341

3,282

9,794

8,845

16,306

Cash flows from financing activities
Fiscal year-end balance of cash and cash equivalents
Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

18 24

FY7/23

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir■ Outlook
Forecasting a slight decline in profit in FY7/24 but there is room for
upside• Overview of consolidated results forecast for FY7/24
For its FY7/24 consolidated results, the Company is projecting net sales to increase by 5.1% YoY to ¥72,047mn,
operating profit to decrease 7.5% to ¥3,338mn, ordinary profit to drop 6.8% to ¥3,300mn, and profit attributableto owners of parent to fall 9.6% to ¥2,784mn. In terms of net sales, the Company expects sales of its mainstay
products to be solid, and for net sales to grow as new products also contribute, but it is forecasting slight declines
for all profit lines. In addition to an increase in advertising expenses (up 2.9% year on year to ¥40,000mn), expenses
related to the start of full-scale R&D investment and capital investment for the social implementation of new value
creation set forth in the growth strategy have been taken into consideration. Advertising expenses may fluctuate
depending on sales trends, but the Company plans to continue to optimize them while taking into consideration
CPO and LTV trends. As for Meiji Yakuhin, orders are increasing and the current factory operating rate is over 100%.
In addition to this, in the future the Company aims to evolve into a pharmaceutical (OTC drug) manufacturer rather
than just contract manufacturer of pharmaceuticals, and to this end it plans to construct a new factory (scheduled tostart operation in five years as registration for manufacturing is required). However, overall the Company’s forecasts
seem very conservative, and we at FISCO believe that there is room for upside in the Company’s forecasts, taking
into account factors such as growth in new products and the effects of controlling advertising investment.
Consolidated outlook for FY7/24(¥mn)
FY7/23

FY7/24

Results% of sales

Forecast% of sales

Net sales

68,572100.0%

72,047100.0%

YoY
5.1%

Operating profit

3,610

5.3%

3,338

4.6%

-7.5%

Ordinary profit

3,540

5.2%

3,300

4.6%

-6.8%

Profit (loss) attributable toowners of parent

3,081

4.5%

2,784

3.9%

-9.6%

Advertising expenses

38,86556.7%

40,000

55.5%

2.9%

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

19 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir■ Growth strategy
Aiming for net sales of ¥100.0bn in FY7/26 through initiatives tocreate new value
1. Medium-Term Management Plan 2026
In its Medium-Term Management Plan 2026 (FY7/22-FY7/26), the Company has established “new value creation 1K”
as a goal, and through initiatives to create new value (new products, new markets, and a new organization), seeks
to be a company with net sales of ¥100.0bn by FY7/26. Looking at a breakdown of this goal, it is targeting ¥70.0bn
in growth from existing businesses and ¥30.0bn from new value creation, and it has committed to an average sales
growth rate of 20% or higher and a 20% total payout ratio, including share buybacks, through to FY7/26. Regarding
profit levels, the Company will conduct business development through FY7/26 without concern over a decline inprofit margin each year and intends to expand in scale while boldly taking on risk. Through this, it is aiming to createa structure that can secure an average operating profit margin of 10%.

Growth in BtoB business NB products and new products in the BtoC
business
2. Creation of new products
For the creation of new products, to create the next hit products to follow up products such as PharmaGABA®
and Newmo® Hair Growth Formula, the Company is advancing R&D including to develop new ingredients, newapplications and effects, and next-generation antibodies. It is also developing products for the scalp and skin field,
pharmaceutical e-commerce field, and oral care field.
In July 2021, the Company concluded a sales agreement with Mitsui Sugar Co., Ltd. of Mitsui DM Sugar Holdings
Co., Ltd. <2109> Group for Lipi Smart®, which is a functional foods ingredient that suppresses absorption of
triglycerides. Through joint development with Mitsui Sugar, the Company has developed a proprietary technology(patent pending) to manufacture Lipi Smart® from sesame. Through this, it launched a product onto the metabolic
market for the first time. Most recently, the Company has been encountering growth when it comes to its own NB
brand merchandise launched by the BtoB business and new products of the BtoC business.

We encourage readers to review our complete legal statement on “Disclaimer” page.

20 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Growth strategy

Creation of new markets with advanced utilization of eggshellmembranes
3. Creation of new markets
For the creation of new markets, the Company will advance initiatives for the expanding health market, including
to strengthen brands and develop overseas markets (US market, China market through cross-border EC, andSoutheast Asia market through halal certification), deepen the e-commerce business in the domestic market (develop
new products and services that utilize the D2C platform of 1,000,000 people), shift the business orientation from
BtoB to BtoC (develop the Company’s own brand products for the distribution networks of major drugstores andconvenience stores), conduct initiatives for SDGs (create upcycle markets for unused resources), and enter thehealth support devices and medical devices fields (health devices, facial beauty devices, measuring devices, andhearing aids).
Of these initiatives, to develop the US market, the Company is aiming to acquire GARS (Generally Recognized asSafe) certification from the FDA (US Food and Drug Administration) for PharmaGABA®. By acquiring the FDA’s
GARS certification, it will widen its current target of supplements to general food and beverages. This will lead to its
adoption by major food and beverage manufacturers in the US, which can be expected to result in its rapid growthin the US market. The Company’s efforts in seeking to tap the Southeast Asian market have involved conclusionof a memorandum of understanding regarding establishment of a joint venture company in Vietnam, where it plansto build a health food factory. Meanwhile, the Company apparently has its sights set on expanding into Southeast
Asian markets other than Vietnam in the future.
Regarding creating an upcycling market for unused resources, the Company intends to harness unused naturalingredients and utilize technology for new value creation from natural products in farming. Specifically, it created
the Agri-Nutrition Basic Plan in September 2021 with Sanyo Chemical Industries that integrates the development
and technological capabilities of both companies aimed at solving the global farming crisis. The Company has
begun verification tests aimed at building a new farming system in Shintomi Town, Miyazaki Prefecture in 2022,
and the future schedule is to develop high value-added crops with enhanced yields, resilience, and functionality
using biostimulants* that combine technologies from both companies in 2024, conduct sales via the Company’s
e-commerce sales channel of high-performance health foods and cosmetics made from unused portions of highvalue-added crops in 2025, expand target crops and promote sixth sector industrialization and brand formation in
2026, and develop a sustainable farming system in 2030.
*	Biostimulant. A new technology that reduces damage to plants caused by climate and soil conditions and provides healthy
plants by controlling abiotic stress on plants (quoted from the website of the Japan Biostimulant Association).

The Company also announced its entry into the fiber and plant vitalizing agent markets through advanced utilizationof eggshell membranes as a new unused resources upcycling business in December 2021. Through this upcycling,
it aims to convert the 260,000 tons of eggshells thrown away annually in Japan into high-value-added products
and thereby contribute to the realization of a sustainable society. The Company is currently in negotiations looking
toward engaging in sales involving Ovoveil eggshell membrane fiber. In addition, in July 2022, the Company jointly
invested with ENESO Holdings in ENEGGO, which manufactures liquid fertilizers from eggs, and signed a businessalliance agreement with GreenTechno21 Co., Ltd. and its subsidiary ENEGGO. Through this, it will procure eggshells
and eggshell membranes on the largest scale in Japan and work to bolster its chemicals business, which includes
eggshell membrane fiber, liquid fertilizers, and other products.

We encourage readers to review our complete legal statement on “Disclaimer” page.

21 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Growth strategy

In June 2023, through joint research with Shinshu University’s Institute for Fiber Engineering (IFES) of Interdisciplinary
Cluster for Cutting Edge Research, the Company succeeded in producing the world’s first nanofiber membraneusing an eggshell membrane. Going forward, the Company will form an industry-academia partnership with IFES,
and will advance research with the aim of applying eggshell membrane nanofibers to the medical field, including
biomembrane wound dressings, and to the energy materials domain, such as supercapacitors.
In September 2023, the commercialization of utilization of an eggshell membrane upcycling platform in three areas(hybrid fibers, new energy storage element materials, and agricultural bio-stimulant peptides) was chosen as acommissioned and subsidized project for the “Biomanufacturing Revolution Promotion Project” promoted by the
New Energy and Industrial Technology Development Organization (NEDO), a national research and development
organization. Regarding new energy storage element materials, the Company has discovered that it is possible
to develop energy storage element materials with excellent electrical properties by converting eggshell membranehydrolyzate into nanofibers. In the future, the Company aims to develop and mass-produce eggshell membranematerials that have properties suitable for a wide range of industrial uses, including electronic materials madefrom nanofibers, not just in the textile and agricultural fields. The Company plans to invest a total of over ¥5.0bn(approximately ¥15.0bn including construction of a new Meiji Yakuhin factory) over the next five to eight years while
also receiving subsidies from NEDO.
Eggshell membrane upcycling platform

Eggsh e l lm e m b r an ec l o t h i n g o vo ve i l
Eggshellmembrane/eggshell
compounds: 260,000
tons/year

Eggshellmembranes
10,000tons/year

Hybrid textiles

2.63mn tons/year ofchicken eggs
*Annual production
volume of chicken eggs
in Japan

B at t e r y m at e r i al
Eggshell membrane nanofiber

Liquefied eggshellm e m bra n e

B i o - s t i m u l an t

P r o c e s s e g g s h e l l m e m b r an e , a f u n c t i o n al
p r o t e i n , i n t o an e as y - t o - u s e s t at e
Eggshell membrane
peptideSource: The Company’s results briefing materials

Aggressive promotion of M&A/alliances
4. Creation of a new organization
For the creation of a new organization, the Company will develop initiatives including conducting reforms for theorganizational, personnel, and hiring aspects, such as providing salary levels enabling employees to work withpeace of mind and incentives for growth; developing and strengthening the Global Solution Team, including building
overseas manufacturing and overseas sales bases; and proactively conducting M&A and entering into alliances.
Within these initiatives, the Company will utilize cash on hand and its financing framework for M&A and alliances,and has set its sights on companies with a sales scale of ¥10.0bn in relation to new products and markets. In
January 2023, the Company established and initiated operations of PF Visionary Fund, a limited liability investment
partnership. By investing in startup companies, the Company seeks to accelerate innovation in the antibody drug
discovery and healthcare business.
We encourage readers to review our complete legal statement on “Disclaimer” page.

22 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Growth strategy

Targets total shareholder return ratio of 20% including acquisitionsof treasury shares as shareholder return policy
5. Shareholder return policy
The Company’s basic policy for returning profits to shareholders is, based on its business policy of achieving both
corporate growth potential and profitability, to actively return profits to shareholders through dividends and othermeans, while continuing to expand investment for aspects such as R&D, advertising and M&A. Based on this policy
and considering maintaining a balance between investing in growth, securing financial soundness, and strengthening
returns to shareholders, it targets a total shareholder return ratio of 20%, including acquisitions of treasury shares.
For FY7/23, the Company paid an annual dividend per share of ¥22.0 (interim dividend = ¥10.0; year-end dividend= ¥12.0), a ¥2.0 increase from the previous fiscal year, and the dividend payout ratio was 20.6%. The Company also
conducted a share buyback (total acquisition cost = approximately ¥300mn), and including this the total shareholder
return ratio was 30.3%. For FY7/24, the Company plans to pay a dividend of ¥20.0 per share (interim dividend =¥10.0; year-end dividend = ¥10.0), a ¥2.0 decrease from FY7/23, resulting in an expected dividend payout ratioof 20.7%.

Dividend per share and dividend payout ratio
Ordinary dividend per share (left)(¥)

Commemorative dividend (left)

Dividend payout ratio (right)

28.0

70.0%

2 5 .0

24.0

5.0

60.0%

2 2 .02 0 .02 0 .0

20.0
16.0

50.0%
35.7%

40.0%

12.0
8.5

20.0

20.0

22.0

30.0%
20.0

8.0
4.0

20.0%
8.5

20.6%

18.9%

20.7%
10.0%

0.0

0.0%

FY7/20FY7/21

FY7/22

FY7/23

FY7/24 E

Note: The Company conducted a share buyback (¥300mn) in FY7/22 as well, but because there was a net loss that year thedividend payout ratio and the total shareholder return ratio were not calculated
For FY7/23, the total shareholder return ratio including the share buyback (approximately ¥300mn) was 30.3%
Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

23 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Pharma Foods International Co., Ltd.
2929 Tokyo Stock Exchange Prime Market

16-Jan.-2024
https://www.pharmafoods.co.jp/ir

Growth strategy

Bolstering sustainability management
6. Sustainability management
The Company’s business is consistent with the SDGs in that it involves the development and sales of food andcosmetic functional ingredients and products made from naturally derived raw ingredients that relate to people’s life
activities and health maintenance. It formulated the Sustainability Basic Policy in December 2021 and is bolstering
initiatives in ESG (environment, social, governance) management and SDGs. The Company presents a sustainability
vision of meaningful prosperity and health in an era with lives spanning 100 years and intends to make efforts
so that its own business growth contributes to realization of a sustainable society as a company that provides
comprehensive support in health maintenance. Key issues (materiality) are enhancement of people’s QOL, upcyclingof unused resources, and respect for diversity. Through its responses to these issues, the Company aims to achieve
its sustainability vision and further enhance corporate value.
Joint research on improving cognitive functioning through food was launched in April 2022 with a team of vasculardementia specialists from the National Cerebral and Cardiovascular Center. The research is aimed at removing
brain waste, promoting cerebral circulation and activating nerve cells through a “brain function cocktail” that
includes GABA. In March 2023, the Company was recognized as a “Certified Health and Productivity Management
Outstanding Organization 2023” (large enterprise category) by the Ministry of Economy, Trade and Industry, as an
excellent company aggressively working on sustainability management. The Company also plans to exhibit at the
Osaka Pavilion on the theme of “Eggs Save Earthlings” at Expo 2025 in Osaka, Kansai.

High potential for medium- to long-term growth due to drug
discovery, advanced utilization of eggshell membrane materials andother factors
7. FISCO’s opinion
The Company’s profit level has changed significantly, driven by the hit product Newmo® Hair Growth Formula, andthere are some people in the market who say it is a company whose results fluctuate depending on hit productsin the BtoC business and advertising expenses. However, considering that in the BtoB business the adoption of
PharmaGABA® is on the rise, the contribution of Meiji Yakuhin’s CMO to profits is increasing, and in the BtoB
business there is growth in NB products such as Meiseki Lab and Kinniku Lab, and growth in new products
such as the Eyelash Deluxe WMOA and the DRcula series in the BtoC business, at FISCO we positively evaluate
the Company as making progress in reducing its risk of dependence on specific hit products. In the medium tolong term, expectations are rising for drug discovery and development in the Bio Medical business, as well as for
new businesses that make advanced use of eggshell membrane materials. Although the Company’s immediate
performance may fluctuate due to advertising investment, we at FISCO believe that the Company has strong
medium- to long-term growth potential based on the creation of new products and new markets, as well as its
aggressive M&A strategy.

We encourage readers to review our complete legal statement on “Disclaimer” page.

24 24

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
The intellectual property rights, including the copyrights to the main text hereof, the data
and the like, belong to FISCO, and any revision, reprocessing, reproduction, transmission,
distribution or the like of this report and any duplicate hereof without the permission of FISCO
is strictly prohibited.
FISCO and its affiliated companies, as well as the directors, officers and employees thereof,
may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-13-3 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (IR Consulting Business Division)
Email: support@fisco.co.jp