COMPANY RESEARCH AND ANALYSIS REPORT

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

1-Dec.-2022
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

1-Dec.-2022
https://www.pharmafoods.co.jp/en■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Company profile.. ................................... ......................................................................................................

01

2. Outline of results for FY7/22........................................................................................................................

01

3. Outlook for FY7/23.. .....................................................................................................................................

02

4. Growth strategy...........................................................................................................................................

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

03

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

03■Business summary--------------------------------------------------------------------------------------------------------------------------------------------------- 05
1. BtoB business. . ............................................................................................................................................

07

2. BtoC business.. ...................................... ......................................................................................................

10

3. Bio Medical business............................. ......................................................................................................

11

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

13■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 14
1. Outline of results for FY7/22........................................................................................................................

14

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

15

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

18■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 19
1. Outlook for FY7/23.. .....................................................................................................................................

19

2. Outlook by business segment. . ....................................................................................................................

20■Growth strategy----------------------------------------------------------------------------------------------------------------------------------------------------------- 21
1. Creation of new products. . ...........................................................................................................................

21

2. Creation of new markets........................ ......................................................................................................

21

3. Creation of a new organization. . ...................................................................................................................

22

4. FISCO’s Opinion..........................................................................................................................................

23■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 23■Initiatives for ESG and SDGs-------------------------------------------------------------------------------------------------------------------------- 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

1-Dec.-2022
https://www.pharmafoods.co.jp/en■ 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 and products 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. Company profile
With a sustainability vision of meaningful prosperity and health in an era with lives spanning 100 years, the Company
seeks to realize a sustainable society in which people are happy and healthy. To achieve this goal, it develops foodproducts, cosmetics, and pharmaceuticals based on scientific evidence and broadly provides them to society inthree business, the BtoB business, BtoC business, and Bio Medical business. The BtoB business manufactures andsells functional ingredient products such as PharmaGABA®, and through Meiji Yakuhin Co., Ltd., which was madeinto a subsidiary in August 2021, it manufactures and sells pharmaceutical and quasi-pharmaceutical products.
The BtoC business conducts e-commerce sales of supplements, quasi-pharmaceutical products, and cosmetics
that blend the Company’s proprietary functional ingredients. The main product is Newmo® Hair Growth Formula, ahair 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 other technologies.
2. Outline of results for FY7/22
In the Company’s FY7/22 consolidated results*1, net sales increased 28.7% year on year (YoY) to ¥60,185mn,
operating profit declined 81.0% to ¥1,080mn, ordinary profit fell 78.1% to ¥1,264mn, and loss attributable to ownersof parent was ¥374mn (versus a profit of ¥3,841mn in the previous fiscal year). The addition of Meiji Yakuhin to thescope of consolidation contributed to the increase in net sales, but profit was down substantially as a result of active
investments made in R&D (+46.8% YoY), advertising (+43.8%), and alliance-building including M&A (approx. ¥3.0bn)
aimed at achieving the Medium-Term Management Plan. By segment, in the BtoB business, Meiji Yakuhin’s contract
manufacturing organization (CMO) business performed well and contributed to results. In the BtoC business, there
was growth in new products such as Eyelash Deluxe WMOA and Shiboranaito® GOLD, evolving into a support
structure for Newmo® Hair Growth Formula. Also, in the Bio Medical business, patents were granted for anti-PAD*22
antibodies in Japan and anti-PAD4 antibodies in the U.S., and the Company will move to the license-out stage in
the next term.
*1	The Company has applied Accounting Standard for Revenue Recognition, etc. from FY7/22, and figures for the FY7/22
results reflect application of this standard, etc. Furthermore, figures prior to application of this standard, etc. are used for
YoY growth rates.
*2	Abbreviation of Peptidylarginine deiminase, an enzyme that citrullinates the target protein arginine. There are five typesof PAD in the body and their relationships with various diseases have been reported.

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Summary

3. Outlook for FY7/23
For its FY7/23 consolidated results, the Company is projecting net sales to increase by 18.0% YoY to ¥71,000mn,
operating profit to increase 10.3% to ¥1,191mn, ordinary profit to edge up 0.3% to ¥1,268mn, and profit attributableto owners of parent to be ¥886mn (versus a loss of ¥374mn the previous fiscal year). The Company will continue
to focus on M&A and building alliances, and intends to establish overseas sites and actively expand, but it plans tooffset this by achieving higher sales in all segments. In the BtoC business, the Company may increase advertisingexpenses depending on sales trends during the term.
4. Growth strategy
In its Medium-Term Management Plan 2026, the Company has put forth “new value creation 1K” as a goal, andthrough initiatives to create new value (new products, new markets, and a new organization), it is seeking to be acompany with net sales of ¥100.0bn by FY7/26. Regarding its approach to profit levels, it will conduct businessdevelopment through FY7/26 without concerns over a decline in profit margin each year and intends to expand inscale while boldly taking on risk. The Company is aiming to create a structure that can secure an average operating
profit margin of 10%. In the BtoC business, new products that support Newmo® Hair Growth Formula are growing
steadily, and with PharmaGABA®’s dominant share and expansion of the CMO business in the BtoB business andexpectations for drug discovery development in the Bio Medical business, efforts are being made to reduce therisk of dependence on hit products. Business results for the immediate future may vary depending on the level ofinvestment in advertising, but through new product and new market creation and active business development,
FISCO believes the Company has high potential for medium- to long-term growth.
Key Points
A biotechnology company aiming to create pharma foods by fusing pharmaceuticals and foods
In FY7/22, net sales increased, but profits declined due to active investment to achieve the Medium-Term
Management Plan
• For FY7/23, forecasting increases in net sales and profits; will continue to focus on M&A and alliance-building• Aiming for net sales of ¥100.0bn in FY7/26 through initiatives to create new value••㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕

(¥mn)

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Note: The Company has applied Accounting Standard for Revenue Recognition, etc. from FY7/22

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en■ 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 FY7/22, 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) and two equity-method affiliates (Benart Co., Ltd. and Onkyo Home Entertainment 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.
At the end of FY7/22, total assets were ¥31,159mn, net assets were ¥7,074mn, capital was ¥2,042mn, the equity
ratio was 22.7%, and the number of issued shares was 29,073,800 shares (includes 52,483 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 main functional ingredient products, sales of the GABA-containing ingredient PharmaGABA®
began in September 2001, the e-commerce sales brand Tamagokichi® and the Tamagosamine® with iHA® formulation supplement were launched in August 2012, and Newmo® Hair Growth Formula, a non-pharmaceuticalproduct formulated with HGP® (Hair Growth Peptide), was launched in November 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 Home Entertainment Corporation (made an equity-method affiliate in May 2022 through third-party
allocation of shares) and entered the hearing aid business. Additionally, the Company obtained the biosciencebusiness (proteome analysis business) of Intégrale Co., Ltd., which possesses top-level results and technologicalcapabilities in protein analysis in Japan, via an absorption-type split in April 2022. Most recently, in July 2022, it
made joint investments with ENEOS Holdings <5020> in ENEGGO Inc., which manufactures liquid fertilizers derived
from eggs.
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.

03 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

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 Tamagosamine 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
November 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 Home Entertainment 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>

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.

04 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en■ Business summary
Develops BtoB business, BtoC business, and Bio Medical business
The Company performs research on pharmaceuticals and functional ingredients that act on immunity, aging, and thenervous system, and based on its research results, it conducts BtoB sales of functional raw materials to food productmanufacturers and other companies, conducts BtoC sales of food products and cosmetics to general consumers,
and promotes the licensing out of chicken antibodies to pharmaceutical companies. The Company is a fablesscompany that conducts R&D, marketing and sales, established manufacturing methods and production process, andmonitors health and safety management while contracting out product production to outside manufacturing partners.
Development of pharmaceuticals and functional ingredients that act on immunity, aging, and the nervous system

Source: The Company's results briefing materials

The Company changed its segment categories and names from 2Q FY7/22 to provide more suitable expression ofbusiness content for the overall group. The names of these segments were switched from the Bio Seeds business,
Bio Value business, and Bio Medical business to the BtoB business, BtoC business, and Bio Medical business. It
also revised segment categories from the previous method based on “products and services” to a method based on“products and services” and “sales channels” accompanying the inclusion of Meiji Yakuhin’s results from 2Q FY7/22.
Segment category and name changes
Previous segment

New segment

Main changes

Bio Seeds business

BtoB business

Newly added Meiji Yakuhin’s contract manufacturing organization (CMO) business and consumer
health care (CHC) business

Bio Value business

BtoC business

Newly added Meiji Yakuhin’s new repeat e-commerce business

Bio Medical business

Bio Medical business

Plans to newly add Intégrale’s proteomic analysis business

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Business summary

Looking at the trends in net sales and operating profit by business segment in the most recent five periods (FY7/18
to FY7/22), in the BtoB business, net sales and operating profit grew steadily alongside the increase in the numberof adopting companies. In the Integral’s BtoC business, Newmo® Hair Growth Formula, which was launched on
the market in November 2018, has become a hit product and is contributing greatly to earnings as a whole. In
addition, Meiji Yakuhin’s Shiboranaito® GOLD also contributed to results in FY7/22. The Bio Medical business is at
the development stage and it records lump-sum income relating to joint research and licensing as sales.

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Note: Segment classifications and names changed as of 2Q FY7/22. The Accounting Standard for Revenue Recognition, etc.
applied as of FY7/22
Source: Prepared by FISCO from the Company’s financial results㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㼎㼥㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼟㼑㼓㼙㼑㼚㼠㻮㼠㼛㻮㻌㼎㼡㼟㼕㼚㼑㼟㼟㻮㼠㼛㻯㻌㼎㼡㼟㼕㼚㼑㼟㼟㻮㼕㼛㻌㻹㼑㼐㼕㼏㼍㼘㻌㼎㼡㼟㼕㼚㼑㼟㼟

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Note: From FY7/19, the Company changed the method of displaying Company-wide expenses and amortization of goodwill
to a method displaying the adjustment amounts. Figures for FY7/18 reflect this change.
Segment classifications and names changed as of 2Q 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.

06 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Business summary

Mainstay BtoB business product PharmaGABA® holds top share in
GABA production. Contributions also made by Meiji Yakuhin’s CMO
and CHC businesses
1. 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. Additionally, from 2Q FY7/22, Meiji Yakuhin’s contract manufacturing organization (CMO)
business*1 and CHC business*2, which sells functional foods, pharmaceuticals, and other products mainly in the
drugstore channel, as new manufacturing and sales channels, has been included.
*1	Abbreviation for contract manufacturing organization.
*2	A bbreviation for consumer health care (refers to selling pharmaceuticals, functional foods, and other products at
drugstores).

Searching for food and cosmetic functional ingredients from eggs

Source: The Company’s results briefing materials

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.
2929 Tokyo Stock Exchange Prime Market

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Business summary㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼚㼑㼠㻌㼟㼍㼘㼑㼟㻌㼎㼥㻌㼕㼠㼑㼙㻌㼕㼚㻌㼠㼔㼑㻌㻮㼠㼛㻮㻌㼎㼡㼟㼕㼚㼑㼟㼟㻼㼔㼍㼞㼙㼍㻳㻭㻮㻭㻾㼡㼚㼜㼑㼜
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㻥㻘㻜㻜㻜

㻮㼛㼚㼑㼜㼑㼜
㻯㼑㼞㼑㼜㼞㼛㼚
㻯㼔㼕㼏㼗㼑㼚㻌㼑㼓㼓㻌㼍㼚㼠㼕㼎㼛㼐㼕㼑㼟㻻㼠㼔㼑㼞㻌㼕㼚㼓㼞㼑㼐㼕㼑㼚㼠㼟㻯㻴㻯㻲㼛㼘㼍㼠㼑㻙㼑㼚㼞㼕㼏㼔㼑㼐㻌㼑㼓㼓㼟
㻴㻳㻼
㼕㻴㻭
㻻㻱㻹
㻤 㻘 㻜㻣㻥

㻤㻘㻜㻜㻜
㻝㻘㻤㻜㻝

㻣㻘㻜㻜㻜
㻢㻘㻜㻜㻜
㻡㻘㻜㻜㻜

㻟㻘㻢㻠㻞

㻠㻘㻜㻜㻜
㻞 㻘 㻡㻣㻡

㻟㻘㻜㻜㻜
㻞㻘㻜㻜㻜
㻝㻘㻜㻜㻜
㻜

㻞 㻘 㻤㻡㻞

㻡㻡㻟

㻣㻟㻥

㻢㻞㻡

㻤㻣㻝

㻝㻘㻞㻟㻡

㻝㻘㻟㻠㻤

㻝㻘㻞㻣㻝

㻲㼅㻣㻛㻝㻥

㻲㼅㻣㻛㻞㻜

㻲㼅㻣㻛㻞㻝

㻲㼅㻣㻛㻞㻞㻝 㻘 㻢㻜㻤㻝 㻘 㻣㻣㻣

㻞㻟㻞

㻞㻤㻥

㻣㻤㻟
㻲㼅㻣㻛㻝㻤

Note: Net sales of CMO and CHC businesses are Meiji Yakuhin’s sales from August 16, 2021 to July 31, 2022
Source: Prepared by FISCO from the Company's results briefing materials

(1) PharmaGABA®
PharmaGABA® is the Company’s mainstay product. GABA is a type of non-protein amino acid produced byanimals and plants and microorganisms, 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 through a 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 at the end of July 2022, it ranked highest with 716 notifications (Company
data) and is maintaining a track record of adoptions. The growing adoptions of GABA by food manufacturers is
leading to an increase in orders for PharmaGABA® made by the Company, which holds the top share of GABA.
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, China, and other regions, and its
adoptions are growing. PharmaGABA® has acquired halal certification, so the plan is to launch fully fledged sales
in the Southeast Asian region where there are many Muslims.
(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.

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08 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Business summary(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) Pharma Biomix
Pharma Biomix is a feed supplement to help hens to lay folate-enriched eggs. Within Japan, it has been adopted
by JA.Z-TAMAGO. CO., LTD. for its “Shin-Tamago” and “Brown Shin-Tamago” products, and overseas, it has
been adopted by Pulmuone Co., Ltd. (Pulmuone) in South Korea for functional eggs.
(6) 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.
(7) 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.
(8) Moringa
Moringa is known to be a superfood and since ancient times, it has been used as herbal medication in Indian
Ayurveda medicine. Research results have shown that it has an anti-aging effect, and it is being adopted for andused to create products in the foods and supplements fields.
(9) OEM businessIn 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. As afield that it will focus on in the future, the Company is aiming to expand the OEM business for its own products.
(10) 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 a number of business suspensions due to legal violations at multiple companies in the domestic
generic drug industry.
(11) CHC businessIn the CHC business, Meiji Yakuhin is selling its brand products to drugstores and other distribution channels.
Sales have risen to cross-border EC distributors in recent years.

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09 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Business summary

BtoC business strengthens the product lineup led by Newmo® Hair
Growth Formula
2. BtoC business
As an “invention company’s e-commerce business,” the BtoC business sells supplements and non-pharmaceuticalproducts (under the Tamagokichi®) formulated using the Company’s proprietary functional ingredients and cosmetics(including under the FUTURE LABO brand). Sales methods comprise direct sales to consumers through e-commerce
and wholesales to dedicated shopping channels. Furthermore, Meiji Yakuhin’s new repeat e-commerce businesshas been included from 1H FY7/22.
Main products include Tamagosamin® (iHA® formulation supplement for knee joints); non-pharmaceutical productNewmo® Hair Growth Formula (hair restoration and new growth stimulant); and Tamahada Lanshell® (cosmetic
cream formulated from active eggshell membranes), Tamahada Nou Mitsu®, and Derma QII® (keratin peeling gel)in cosmetics. In February 2021, the Company launched sales of Has V, a schedule III pharmaceutical, as phase 1of its entry into the pharmaceutical e-commerce market in addition to launching sales of hearing aids from Onkyo
in March 2022. It also launched products such as ROHTO V5 ACT-VISION, an eye care supplement from ROHTO
Pharmaceutical, as a cross-selling product in FY7/22.
By item, Newmo® Hair Growth Formula, which promotes hair growth and restoration, 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 the cosmetics field, HAIR BEAUTE® ECLAT Botanical Air Color Foam (a non-pharmaceutical product),which is permanent hair dye for white hair, has been experiencing sales growth. In addition, sales from cross-selling
have been strong for products such as Eyelash Deluxe WMOA, launched in FY7/22, and ROHTO V5 ACT-VISION,
and rapid growth has also been seen in Shiboranaito® GOLD, a food product of Meiji Yakuhin authorized to display
functional claims. 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

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 customer
is acquired, but net sales are recorded continuously over the regular course. So, when the Company focuses onacquiring new customers, this temporarily causes expenses to increase.

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10 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Business summary

The BtoC business’s revenue structure

Source: The Company’s results briefing materials

Bio Medical business develops a drug discovery business using its
proprietary ALAgene® technology
3. 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. Additionally, the Company added Intégrale’s proteomic analysis business, acquired throughan absorption-type split on April 1, 2022.
ALAgene® technology is a foundational Company technology that makes possible the production of antibodies for
drug discovery target molecules that are difficult to produce using conventional technologies. The Company is using
this technology to conduct R&D into antibody pharmaceuticals indicated for patients with autoimmune diseases andmalignant tumors. In addition, Reprotite®, a peptide derived from chicken egg yolk developed by the Company,
has been successfully isolated and identified as a bioactive material involved in bone formation, and the Company
is developing it as an important pipeline candidate. Moreover, by combining ALAgene® technology and proteome
analysis technology, whose business has been transferred to the Company, it intends to further strengthen the
search for drug discovery targets and their identification in order to accelerate the development of antibody drugs.

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11 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Business summary

Producing antibody pharmaceuticals from chickens

Source: The Company’s results briefing materials

Also, based on the technologies obtained from R&D relating to functional ingredients overall, the Company isconducting the LSI (Life Science Information) business, in which external companies outsource work such as
analyses and efficacy evaluation tests to the Company. It effectively utilizes its technological capabilities to support
the R&D of various manufacturers, mainly in the food industry, including by acquiring and analyzing data on functions,analyzing the components of various ingredients, and creating requests for finished products.
In terms of the business model, the Company progresses development up to the non-clinical trial stage, and fromthe clinical trials onwards, the 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 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, theCompany was granted a patent in Japan for anti-PAD2 antibodies and in August was granted a patent by the UnitedStates Patent and Trademark Office for anti-PAD4 antibodies (already patented in Japan). It is now moving toward
licensing out in the next term.
*	The autoimmune disease therapy market is over ¥5tn (the Company’s estimate).

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12 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Business summaryMarket for Rheumatoid Arthritis Drugs
Product
name

Global sales(FY2020)

Anti-TNF alpha antibody

Humira¥1,306.2bn

Soluble TNF alpha / TNF beta receptor
formulations

Enbrel¥474.3bn

Selective T-cell co-stimulation modulator

Orencia¥286.8bn

Bristol-Myers Squibb (US) / Ono Pharmaceutical

Anti-TNF alpha antibody

Simponi¥277.4bn

Johnson & Johnson (US) / Merck (US) / Mitsubishi Tanabe Pharma

PEGylated anti-TNF alpha antibody Fabfragment preparation

Cimzia¥228.9bn

Anti-IL-6 receptor antibody

Actemra¥211.5bn

Roche (Switzerland) / Chugai Pharmaceutical

Anti-TNF alpha antibody

Remicade¥168.6bn

Johnson & Johnson (U.S.) / Merck (U.S.) / Mitsubishi Tanabe Pharma

Segment

Distributor
AbbVie (US) / Eisai
Amgen / Pfizer / Takeda Pharmaceutical

UCB (Belgium) / Astellas Pharma

Source: Nikkei Biotechnology & Business, December 7, 2021
Source: Prepared by FISCO from the Company’s results briefing materials

4. 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 currently there are few concerns about competition intensifying.
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 Newmo® Hair Growth Formula,a hair restoration and new growth stimulant, but it is actively promoting the development of new products, including
Eyelash Deluxe WMOA, an eyelash beauty serum, and Shiboranaito® GOLD in an effort to reduce reliance riskby expanding its product lineup. At the same time, with respect to advertising expenses, the Company is working
to reduce related risks by responsively 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 progressing 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.

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13 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en■ Results trends
In FY7/22, net sales increased, but profits declined due to active
investment to achieve the Medium-Term Management Plan
1. Outline of results for FY7/22
In the Company’s FY7/22 consolidated results, net sales increased 28.7% to ¥60,185mn, operating profit decreased
81.0% to ¥1,080mn, ordinary profit declined 78.1% to ¥1,264mn, and there was a loss attributable to owners ofparent of ¥374mn (versus profit of ¥3,841mn in the previous fiscal year). The Company has applied the AccountingStandard for Revenue Recognition, etc. from the beginning of FY7/22, causing reductions of ¥121mn in net sales,¥75mn in cost of sales, and ¥45mn in each of operating profit, ordinary profit and profit before income taxes.
Consolidated results for FY7/22(¥mn)
FY7/21

FY7/22

Results% of total

Results% of total

46,752100.0%

60,185100.0%

28.7%

BtoB business

2,852

6.1%

8,079

13.4%

183.3%

BtoC business

43,52493.1%

51,886

86.2%

19.2%

375

0.8%

220

0.4%

-41.3%

Gross profit

39,72485.0%

48,108

79.9%

21.1%

SG&A expenses

34,051

72.8%

47,028

78.1%

38.1%

Operating profit (loss)

5,673

12.1%

1,080

1.8%

-81.0%

BtoB business

770

27.0%

1,660

20.5%

115.6%

BtoC business

5,575

12.8%

638

1.2%

-88.6%

Bio Medical business

81

21.6%

-231

-105.0%-Adjustment amount

-754

-

-986

-

-

Ordinary profit

5,767

12.3%

1,264

2.1%

-78.1%

Profit attributable to owners of parent

3,841

8.2%

-374

-0.6%

-

Net sales

Bio Medical business

YoY

Note: T he Company has applied Accounting Standard for Revenue Recognition, etc. from FY7/22, and figures for the FY7/22 results
reflect application of this standard, etc. Figures and year-on-year comparisons use figures and comparisons prior to application of
the standard, etc.
In FY7/22, BtoB business net sales include Meiji Yakuhin’s net sales from August 16, 2021 to July 31, 2022
Source: Prepared by FISCO from the Company’s financial results

Sales increased due in part to Meiji Yakuhin being added to the scope of consolidation (11.5 months of results), but
active investments were made in R&D, advertising, and alliance-building, including M&A, to achieve the MediumTerm Management Plan, which resulted in a large decline in profits. Investing in R&D, the Company took over thebioscience business of Intégrale in April 2022 via an absorption-type split, which was one of the factors that led
R&D expenses to increase 46.8% YoY to ¥766mn. Investing to advertise new products, the Company focused on
advertising Shiboranaito® GOLD, for which orders have been buoyant, from the third quarter in particular. This
resulted in advertising expenses increasing by 43.8% to ¥35,748mn. Regarding advertising expenses, the Company
had planned to spend around 70% of its budget of ¥30.0bn in the first half, but in considering CPO, it limited
spending to around 50% (¥15.5bn). For alliance-building, the Company invested over ¥3.0bn, getting involved in new
product development and new markets through investment in Onkyo and ENEGGO. As for the factors behind thechange in operating profit, profit increased by ¥13,433mn owning to the increase in sales, but negative factors werean increase in cost of sales of ¥5,049mn, R&D expenses of ¥219mn, advertising expenses of ¥10,887mn, personnel
expenses of ¥943mn, commission expenses of ¥236mn, freight costs of ¥331mn, and other expenses of ¥358mn.

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14 24

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

Pharma Foods International Co., Ltd.

1-Dec.-2022

2929 Tokyo Stock Exchange Prime Market

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

Results trends

Looking at trends by quarter, net sales were ¥12,606mn in 1Q FY7/22, ¥16,215mn in 2Q, ¥15,228mn in 3Q, and¥16,135mn in 4Q, so there continues to be a growth trend. By contrast, operating profit was ¥1,575mn in 1Q FY7/22
and ¥457mn in 2Q, there was an operating loss of ¥1,100mn in 3Q, followed by operating profit of ¥148mn in 4Q.
While a loss was posted for the third quarter, it was due to opportunistic investment similar to 1Q FY7/21 in whicha loss of ¥1,428mn was recorded due to aggressive investment in Newmo® Hair Growth Formula.

㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼝㼡㼍㼞㼠㼑㼞㼘㼥㻌㼞㼑㼟㼡㼘㼠㼟㻺㼑㼠㻌㼟㼍㼘㼑㼟(¥mn)

㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼘㼛㼟㼟㻕㻝㻤㻘㻜㻜㻜

㻝㻢㻘㻞㻝㻡

㻝㻡㻘㻜㻜㻜
㻝㻞㻘㻜㻜㻡

㻝㻟㻘㻟㻡㻡 㻝㻟㻘㻜㻜㻟㻝㻡㻘㻞㻞㻤

㻝㻢㻘㻝㻟㻡

㻝㻞㻘㻢㻜㻢

㻝㻞㻘㻜㻜㻜
㻤㻘㻟㻤㻣

㻥㻘㻜㻜㻜
㻢㻘㻜㻜㻜

㻟㻘㻜㻥㻜 㻟㻘㻟㻢㻝㻠㻘㻢㻢㻜 㻠㻘㻞㻠㻜㻟㻘㻜㻜㻜㻞㻘㻣㻝㻠 㻟㻘㻜㻠㻜
㻝㻘㻟㻞㻤

㻝㻘㻟㻠㻢

㻥㻥㻣

㻝㻘㻡㻣㻡
㻝㻠㻤

㻠㻡㻣

㻜
㻙㻟㻘㻜㻜㻜

㻙㻣㻤㻠

㻙㻤㻜㻜

㻝㻽

㻞㻽

㻙㻝㻘㻠㻞㻤
㻟㻽㻲㼅㻣㻛㻞㻜

㻠㻽

㻝㻽

㻞㻽

㻟㻽

㻲㼅㻣㻛㻞㻝㻠㻽㻝㻽㻞㻽㻙㻝㻘㻝㻜㻜
㻟㻽㻠㻽㻲㼅㻣㻛㻞㻞

Source: Prepared by FISCO from the Company’s results
 briefing materials
2. Trends by business segment(1) BtoB businessNet sales in the BtoB business increased 183.3% YoY to ¥8,079mn, and segment profit increased 115.6% to¥1,660mn. The CMO business of Meiji Yakuhin performed well, contributing to both sales and profits and resulting
in large increases in both. The Company is shifting its area of focus from sales of functional raw materials to salesof end products.

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15 24

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

Pharma Foods International Co., Ltd.

1-Dec.-2022

2929 Tokyo Stock Exchange Prime Market

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

Results trends㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼝㼡㼍㼞㼠㼑㼞㼘㼥㻌㼞㼑㼟㼡㼘㼠㼟㻌㼕㼚㻌㻮㼠㼛㻮㻌㼎㼡㼟㼕㼚㼑㼟㼟㻺㼑㼠㻌㼟㼍㼘㼑㼟㻿㼑㼓㼙㼑㼚㼠㻌㼜㼞㼛㼒㼕㼠

(¥mn)
㻟㻘㻡㻜㻜

㻟㻘㻝㻠㻟

㻟㻘㻜㻜㻜
㻞㻘㻟㻤㻞

㻞㻘㻡㻜㻜
㻞㻘㻜㻠㻤

㻞㻘㻜㻜㻜
㻝㻘㻡㻜㻜
㻤㻥㻝

㻝㻘㻜㻜㻜
㻠㻥㻡
㻡㻜㻜

㻡㻝㻝

㻝㻠㻥

㻝㻟㻡

㻝㻽

㻞㻽

㻢㻥㻤

㻢㻣㻢

㻟㻞㻡

㻣㻢㻥

㻡㻜㻠

㻠㻢㻜

㻝㻤㻥

㻝㻜㻢

㻥㻞㻠

㻞㻝㻣

㻝㻣㻝

㻡㻟㻣

㻠㻢㻞

㻞㻽

㻟㻽

㻞㻣㻡

㻢㻡㻢

㻟

㻜
㻟㻽

㻠㻽

㻲㼅㻣㻛㻞㻜㻝㻽㻞㻽㻟㻽㻲㼅㻣㻛㻞㻝㻠㻽㻝㻽㻠㻽㻲㼅㻣㻛㻞㻞

Source: Prepared by FISCO from the Company’s results
 briefing materials
Within functional ingredients, sales of mainstay PharmaGABA® declined 5.8% YoY to ¥1,271mn. Overseas
markets decreased 3.4% to ¥589mn, but sales increased in the major markets of North America (+10.0%) andChina (+100.0%). At the same time, sales from the domestic market declined 7.7% to ¥681mn. The number of
GABA notifications in the foods with functional claims system totaled 716, maintaining the top spot, as of July 31,
2022. Use of GABA by food product manufactures continues to increase. Bonepep® is being increasingly adopted
by overseas dairy products companies in particular, over 20 thus far, but sales declined by 29.0% YoY to ¥176mn.
Sales from the OEM business declined 15.4% YoY to ¥625mn. Diet foods and healthy beverages for healthcarecompanies performed well, primarily in Japan, but pouch jelly products for convenience stores fell short of
expectations. In this business, the Company has proposed combinations of evidence-based materials centering
on its proprietary ingredients and continues to carry out projects both domestically and overseas.
Cross-border EC business, a new business area, recorded ¥300mn in net sales. The Company increased sales
to Tmall Global and other EC platforms and local distributors.
In new manufacturing and sales channels, sales from the CMO business, which consists of contract pharmaceutical manufacturing by Meiji Yakuhin, were ¥3,642mn, and sales from the CHC business, which conducts salesof functional food products and pharmaceuticals through drug store channels, etc., totaled ¥1,801mn. In the
CMO business, capacity utilization rose from 60% to 105% from increased orders. The Company also finishedintegrating the sharp increases in personnel expenses and raw material costs into order prices.
(2) BtoC businessNet sales in the BtoC business increased 19.2% YoY to ¥51,886mn, while segment profit declined 88.6% to¥638mn. The growth trend continued and the segment set a new record high for quarterly sales. At the sametime, with a view to obtaining more regular customers, it recorded advertising expenses of ¥35,608mn (+43.2%),
resulting in a major decline in segment profit.

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16 24

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

Pharma Foods International Co., Ltd.

1-Dec.-2022

2929 Tokyo Stock Exchange Prime Market

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

Results trends㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼝㼡㼍㼞㼠㼑㼞㼘㼥㻌㼞㼑㼟㼡㼘㼠㼟㻌㼕㼚㻌㼠㼔㼑㻌㻮㼠㼛㻯㻌㼎㼡㼟㼕㼚㼑㼟㼟㻺㼑㼠㻌㼟㼍㼘㼑㼟(¥mn)

㻿㼑㼓㼙㼑㼚㼠㻌㼜㼞㼛㼒㼕㼠㻝㻡㻘㻜㻜㻜

㻝㻞㻘㻡㻢㻣 㻝㻞㻘㻜㻡㻠 㻝㻞㻘㻜㻥㻝 㻝㻟㻘㻜㻢㻤㻝㻟㻘㻝㻠㻣 㻝㻟㻘㻡㻣㻥㻝㻜㻘㻥㻣㻥

㻝㻞㻘㻜㻜㻜
㻣㻘㻥㻞㻞

㻥㻘㻜㻜㻜
㻢㻘㻜㻜㻜
㻟㻘㻜㻜㻜

㻞㻘㻠㻤㻤 㻞㻘㻤㻠㻝㻟㻘㻣㻝㻢 㻟㻘㻡㻠㻡㻝㻘㻝㻡㻥㻞㻘㻣㻥㻤 㻟㻘㻜㻝㻞
㻝㻘㻝㻜㻟

㻥㻥㻜

㻝㻘㻤㻝㻤
㻞㻡㻝

㻜
㻙㻟㻘㻜㻜㻜

㻙㻤㻣㻝

㻙㻣㻜㻡

㻝㻽

㻞㻽

㻙㻝㻤㻠

㻙㻝㻘㻟㻟㻥
㻟㻽㻠㻽㻲㼅㻣㻛㻞㻜

㻝㻽㻙㻝㻘㻞㻠㻣
㻞㻽㻟㻽㻲㼅㻣㻛㻞㻝

㻠㻽

㻝㻽

㻞㻽

㻟㻽

㻠㻽

㻲㼅㻣㻛㻞㻞

Source: Prepared by FISCO from the Company’s results
 briefing materials
The Company began aggressively investing in advertising for new products in 3Q FY7/22 while emphasizing CPO,
an indicator of customer acquisition efficiency, and LTV, a profitability indicator, and, as a result, the number ofregular customers as of July 31, 2022 was 1,001,356 (versus 773,844 at the end of the previous year), topping
the one million mark. Repeat purchases from this customer base continue to expedite profit generation and raise
profit levels. Going forward, the Company intends to mitigate risks associated with the advertising expense burden
by responsibly controlling such expenses while keeping a close eye on sales, CPO and LTV trends.
Trends in advertising expenses and number of regular customers in the BtoC business

Source: The Company’s results briefing materials

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17 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Results trends

Looking by item, there was steady growth in sales of new products in support of mainstay Newmo® Hair Growth
Formula, and Newmo® Hair Growth Formula itself also performed well, with sales hitting ¥27,967mn and volume
topping 15 million units (as of July 23, 2022). As a result of focusing on cross-sales to customers of Newmo®
Hair Growth Formula, sales of Newmo® Supplement were ¥2,724mn and sales of Newmo® Vactory Shampoo
were ¥714mn. Regarding efforts to horizontally develop the Newmo® brand, promoting advertising of Eyelash
Deluxe WMOA, an eyelash beauty serum, resulted in sales of ¥2,794mn. In addition, cross-selling ROHTO V5
ACT-Vision, an eye care supplement from ROHTO Pharmaceutical, to customers who purchased PFI Hakase(professor) Loupe® magnifying eyeglasses resulted in sales of ¥1,149mn. Sales of Shiboranaito® GOLD from
Meiji Yakuhin totaled ¥3,194mn and the number of regular customers was 209,379, as the product performed
well. Driven by online media, users have been increasing rapidly, and buoyant orders are putting pressure on
manufacturing lines, so advance orders continue to be required. Sales of HAIR BEAUTE® ECLAT Botanical Air
Color Foam totaled ¥3,332mn, and the number of regular customers was 48,241 (as of July 31, 2022) as a resultof acquiring new customers with an emphasis on CPO. In response to these increases in orders and regularcustomers, a new call center facility with 100 booths was established at Meiji Yakuhin, as the Company continued
investing to strengthen order reception functions.
(3) Bio Medical business
The Bio Medical business reported ¥220mn in net sales (–41.3% YoY) and a ¥231mn segment loss (versus a¥81mn profit in the previous fiscal year). While it recorded lump-sum income relating to joint research and alicensing contract with Mitsubishi Tanabe Pharma as sales in the same period of the previous fiscal year, thesesales were not recorded in FY7/22.
The Company began producing lead antibodies with the potential to be next-generation antibody drug candidates
targeting all diseases. This project has been selected for a five-year period under the FY2021 Project Focusedon Developing Key Technology for Discovering and Manufacturing Drugs for Next-Generation Treatment andDiagnosis (development of manufacturing technologies for next-generation antibody drugs with international
competitiveness) of the Japan Agency for Medical Research and Development (AMED). In addition, the Company
launched a dedicated AI and bioinformatics team and is conducting initiatives to identify the best antibodies as
quickly as possible through AI-based selection and optimization.
3. Financial condition
At the end of FY7/22, total assets increased ¥10,214mn from the end of the previous fiscal year to ¥31,159mn. Thiswas mainly due to increases of ¥1,786mn in notes and accounts receivable - trade, ¥2,045mn in merchandise andfinished goods because of sales expansion in the BtoC business, ¥2,929mn in property, plant and equipment accompanying the acquisition of Meiji Yakuhin as a subsidiary, and ¥1,236mn in investment securities related to acquisitionof shares resulting from concluding capital and business alliance agreements with ROHTO Pharmaceutical and Sanyo
Chemical Industries. Total liabilities at the end of FY7/22 climbed ¥11,606mn to ¥24,084mn mainly because of risesof ¥793mn in accounts payable-other related to the increase in advertising expenses and ¥12,900mn in short-termborrowings following implementation of borrowing based on a commitment line agreement, albeit with some offset
via a ¥1,565mn decline in income taxes payable, etc. Total net assets decreased ¥1,391mn to ¥7,074mn due torecording loss attributable to owners of parent and dividends paid. The equity ratio hence dropped 17.7ppt to 22.7%.

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

18 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Results trends

The Company’s overall balance sheet has ballooned as sales have increased sharply, and its equity ratio continues
to decline, but the Company also continues to expedite profit generation and raise profit levels through aggressive
investment in advertising. Moreover, the increase in interest-bearing debt has not been a factor putting pressure
on profits. For these reasons, FISCO believes that there are no concerns regarding the Company’s financial soundness. In September 2022, the Company concluded a commitment line agreement for a total of ¥7.6bn (three-year
agreement) through the Bank of Kyoto <8369>, its main bank, and five regional banks. It can be concluded that
this reflects the positive evaluation given to the Company’s track record in drug discovery, functional ingredientresearch and development, and e-commerce sales as well as the high regard the banks have for the feasibility of
its Medium-Term Management Plan aimed at expansion in the healthcare domain.
Consolidated balance sheet(¥mn)
End of FY7/20

End of FY7/21

End of FY7/22

Change10,096

20,944

31,15910,214Current assets

7,437

17,93323,513

5,580

Non-current assets

2,659

3,010

7,645

4,635

5,188

12,47824,084

11,606

Current liabilities

2,837

10,97822,795

11,817

Non-current liabilities

2,350

1,499

1,288

-211

4,907

8,465

7,074

-1,391

Shareholders’ equity

4,895

8,455

7,024

-1,431

Capital stock

2,033

2,038

2,042

4

48.6%

40.4%

22.7%

-17.7pt

Total assets

Total liabilities

Total net assets

Equity ratio

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

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

FY7/22

Cash flows from operating activities

5,938-6,065

Cash flows from investing activities-442-2,539Cash flows from financing activities

1,030

7,679

Balance of cash, deposits, and cash
equivalents at the end of the period

9,794

8,845

Source: Prepared by FISCO from the Company’s financial results■ Outlook
For FY7/23, forecasting increases in net sales and profits; willcontinue to focus on M&A and alliance-building
1. Outlook for FY7/23
For its FY7/23 consolidated results, the Company is projecting net sales to increase 18.0% to ¥71,000mn, operating
profit to increase 10.3% to ¥1,191mn, ordinary profit to edge up 0.3% to ¥1,268mn, and profit attributable toowners of parent of ¥886mn (versus a loss of ¥374mn the previous term). While continuing to focus on M&A andalliance-building, the Company plans to establish overseas sites and aggressively expand, but it expects to offset
the expenditures by achieving increased sales in all segments.

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.

1-Dec.-2022

2929 Tokyo Stock Exchange Prime Market

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

OutlookConsolidated outlook for FY7/23(¥mn)
FY7/22

FY7/23Results% of sales

Forecast% of sales

60,185100.0%

71,000100.0%

BtoB business

8,079

13.4%

8,600

12.1%

6.4%

BtoC business

51,88686.2%

62,000

87.3%

19.5%

Net sales

YoY
18.0%

220

0.4%

360

0.5%

63.6%

Operating profit

1,080

1.8%

1,191

1.7%

10.3%

Ordinary profit

1,264

2.1%

1,268

1.8%

0.3%

Profit attributable to owners of parent

-374

-0.6%

886

1.2%

-

Bio Medical business

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

2. Outlook by business segment(1) BtoB businessIn the BtoB business, the Company is forecasting sales of ¥8,600mn, a YoY increase of 6.4%. In functional
ingredients, it will strengthen overseas sales and build a production system overseas for stable supply in overseas
markets. The Company plans to accelerate its shift from functional raw material sales to end product sales andwill transition from contract production for private brands to sales of products under its own brands. For mainstay
PharmaGABA®, it plans to receive large-scale orders. At the same time, the CMO business of Meiji Yakuhin is
expected to be operating at full capacity.
(2) BtoC businessIn the BtoC business, the Company is forecasting sales of ¥62,000mn, a YoY increase of 19.5%. Newmo® Hair
Growth Formula is expected to remain firm, with the Company making changes to its advertising. New productsthat grew steadily in FY7/22 (Eyelash Deluxe WMOA, Shiboranaito® GOLD and HAIR BEAUTE® ECLAT Botanical
Air Color Foam) are also expected to continue their growth. In addition, the launch of a new brand, the DRcula
Series, for which test sales were started in July 2022, appears to be proceeding steadily. It is possible thatadvertising expenses will be increased depending on sales trends during the term.
(3) Bio Medical business
Sales in the Bio Medical business is expected to increase 63.6% YoY to ¥360mn. The Company will expand its
contract services for next-generation proteome analysis, including Olink for major pharmaceutical companies,
while moving forward on antibody drug development for new diseases.

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20 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en■ Growth strategy
Aiming for net sales of ¥100.0bn in FY7/26 through initiatives tocreate new value
In its Medium-Term Management Plan 2026, the Company has put forth “new value creation 1K” as a goal, andthrough initiatives to create new value (new products, new markets, and a new organization), it is seeking 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 ingrowth from existing businesses and over ¥30.0bn from new value creation, and it has committed to an averagesales 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 adecline in profit margin decline each year and intends to expand in scale while boldly taking on risk. Through this,
it is aiming to create a structure that can secure an average operating profit margin of 10%.
1. Creation of new products
For the creation of new products, toward creating the next hit products to follow on from products such as
PharmaGABA®, Newmo® Hair Growth Formula, and Derma QII®, the Company is progressing R&D including todevelop new ingredients (wine ceramide, Lipi Smart®, sialo sugar chains, egg placenta, and eggshell membrane
peptides), new applications and effects (a brain function cocktail theory drink, Moringa, Wellmune, Banafine, andcollagen eggshell membrane peptides), and next-generation antibodies. It is also developing products for thescalp and skin field (creating active components for non-pharmaceutical products, hair restorer formulas, wrinkle
improvers, egg placenta, and ELLE brand cosmetics), pharmaceutical e-commerce field, and oral care field.
In July 2021, the Company concluded a sales agreement with Mitsui Sugar Co., Ltd. of the Mitsui DM Sugar Holdings<2109> Group for Lipi Smart®, which is a functional foods ingredient that suppresses absorption of triglycerides andcontains sesame as a raw ingredient. 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.
2. Creation of new markets
For the creation of new markets, the Company will progress initiatives for the expanding health market, including tostrengthen brands and develop overseas markets (US market, China market through cross-border EC, and Southeast
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 drugstores and convenience
stores), conduct initiatives for SDGs (create upcycle markets for unused resources), and enter the health support
devices and medical devices fields (health devices, facial beauty devices, measuring devices, and hearing 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.

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21 24

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

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Growth strategy

With regard to 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 plans to develop high value-added crops with enhanced yields, resilience, and functionality using bio-stimulants that combine technologies from both companies in 2024, begin sales via the Company’s e-commerce sales
channel of high-performance health foods and cosmetics made from unused portions of high-value-added crops in
2025, expand target crops and promote sixth sector industrialization and brand formation in 2026, and develop asustainable farming system in 2030. The Company also announced its entry into the fiber and plant vitalizing agent
markets through advanced utilization of 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 inJapan into high-value-added products and thereby contribute to the realization of a sustainable society. In addition,
in July 2022, the Company jointly invested with ENESO Holdings in ENEGGO, which manufactures liquid fertilizers
from eggs, and signed a business alliance 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.
Up-cycle of unused resources

Source: The Company’s results briefing materials

3. Creation of a new organization
For the creation of a new organization, the Company will progress 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 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. The Company explainsthat “attention should be given to pursuit of collaboration with a variety of companies even now.”

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.

1-Dec.-2022

2929 Tokyo Stock Exchange Prime Market

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

Growth strategy

Recent M&A and alliances
M&A and alliance

AmountMarch 2021

Date

Sanyo Chemical
Industries, Ltd.

Company nameBusiness and capitalalliance

Roughly¥400mnCollaboration in R&D and sales for cosmetics, agrinutrition,
pharmaceuticals, and other products

Summary

July 2021

ROHTO PharmaceuticalCo., Ltd.

Business and capitalalliance

Roughly¥600mnCollaboration in product development, production, and sales inhealth and beauty care and food areas

August 2021 Meiji Yakuhin Co., Ltd.

Acquisition as a wholly
owned subsidiary

Roughly¥2.3bnUtilization of managerial resources including production anddrugstore sales channels

August 2021 Ai-BrainScience Inc.

Underwriting of thirdparty allocation of shares¥60mn

Combination of early discovery of cognitive function decline andfunctional food ingredients to improve conditions

April 2022

Intégrale Co., Ltd.

Absorption-type split

May 2022

Onkyo HomeEntertainment
Corporation

Made an equity-method
affiliate

July 2022

ENEGGO Inc.

Received third-party
share allocation jointlywith ENEOS Holdings

Strengthening drug discovery target searches and identification
through the combination of ALAgene® technology and Intégrale’s
proteomic analysis technology
Several 100 Sales of health and medical equipment and targeted AI-based
million yen searching in the drug discovery business¥100mnDevelopment, production and sales coordination for bio-stimulant
products that use eggshell membranes and GABA

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

4. FISCO’s Opinion
Because the Company’s earnings level has changed substantially on the strength of Newmo® Hair Growth Formula,
there are some in the market who believe it is a company whose performance varies depending on hit products andadvertising investment in its BtoC business. However, in the BtoC business, new products that support Newmo®
Hair Growth Formula are growing steadily, and with PharmaGABA®’s dominant share and expansion of the CMO
business in the BtoB business and expectations for drug discovery development in the Bio Medical business, efforts
are being made to reduce the risk of dependence on hit products. Business results for the immediate future mayvary depending on the level of investment in advertising, but through new product and new market creation andactive business development, FISCO believes the Company has high potential for medium- to long-term growth.

■ Shareholder return policy
Targets total shareholder return ratio of 20% including acquisitionsof treasury shares as shareholder return policy. Expects ¥20.0 for
the FY7/23 annual dividend
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.
In FY7/22, it reduced the annual dividend per share by ¥5.0 YoY (same as the previous fiscal year on an ordinary
dividend basis) to ¥20.0. Furthermore, in FY7/23, it plans for an annual dividend per share of ¥20.0, the same amountas the previous fiscal year (dividend payout ratio: 65.6%, total shareholder return ratio: 65.5%).

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

1-Dec.-2022
https://www.pharmafoods.co.jp/en

Shareholder return policy

In addition, in order to raise capital efficiency and execute a flexible capital policy based on business conditions,the Company conducts share buybacks, and in September 2021, it acquired 108,300 shares (total acquisition costof ¥299mn). Most recently, it announced a share buyback on October 7, 2022 and plans to acquire up to 270,000
shares by October 24 (total acquisition cost of ¥300mn; 0.93% of shares outstanding excluding treasury stock).

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛(¥)

㻻㼞㼐㼕㼚㼍㼞㼥㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕㻯㼛㼙㼙㼑㼙㼛㼞㼍㼠㼕㼢㼑㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㻔㼘㼑㼒㼠㻕
㻢㻡㻚㻢㻑

㻞㻤㻚㻜

㻞 㻡 㻚㻜

㻞㻠㻚㻜

㻢㻜㻚㻜㻑
㻡㻚㻜

㻞 㻜 㻚㻜㻞 㻜 㻚㻜

㻞㻜㻚㻜

㻝㻢㻚㻜

㻡㻜㻚㻜㻑

㻟㻡㻚㻣㻑

㻠㻜㻚㻜㻑

㻝㻞㻚㻜

㻟㻜㻚㻜㻑
㻤㻚㻡

㻞㻜㻚㻜

㻞㻜㻚㻜

㻞㻜㻚㻜

㻤㻚㻜
㻠㻚㻜

㻣㻜㻚㻜㻑

㻞㻜㻚㻜㻑

㻤㻚㻡

㻝㻤㻚㻥㻑

㻝㻜㻚㻜㻑

㻜㻚㻜

㻜㻚㻜㻑
㻲㼅㻣㻛㻞㻜

㻲㼅㻣㻛㻞㻝

㻲㼅㻣㻛㻞㻞

㻲㼅㻣㻛㻞㻟㻌㻱

Source: Prepared by FISCO from the Company’s financial results■ Initiatives for ESG and SDGs
Formulated the Sustainability Basic Policy and bolstering related
initiatives
As the Company’s business itself involves the development and sales of food and cosmetic functional ingredients andproducts made from naturally derived raw ingredients that relate to people’s life activities and health maintenance,
its business is consistent with the SDGs. It formulated the Sustainability Basic Policy in December 2021 and isbolstering initiatives in ESG (environment, social, governance) management and SDGs. The Company presents asustainability vision of meaningful prosperity and health in an era with lives spanning 100 years and intends to makeefforts 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. Also, as mentioned above, the Company began a new upcycling business using eggshell membranes, and its
eggshell membrane fiber has been drawing attention, being featured on TV programs and the like. The Company alsoplans to exhibit at the Osaka Pavilion on the theme of “Eggs Save Earthlings” at World Expo 2025 in Osaka, Kansai.
We encourage readers to review our complete legal statement on “Disclaimer” page.

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Disclaimer
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◾ 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