COMPANY RESEARCH AND ANALYSIS REPORT

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

28-May-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

28-May-2024
https://www.pharmafoods.co.jp/en■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Business description. . ..................................................................................................................................
2. Return to profitability in 1H FY7/24..............................................................................................................

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01

3. Forecast for FY7/24 revised downward in anticipation of greater decline in profit but this is due totemporary factors........................................................................................................................................
4. Creating new markets in the fibers, battery materials, and biostimulant fields as a growth strategy. ...........

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02

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

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

03
04■Business summary--------------------------------------------------------------------------------------------------------------------------------------------------- 06
1. A healthcare equipment manufacturer focused on R&D...............................................................................
2. BtoB business. . ............................................................................................................................................
3. BtoC business.. ...................................... ......................................................................................................
4. Bio Medical business...................................................................................................................................
5. Risk factors and challenges and countermeasures. .....................................................................................

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■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 14
1. Outline of results for consolidated 1H FY7/24..............................................................................................
2. Trends by business segment. . ......................................................................................................................
3. Financial condition................................. ......................................................................................................

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17

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

18■Growth strategy----------------------------------------------------------------------------------------------------------------------------------------------------------- 19
1. Medium-Term Management Plan 2026.. ......................................................................................................
2. Creation of new products. . ...........................................................................................................................
3. Creation of new markets........................ ......................................................................................................
4. Creation of a new organization. . ...................................................................................................................
5. Shareholder return policy....................... ......................................................................................................
6. Sustainability management..........................................................................................................................
7. FISCO’s opinion..................................... ......................................................................................................

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

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

28-May-2024
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 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.
2. Return to profitability in 1H FY7/24
In the Company’s 1H FY7/24 consolidated results, net sales decreased 9.9% year on year (YoY) to ¥31,652mn,
operating profit was ¥1,535mn (versus a loss of ¥883mn YoY), ordinary profit was ¥1,542mn (versus a loss of¥912mn), and profit attributable to owners of parent was ¥768mn (versus a loss of ¥914mn). Despite steadysales growth in the BtoB business, net sales decreased overall due to the impact of a decline in operating rates
at contracted production partners and manufacturing delays caused by distribution restrictions at raw materials
suppliers in the BtoC business. On the other hand, the Company returned to profitability for each type of profit asadvertising expenses decreased considerably due to the postponement of advertising activities for new products in
the BtoC business. Looking at quarterly results, 1Q net sales were ¥16,142mn and operating profit was ¥601mn,
and 2Q net sales were ¥15,510mn and operating profit was ¥933mn. Since 2Q FY7/23, the Company has beensteadily recording operating profits as a result of efforts such as the optimization of advertising investment.

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01 24

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

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

28-May-2024
https://www.pharmafoods.co.jp/en

Summary

3. Forecast for FY7/24 revised downward in anticipation of greater decline in profit but this is due totemporary factors
On March 11, 2024, the Company revised its FY7/24 consolidated results downward and it is now projecting net
sales to decrease by 6.5% YoY to ¥64,100mn, operating profit to decrease 25.2% to ¥2,700mn, ordinary profit todrop 18.1% to ¥2,900mn, and profit attributable to owners of parent to fall 41.6% to ¥1,800mn. In contrast to initial
forecasts, net sales are now expected to decrease, compounding the decline in each type of profit. Although the
BtoB business is expected to perform fairly steadily, in the BtoC business, the impact of the decline in operating
rates at contracted production partners and manufacturing delays caused by distribution restrictions at raw materials
suppliers that manifested in 1H is expected to delay plans for the full-scale promotion of new products such as
NEW Z. However, at FISCO, we see this downward revision as the result of temporary factors in 1H, and taking
into account that the Company is expected to begin the full-scale promotion of its new products in 2H and that it ismaking progress on controlling its advertising expenses, there is room for upside in the revised forecasts.
4. Creating new markets in the fibers, battery materials, and biostimulant fields 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. Looking at a breakdown of this goal, it is targeting ¥70.0bn ingrowth from existing businesses and ¥30.0bn from new value creation, and it has committed to an average net 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%. To create an upcycling market for unused
resources, the Company will aim to create new markets in the fibers, battery materials, and biostimulant* fields byharnessing unused natural ingredients and realizing the advanced utilization of eggshell membranes. In February
2024, it officially agreed on and launched a five-year R&D project as part of the “Bio Manufacturing Revolution
Promotion Project Research and Development Plan” promoted by the New Energy and Industrial Technology
Development Organization (NEDO), a national research and development organization.
*	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).

5. High potential for medium- to long-term growth due to drug discovery, advanced utilization of eggshellmembrane materials and other factors
The Company is a biotechnology company that practices development based on the concept that immunity, aging,and the nervous system are three important elements in life activity and health maintenance. At FISCO, we havea high opinion of its development capabilities, from its exploration of functional ingredients and development offunctional products to its creation of new markets through drug discovery and the advanced utilization of eggshellmembrane materials, and we think it has strong medium- to long-term growth potential. Another factor to beevaluated is the Company’s commitment to strengthening dialogue with the stock market and investors as part ofits efforts to enhance corporate value. Going forward, we will be monitoring the progress of its “Bio Manufacturing
Revolution Promotion Project Research and Development Plan” (fibers, battery materials, and biostimulants) efforts
following its agreement with NEDO and the Autoimmune Disease Project based on an exclusive licensing agreementwith Mitsubishi Tanabe Pharma Corporation.

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02 24

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

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

28-May-2024
https://www.pharmafoods.co.jp/en

Summary

Key Points
A biotechnology company aiming to create pharma foods by fusing pharmaceuticals and foods
Return to profitability in 1H FY7/24• Forecast for FY7/24 revised downward in anticipation of greater decline in profit but this is due to temporary
factors• Creating new markets in the fibers, battery materials, and biostimulant fields as a growth strategy• High potential for medium- to long-term growth due to drug discovery, advanced utilization of eggshellmembrane materials and other factors••

Results trends
Net sales (left)

Operating profit (right)

(¥mn)

(¥mn)

68,57270,00064,100
5,673

60,0007,000

60,1856,000

50,000

5,000
3,610

40,0004,000

46,7522,700

30,00020,0001,080

15,353

3,000
2,000

10,532
10,000
0

1,000
576

740

FY7/19FY7/200FY7/21

FY7/22

FY7/23

FY7/24 E

Note: FY7/24 E value is from the revised forecast released on March 11, 2024
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 (QOL).

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

28-May-2024
https://www.pharmafoods.co.jp/en

Company profile

At the end of 1H FY7/24, 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, Meiji Yakuhin Co., Ltd., and PF Capital Co., Ltd.) and two 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 and Meiji Yakuhin manufacturesand sells pharmaceuticals and non-pharmaceutical products. PF Capital Co., Ltd. (which became a subsidiaryfollowing acquisition of the CVC operating company in May 2022) manages the PF Visionary Fund, a limited liability
investment partnership established in January 2023. At the end of 1H FY7/24, total assets were ¥37,020mn, net
assets were ¥9,202mn, the equity ratio was 24.9%, and the number of issued shares was 29,079,000 shares(including 1,006,767 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 business) 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, Inc. <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.

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04 24

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

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

28-May-2024
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 e-commerce 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 e-commerce 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

Business alliance with Takara Bio

September 2023

Took over the healthcare e-commerce business of Daicel Corporation

November 2023

First company in Japan to acquire international ISO/IEC 17025 certification regarding chemical testing of GABA ingredients

January 2024

Started sales of K-3, a liquid lactobacillus ferment containing GABA, as the first biostimulant agricultural material

February 2024

ovoveil, a next-generation sustainable fiber, used in Kyoto University Program-Specific Professor Naoko Tosa’s Fall/WinterCollection
Agreement on the “Bio Manufacturing Revolution Promotion Project Research and Development Plan” concluded with NEDO

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

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05 24

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

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

28-May-2024
https://www.pharmafoods.co.jp/en■ Business summary
A healthcare equipment manufacturer focused on R&D thatdevelops BtoB business, BtoC business, and Bio Medical business
1. A healthcare equipment manufacturer 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 researches and develops functional ingredientsand pharmaceuticals that act on immunity, aging, and the nervous system, and then delivers the results of thisoriginal research and products to wider society through its BtoB, BtoC, and Bio Medical businesses. The BtoB
business manufactures and sells functional ingredient products such as PharmaGABA®, and it also manufacturesand sells pharmaceutical and non-pharmaceutical products through Meiji Yakuhin Co., Ltd., which was madeinto a subsidiary in August 2021. The BtoC business conducts e-commerce sales and the wholesale distributionof supplements, non-pharmaceutical products, and cosmetics that blend the Company’s proprietary functional
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.
Development of pharmaceuticals and functional ingredients that act on immunity, aging, and the nervous system

Source: The Company’s results briefing materials

In the BtoB business, there has been an increase in the number of companies adopting functional ingredients suchas PharmaGABA®, and Meiji Yakuhin has been steadily growing its contributions since becoming a subsidiary
in FY7/22. In the BtoC business, there have been contributions from Newmo® Hair Growth Formula, which waslaunched on the market in November 2018, as well as Meiji Yakuhin’s Shiboranaito® GOLD since FY7/22, and the
new eyelash beauty serum Eyelash Deluxe WMOA and medicated whitening gel DRcula series since FY7/23. The
Bio Medical business is still at the research and development stage but it is recording lump-sum income related tojoint research and licensing sales.

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06 24

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

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

28-May-2024
https://www.pharmafoods.co.jp/en

Business summary

Trends in net sales by business segment
BtoB business(¥mn)

BtoC business

Bio Medical business
68,57270,000343

60,185220

60,00046,75250,000375

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

186

10,532231

10,0008,523

12,591

1,777

0
FY7/19

2,852

2,575
FY7/20FY7/21

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

BtoC business

Bio Medical business

(¥mn)
7,000

81

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

3,746

3,000

2,000
1,000
0

638
21
288
713

573

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.
2929 Tokyo Stock Exchange Prime Market

28-May-2024
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
2. BtoB business
The BtoB business handles the 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 include PharmaGABA®, Bonepep®, Cerepron®, Runpep®, Pharma Biomix,and HGP®. 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. Among functional ingredients,
PharmaGABA® is trending upward and the Company is strengthening sales channels for its new brand (NB) products
in its functional ingredient products. Additionally, from 2Q FY7/22, as new manufacturing and sales channels, theCompany is carrying out Meiji Yakuhin’s CMO business of contract manufacturing of pharmaceutical products andCHC business*, which sells functional foods, pharmaceuticals, and other products in the drugstore channel andelsewhere. Looking at FY7/23 net sales on an itemized basis, net sales of functional ingredients were ¥2,002mn,
sales of functional products were ¥1,368mn, sales of Meiji Yakuhin’s CMO were ¥4,190mn, while sales of CHC were¥857mn. Additionally, Meiji Yakuhin orders are increasing steadily, so in the future the Company aims to evolve intoa pharmaceutical (OTC drug) manufacturer rather than just contract manufacturer of pharmaceuticals, and to thisend it plans to construct a new factory (scheduled to start operation in five years as registration for manufacturing
is required).
*	Abbreviation 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

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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

28-May-2024
https://www.pharmafoods.co.jp/en

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 February 29, 2024, it ranked highest with 1,086 notifications (Company data) and is maintaining thehighest level of adoptions. Also, in November 2023, the Company became the first company in Japan to acquireinternational ISO/IEC 17025 certification regarding chemical testing of GABA ingredients.
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) 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.

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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

28-May-2024
https://www.pharmafoods.co.jp/en

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. Also, in March 2024, the Company’s Suimin
Labo won a Trend Award in the New Product Spring/Summer 2024 Grand Prix awards announced by Nippon
Access, Inc., a major foods wholesaler in the group led by ITOCHU Corporation <8001>.
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.
(7) 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.
(8) CHC businessIn the CHC business, Meiji Yakuhin is selling its NB products to drugstores and other distribution channels. Meiji
Yakuhin is working to strengthen inhouse production and sale of products such as cold syrups for children to
evolve as a pharmaceutical manufacturer. Sales to cross-border EC distributors have also risen in recent years.

BtoC business strengthens the product lineup led by Newmo® 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 pharmaceuticals, non-pharmaceuticalproducts and supplements formulated using the Company’s proprietary functional ingredients, and cosmetics.
Sales methods comprise direct sales to consumers through e-commerce and wholesaling to dedicated shopping
channels. Furthermore, Meiji Yakuhin’s repeat e-commerce business was added in 2Q FY7/22. Looking at FY7/23
net sales on an itemized basis, net sales of pharmaceutical and non-pharmaceutical products were ¥34,275mn,
sales of supplements were ¥11,212mn, and sales of cosmetics were ¥12,167mn. The number of regular customers
for the overall Group at the end of FY7/23 was 941,628 customers.

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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

28-May-2024
https://www.pharmafoods.co.jp/en

Business summary

Its main products in the pharmaceutical product and non-pharmaceutical product field include Newmo® Hair Growth
Formula, which promotes hair growth and restoration, the DRcula series of medicated whitening gel toothpastes,and Meiji Yakuhin’s Lactron series of intestinal regulation and digestive medicines. In the supplements field, the main
products include Tamagosamin® (iHA® formulation supplement for knee joints) and Meiji Yakuhin’s Shiboranaito®. In
the cosmetics field, the main products include Eyelash Deluxe WMOA and Tamahada LANSHEL® (cosmetic cream
formulated from active eggshell membranes). On January 17, 2024, the cumulative number of units of Newmo®
Hair Growth Formula shipped passed 25 million. Also, in September 2023 the Company took over the healthcare
e-commerce business of Daicel Corporation. Going forward, the Company intends to expand its product lineup
around its mainstay Newmo® Hair Growth Formula and it is starting to promote new additions to the Newmobrand such as the pharmaceutical product NEW Z and Hair Powder, a formula for artificial hair containing eggshellmembranes.
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 of business. So, when the
Company focuses on acquiring new customers, there is a temporary increase in advertising expenses at first.
However, repeat purchases generated from the base of regular customers give rise to future profits. Also, following
revisions to Japan’s Act on Specified Commercial Transactions (effective June 1, 2023; digitalization of contracts,etc.), the Company has led the industry in carrying out a thorough response to these revisions, including providing
detailed explanations on final confirmation screens to ensure there are no misunderstandings among customers.
Furthermore, the Company is aiming to achieve zero complaints through efforts such as enhancing explanations
provided by advertisements and call centers, its points of contact with customers, and improving response quality,
while at the same time it is focusing on customer relationship management (CRM) measures to retain existingcustomers and encourage repeat purchases.
The BtoC business’ revenue structure

Source: The Company’s results briefing materials

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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

28-May-2024
https://www.pharmafoods.co.jp/en

Business summary

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 for treatment of autoimmune diseases and intractablediseases such as cancer and fibrosis. 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 ofvarious 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. The proteome analysis service“OLINK,” which the Company 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 tocustomer needs in a one-stop manner, and they will collaborate on promotional activities going forward.
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, and from the clinical trial stage onward, the pharmaceutical company
to which the technology 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.

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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

28-May-2024
https://www.pharmafoods.co.jp/en

Business summary

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).

Reducing the risk of reliance on certain products
5. Risk factors and challenges and countermeasures
Risk factors include competition, delays in responding to product development and technological innovation, relianceon specific products, laws and regulations including the Pharmaceuticals and Medical Devices Act and Food
Sanitation Act, and the protection of personal information. Regarding competition, PharmaGABA®, which is themainstay product in the BtoB business, holds the top share for 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.

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13 24

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

Pharma Foods International Co., Ltd.

28-May-2024

2929 Tokyo Stock Exchange Prime Market

https://www.pharmafoods.co.jp/en■ Results trends
Return to profitability in 1H FY7/24
1. Outline of results for consolidated 1H FY7/24
In the Company’s 1H FY7/24 consolidated results, net sales decreased 9.9% year on year (YoY) to ¥31,652mn,
operating profit was ¥1,535mn (versus a loss of ¥883mn YoY), ordinary profit was ¥1,542mn (versus a loss of¥912mn), and profit attributable to owners of parent was ¥768mn (versus a loss of ¥914mn). Despite steadysales growth in the BtoB business, net sales decreased overall due to the impact of a decline in operating rates
at contracted production partners and manufacturing delays caused by distribution restrictions at raw materials
suppliers in the BtoC business. On the other hand, the Company returned to profitability for each type of profit asadvertising expenses decreased considerably due to the postponement of advertising activities for new productsin the BtoC business.
On a Company-wide basis, gross profit fell 11.6% YoY to ¥25,101mn and the gross margin decreased 1.5ppt to79.3%. SG&A expenses decreased 19.5% YoY and the SG&A expense ratio fell 8.8ppt to 74.5%. Among SG&A
expenses, advertising expenses decreased 25.6% and the ratio of advertising expenses to net sales declined
11.3ppt to 53.7%. Looking at quarterly results, 1Q net sales were ¥16,142mn and operating profit was ¥601mn,
and 2Q net sales were ¥15,510mn and operating profit was ¥933mn. Since 1H FY7/23, the Company has beensteadily recording operating profits as a result of efforts such as the optimization of advertising investment.
Consolidated results for 1H FY7/24(¥mn)
1H FY7/23

1H FY7/24

YoY comparison

Results% of sales

Results% of sales

Change%35,143100.0%

31,652100.0%-3,491-9.9%

Gross profit

28,38680.8%

25,101

79.3%-3,285-11.6%

SG&A expenses

29,27083.3%

23,56574.5%-5,705-19.5%

413

1.2%

482

1.5%

69

16.7%

22,83565.0%

16,99053.7%-5,845-25.6%

Operating profit

-883

-

1,535

4.8%

2,418

-

Ordinary profit

-912

-

1,542

4.9%

2,454

-

Profit (loss) attributable to owners of parent

-914

-

768

2.4%

1,682

-

BtoB business

4,071

11.6%

4,171

13.2%

100

2.5%

BtoC business

30,92388.0%

27,353

86.4%-3,570-11.5%

Bio Medical business

138

0.4%

117

0.4%

-21

-15.2%

Other (fund management, etc.)

10

0.0%

9

0.0%

-1

-3.0%

BtoB business

700

17.2%

743

17.8%

43

6.1%

BtoC business

-857

-

1,732

6.3%

2,589

-

Bio Medical business

-145

-

-224

-

-79

-

-1

-

-8

-

-6

-

-580

-

-708

-

-127

-

Net sales(Research and development expenses)(Advertising expenses)

Net sales by segment

Operating profit by segment

Other (fund management, etc.)
Adjustment amount (Company-wide costs, etc.)

Note: The % of sales values in the operating profit by segment section are the profit margin in relation to each net sales
Source: Prepared by FISCO from the Company’s financial results and results briefing materials

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14 24

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

Pharma Foods International Co., Ltd.

28-May-2024

2929 Tokyo Stock Exchange Prime Market

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

Results trends

Trends in quarterly results
Net sales（¥mn）
21,00018,000Operating profit (loss)

16,21515,00012,005

13,355 13,003

15,228

16,135

17,03018,113

17,39016,039 16,142 15,510

12,606

12,000

9,000

8,387

6,000
2,714 3040

3,000

1346

1,575

457

1,310

148

2,518 1,976
601

933

1Q

2Q

0
-3,000

-1428
1Q
2Q

-1,1003Q

FY7/21

4Q

1Q

2Q

3Q

4Q

-2,194
1Q
2Q

FY7/22

3Q

FY7/23

4Q

FY7/24

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

Smooth growth in the BtoB business and return to profitability in the
BtoC business, despite fall in sales
2. Trends by business segment(1) BtoB businessNet sales in the BtoB business increased 2.5% YoY to ¥4,171mn and segment profit (operating profit before
Company-wide costs and other adjustments) rose 6.1% to ¥743mn. Some shipments of Meiji Yakuhin products
were impacted by the 2024 Noto Peninsula Earthquake, but sales and profits increased following steady growth,particularly for the mainstay PharmaGABA®. As for net sales by item, sales of functional ingredients increased
16.0% to ¥946mn, sales of functional products decreased 51.8% to ¥372mn, sales of Meiji Yakuhin’s CMO rose
11.2% to ¥2,220mn, and sales of CHC rose 30.5% to ¥632mn. In functional ingredients, sales of PharmaGABA®
grew in both Japan and overseas. In functional products, the Company is strengthening marketing activities for
new NB products such as Meiseki Lab and Suimin Labo. In the CMO business, the Company has been working
to raise the stability of orders and enhance profit margins amid mounting demand for substitute products due
to quality issues and production-related issues among generic drug manufacturers. In the CHC business, it has
intensified its focus on new Meiji Yakuhin brand products for drugstores.

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15 24

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

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

28-May-2024
https://www.pharmafoods.co.jp/en

Results trends

BtoB business sales by item(¥mn)
FY7/22

FY7/23

FY7/24

1Q

2Q

3Q

4Q

Total

1Q

2Q

3Q

4Q

Total

1Q

2Q

Total

Functional ingredients*1

252

431

391

633

1,708

375

440

564

620

2,002

504

441

946

Functional products*2

252

169

242

261

925

289

484

449

145

1,368

199

172

372

-

1,672

948

1,021

3,642

892

1,104

1,076

1,117

4,190

1,151

1,068

2,220

CMO*3
CHC*4

-

869

466

465

1,801

312

172

294

78

857

377

254

632

Total

504

3,143

2,048

2,382

8,079

1,869

2,201

2,384

1,962

8,418

2,233

1,938

4,171

*1 PharmaGABA, Bonepep, etc.
*2 OEM, cross-border EC, and sales of end products, including own-brand products, primarily through Bto(BtoC) channels*3 Contract Manufacturing Organization: Contract manufacturing of pharmaceutical products*4 Abbreviation for consumer health care (refers to selling pharmaceuticals, functional foods, and other products at drugstores)
Source: Prepared by FISCO from the Company’s results briefing materials(2) BtoC businessNet sales in the BtoC business decreased 11.5% YoY to ¥27,353mn and segment profit was ¥1,732mn (versus
a loss of ¥857mn YoY). By category, net sales in pharmaceuticals/non-pharmaceuticals increased 15.6% to¥18,918mn, supplements fell 44.4% to ¥4,178mn, and cosmetics decreased 40.2% to ¥3,972mn. The mainstay
Newmo® Hair Growth Formula and DRcula series maintained a high level of sales, but overall, sales fell to alevel lower than forecast following the postponement of the full-scale promotion of new products such as NEW
Z and Bofutsushosan due to the impact of a decline in operating rates at contracted production partners andmanufacturing delays caused by distribution restrictions at raw materials suppliers, as well as the curbing ofadvertising spending on supplements and cosmetics due to a focus on profitability indicators. However, thisconsiderable decrease in advertising expenses resulted in a return to profitability. The number of regular customers
for the overall Group decreased by 14.3% to 900,914 customers. Although the number of regular customers
has decreased following the fall in advertising expenses, it remains relatively high. Also, as a result of efforts to
respond to revisions to laws and regulations, improve the quality of advertisements, and enhance the quality ofengagement at call centers, in January 2024, the number of complaints to the National Consumer Affairs Centerof Japan regarding the Group decreased 87.5% YoY.
Trends in advertising expenses and number of regular customers in the BtoC business
Number of regular customers for main productsA
dvertising expenses
広告宣伝費

1,146,889

Number of regular
1,200,000
定期顧客件数
customers

1,100,000

982,458

1,000,000
900,000
800,000

802,021700,000

10,517

941,628

10,007

8,229

9,529

942,343
8,627

7,665

umber)
900,914 (N(件)8,242(¥ m n)
(百万円)

8,851

600,000
500,000

991,535
12,764

834,139

Color shampoo:22,815

Newmo Hair Growth Formula : 391,083

11,000:100,580

Lactron tablets：55,233

5,000

300,000
200,000
2Q:11,507

NE W ZD r cula ser ies
9,000

D o n Whid o n

6,710

1Q

:19,217

7,000
Bofutsushosan Soushisei ：29,178

400,000

100,000:46,842

Lanshe13,0001,050,880

1,001,356

Eyelash beauty serums

3Q

7/20222022/7期

4Q

1Q

2Q

3Q

4Q

1Q

2Q

2023/7期
7/2023

3Q

4Q：18,2033,000
S h i b o r an ai t o 2：64,341

Tamagosamin：29,818

1,000

7/20242024/7期

Advertising activities for NEW Z and Bofutsushosan have been postponed due to a decline in operating rates at contracted production
partners and manufacturing delays caused by distribution restrictions at raw materials suppliers .

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

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16 24

1

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

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

28-May-2024
https://www.pharmafoods.co.jp/en

Results trends(3) Bio Medical businessNet sales in the Bio Medical business decreased 15.2% YoY to ¥117mn and segment loss was ¥224mn (versus aloss of ¥145mn YoY). Although there was an operating loss as the business is still at the R&D stage with a focus
on autoimmune diseases, the contract services business for Olink Target and Olink Flex services for analyzingchanges in trace amounts of proteins in the proteome analysis contributed to sales. Furthermore, progress isbeing made on readying an autoimmune disease antibody drug for clinical trials (Phase I).

No concerns about financial soundness
3. Financial condition
At the end of 1H FY7/24, total assets increased ¥787mn from the end of the previous fiscal year to ¥37,020mn. Thiswas mainly due to a ¥694mn increase in cash and deposits and a ¥212mn increase in investment securities. Total
liabilities climbed ¥1,215mn to ¥27,817mn. This was mainly due to a ¥792mn increase in accounts payable - otherand a ¥821mn increase in income taxes payable. Total net assets decreased ¥428mn to ¥9,202mn. Althoughretained earnings rose ¥408mn (due to recording an increase of ¥768mn in profit attributable to owners of parent
and a decrease of ¥346mn due to payment of dividends), it was offset by a decrease of ¥851mn associated with theacquisition and disposal of treasury shares. As a result, the equity ratio fell 1.7ppt to 24.9%. Over the medium- tolong-term, it is desirable that the Company reduces interest-bearing debt and improves its equity ratio. However,considering that cash and deposits are currently at a high level, and interest-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 (simplified)(¥mn)
FY7/20FY7/21

FY7/22

FY7/23

1H FY7/24

Change10,096

20,944

31,15936,23237,020787

Current assets

7,437

17,93323,513

27,53027,683153

Non-current assets

2,659

3,010

7,645

8,701

9,336

635

5,188

12,47824,08426,601

27,817

1,215

Current liabilities

2,837

10,97822,79524,37425,814

1,440

Non-current liabilities

2,350

1,499

1,288

2,227

2,002

-225

4,907

8,465

7,074

9,630

9,202

-428

Shareholders’ equity

4,895

8,455

7,024

9,306

8,863

-443

(Capital stock)

2,033

2,038

2,042

2,043

2,043

-

48.6%

40.4%

22.7%

26.6%

24.9%

-1.7ppt

Total 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

Cash flows from investing activities

-860

-442

Cash flows from financing activities

375
3,282

Fiscal year-end balance of cash and cash equivalents

FY7/23

1H FY7/24-6,065

6,125

2,835

-2,539-1,013

-602

1,030

7,679

2,341

-1,542

9,794

8,845

16,30617,001

Source: Prepared by FISCO from the Company’s financial results and quarterly securities reports

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.

28-May-2024

2929 Tokyo Stock Exchange Prime Market

https://www.pharmafoods.co.jp/en■ Outlook
Forecast for FY7/24 revised downward in anticipation of greater
decline in profit but this is due to temporary factors• Overview of consolidated results forecast for FY7/24
On March 11, 2024, the Company revised its FY7/24 consolidated results downward and it is now projecting net
sales to decrease by 6.5% YoY to ¥64,100mn, operating profit to decrease 25.2% to ¥2,700mn, ordinary profit
to drop 18.1% to ¥2,900mn, and profit attributable to owners of parent to fall 41.6% to ¥1,800mn. Compared tothe initial forecast (net sales of ¥72,047mn, operating profit of ¥3,338mn, ordinary profit of ¥3,300mn, and profit
attributable to owners of parent of ¥2,784mn), net sales have been revised downward by ¥7,947mn, operating
profit by ¥638mn, ordinary profit by ¥400mn, and profit attributable to owners of parent by ¥984mn. Net sales are
now expected to decrease, compounding the decline in each type of profit.
Although the BtoB business is expected to perform fairly steadily, in the BtoC business, the impact of the decline inoperating rates at contracted production partners and manufacturing delays caused by distribution restrictions at
raw materials suppliers that manifested in 1H is expected to delay plans for the full-scale promotion of new products
such as NEW Z. Progress on the optimization of advertising investment will not be enough to cover the fall in sales.
Furthermore, an increase in costs associated with the strengthening of CRM measures and an increase in researchand development expenses are expected to have an effect on results. However, at FISCO, we see this downward
revision as the result of temporary factors in 1H, and taking into account that the Company is expected to begin the
full-scale promotion of its new products in 2H and that it is making progress on controlling its advertising expenses,
there is room for upside in the revised forecasts.
Consolidated outlook for FY7/24(¥mn)
FY7/23

FY7/24Comparison with initial
forecast

YoY

Results% of sales

Initialforecast

Revisedforecast% of sales

ChangeNet sales

68,572100.0%

72,047

64,100100.0%

Operating profit

3,610

5.3%

3,338

2,700

4.2%

Ordinary profit

3,540

5.2%

3,300

2,900

Profit (loss) attributableto owners of parent

3,081

4.5%

2,784

1,800

%

Change%-4,472-6.5%-7,947-11.0%-910-25.2%-638-19.1%

4.5%-640-18.1%-400-12.1%

2.8%-1,281-41.6%-984-35.3%

Note: The FY7/24 forecast is the revised forecast released on March 11, 2024
Source: Prepared by FISCO from the Company’s financial results and press releases

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18 24

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

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

28-May-2024
https://www.pharmafoods.co.jp/en■ Growth strategy
Aiming for net sales of ¥100.0bn in FY7/26 through “new value
creation 1K”
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
In order to create the new products to follow up products such as PharmaGABA® and Newmo® Hair Growth
Formula, the Company is advancing R&D, including the development of new ingredients, new applications andeffects, and next-generation antibodies. It is also developing products for the scalp and skin field, pharmaceuticale-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 Co., Ltd. <2109> Group for LipiSmart®, 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 LipiSmart® from sesame. Through this, it
launched a product onto the metabolic market for the first time. Furthermore, the Company has been seeing growthfor its NB products in the BtoB business and new products in the BtoC business and over the next two years, itplans to develop and release over 50 new products throughout the Group (23 from the Company, 20 from FUTURE
LABO, 16 from Meiji Yakuhin, etc.)

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19 24

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

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

28-May-2024
https://www.pharmafoods.co.jp/en

Growth strategy

Creating new markets in the fibers, battery materials, andbiostimulant fields
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.
To create an upcycling market for unused resources, the Company will aim to create new markets in the fibers,
battery materials, and biostimulant fields by harnessing unused natural ingredients and realizing the advanced
utilization of eggshell membranes. Through this upcycling, it aims to convert the 260,000 tons of eggshells andeggshell membranes thrown away annually in Japan into high-value-added products and thereby contribute to therealization of a sustainable society.
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 “Bio Manufacturing Revolution Promotion Project Research andDevelopment Plan” promoted by the New Energy and Industrial Technology Development Organization (NEDO), a
national research and development organization. The Company signed an official agreement with NEDO in February
2024 regarding the “Bio Manufacturing Revolution Promotion Project Research and Development Plan” and started
a five-year R&D project. Regarding new energy storage element materials, the Company has discovered that it
is possible to develop electronic and energy storage materials with excellent electrical properties by converting
eggshell membrane hydrolyzate into nanofibers. In the future, the Company aims to develop and mass-produce
eggshell membrane materials that have properties suitable for a wide range of industrial uses, including electronicmaterials made from nanofibers, not just in the textile and agricultural fields. The Company plans to invest a total ofover ¥5.0bn over the next five to eight years while also receiving subsidies from NEDO (for a total of approximately¥15.0bn, including about ¥8.0bn for construction of a new Meiji Yakuhin factory).

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

28-May-2024
https://www.pharmafoods.co.jp/en

Growth strategy“Bio Manufacturing Revolution Promotion Project Research and Development Plan” agreement
Building a platform for the comprehensive use of eggshell membranes that
contributes to the SDGs (budget of over \5.0bn over five years)

Eggshell membrane
clothing
ovoveil2 . 6 3 m n t o n s / ye a r o f c h i c k e n e g g s( an n u al d o m e s t i c c h i c k e n e g g
p r o d u c t i o n i n J ap an )Hybrid textiles

Battery material
Eggsh e llmembrane/eggshell
compounds:
260,000 tons/year

Eggsh e llm e m b r an e s :1 0 , 0 0 0 t o n s / ye ar

L i q u e f i e d e g g s h e l l m e m b r an e
Functional protein withapplications in every
i n d u s tr y

Eggshell membrane
nanofiber

B i o - s t im u la n t
Eggshell membrane peptide
Source: The Company’s results briefing materials

In the fiber field, in February 2024, ovoveil, a next-generation sustainable fiber made using eggshell membranes,
was used in Kyoto University Program-Specific Professor Naoko Tosa’s Fall/Winter Collection and exhibited at
New York Fashion Week (NTFW), one of the world’s “Big Four” fashion weeks. The distinguishing characteristics
of ovoveil are that it possesses the skin and health enhancing functions of eggshell membranes and that it has asmooth texture similar to cashmere. Going forward, the Company will engage in sales discussions regarding its use
by major apparel manufacturers.
In June 2023, through joint research with the Interdisciplinary Cluster for Cutting Edge Research from Shinshu
University’s Institute for Fiber Engineering (IFES), the Company succeeded in producing the world’s first nanofiber
membrane using an eggshell membrane. Going forward, the Company will form an industry-academia partnershipwith 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 the biostimulant field, in September 2021, the Company created the Agri-Nutrition Basic Plan with Sanyo Chemical
Industries, which integrates the development and technological capabilities of both companies with the aim ofsolving the global farming crisis. The Company began verification tests aimed at building a new farming system in
Shintomi Town, Miyazaki Prefecture in 2022. Going forward, the plan aims to develop high value-added crops withenhanced 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 high-value-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. Additionally,in December 2023, the Company took over WakenBtech Co., Ltd.’s business concerning agricultural microbial
materials containing plant-based endophytic yeasts and in January 2024 it started selling K-3, a liquid lactobacillus
ferment containing GABA and the Company’s its first biostimulant agricultural material, through its e-commerce sales
channel. The results of research that tested K-3 on fruit and vegetable cultivation carried out at over 20 locations
throughout Japan confirm that it shortens the growth times and increases the yields of tomatoes and bell peppers.

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

28-May-2024
https://www.pharmafoods.co.jp/en

Growth strategy

In addition, in July 2022, the Company jointly invested with ENEOS 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 endeavor, it will procure eggshells and eggshell membranes on the largest scale in Japan andwork to bolster its chemicals business, which includes eggshell membrane fiber, liquid fertilizers, and other products.

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 net sales scale of ¥3.0bn to ¥20.0bn in relation to new products andmarkets. 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.

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 in areas such as R&D, advertising, and M&A. Based on this policy
and considering the balancing of investment 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
FY7/24, the Company forecasts an annual dividend per share of ¥20.0 (interim dividend = ¥10.0; year-end dividend= ¥10.0), a ¥2.0 decrease from the previous fiscal year, with a dividend payout ratio of 31.7%. Furthermore, after
comprehensive consideration that included improvements to the Company’s financial position and forecasts of therealization of adequate profit, from January 9 to 19 2024, the Company carried out a share buyback to acquire
874,100 treasury shares (¥1,000mn). The total shareholder return ratio with this included is 87.2%.

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.

28-May-2024

2929 Tokyo Stock Exchange Prime Market

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

Growth strategy

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

Dividend payout ratio (right)

（¥）
30.0

60.0%
25.0

25.0
20.0
20.0

50.0%

22.0
20.0

40.0%

35.7%
31.7%

15.0
10.0

30.0%
8.5

20.6%

18.9%

20.0%

5.0

10.0%

0.0

0.0%
FY7/20FY7/21

FY7/22

FY7/23

FY7/24 E

Note 1: Includes a commemorative dividend paid in FY7/21
Note 2: The Company conducted a share buyback (¥300mn) in FY7/22 as well, but because there was a net loss that year
the dividend payout ratio and the total shareholder return ratio were not calculated
Note 3: For FY7/23, the total shareholder return ratio including the share buyback (approximately ¥300mn) was 30.3%
Note 4: The total shareholder return ratio including the FY7/24 E share buyback (¥1,000mn) is 87.2%
Source: Prepared by FISCO from the Company’s financial results and results briefing materials

The Company’s approach to realizing management that is conscious of capital cost and share price is to enhance
ROIC (Return On Invested Capital), reduce the cost of shareholder’s equity, and engage in raising growth expectations through measures such as capturing revenue by strengthening CRM measures in a way that leverages its
customer base, restructuring its business portfolio to cultivate new businesses and products, expanding investment
in R&D, facilities, and human capital, and actively pursuing M&A. It will also work to raise its corporate value by
creating further opportunities to engage in dialogue with the capital markets and investors (participation in IR fairs,
holding online results briefings, holding meetings with small numbers of attendees, providing disclosure materials in
English) and by strengthening ESG (environmental, social, and governance) management (in such ways as enhancing
disclosure on non-financial information).

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 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 healthmaintenance. Key issues (materiality) are enhancement of people’s QOL, upcycling of unused resources, and respectfor diversity. Through its responses to these issues, the Company aims to achieve its sustainability vision and further
enhance corporate value.

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

28-May-2024
https://www.pharmafoods.co.jp/en

Growth strategy

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 health management. In February 2024, the Company joined the Health& Productivity Management Alliance (established in June 2023) to promote health management through practical
initiatives and sharing of know-how. 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
Sales of Newmo® Hair Growth Formula have considerably transformed the Company’s revenue levels and someof the market is positioning it as an e-commerce company. However, the Company is essentially a biotechnology
company that practices development based on the concept that immunity, aging, and the nervous system are threeimportant elements in life activity and health maintenance. At FISCO, we have a high opinion of its development
capabilities, from its exploration of functional ingredients and development of functional products to its creation of
new markets through drug discovery and the advanced utilization of eggshell membranes materials, and we think it
has strong medium- to long-term growth potential. We also commend the Company’s commitment to strengthening
dialogue with the stock market and investors as part of its efforts to enhance corporate value. Going forward, we
will be monitoring the progress of its “Bio Manufacturing Revolution Promotion Project Research and Development
Plan” (fibers, battery materials, and biostimulants) efforts following its agreement with NEDO and the Autoimmune
Disease Project based on an exclusive licensing agreement with Mitsubishi Tanabe Pharma Corporation.

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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
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not make any promises regarding any future outcomes. If you use this report or any information
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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.
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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