FY2022 Results Presentation Topics
Launch of Mission 2030 Management Plan andGrowth Strategy for Silicon Nitride andG47Δ, Oncolytic Herpes Virus May 11, 2023

Contents1

Launch of Mission 2030 Management Plana) Path Toward 2030b) Definition of Three-Star Businessesc) KPI Progress Management(Reference) Major Financial / Non-financial KPIs in the Mission 2030 Management Plan(Reference) Detail of Megatrends Incorporated in the Mission 2030 Management Plan2Silicon Nitride Growth Strategya) Silicon Nitride Business (Powder and Substrate) Supply Chainb) Silicon Nitride Market GrowthC) Future Outlook

3

G47Δ, Oncolytic Herpes Virus, Business Development Strategya) G47Δ Overviewb) Background of Entering Oncolytic Virus Businessc) What is Oncolytic Virus Therapy?
d) Effects of G47Δe) Future Outlook

1

Launch of Mission 2030 Management Plan

2

Launch of Mission 2030 Management Plana)Path Toward 2030
▮ Specialty businesses grew under the Denka Value-Up initiatives

Under Mission 2030, we will concentrate management resources on our Three-Star Businesses
to achieve further growthMission 2030 (FY2023-FY2030)

Denka Value-Up (FY2018-FY2022)

OperatingIncome(¥ billions)OperatingMargin

FY2018FY2019FY2020

FY2021

FY2022

FY2026(Plan)

34.2

31.6

34.7

40.1

32.3

60.0

8.3%

8.3%

9.8%

10.4%

7.9%

FY2030(Plan)

100.0
or more15.0%
or moreNon-Specialty
Specialty

3.0
0.3

1.2
12.2

8.6

33.5
22.0

37.0

Turn All Businesses Into ThreeStar Businesses* by 2030
32.0

23.0

*Three-Star Business: Businesses incorporating three elements of specialty, megatrends, and sustainability businesses

3Launch of Mission 2030 Management Planb)Definition of Three-Star Businesses▮ We will move forward with a portfolio shift for products not on track to meet thethree elements by FY2030
Three Elements

Specialty

Megatrends

Sustainability

Definition
ROIC by Product >10%
(Past Three-Year Avg.)

Three Applicable Focus Areas(ICT ＆ Energy, Healthcare, and Sustainable Living)

Less Than 10,000 Tons of CO₂ Emissions by ProductandLabor Productivity by Product > 5 Million Yen

Objective
To emphasize capital efficiency, inaddition to profits resulting from market
share, uniqueness, and technologicalcapabilities (number of patents)

Businesses judged to have growthpotential if said business corresponds tothe three focus areas derived fromidentified megatrends
CO₂ emissions must be included, asemissions represent clear KPIs toward a
60% reduction in 2030 and carbon
neutrality in 2050
In addition, businesses having low laborproductivity will find it difficult tocontinue operations due to the future
decline in the working population4

Launch of Mission 2030 Management Planc) KPI Progress Management▮Establish a management mechanism and strive to achieve KPIs as a united Denka Group

Portfolio Transformation Committee(Overview)
Chaired by the president, the committee
deliberates on measures to achieve 100%Three-Star Businesses across our organization(Progress and Future Steps)
・Assigned star ratings for each product (updated annually)
・Address products that are one-star and unprofitable during
FY2023
Determine policy within 3 years

Sustainability Committee(Overview)
Chaired by the president, and with the chairperson,
outside directors, and full-time Audit Committee
members as observers, the committee deliberates on
progress and initiatives related to non-financial
targets and KPIs under the Mission 2030
management plan, and makes recommendations
when warranted(Future Steps)
・The Administration Department reports twice a year on
the status of activities and progress of KPIs
・Business divisions report once a year on responses torisks and profit-earning opportunities with respect tosustainability issues

Incorporate Personal Goals Into the Mission 2030 Management Plan
(Internal Acceptance)(Overview)
・Each department head incorporates the financial and non-financial KPIs of Mission 2030 into clear organizational
goals, and each employee incorporates these organizational goals into personal goals for which they will beevaluated(Objective)
・To break down ROIC into profitability and capital efficiency (CCC, etc.) elements, tying the achievement of KPIs toeveryday workplace operations to ensure these KPIs are internalized by employees
5(Reference) Major Financial / Non-financial KPIs in the Mission 2030 Management Plan

2030 KPI Targets

Non-financial

Financial

Operatingincome¥100 billion or more

Operatingmargin15%or higher

ROE

15% or higher

ROIC

10%or higher

Approved
investment
amount¥540 billion

Total
ReturnRatio

50% level(8 years from FY2023 to FY2030)

CO2 emissions

Rate of lostworktime injuries:(Number of deaths andinjuries ÷ Total hours
worked × 1 million)

60% reduction
compared with FY2013(1 million tons)

0.2 or lessMaximum outputof renewableenergy power

150MW

Managerial positions
occupied by women,
foreign nationals, andmid-career hires

50%6(Reference) Detail of Megatrends Incorporated in the Mission 2030 Management Plan
Business Segments and Mission 2030 Megatrends (Breakdown of Operating Income Targets)Segment

FY2026

FY2030Management Plan: Three
Megatrend Areas(¥ billions)

FY2026

FY2030Electronics &Innovative
Products

30.0

45.0

ICT & Energy

30.045.0Life Innovation

20.040.0Healthcare

20.0

40.0

3.0

5.0

Sustainable Living

10.0

15.0

Total

60.0

100.0

Elastomers &InfrastructureSolutions

Polymer Solutions

7.0

10.0

Total

60.0

100.0

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Silicon Nitride Growth Strategy8

Silicon Nitride Growth Strategya) Silicon Nitride Business (Powder and Substrate) Supply Chain
Silicon Nitride Business (Powder and Substrate) Supply Chain(by Market Application)

Silicon Nitride(Powder)

In-House
Production

Ceramic Substrate Business(Copper Bonded Circuit Substrate Business)
Aluminum Nitride(Substrate)
Bare substrate

Silicon Nitride(Substrate)

Electric RailwayApplicationsxEV Applications
External Sales

Ceramic Substrate
Manufacturers

Ceramic Ball
Manufacturers
Structural Material
Manufacturers, Etc.

Bearing Ball
Applications
Other Applications: Manufactured and Marketed by Denka: Growing Market9Silicon Nitride Growth Strategyb) Silicon Nitride Market GrowthxEV Heat Dissipation Substrate Applications

・Silicon nitride substrate is used as insulating
substrate for inverter power modules inconnection with the electrification of automobiles.

EV Sales Volume Forecast(million units)

・The replacement of other insulating materials withsilicon nitride is also progressing in connection
with higher efficiency, etc.

2022

2023

2024

2025

2026

2027

2030

・Adoption of silicon nitride substrate will continue
to increase.

Bearing Ball Applications

・EV trends are leading toward extended cruising range andshortened charging time, which increases withstand voltage.

Silicon nitride ball and bearing(concept)

・As a result, take measures to avoid the risk of electricalcorrosion are necessary, and the adoption of ceramic balls
meeting safety and reliability requirements for EVs isaccelerating worldwide.
10Silicon Nitride Growth Strategyc) Future Outlook: Silicon Nitride (Powder)
Silicon Nitride (Powder)(Our Strengths)
・Reliable quality and cost-effective performance that answer keywords required in the xEV(automotive) market: heat dissipation, light weight, high rigidity, and long useful life
・We enjoy an overwhelming supply capacity to meet strong market demand.
(Future Outlook)
Demand and Supply Capacity for Silicon Nitride (Powder)
HeatDissipation
SubstratesBearings

Other

Supply Capacity
In Planning Stages(TBD)

・Expand facilities further to meetthe strong xEV market demand(Scheduled to Begin Operationsin 2025)
・In addition to high-growth heatdissipation substrate applications,
we will also capture applications
for bearing balls, which havebeen under increasing demand inrecent years

FY2020

FY2021

FY2022

FY2023

FY2025

FY2030*Trends in demand and supply capacity, indexing FY2020 demand to 100

11Silicon Nitride Growth Strategyc) Future Outlook: Ceramic Substrate
Ceramic Substrates (Silicon Nitride, Aluminum Nitride)(Our Strengths)
・The only manufacturer that manufactures silicon nitride powder, bare substrate, and copper bonded
circuit substrate in an integrated manufacturing process. This advantage allows us to respond flexibly
to the characteristics required to achieve higher performance.
・Experience in the electric railway industry, and history of performance in the automotive industry

・The only manufacturer with a lineup of two types of products, aluminum nitride and silicon nitride,allowing us to respond to either thermal conductivity-oriented or reliability-oriented module design
High Thermal
Conductivity Substrates(Future Outlook)
Supply Capacity of Silicon Nitride Ceramic Substrate for
Automotive Applications
InPlanni
In Planning StagesngStages
InPlanniIn PlanningStagesng
Approximately
2xStages
ApproApprximate
oxim
ately
Approximately
2xly 2x2x

FY2020
FY2020

FY2022

FY20232H

FY2022

FY2026FY2027
FY2023
2H・Raise capacity to meet increasing
demand for automotive products(further expansion planned, including
doubling in the second half of FY2023)

FY2028FY2029
FY2026FY2027

FY2028FY2029

・Introduce more high-productivity
processes and utilize AI-based
inspection systems(Adopting AI to inspect for defectiveproducts, a process traditionally handledby human visual inspection)
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G47Δ, Oncolytic Herpes Virus,
Business Development Strategy

13G47Δ, Oncolytic Herpes Virus, Business Development Strategya) G47Δ Overview

What is G47Δ?

・G47Δ is triple muted, third generation oncolytic herpes
simplex virus type1 , invented by Professor Tomoki Todo of theInstitute of Medical Science, the University of Tokyo.
・G47Δ is designed to replicate only in cancer cells and toselectively kill them, while it doesn’t replicate in normal cells
even if infected.

Characteristics

・The G47Δ pharmaceutical has been approved for the firstoncolytic virus products for cancer treatment in Japan, thesecond in the world. Being indicated for malignant glioma, it isthe first, even in the world, for a viral pharmaceutical against
brain tumors.
・The G47Δ is a novel therapy that could potentially curerefractory cancers, which have been difficult with conventional
therapies.

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G47Δ, Oncolytic Herpes Virus, Business Development Strategyb) Background of Entering Oncolytic Virus BusinessBackground of Entering Oncolytic Virus Business・With production know-how, which had been nurtured through abundant Vaccines and Viral
Diagnostic agents, Denka could scale up commercially producing the pharmaceutical.
・We had experience in legal procedures to handle designing recombinant virus (the CartagenaProtocol) .
・Denka was highly motivated in contributing to saving many precious lives by playing animportant role to disseminate the new oncolytic virus therapy, in which effectiveness andsafety that exceed conventional therapies could be expected, while the number of cancer
patients were anticipated to keep increasing.

2015:
2020 :
June 2021:
August:November:

Joint Development Contract on G47Δ Production Process was signed between
Denka and the venture company that had licensing right.
Production and Sales Approval was filed by the Sales CompanyApproval was granted with conditions and time limits
Indication was malignant glioma
NHI drug price listed. Denka started commercial manufacturing
Sales Company started shipments to a limited number of medical institutions
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G47Δ, Oncolytic Herpes Virus, Business Development Strategyc)What is Oncolytic Virus Therapy?
Disadvantages of Current Standard Cancer Treatment Methods(Treatment Method)(Disadvantages)(1) Surgery

・Extirpation is not possible depending on cancer location, forexample, brain and heart.
・Heavy physical burdens need to be accepted.

(2) Chemotherapy

・Frequent side effects throughout the body are observed, andsometimes cancers gain resistance against chemical substances
used.

(3) Radiation Therapy

・Severe damages are given to normal areas, and it cannot beapplied to the same area multiple times.

What is Oncolytic Virus Therapy?

・Oncolytic virus therapy uses wild-type virus that are genetically recombined by geneticengineering.
・It is a completely new therapy from the conventional ones above and is expected to have thepotential to change the cancer treatment system fundamentally.

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G47Δ, Oncolytic Herpes Virus, Business Development Strategyd) Effects of G47Δ
Effects of G47Δ

Two-stage effects of G47Δ, oncolytic herpes virus
G47Δ

G47Δ

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G47Δ, Oncolytic Herpes Virus, Business Development Strategye) Future Outlook
Future Outlook(1) Supply Capacity Expansion(Announced April 12, 2023)

https://www.denka.co.jp/eng/storage/news/pdf/456/20230412_denka_g47_en.pdf

Investment: Approximately 12 billion yen
Completion date (tentative) : 1. Phase 1: End of FY2025
2. Phase 2: Second half of FY2027・Construction will be conducted in two phases to increase supply capacity as quickly as possible.

(2) Number of Patients

・The indication currently approved for is only malignant glioma, the number of which annuallydiagnosed is approximately 3,000 in Japan .

・In foreign countries, there are more than 50,000 in Europe and the U.S. combined. With China andother countries included, significant number of patients are estimated to exist.

(3) Clinical Studies on Other Cancers
・G47Δ is theoretically effective in any solid cancers, and clinical studies are in progress at multiple
domestic universities for other cancers than malignant glioma.

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Cautionary statement regarding forward-looking information

業績予想の適切な利用に関する説明
Target figuresin this material are not forecasts of business results.
In addition, any（将来に関する記述等についてのご注意）
description relating to the future in this material is subject toknown or unknown risks and uncertainties, although it is based on management'scurrent assumptions and beliefs in light of the information currently available to it.
Please be cautioned that a number of important factors could cause actual results
to differ significantly from the description in the material.
Such risks and uncertainties include adverse economic conditions, currency
本資料に掲載されている業績の見通し等の将来に関する記述は、
exchange
rate fluctuations, adverse legislative and regulatory developments,
delays in new product launch, pricing, and product initiatives of competitors,
当社が現在入手している情報および合理的であると判断する一定
the inability of the Company to market existing and new products effectively,interruptionsin production, infringements of the company's intellectual propertyの前提に基づいており、実際の業績等は様々な要因により大きく
rights and the adverse outcome of material litigation.
異なる可能性があります。

19

Inquiries regarding this materialCorporate Communications Dept,
Denka Co., Ltd.
TEL
ＵＲＬ

03-5290-5511
https://www.denka.co.jp/eng/