Overview of
Pharmaceutical Business at JT
July 4, 2017
Muneaki Fujimoto
President, Pharmaceutical Business

1

FORWARD-LOOKING STATEMENTS
This presentation contains forward-looking statements. These statements appear in a number of places in thispresentation and include statements regarding the intent, belief, or current and future expectations of ourmanagement with respect to our business, financial condition and results of operations. In some cases, you
can identify forward-looking statements by terms such as “may”, “will”, “should”, “would”,“expect”, “intend”,“project”, “plan”, “aim”, “seek”, “target”, “anticipate”, “believe”, “estimate”, “predict”,“potential” or thenegative of these terms or other similar terminology. These statements are not guarantees of future
performance and are subject to various risks and uncertainties. Actual results, performance or achievements,or those of the industries in which we operate, may differ materially from any future results, performance orachievements expressed or implied by these forward-looking statements. In addition, these forward-looking
statements are necessarily dependent upon assumptions, estimates and data that may be incorrect or
imprecise and involve known and unknown risks and uncertainties. Forward-looking statements regarding
operating results are particularly subject to a variety of assumptions, some or all of which may not be realized.
Risks, uncertainties or other factors that could cause actual results to differ materially from those expressed inany forward-looking statement include, without limitation:(1)decrease in demand for tobacco products in key markets;(2)restrictions on promoting, marketing, packaging, labeling and usage of tobacco products in markets inwhich we operate;(3)increases in excise, consumption or other taxes on tobacco products in markets in which we operate;(4)litigation around the world alleging adverse health and financial effects resulting from, or relating to,tobacco products ;(5)our ability to realize anticipated results of our acquisition or other similar investments;(6)competition in markets in which we operate or into which we seek to expand;(7)deterioration in economic conditions in areas that matter to us;(8)economic, regulatory and political changes, such as nationalization, terrorism, wars and civil unrest, incountries in which we operate;(9)fluctuations in foreign exchange rates and the costs of raw materials; and(10) catastrophes, including natural disasters.
2History
1987

Jun.

Announced entry into the pharmaceutical business.

1988

Jul.

Established the pharmaceutical business division.

1993

Sep.

Opened the Central Pharmaceutical Research Institute. (Takatsuki, Osaka Pref.)

1998

Dec.

Acquired >50% open stock of Torii Pharmaceutical Co., Ltd.(Torii).

Jan.

Founded Akros Pharma Inc.. (U.S.)

Oct.

Formed a business tie-up with Torii. (Torii is in charge of manufacturing and sales while concentrating R&D activities at JT)

1999<Product history>
1998

Mar.

“Viracept Tablets”, an anti-HIV drug : Approved in Japan.

2004

Mar.

“Viread Tablets”, an anti-HIV drug (in-licensed from Gilead Sciences): Approved in Japan.

2005

Mar.

2009

Jan.

2012

Aug.

“Emtriva Capsules” and “Truvada Combination Tablets”, an anti-HIV drug (in-licensed from Gilead Sciences): Approved in Japan.
“REMITCH CAPSULES 2.5 μg”, an oral antipruritus drug : Approved in Japan.
Co-developed by Toray Industries, Inc.(Toray), Torii and JT.
“Stribild”, an anti-HIV drug containing JTK-303(out-licensed to Gilead Sciences): Approved in U.S..
*A government office approved a new drug including JTʼs original compound for the first time.

Mar.

“Stribild Combination Tablets”, an anti-HIV drug containing JTK-303(out-licensed to Gilead Sciences): Approved in Japan.

May

2013

2014

Jan.

2015

Sep.

“Mekinist”, an MEK inhibitor(out-licensed to GlaxoSmithKline): Approved in U.S..
*The rights to this drug has been held by Novartis since March 2015 due to a business transfer“Riona Tablets”, a therapeutic agent for Hyperphosphatemia (in-licensed from Keryx): Approved in Japan.
Co-developed by JT and Torii.
“CEDARTOLEN SUBLINGUAL DROP”, a sublingual immunotherapy drug for Japanese cedar pollinosis: Approved inJapan. (developed by Torii)“MITICURE House Dust Mite Sublingual Tablets”, an allergen immunotherapy tablet for house dust mite allergy: Approved in Japan. (developed by Torii)

Jun.

“Genvoya Combination Tablets”, an anti-HIV drug containing JTK-303(out-licensed to Gilead Sciences): Approved in Japan.

Dec.

“Descovy Combination Tablets LT/HT“, anti-HIV drugs (in-licensed from Gilead Sciences): Approved in Japan.

20163Business model
Out-licensing
・Advantage:

Cost efficiency / Good use of partnerʼs expertise.

・Disadvantage: Time loss (We must stop development while we negotiate
out-licensing agreement) / Profits must be shared withpartners.
*Partially implemented by Torii(allergens, etc.)
Basicresearch

Domestic
Markets

Overseas
MarketsJT

Non-clinicalstudies*(Takatsuki, Osaka Pref.,Yokohama and Hadano,
Kanagawa Pref.)Clinical trials

Applicationforapproval

JTJT**(Chuo, Tokyo)

Manufacturing

Sales

PromotionTorii Pharmaceutical(Chuo, Tokyo)

Implemented by partners
Akros
Pharma JT out-licensed exclusive rights to develop and commercialize
our compounds. JT receive milestone payments complied withInc.
progress in development and royalties linked to sales.
(U.S.)

4

Organization
Central PharmaceuticalResearch Institute
Pharmaceutical Frontier ResearchLaboratories

Drug Metabolism &Pharmacokinetics
Research Laboratories

Chemical ResearchLaboratories

Product Development
Laboratories

Biological/PharmacologicalResearch Laboratories

Toxicology Research Laboratories

R&D(Approx. 600)

Clinical development
Clinical development
division

Akros Pharma Inc.

(Approx. 100)(Approx. 50)

Torii Pharmaceutical

Approx. 1,800
of personnel

Manufacturing,sales and promotion(Approx. 1,050 includes 500 MRs)

5

Approach to R&D focus area
 Targeting diseases with strong Unmet Medical Needs
 Focusing First-In-Class(FIC) drugs
 Implementing a drug discovery strategy in view of afuture paradigm shift in therapeutic method
 Specializing in small molecule compounds

Current Focus Area(i) Metabolic diseases(ii) Autoimmune/Inflammatory diseases(iii) Viral infection
6

(Reference) Toriiʼs focus area and main products① Renal diseases and hemodialysis
REMITCH CAPSULES, oral therapeutic agent for pruritus in hemodialysis patients; co-developed byJT, Torii and Toray
REMITCH OD Tablets, oral therapeutic agent for pruritus in hemodialysis patients; co-developed by
JT, Torii and Toray
Riona Tablets, therapeutic agent for hyperphosphatemia; co-developed by JT and Torii② Skin diseases
ANTEBATE, topical corticosteroid③ Allergens
CEDARTOLEN SUBLINGUAL DROP, allergen immunotherapy drugs
MITICURE House Dust Mite Sublingual Tablets, allergen immunotherapy tablet④ HIV infection
Truvada Combination Tablets, Stribild Combination Tablets, Genvoya Combination
Tablets and Descovy Combination Tablets
Torii is working in close cooperation with JT to search and develop new in-licensed compounds, and also
devotes efforts to develop new dosage form and additional indication of existing products, and R&D inallergens.
<<Status of clinical development (as of the end of June 2017)>>・ JTT-751 (Riona Tablets), iron-deficiency anemia (Oral)- Phase 2 (co-developed by JT and Torii)
・ TO-203, house dust mite induced allergic asthma (Allergen Immunotherapy)(Sublingual tablets)Phase 2/3 completed
・ TO-203, house dust mite induced allergic rhinitis in children (Allergen Immunotherapy) (Sublingualtablets) -Application
・ TO-206, Japanese cedar pollinosis (Allergen Immunotherapy)(Sublingual Tablets )- Application
7R&D expenditure, revenue and profit
100Unit: ¥billion

Note:• The figures for the years until 2009 are based on Japanese GAAP andthe figures for the years since 2010 are based on IFRS.
• In 2014, JT changed accounting period, with the closing date movingfrom March 31 to December 31.
• R&D expenditures for the years until 2004 are based on nonconsolidated statement and the estimate for 2017 has not been
disclosed.
75.6

Consolidated R&D expenditure (¥billion)

95

Consolidated revenue (¥billion)

90

Consolidated operating profit (¥billion)

85
80
75
70
65
60

Making continuous and stable R&D investment
64.4

61.8

55

53.9

50

57.7
51.2

56.8
49.3

45
40
35

45.5

98.0

87.2

65.8

53.2

49.1
44.1

44.1

47.4

34.5
30.7

30

26.4

25
20

23.1

20.1

19.9

23.4

24.4

23.8

23.1

23.4

30.5

28.9

30.7

30.7

24.9

19.0

15

9.7

10
5

1.9

0

1.0

-2.3

-5.1

-5
-10
-15

-19.1

-20

2001

-13.9

2002

-11.2

-12.8

2003

2004

2005

2006

-9.6

2007

2008

-9.0

-13.6 -13.3

-13.5

-16.2

2009

2011

2012

2010

2013

-7.3

2014

2015

2016

2017

(Estimate)

8

Profit growth drivers
 Progress in R&D/market launch Reaping the fruits of past R&D activities
 Steadily launching new drugs

 Major products recently launched
Stribild Combination Tablets (antiviral agent for HIV)・Overseas Out-licensed to Gilead Sciences
FDA approval in Aug. 2012
・JapanSold by ToriiMHLW approval in Mar. 2013
Genvoya Combination Tablets (antiviral agent for HIV)・Overseas Out-licensed to Gilead Sciences
FDA approval in Nov. 2015
・JapanSold by ToriiMHLW approval in Jun. 2016
Mekinist (MEK inhibitor)
・Worldwide Out-licensed to GlaxoSmithKline and Novartis*
FDA approval in May. 2013
*The rights to this drug has been held by Novartis since March 2015 due to a business transfer

Riona Tablets (therapeutic agent for hyperphosphatemia)
・JapanSold by ToriiMHLW approval in May. 2014

 Revenue Growing sales of out-licensed products

Increased royalty revenue from out-licensed products / Milestone revenue related to theprogress in drug development

 Driving growth of domestic revenue with recent launch of anti-HIV drugs,
Riona Tablets, etc.

9Pipeline (as of the end of June 2017)
Code/*development phase(Generic name)Potential
Indication/
Dosage form
Anemia associatedwith chronic kidneydisease/Oral

Mechanism

In-house/licensing

Supplementary explanation

HIF-PH inhibitor

In-house*Out-licensed to JW(Competing candidates)
Roxadustat: Global Ph3
Daprodustat: Global Ph3

JTZ-951

Japan: Phase 2
Overseas: Phase 1

JTE-052

Japan: Phase 3

Autoimmune/
allergic diseases/Oral, Topical

JAK inhibitor

In-house
Co-development with Torii*Out-licensed to LEO

Most advanced clinical study isfor atopic dermatitis in Japan

JTE-051

Overseas: Phase 2

Autoimmune/
allergic diseases/OralInterleukin-2 inducible
T cell kinase (ITK)inhibitor

In-house

No program in clinical stage isreported from any companies

JTT-251

Overseas: Phase 1

Type 2 diabetes
mellitus/Oral

PDHK inhibitor

In-house

No program in clinical stage isreported from any companies

JTK-351

Japan: Phase 1

HIV infection/Oral

HIV integrase inhibitor

In-house―JTE-451Overseas: Phase 1

Autoimmune/
allergic diseases/Oral

RORγ antagonist

In-house

While competition to develop
RORγ antagonist drugs isintense, JT is not lagging
behind competitors.

JTT-751(ferriccitrate)

Japan: Phase 2

Iron-deficiency
anemia/Oral

In-license
Oral iron replacement (Keryx Biopharmaceuticals)
Co-development with Torii*Additional indication

Notes:• The clinical trial phases presented above are based on the first dose.
• Out-licensed to JW Pharmaceutical (South Korea) under a license agreement for exclusive rights to development and commercialization in South Korea for application
to oral medication.
• Out-licensed to LEO Pharma (Denmark) under a license agreement for exclusive rights to development and commercialization in the world outside Japan for topicaluse in dermatological indications.

10For the future
 R&D investment

 Continuous and stable R&D investment independent from revenue

fluctuations

 Open innovation

 Creation of FIC new drugs that fulfill Unmet Medical Needs.
• New drug targets• Drug Efficacy / Development technologies• Advancing into cutting-edge fields(leading to future drug creation)

 Active engagement in partnering and licensing rather than publicinvitation programs.
• Building mutual trust and respect• Dispatching researchers*Reference
Public invitation programs: a3, COCKPI-T FINDS, TaNeDS, PRISM
Comprehensive partnerships: AK Project, TK Project Enhancement of in-licensing (expansion of the domestic pipeline)
 Group-wide in-licensing activity in co-operation with JT and Torii
 Participating in BIO conferences / Organizing partnering conferences(overseas)

11Conclusion
 With the entire group working together

to deliver new drugs to patients as soon as possible.
 3 Key Principles•

Carrying on full effort for the patients•

Targeting FIC, small molecule compounds•

Continuous and stable R&D investment

 4 Key Strategies•

Continue to out-license our New Molecule Entities globally•

Put more emphasis on in-licensing for the Japanese Market•

Determine indications and clinical development plan with both global
licensing and domestic sales franchise in mind•

Contribute to JT Group profit through R&D for products of next
generation and maximizing the value of existing products12