Business Results Briefing for
the Fiscal Year 2019

TSUMURA & CO.
May 12, 2020

Today's agenda(1) Initiatives to Tackle COVID-19(2) ESG Management & Sustainability Vision

CEO
Kato

(3) China Business Update(4) FY2019 Business Results(5) FY2020 Forecast

CFO
Handa

Business Results Briefing for the
Fiscal Year 2019(1) Initiatives to Tackle COVID-19(2) ESG Management & Sustainability Vision(3) China Business Update

TSUMURA & CO.
Terukazu Kato, President andRepresentative Director, CEO

May 12, 2020

Details of Today's Briefing(1) Initiatives to Tackle COVID-19(2) ESG Management & Sustainability Vision(3) China Business Update(4) FY2019 Business Results(5) FY2020 Forecast

COVID-19 Impact: China Group Corporate Activities
Supply system for crude drug raw materials

Production and supply of Kampo extract powder

All China group companies are under normal

At present, expect to secure production volume

operation as there was no impact to the supply oftargeted in annual plan as there is little impact

crude drug raw materials.

Shanghai Tsumura Pharmaceuticals Co.,Ltd. to

Systematically export crude drug raw materials

resume operations early on and carry out

essential for production

normal operations. Export of extracts also going

Increase in demand for some crude drug raw

smoothly.

materials (traditional Chinese medicines related

In accordance with our BCP (Businessto COVID-19), status of sowing seeds during

Continuity Plan), collaborate with Japan tospringundertake production of formulations under

Tianjin China Medico Technology Co., Ltd. became amember of the Tsumura Group in Marchsupervision
China Group employees: No one was infected with
COVID-19[Jan. 22] Established COVID-19 Control Committee in China (Chairman: Representative Executive Officer of China)[Feb. 11-18] Shanghai Tsumura/Shenzhen Tsumura/China Medico Technology to resumed operations [Mar. 20] Tsumura China
Medico resumed construction

5

Activities to Support COVID-19 Measures
Tianjin China Medico Technology support activities (government request)

Tianjin China Medico Technology donated drug pieces for Seihaihaidokuto to traditional Chinese
medicine clinics in Huanggang, Hubei Province

Activities to Support Measures to Prevent COVID-19[Jan. 29] Donated 5 million yen to the Chinese Embassy for the purpose of procuring medical masks, goggles,
protective clothing and other supplies

6

COVID-19 Impact: Business Activities in Japan
Domestic production anddistribution system

Kampo prescription trends

At present, all production bases and distribution

Increase in demand for specific prescriptions incenters are in normal operation

tandem with dissemination of information on

 Carrying out planned production for priority

COVID-19 treatments using Kampo by doctors

prescription Kampo and to deal with increasethat prescribe Kampo medicine (late March-in demand, in accordance with the BCP

April)(Business Continuity Plan) On the Japanese Association for Infectious

 Increasing inventory of above prescription

Disease website prescriptions Dr. Keiko

Kampo drugs by conducting unplanned

Ogawa (Kanazawa University) submitted

production

special contributions (articles) related to Also supporting production for long-termprescription trends

Kampo prescriptions and related matters Prescriptions (as well as OTCs) related to

At present, there are no obstacles to stable

the new traditional Chinese medicine,

supplySeihaihaidokuto

7

Disseminating Information on Kampo Treatments related to COVID-19

3/9
Japanese Association for
Infectious Disease website

4/18
Japan Medical Journal website

4/18
Japan Society of Oriental
Medicine (JSOM) website

Dr. Keiko Ogawa (Department of Japanese-Traditional (Kampo) Medicine,
Kanazawa University Hospital )Contributed a special article titled "Concept of Kampo Medicine for COVID-19"

Article compiles alternative methods for administering prescription Kampo
formulations

Dr. Kenji Watanabe (Yokohama University of Pharmacy) and other urgent
literary contributions"Role of Kampo in Treating Patients with COVID-19"
Compiles considerations on the efficacy of Kampo medicine

Dr. Shin Takayama (Tohoku University, Kampo Medicine in the
Department of General Medicine) and others
Retrospective observational study: Clarification of the correlation between
symptomatic treatment and severe aggravation in COVID-19 patients8

Support for research on using Kampo to treat COVID-19 patientsOn the part of Tsumura, provide full support for Kampo
treatment research
4/6
Request for research support
and collaboration

4/22
Articles published inindustry papers

Other

Request from the Japanese Society of Oriental Medicine (Chairman:
Takashi Ito) for cooperation to support research on Kampo treatments
for COVID-19 patients
Tsumura decided to provide full support (4/8)

Introduced in the Yakuji Nippo: “Tsumura to lend support in investigatorinitiated clinical research on prescription Kampo drugs for influenza
patients, including those with COVID-19”

Other research support

Tsumura prescription Kampo formulation to be provided free ofcharge (scheduled)9Degree of Impact due to Spread and Continuation of COVID-19
Kampo related

Demand for related prescriptions rising in tandem

External environmentgoing to the hospital/undergoing medical exams andwith the dissemination of information on Kampo
prescriptions being prescribed by doctors for

Number of patients declining as people refrain fromdue to access restrictions

Long-term prescriptions trending upward for patients,

COVID-19 (1Q)

mainly with chronic diseases, and the number ofGrowing interest in Kampo as it balances the mind

hospital visits is trending downward

and body overall, naturally enhances the body’s

Business activities

immune system to promote improvement insymptomsLack of face-to-face information provision by MRs



No implementation of/delays in priority measures

Since it cannot be determined when the spread of COVID-19 will end or if the disease will spread ina second and third wave, we are unable to factor in the degree of impact into our earnings forecast.
Based on market estimates by external institutions and our actual performance and forecasts, there
is a possibility of a negative impact that will drag down annual sales by around 2%-4%.

10

Details of Today's Briefing(1) Initiatives to Tackle COVID-19(2) ESG Management & Sustainability Vision(3) China Business Update(4) FY2019 Business Results(5) FY2020 Forecast

ESG Management and Sustainability Vision
Be No. 1 and possess proprietary
technology

Skill

Bring together the power of diverse
personnel

Contribute to therealization of a sustainable
society by creating value
through our Kampo andcrude drug businesses

TsumuraPeopleCo-creation

Together create a sustainable society
12Contribute to medical care and society by creating value through the Kampo
and crude drug business
TsumuraFounder: Meaningful business that is part of the public interest
Jusha Tsumura (second generation; son of founder): Kampo is not“unscientific," it is yet to be scientifically verified
Contribute to the creation of value and to medicine based on the following approach"Kampo" ≠ "synthetic medicine""Kampo" balances the body and mind overall and by enhancing the body’s
natural healing power, it promotes improvement to symptoms

Explore efficacy of Kampo medicine in treating COVID-19 patientsJapanese Society of Oriental Medicine and other organizations haverequested Tsumura’s assistance in researching Kampo for use in treating
COVID-19 patients. In response to this request, we will explore the efficacy
of prescription Kampo formulations through full-fledged cooperation
13

Create New Value and Market by Being No. 1 and Leveraging
Proprietary Technologies
Skill

Create a market using the Ping An Tsumura manufacturing andsales platform
Ex: Manufacture and sale of safe and secure high-quality traditional
Chinese medicine

Comprehensive financial and IT
capabilities
Scale and recognition

Quality / Technology /Information

Ping An Tsumura
Crude drug platform

Manufacturing
platform

Sales platform

Analysis / Research
14Realize protection of the natural environment and a recycling-based society using our
proprietary cultivation research technology
Expand cultivation areas by using the Ping An Tsumura crude drug platform
Skill

Ex: Forest and water conservation (nature preservation)

Co-creation
Forest cultivation

Farmland cultivation

Ex: Develop cultivation of wild crude drugs (environmental preservation,
recycling-oriented society)Wild crude drugs

Cultivated crude drugs
15

Create a sustainable society by overcoming poverty throughthe consigned cultivation of crude drugs
Cultivation in poor areas using the Ping An Tsumura crude drug platform
Co-creation

Ex: Successful case of Chinese rhubarb (da-huang) cultivation (contribution
to local economy and job creation)

Impoverished areas(mountainous area)
Poor housing
Inadequate water and seweragesystems
Low income and impoverishedfarmers
Ethnic minorities have difficultyfinding jobs

Contribution to the local economy
Housing maintenance
Safe drinking water and toilet
Stable income for farmers
Create jobs

16

High-quality Crude Drug Cultivation, Processing and Research
Conducting by People with Disabilities
PeopleCo-creation with Yubari Tsumura’s “Harunire no Sato,” a social
welfare corporation
Ex: Crude drug cultivation at “Temiru Farm” in Ishikari City, Hokkaido

Co-creation

Perilla herb cultivation
High-quality perilla herb
cultivation
Top-level processing technology
Boost level of skill acquisition
Continued employment in crude
drug cultivation

BukuryoCultivation research
Indoor bukuryo cultivation
research
Applications for sawdust
substrate cultivation technology
Establishment of cultivation
technology infrastructure
Research for commercialization17

Details of Today's Briefing(1) Initiatives to Tackle COVID-19(2) ESG Management & Sustainability Vision(3) China Business Update(4) FY2019 Business Results(5) FY2020 Forecast

China Business Vision
Contribute to the health of the people of China/
Stable procurement of crude drug raw materials 2027
Sales: RMB10 billion

Ping An Tsumura Group(China business vision: Image of sales)-Becoming the most trusted Chinese medicine company in China-

2021
Sales: RMB240 million(Medium-term management plan for the
China business)

2018

Make the traditional Chinese
medicine business a pillar

・ Development business via crude drug platform・ Selling products made from crude drugs, such as“Yakushoku-dogen” products and Chinese Crude
Drug Pieces

19

On February 28, 2020, a news release titled “Tsumura Announces Conclusion of
Agreement Regarding Acquisition of Equity Interest in Tianjin China Medico
Technology Co., Ltd.by Ping An Tsumura Inc.” was put out. The deal was concluded
in March.

■ Purpose of capital tie-up
1) Strengthen the stable supply system for crude drug raw materials for export toJapan2) Expand China business by acquiring experienced personnel in the Chinese
medicine industry
3) Strengthen stable supply system for crude drug raw materials for use by China
business (traditional Chinese medicines, etc.)

Strengthen stable supply system of crude drug raw materials by gatheringknowhow from the Tsumura Group and China Medico Technology
Promote expansion of the traditional Chinese medicine (crude drug raw
materials) and drug pieces (chopped crude drugs) in China
to establish a solid position
20Build a Crude Drug Platform
Tsumura & Ping An
Share crude drug-related
technology

Development of externalsales routes

Crude drug platform
China Medico Technology

Shenzhen Tsumura

Crude drug raw
materials for
Japan

Crude drug raw materials for China

Crude drug raw
materials for traditional
Chinese medicines

Drug pieces(Chopped crude
drugs)

Yakushokudogen products
21NEXT Stage
2027
Advancing into
traditional Chinese
medicine business

Tianjin Factory
Crude drug platform
Strengthen stable supply
system for crude drug raw
materials

Establish production
systemScheduled to launch
operations in 2022

2019

Establish
sales system

M&A
Approach fortraditionalprescriptions

Sales: RMB10 billion(China business vision: Image of sales)

Make the traditional
Chinese medicine businessa pillar

Analysis andresearch
center2021
Sales: RMB240 million

Sales of crude drugs through thecrude drug platform(Medium-term management plan for
China business)

22

Business Results Briefing for the
Fiscal Year 2019
(4) FY2019 Business Results(5) FY2020 Forecast

TSUMURA & CO.
Muneki Handa, Director andManaging Executive Officer, CFO

May 12, 2020

Details of Today's Briefing(1) Initiatives to Tackle COVID-19(2) ESG Management & Sustainability Vision(3) China Business Update(4) FY2019 Business Results(5) FY2020 Forecast

Consolidated Performance for FY 2019
FY 2019Plan

FY 2019
Results

Achievement
rate(million yen)

Vs. FY 2018

FY 2018
Results

AmountChangeNet sales

125,000

123,24898.6％

120,906

2,341

1.9％

Operating profit

17,00018,876111.0％

18,520356

1.9％Operating profit
margin

13.6%

15.3%

ー

15.3%

ー

ー

Ordinary profit

18,00019,649109.2％

19,702(52)(0.3)％

Profit attributable toowners of parent

12,30013,765111.9％

14,593(828)(5.7)％

Sales by product

FY 2019
Plan

Dividend(Per share)¥64

FY 2019
Results¥64

Other prescription
Pharmaceutical products
0.4%

FY 2018
Actual¥64

OTC medicines
3.1%
Prescription
Kampo products
95.2%

Other
1.3%

25

Changes in Major Subsidiaries in FY 2019
Consolidated subsidiary

Ping An Tsumura Inc.

Ownership ratio

Tianjin China Medico Technology Co., Ltd.

80％

China Medico Corporation and 4 othercompanies

Business description: Production, manufacturing, sales and other activities related to traditional Chinese
medicine and drug pieces

Business combination date

March 30, 2020 (Deemed acquisition date is December 31, 2019)

Ratio of equity acquired

80％

Earnings at acquired companies, included in
the consolidated financial statements

In FY 2019, only balance sheet items of the acquired companies were reflected in the
consolidated balance sheets.
Earnings at the acquired companies were not reflected in the income statement.

Goodwill

RMB765 million (¥12,016 million); preliminary calculation

Goodwill depreciation method anddepreciation period

Straight-line depreciation over 20 years (approximately ¥600 million annually)

Value and breakdown of assets and liabilities received on the day of business combination(million RMB)

Current assets
Non-current assets
Total assets
Current Liabilities
Non-current liabilities
Total liabilities

1,674
365
2,039
1,212
241
1,453

(million yen)

26,292
5,793
32,086
19,0293,788
22,81826

Key Points in Performance
Although operating profit rose, overall sales were up while profit was down due to theposting of extraordinary loss
Achieved all profit targets but underperformed sales plan
Consolidated
net sales

million123,248 yen

Achievement rate vs. plan

98.6％

YoY

＋1.9％

 Net sales of 129 prescription of Kampo products rose 1.8% year-on-year. On a yen-basis, sales rose for 66 prescriptions.
 Net sales of OTC medicines grew 13.9% year-on-year.
millionOperating profit

18,876 yen

Operating profit
margin15.3 %

Achievement rate vs. plan

111.0％

YoY

＋1.9％

YoY

＋0pt

 The cost-to-sales ratio stood at 41.2%(+0.3pt YoY) due to sales mix, despite a decline in the crude drug-related costs.
The cost-to-sales ratio was down 0.6pt versus plans due to a reduction in crude drug-related cost.
 The SG&A cost ratio was 43.5% (down 0.3 pt from the previous fiscal year) due to expenses incurred from refraining from business activities
due to the spread of COVID-19 which has left earmarked funds unused.
The SG&A cost ratio was down 1.1pt versus plan mainly due in part to a shift in period for the posting of R&D expenses and other payments.
millionOrdinary profit

19,649 yen

Profit attributable toowners of parent

13,765 yenmillionAchievement rate vs. plan

109.2％

YoY(0.3)％

Achievement rate vs. plan

111.9％

YoY(5.7)％

5.7% decrease from the previous fiscal year was recorded due to an extraordinary loss of 431 million yen in valuation loss on
investment in an affiliated company associated with the dissolution and liquidation of "SPH Tsumura Pharmaceutical Co., Ltd."

27

Factors for changes in Operating Profit(million yen)

+1,383(340)

Profit impact from changes insales cost margin(687)

18,876
18,520FY 2018
Profit impact from Profit impact
Operating profit changes in sales from changes
in sales cost
margin(million yen)

Sales composition(492)

Crude drug cost

398

Processing cost

(246)

Profit impact from changes in
SG&A expenses

Profit impact
from changes
in SG&A
expenses

FY 2019
Operating profit

Sales-related expenses(185)

R&D expenses(344)

Personnel expenses

(287)

Other

129

28

Financial Condition
Balance Sheets(million yen)

FY 2018

FY 2019

287,322

311,042

23,719Current assets

190,027

194,288

4,261

Non-current
assets97,295

116,753

19,45881,181

97,993

16,81233,32048,47615,15647,86149,516

1,655

206,141

213,048

6,907

70.2%

66.0％

(4.2)pt

Total assets

Total liabilities
Current
Liabilities
Non-current
liabilities
Total net assets
Equity ratio

Cash Flow Position

Change(billion yen)

Operating Investing
Activities Activities

+18.1
56.2

Effect ofexchange
Financingrate(23.4) Activities
Changes

+7.1

(0.3)

57.6

(million yen)

B/S

FY 2018

FY 2019

Comparison

51,80873,31021,502(Merchandise and finishedgoods)

9,382

10,338955(Work in progress)

11,125

12,418

1,293(Raw materials and stores)

31,29950,553

19,254Inventory assets

Cash and cash
equivalents atthe beginning of
periodCash and cash
equivalents at
end of period

That said, of the ¥19,254 million increase in raw materials andstores, ¥16,236 million yen are assets belonging to China
Medico.

29Roadmap for the Realization of the Long-term Management Vision
2018

2019

2021

Third medium-term
management plan
Growth investments

Over 135 billion yen

Building the foundation for the China
business
Consolidated net sales

120.9 billion yen

123.2 billion yen

Rapid
progress

Overseas sales
ratioOver 50%

Consolidated net sales

Sustainably expanding the Kampo market

Consolidated net sales

2022
Becoming a value-creation company
that contributes to people’s healththrough its Kampo business

Domestic business● Establishing a Kampo
medicine business
Having one in every two doctors
writing over 10 Kampo prescriptions

China business● Contribution to the healthof the China’s citizens
Becoming the most trusted Chinese
medicine company in China

Strategic challenges
1. Sustainably expanding the Kampo market and establishing a presence
2. Investing in growth and building business foundations in China
3. Improving productivity using new technologies(AI, automation, RPA)

4. Fostering a corporate culture through philosophy-based
management and developing diverse human resources
5. Promoting the SDGs through the Kampo Value Chain

30

Establishing a Kampo medicine business
Number of doctors who prescribe Kampo
One in two doctors prescribe 10 or more prescription Kampo
Third Medium-Term Management Plan (FY 2019-2021): Aim for a 24,000 increase inheadcount in 3 years

Headcount increased 9,900, versus a FY 2019 target of
8,000, putting the company off to a smooth startThree pillars of Kampo medicine education
Number of universities conducting
Kampo medicine education

Classroom
lectures

81 universities/ 81 universities

Clinical training

58 universities/ 81 universities

On-campus Kampo study sessions

80 universities/ 81 universities

Kampo outpatient treatment

80 facilities/ 81 facilities

31

Sales of 129 prescriptions Kampo products
10,000 units (converted)

2,222
10,000 units

2,500

2,000

1,500

1,000

500

Promotion of drug-fostering program formulations (since FY 2004)
Establishment and enhancement of Kampo medicine education (from FY 1997)

01995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (year)

1 unit equals 1 standard packaged box; 1 box contains 9 weeks of drugs

First Medium-termManagement Plan

Second Medium-termManagement Plan

Third Medium-termManagement Plan

32

Sales of prescription Kampo products (Drug-fostering and Growing formulations)(million yen)Salesranking

Product No./name

FY 2018

FY 2019

YoY

Drug-fostering
program formulations

1

100

Daikenchuto

10,43010,357(72)(0.7)%

2

54

Yokukansan

7,664

7,774

110

1.4%

3

43

Rikkunshito

7,256

7,370

114

1.6%

9

107

Goshajinkigan

3,625

3,603

-22

(0.6)%

22

14

Hangeshashinto

1,350

1,390

39

3.0%

30,32730,496169

0.6%

Total drug-fostering formulations
41

Hochuekkito

7,158

7,113

(45)

(0.6)%

5

68

Shakuyakukanzoto

5,097

5,202

105

2.1%

6

29

Bakumondoto

4,734

4,839

104

2.2%

7

24

Kamishoyosan

4,539

4,598

59

1.3%

8

17

Goreisan

4,124

4,491

367

8.9%

Total growing formulations

25,653

26,245591

2.3%

Total sales for 119 prescriptions other than drug-fostering andgrowing prescription formulations

59,27460,605

1,331

2.2％

Total sales for 129 prescription Kampo formulations

115,255

117,347

2,092

1.8%

Growing formulations

4

Drug price revision rate for 129 formulations forprescription Kampo medicines
October 2019
NHI drug pricerevision rate(1.8)%

0% when factoring in consumption tax increase

April 2020
(0.3)%

33

Factors/measures for underperformance of Daikenchuto and
Hochuekkito
Daikenchuto[Key promotional points going forward]
Gastrointestinal hyperactivity

Impact of briefing session measures

Expansion of
measures

Gastrointestinal hyperactivity
Plus efficacy in improving intestinal blood flow

・ University hospitals
Implementation of briefings: 98.8%
・ Clinical training designated hospitals Implementation of briefings: 77.5%

Measures for FY 2020
1.
2.

Market materializing owing to awareness-raising activities for
efficacy in treating bloating
Approaches based on various mechanism of action of
Daikenchuto, with the goal of fixing or extending theperioperative period

Hochuekkito

1H: Bad summer weather

Gastrointestinal hyperactivity
Improve intestinal blood flow
Anti-inflammatory benefits
Effective in improving intestinal
flora

2H: Sales decline due to a lack of people catching colds

Strengthening medical approach
using Kampo

34

Progress of Yokukansan and Rikkunshito sales
measuresRikkunshito

Prescriptions

FY 2019

FY 2020

FY 2021

Targeting Measures ... Providing information using "DREAM Study * " materials, etc.

Rikkunshito

Implement academic lectures focusing on gastroenterology
Develop online and in-person lectures

Hangeshashinto

Create materials based on new evidence → Dual promotion

Further establish presence as a therapeutic drug for upper gastrointestinal tract infections*DREAM Study: A multi-facility, double-blind comparative study on the efficacy and safety of Rikkunshito for patients with functional dyspepsia

Yokukansan
Yokukansan single promotion■ Yokukansan
Doctors providing support
for dementia patients
Receipt

Expansion of
measures

Recommend prescribing for peripheral symptoms ofdementia■ Trends at facilities using Kampo
Facilities using 54 Yokukansan

44,044 facilities

Facilities using 108 ninjin’yoeito

21,960 facilities

Facilities using both Kampo products

20,623 facilities

Successful activities and smooth
trends. Continue to strengthen
activities going forward35

FY 2019 e-Promotion Implementation Trends
Kampo Mega Web Lecture
Theme"Kampo is a must for clinicians""Managing Kampo Extracts""Acute respiratory tract infections andKampo"

Speaker

Date held

Number ofviewers

Dr. Masanori Niimi

2019. 9.25

17,878 people

2019.12.16

18,855 people

2020. 3.23

17,354 people(Teikyo University, School of Medicine)Dr. Masanori Niimi(Teikyo University, School of Medicine)

Dr. Shigeki Nabeshima(Fukuoka University, School of Medicine)

Other e-promotions
Delivery format

Number of times held

Total views

One-point video delivery

4 times

58,196 people

Web seminar (attract to venue)

5 times

11,295 people

E-promotions, including web lectures, make it possible to approach to unmet physicians, andhave been effective as a channel for providing information.
Even in FY 2020, we plan to promote e-promotions that aim to have synergistic benefits with MR
activities.

36

FY 2020 Activities to Disseminate Information
Priority issues
e-promotion

Themes to be implemented
Implementation of new access, includingweb lectures and online interviews➡ Realize optimal communication that maximizes MR activities

Provide detailed information that takes into consideration features of the region

Area activities

and facility➡ To respond to the needs of doctors who want to learn about Kampo,

Hold an area plan, including "Introductory Seminar on Kampo"

In addition to face-to-face activities to fulfill information needs on Kampo, we
aim to continually expand the Kampo market by implementing activities todisseminate information, including e-promotions.
*In consideration of the conditions caused by COVID-19, we aim to flexibly carryout plans to address needs.
37Sales Measures
 Position healthcare for the geriatrics, cancer (supportive care* ) and women’s healthas our three key domains and focus our activities in these domains
 Deploy a sales approach that entails prescriptions in these three key domains plus
drug-fostering program formulations and growing formulations

Geriatric healthCancer(Supportive care)

Women’s health

Psychiatric andneurological disorders

Digestive systemdiseases

Mitigation of side effects, etc.

Diseases specific to women

Yokukansan D

Rikkunshito D
Daikenchuto D
Hochuekkito G

Rikkunshito D
Hangeshashinto D
Goshajinkigan
D

Kamishoyosan G+ Related formulations

Respiratory diseases+ Related formulations+ Related formulations+ Related formulations

Other diseases and symptoms

Bakumondoto G

Daikenchuto D
Goreisan G+ Related formulations+ Related formulations

Peripheral symptoms
for cardiovasculardiseaseGoreisan G+ Related formulations

D

Drug-fostering program formulations
After close examination of the structureof medical disorders in recent years,
we are concentrating drug development
on disorders that are difficult to treat with
Western drugs but where Kampo
preparations show specific results.

G

Growing formulations:
Formulations that aim to be listed in
medical treatment guidelines as a
strategic formulation following the five
drug fostering program formulations
through the establishment of scientificevidence (data on safety, efficacy, etc.)
in fields where satisfaction withtreatment and the contribution of
medicine are low.

*Supportive care:
Treatment to reduce symptoms
associated with cancer itself andsymptoms of the adverse effects ofcancer treatment.

38

Details of Today's Briefing(1) Initiatives to Tackle COVID-19(2) ESG Management & Sustainability Vision(3) China Business Update(4) FY2019 Business Results(5) FY2020 Forecast

FY 2020 Forecast(million yen)

FY 2019 results

FY 2020 forecast

Vs. FY 2019
AmountGrowthNet sales

123,248

132,000

8,751

7.1％

Operating profit

18,87617,000(1,876)(9.9)％

Operating profit margin

15.3%

12.9%

ー

ー

Ordinary profit

19,64917,900(1,749)(8.9)％

Profit attributable toowners of parent

13,76513,000(765)(5.6)％

Main breakdown of negative factors impacting operating profit
Increase in R&D expenses(including carry-over portion from FY 2019)1.23 billion yen

Increase in SG & A expenses associated withthe consolidation of China Medico Technology

1.15 billion yen

Amortization of goodwill associated withconsolidation of China Medico Technology

0.6 billion yen

Total：2.98 billion yen

Tianjin Medico FY 2019 results
Sales

16.6 billion yen

Gross profit

3.9 billion yen

Operating profit

2.7 billion yen *FY 2020 profit is eliminated as unrealized profit40

FY 2020 Forecast(million yen)

FY 2019 results

FY 2020 forecast

Vs. FY 2019
AmountGrowthNet sales

123,248

132,000

8,751

7.1％

Operating profit

18,87617,000(1,876)(9.9)％

Operating profit margin

15.3%

12.9%

ー

ー

Ordinary profit

19,64917,900(1,749)(8.9)％

Profit attributable toowners of parent

13,76513,000(765)(5.6)％

Fiscal 2019 results

Fiscal 2020 forecast

¥64

¥64

ＥＰＳ

179.96 yen

169.92 yen

ＲＯＥ

6.8％

6.2％

Dividend (pershare)

Impact of COVID-19

The impact of COVID-19 is not reflected in the above forecast as it is difficult to accurately
predict the timing of COVID-19 will peak out.
Assuming the peak for COVID-19 is from April to June, after which is gradually continues todissipate, we estimate a negative impact to sales of 2% to 4%. However, should it be prolonged,
we will make timely and appropriate disclosure in line with changes in the situation.

41

Policy on Return of Profits to Shareholders
We seek to increase corporate value through the sustainable expansion of
the Kampo business and investments to build business foundations inChina
We will bear in mind the state of the mid-to-long term profit levels and cash
flow to ensure stable dividends

Dividend

45.0%

100

80

35.9%

35.7%

32.1%
28.4%

31.9%

33.5%

35.6%

37.7%40.0%
35.0%
30.0%
Year-end dividend

25.0%

(yen)

25.0%

60

40

20

32

32

32

32

32

32

32

32

32

Interim dividend
(yen)

20.0%

15.0%
Payout ratio
10.0%

30

32

32

32

32

32

32

32

32

0

5.0%
0.0%

2012

2013

2014

2015

2016

2017

2018

2019

2020 forecast

Note: The year-end dividend and dividend payout ratio for FY2019 are based on the assumption that the dividend
item will be approved at the 84th annual shareholders’ meeting42Inquiries about this material

TSUMURA & CO.
Corporate Communications Department
PR Group

IR Group

TEL：03-6361-7100

TEL：03-6361-7101

Cautionary items regarding forecasts•

The materials and information provided in this presentation contain so-called forward-looking
statements. Readers should be aware that realization of these statements can be affected by avariety of risks and uncertainties and that actual results could differ significantly. Therefore, please beaware that actual results may differ materially from these forecasts.

•

Governmental changes to the healthcare insurance systems or regulations set by medical treatment
authorities on drug prices or other aspects of healthcare in Japan or other regions, or changes ininterest and foreign exchange rates could impact negatively on the Company’s performance or
financial position.

•

In the unlikely event that sales of the Company’s core products were halted or declined substantially
due to a defect, unforeseen side effect or some other factor, it would have a major impact on the
Company’s performance or financial position.