Presentation on Vision for China BusinessFebruary 14, 2018

President, Representative Director

Terukazu Kato

Today’s Agenda

1. Long-Term Business Vision
2. Business Goals
3. Business Strategy

4. Sales Forecast, Market Scale
5. Financing Plan, Schedule2

1．Long-Term Business Vision3

Long-Term Business Vision “Vision for 2021”

Aim to be a value-creation company that contributes to people’s
health through its Kampo business
The “Kampo”
Company
Contributing to creating ahealthcare environment
where all patients canreceive treatment that
includes “Kampo” medicine
where appropriate in any
healthcare institution or
medical specialty in Japan.

The “People”
Company“Kampo” medicine is apioneering field with noprevious examples to build
on worldwide. Therefore, weshall evolve into a corporategroup comprised of “people”
with professional skills that
can independently pave theway forward for our Kampo
business and is trusted by all.

The “Global Niche”
Company
Leveraging the technology andknow-how of the Tsumura Groupto their full extent, we will take on
the challenge of developing andlaunching TU-100 (Daikenchuto)
in the U.S pharmaceuticalmarket as well as creatingnew businesses in China.

4

Roadmap to Realizing Long-Term Vision
JUMPSTEPHOPVision
For2021

Creating New Value
Through Innovations in Kampo

Strengthening thegrowth base to achieve
greater value creation

First Medium-Term
Management Plan

２０１２

Second Medium-Term
Management Plan

２０１５ ２０１６

２０１８ ２０１９

Third Medium-Term
Management Plan

２０２１ ( FY )Medium-Term Management Plan
Strategic Challenges
１．Expansion and stable growth in the Kampo market
２．Continued reinforcement of profitability and maximization of cash flow
３．Taking on the challenge of new businesses in China
5

2. Business Goals

6Business Goals

 Contributing to China
Further development of the traditional Chinese medicine
industry ⇒ Contribution to the health of the people of China

 Stable procurement of crude drugs
Contribute to improving the quality of crude drugs and to thepreservation of crude drug resources ⇒ Stable procurement of
crude drugs and raw materials for crude drugs
7

Business Goals (Background & External Environment)

Increase in medical
costs due to aging
society

Change in disease
structure(Example: obesity among theyoung, etc.)

Stability and safetyof the quality ofcrude drugs andproductsContribute to the health of the people of China
Play a role in improving the quality of crude drugs,
securing safety, and protecting crude drug resources8

Stability & Safety of the Quality of Crude Drugs/Products＜Crude Drug Production in China According to the Crude Drug GACP*＞

Leverage strength of our integrated crude drugs
production and management system＊ＧＡＣＰ ：Good Agricultural and Collection Practice9

3. Business Strategy

10Summary of China Business

TSUMURA China
Investment Ratio

70％

56％

63％

100％

PHARMACEUTICALSSPH TSUMURA
PHARMACEUTICALSPing An Tsumura

SHANGHAITSUMURA

SHENZHENTSUMURA（Tianjin）（Shanghai）（Shenzhen）（Shanghai）（Shenzhen）

TSUMURA SHENGSHI

・Kampo Extract
powder

49％

・Traditional
Chinese medicine
compound granules

・traditional Chinese
medicinal product・Research andDevelopment

・Production
・Production

・Sale
・Sale

Image photo

Image photo・Business related tostrengthening the crude
drug procurement
structure・Business related toanalysis and research
focusing on traditional
Chinese medicines

・Kampo Extract
powder・Crude drug
・Crude drug pieces

・Production

・Procurement
・Sale

・Business related to
traditional Chinese
medicines, health foodand healthcare-related
daily necessities andother operations andmarkets. ※ For SPH Tsumura Pharmaceuticals, Shanghai Tsumura, and Shenzhen Tsumura, we plan to shift our investments in eachcompany to investments from Tsumura China

・Selection andProcessing
・Storage

Astragali Radix

1111

Details of Each Business Operation
Analysis
Establish an analysis center for the purpose of establishing high-quality
standards related to traditional Chinese medicine.
(→ Establish cornerstone for brand building in each business through analysisbusiness)

Image photo

Crude drug
( Crude drug pieces, etc )In the business for crude drugs and crude drug pieces, carry out
procurement, processing, and sales(→ Aim to establish a new business that will create a market that handles
high quality and high spec crude drugs)

Astragali Radix

Traditional Chinese medicine compound granules
Product made from extract granules taken from crude drug pieces. This is used
to prepare traditional Chinese medicine.
Focus is on this becoming a new market for traditional Chinese medicine. Enterthe market with an integrated system that encompasses R&D, production andsales.

Image photo

Traditional Chinese medicinal product, etc（ＯＴＣ, Healthy food, ＨＣ）

Apply the formulation and commercialization techniques nurtured in theKampo and crude drug business to develop, produce and sell traditional
Chinese medicinal products.

Image photo12

Crude drug

Traditional Chinese medicine
compound granules(Crude drug pieces, etc)

Traditional Chinese
medicinal product, etc（ＯＴＣ, Healthy food, ＨＣ）

GACP*Analysis

Correlation between Each Business

Secure high quality crude drugs / Establish the cornerstone forquality and specifications through analysis businessSupply value-added product & Secure quality assurance, safety,efficacy, and uniformity＊ＧＡＣＰ ：Good Agricultural and Collection Practice13

Strengths of Analysis Technology
Abundant
experience in crude
drug trials
System for collaboratingwith local companies andresearch institutes

Assay technology that conforms to theproperties of crude drugs(Residual agrochemicals, toxic mold, microbes)

Technology to identify botanical origins
based on diverse crude drug and plant
specimens (DNA analysis, classification)

Vast library ofcomponents derived
from crude drug *Technology to isolate and refine crude
drug compounds

Integrated managementfrom cultivation to qualityinspections

Applied to cultivation and processing
technology based on test results (Improve＊Library: Database on and related to compounds(Supply reference standard, standard-setting)quality of crude drugs)

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Business Strategy (Synergies from joint venture)

Quality
Technology
Information
Production and sales of highquality Kampo developed basedon advanced production andanalysis technologies cultivatedover more than a century×

Comprehensive
strength in finance & IT,
scale, brandrecognition
Comprehensive strength infinance and IT, solid presence in
China, sales network, etc.
(Client base, including online
users, of 350 million people)

Ping An Tsumura
Aim to become the No. 1 brand in the market in China15

Business Strategy (Utilize Ping An Group sales channel)
Ping An Good Doctor: China’s largest online medical and healthcare management platform
・1,000 in-house doctors online, over 60,000 affiliated doctors, and 5,000 affiliated hospitals
・More than 150 million registered users, over 250,000 medical interviews taken daily (more than 1 million daily during thesummer epidemic season)
・Plan to invest ¥50 billion into R&D for a smart medical exams, including treatments using Kampo

ProviderPatient
Refer customers

Share customers

Healthcare
Management Platform
Ping An Good Doctor

OnlineReferralHospital

OfflineReferralFinance service providers
Ping An Life, Ping An Health, Offline
etc.
ReferralData
Accumulation

Provideservices

Social Health Insurance
Platform
Ping An Social Health
Insurance

Clinics

Physicians

Health Service Chain
Ping An Wanjia Clinic

Payment

Medical expense
control, Higher
service efficiency,
Smart mobile
services

Pharmacies

Customerflow
Stronger productCompetitivenessPrivate insurance
Ping An HealthPing An Life
Ping AnnuityCheckup centers
Other Medical
Institutions
Data Accumulation

Clinical Support

Information platform: Ping An Health Cloud

Product innovation
riskmanagement

Customerreferral

DataAccumulation

Provideservices

Predict diseases

Services provided by Ping An Insurance Group16

4. Sales Forecast, Market Scale

17

Size of Market in China (2016)

RMB874.9 billion (roughly ¥14.87 trillion)＊＊Forex: rate: ¥17/RMB(current as of February 2018)

96

1,956

Traditional Chinese
中成薬
medicinal product

Crude
生薬drug
Traditional Chinese
中薬配合顆粒medicine compoundgranules

Source: Ministry of Industry and Information Technology of the People’s Republic of China,
Southern Medicine Economic Institute of China Food and Drug Administration (CFDA)18

2027 Sales Forecast

10 billion＊RMB

Traditional
Chinesemedicinal
producCrudedrug(roughly ¥170 billion)＊Forex: rate: ¥17/RMB(current as of February 2018)

Traditional
Chinesemedicinecompoundgranules

Analysis

Aim for sales that are equivalent to or higher thansales in Japan on a combined business basis
195. Financing Plan, Schedule20

Financing Plan (disclosed on September 22, 2017)
Specific uses for capital at Ping An Tsumura

Amount( JPY billion )① Business related to strengthening the crude drug procurement structure

10.3

The procurement of land for cultivation, the development of cultivation techniques, theconstruction and development of crude drug processing plants, and the development ofprocessing technologies, etc.
② Business related to analysis and research focusing on traditional Chinese
medicines
Establish an analysis and research center focusing on traditional Chinese medicines,
and the development of analysis and research techniques and the provision of analysis
and testing services, etc.
③ Business related to traditional Chinese medicines, health food andhealthcare-related daily necessities and other operations and markets

FY2018 to FY2020

2.1
FY2018 to FY2022

14.8

Use Tsumura’s Kampo medicine manufacturing knowhow to conduct the business ofmanufacturing and selling traditional Chinese medicines.

Total

FY2018 to FY2022

27.2
2121

Schedule (tentative)
Second Medium-Term
Management Plan

2018

Third Medium-Term
Management Plan

2019

2021

2022

2026

2027

TSUMURA SHENGSHIPHARMACEUTICALS

投資開始investment
Launch

Production / sales

投資開始investment
Launch

Production / sales（Tianjin）

SPH TSUMURA
PHARMACEUTICALS（Shanghai）

Ping An Tsumura投資開始investment
Launch

投資開始
Launch investment

Production / sales

Start analysis（Shenzhen）

Launchinvestment

Kampo Extract powder
Analysis

Production / sales

Traditional Chinese medicinal productTraditional Chinese medicine, Healthy food, HC etc

Traditional Chinese medicine compound granules

22