Business Results for Fiscal 2021

May 11, 2022
President and Representative Director, CEO

Terukazu Katoagenda01

FY2021 Business Results Overview

02

Third Medium-Term Management Plan
（FY2019－FY2021) Summary

03

First Medium-Term Management Plan
（FY2022－FY2024)

2

FY2021 Business Results Overview
Both sales and profit exceeded the revised plan,sales and profit growth year-on-year.
【Million yen】

Net sales

FY 2021
Revised PlanFY 2021
Results

Achievementrate

FY 2020
Results

YoY

AmountChange127,500

129,546101.6%

116,413 +13,132 +11.3%

Domestic

117,800

119,567

101.5%

110,053+9,514+8.6%

Overseas

9,700

9,978

102.9%

6,360+3,618+56.9%

21,10022,376106.1%

19,382

16.5％

17.3％

－

16.6％

－

－

Ordinary Profit

23,40025,904110.7%

20,866+5,038+24.1%

Profit attributable

16,60018,836113.5%

15,332+3,504 +22.9%

Operating Profit
Operating Profit Margin

to owners of parent

Other prescription pharmaceuticals 0.4%

Ratio to total sales

Prescription Kampo Products 88.1%+2,994 +15.4%

3.0% Healthcare
8.5%

External sales by consolidated subsidiaries 3

Sales of Drug-fostering Program Formulations/Growing
Formulations（ Million yen）

Net
sales
Ranking

Product No./formulation name

FY 2020

FY 2021

YoY

Drug-fostering
program formulations

1

100 Daikenchuto

9,251

9,569

+318

+3.4%

2

54 Yokukansan

7,017

7,379

+362

+5.2%

4

43 Rikkunshito

6,676

7,231

+555

+8.3%

8

107 Goshajinkigan

3,229

3,509

+279

+8.6%

23

14 Hangeshashinto

1,257

1,358

+101

+8.0%

27,432

29,048+1,616

+5.9%
+6.5%

Total sales for drug-fostering program formulations

41 Hochuekkito

6,793

7,232

+439

5

17 Goreisan

4,413

5,298

+884 +20.0%

6

24 Kamishoyosan

4,336

4,833

+496 +11.4%

7

68 Shakuyakukanzoto

4,524

4,763

+238

+5.3%

10

29 Bakumondoto

3,127

3,258

+130

+4.2%

Total sales for growing formulations

23,19625,385 +2,189+9.4%

Total sales for 119 formulations other than drug-fostering
program and growing formulations

54,93859,730 +4,792+8.7%

105,567 114,165 +8,597+8.1%

Growing formulations

3

Total sales for 129 prescription Kampo products* The 2020 results have been rearranged to the amount after applying new accounting revenue recognition standards.

Ratio to total sales
119
formulations
other than drugfostering
program andgrowingprescription
formulations

129

52%

Drugfostering
programformulations

26%

Growing
formulations

22%

4

Third Medium-Term Management Plan
（FY2019－FY2021) Summary

Numerical Targets in the 3rd Medium-Term Management Plan
Achieved all numerical targets in 2021

Plan

Sales

Operating Profit

ROE

Over

Over

120

19

Over

Billion yen

Billion yen

6%

After applying revenue
recognition accounting standards【Exchange rate】
16.5yen to the Chinese yuan

(Disclosed initial plan: over 135billion yen)

Results

129.5

22.3

Billion yen

Billion yen

8.2%【Exchange rate】
17.0yen to the Chinese yuan
6Strategic Challenges
Creating New Value Through Innovations in Kampo －Next Stage－

1

Ongoing expansion of the Kampo market and establishment ofpresence therein

2

Investing in growth and building business foundations in China

3

Improving productivity using new technology (AI, Automation, RPA)

4

Fostering a corporate culture through philosophy-based managementand developing diverse human resources

5

Promoting SDGs through the Kampo Value Chain7

①-1．Sales Growth Underpinned by e-promotions
Sales growth in tandem with an increase in the number of cases of information recognition
owing to e-promotions
Third Medium-Term Management Plan
(Number of cases of detailing impact)(Million yen)

Number of cases of epromotion recognition
reaching over 50%

500,000

400,000

360

350

e-promotions
340

Daily sales

300,000(Annual moving average: Approximation)
330

200,000

320

MR
activitie

100,000

310

0March 2022

February 2022

January 2022

December 2021

November 2021

October 2021

September 2021

August 2021

July 2021

June 2021

May 2021

April 2021

March 2021

February 2021

January 2021

December 2020

November 2020

October 2020

September 2020

August 2020

July 2020

June 2020

May 2020

April 2020

March 2020

February 2020

January 2020

December 2019

November 2019

October 2019

September 2019

August 2019

July 2019

June 2019

May 2019

April 2019

March 2019

February 2019

January 2019

December 2018

November 2018

October 2018

September 2018

August 2018

July 2018

June 2018

May 2018

April 2018

300

INTAGE Healthcare Inc. survey, Impact Track*Number of cases of detailing impact: Number of cases of information recognition from various channels, including MR activities and the Internet*MR activities: Detailing, online interviews, in-hospital briefings, etc. conducted by MRs e-promotion: Activities to provide information online that does not go through MRs.

8

①-2. Trends in the Number of Physicians Writing 10 or More
Prescription Kampo Pharmaceuticals
The number of physicians who wrote 10 or more prescriptions are increasing
but underperformed target
Targetover 50 %Actual26 %Third Medium-Term Management Plan

50%
Physicians whowrite 10 or more
Kampo prescriptions

11%

14%

16%

FY2018FY2018

FY2019FY
2019

FY2020
FY
2020*Survey by Tsumura

26%

About 84,000 people

FY2021FY
2021
9

②-1. Overseas Sales Trends
In the China Business, made progress in building a foundation for the crude drug
platform and exceeded initial plans
Plan About ¥4.0 billion

Actual9.9 billion

About ¥

6.3 billion

About ¥

6%

other

19%

drug pieces

75% raw material
crude drugs

About ¥9.9 billion

Product lineup and sales
channel expansion• Develop new customers,
Expand existing customer sales• Expand sales of drug pieces via
public hospitals and online sales
channels (mainly at Ping An Health)

300 million

About ¥FY2019FY
2019

FY2020FY
2020

FY2021FY
2021
10

②-2. Investments and Financing in the China Business
Underperformed the scheduled amount reflecting delays in the M&A for traditional Chinese
medicine companies, and the construction of the Tianjin Plant and the Traditional Chinese
Medicine Research Center
Plan ¥50.0-¥100.0 billion
Actual About ¥29.0 billion
Complete acquisition of Ping
An Tsumura PharmaceuticalSlated to start operations in FY 2022

Acquisition amount: About ¥18.0 billion•

As the crude drug platform, salesof raw material crude drugs and“Yakushokudogen” products

Construct the Traditional
Chinese Medicine
Research Center

Construct the
Tianjin Plant••

Production plant for powdered extracts
Scheduled manufacturing of traditional
Chinese medical products in the futureSlated to start operations in FY 2024••

R&D, analysis and evaluation functions
Evidence for traditional Chinese
medical products further out
Shoulder the building of packages
11

③. Capital Investments to Improve Production
Capacity and Productivity
Boost production capacity and improve labor productivity
Plan ¥22.0 billion

Actual About ¥17.0 billion

No. 3 SD Building at
the Ibaraki Plant••

Introduce robotic technologies into processes,
including injecting crude drugs into devices for cutting,weighing and extraction
Achieve automation/robotization of all manufacturing
processes for Kampo formulations••

Domestic plants
Research/cultivationrelated facilities

AI automated crude
drug selector(Under development)••

Automatically remove defective products
during the crude drugs selection process
Improve the efficiency of selection operations,
reduce workers
12④. Foster a Corporate Culture through Philosophy-based
Management and Developing Diverse Human Resources
Established the Tsumura Academy in 2019 as an institution for training personnel internallyImplement a program to train
management personnel

Increased ratio of female managers

Basic management lecture

As of April 2022: 7.4%

・Employees that completed the course
33 people (of which 5 were women)
・Employees currently taking the course
43 people (of which 11 were women)
Directors, Executive Officer,
General Managers
Produce management
personnel

Division head

Third Medium-Term
Management Plan

7.4%

5.2%

5.9%

6.3%

Basic management
lecture(3-year period)

Chiefs/section
heads

General staff

Advance(3-year period)

Basic(3-year period)

April 2022
April
2021 2021年度
2018年度
April
2019 2019年度
April 2020 2020年度
FY2020
FY2021*Tsumura standalone figures13⑤. Promoting SDGs through the Kampo Value Chain

Upgrade materiality
Endorse TCFD
Set up the “Sustainability Committee,” chairedby the Co-COO, Director
Tsumura Materiality

14

Investment and Financing (Summary)
Total investment and financing: About ¥66.0 billion
Plan

ActualExisting businesses,
capital investment●Domestic plants●Facilities related to research/cultivation¥22.0 billion

・Construction of the No. 3 SD Building at
the Ibaraki Plant
About ¥17.0 billion

China Business
Investments and Financing●Traditional Chinese Medicine Research Center●Tianjin Plant●Traditional Chinese medical products business(M&A, etc.)

Main topics

・Acquire Ping An Tsumura Pharmaceutical¥50.0 100.0 billion

・Delays with the Tianjin Plant, Traditional
Chinese Medicine Research Center
About ¥29.0 billion

・M&A postponement
・Increase in number of write-ups in clinicalguidelines

R&D

・Embark on late Phase II in US development(TU-100)●Basic /clinical research●US development●Crude drug cultivation research・Implement the upland cultivation of ginseng¥20.0 billion

About¥20.0 billion

・COVID-19-related research15

First Medium-Term Management Plan (FY2022-2024)

Laying the Foundations for Creating a
Future that Achieves “Cho-WA” (harmony)TSUMURA Group DNA Pyramid

17

Vision & Strategy Diagram
Sustainability
VisionLiving with nature for tomorrow.

Long-term
management
visionTSUMURA VISION “Cho-WA” 2031

Business vision

Business strategy

Medium-Term
Management Plan

Creating a Future that Achieves “Cho-WA” (harmony)Prescription Kampo
Products

Chineseoperations

Patients can receive Kampo
treatments suited to them
individually at any medical
institution/clinicaldepartment

Contributing to the health ofthe citizens of China

Establish the Kampo
medicine business

Become a trusted traditional Chinese
medicine company in China

Realize a medical setting where one-in-two
physicians will write “basic prescriptions in
all treatment areas” in accordance with
Kampo medicine

Contributing to the health of thecitizens of China
Recognized as a traditional
Chinese medicine company

Strategic challenges

Vision for eachdivision/department

Strategies foreach division/
department

Realize a business scale/sales worth RMB10 billion

KGIs/KPIs for eachdivision/department
18

Roadmap for the Realization of the TSUMURA VISION“Cho-WA” 2031
1st stage

2nd stage

3rd stage

FY2022-2024

FY2025-2027

FY2028-2031—Growth——Flowering——Germination—
Prescription Kampo
Products

Research

Development

Formulation
platform

Traditional Chinese
medical products business

Marketentry

Buildfoundations

Crude drug
platform

Crude drugs, drug pieces andYakushokudogen products

Sales
expansion

Research
platform

Smart factory
Sales

Labor
productivity

Personalized Kampo
treatments
Personalized Kampo
treatments
Scientific study of presymptomatic diseases

R&D

Chineseoperations

Over 50% physicians write 10
or more Kampo prescriptions

Standardization of Kampo
treatments

Traditional Chinese Medicine
Research Center

Establishment

Expand scope of
automation

Establish brands
Function
expansion

Shift to oversight/management

50% of physicians write basicprescriptions in all treatment areas

Socialimplementation

Establish brands

Lead industry development
Evidence-building for traditional
Chinese medical products
Realize smart factories

Sales per MR (Yen/MR)

Production

Physical labor productivity

Crude drugs

Personnel expenses per crude drug
arranging volume

Double productivity(vs. FY2021)
19

Long-term Image of Investments and Finances
1st stage

2nd stage

3rd stage

FY2022-2024

FY2025-2027

FY2028-2031—Germination——Growth——Flowering—Upfront investments

Business/operations
getting into full swing

ROI getting intofull swing

Financial
infrastructure

Capitalinvestment/in
vestment inresearch,
M&A, etc.

Growth investment
Secure production capacity forsales expansion

Depreciation
expenseFoundation
investment
20

Numerical targets (FY2024)

Net sales

Operating profit

ROE

162

29

8

billion yen

billion yen%

Assumption: (NHI price revisions) FY2022, FY2023, FY2024(Exchange rate) FY2022
19.5 yen/RMB, 125.0 yen/USD
FY2023-2024 19.0 yen/RMB, 120.0 yen/USD
21

Create Future Cash Flows
Improve medium/long-term corporate value

GrowthEarnings power(Expand business scale)(Enhance profit margins)

Growth investments
for the future
Invested capitalturnover rate

Operating profit
marginGross profit rate
Sales growth rate
CoGS rate
NHI drug price revision rate

SG&A ratio
Personnel expense rate
Activities expense
Other expenses

Working capitalturnover rate

MaintainInventory turnover rate
Accounts receivable turnover rate
Accounts payable turnover rate

Execute strategic challenges

Maintain

Fixed asset
turnover rate
Tangible fixed asset turnover rate
Intangible fixed asset turnover rate22

Growth (expand business scale)
Sales by business
FY2022-2024
CAGR

China Business(Formulation platform)

30%
Growth●Enter the traditional Chinese
medical products business

China Business(Crude drug platform)●Contribute to high growth andsteady profit

5%

GrowthDomestic business●Stable growth and pioneering
new domains related to Kampo

2021

2022

2024

First Medium-Term
Management Plan

Second/Third Medium-Term
Management Plan (2025-2031)
23

Earnings power (Enhance profit margins)
Further improve earnings power inthe domestic business

Consolidated operating
profit margin
Operating profit margin

18%

17%

15%

Rapid yen depreciationin value
Soaring materials cost
Initial impact of newplant operations

2017

2018

2019

2020

2021

*In 2017-2019, estimates applied retroactively
for revenue recognition standards

Earnings
power

2022

2023

Sales

Realize sales growth that outperforms
previous performance
Sales growth rate for the 129 prescription Kampo products(annual average)

2017-2021: +3.8% ⇒ 2022-2024: +5.4%

Selling
priceContinue to promote selling prices for Tsumura
Kampo formulations

Cost ofgoods
soldCurb the rise in CoGS by improving productivity

R&D

Implement controls by planting seeds for the
future and narrowing down R&D themes

Personnel

Improve added value per person and implement
controls for optimum personnel

ExpenseRealize a full-fledged management of costbenefits and scale down expense to proper levels

2024

First Medium-Term
Management Plan

24

Growth investments for the future■Boost production capacity and improve productivity via automation and DX
Capital investment/DX investment:
approx. 115.0 billion yen

Domestic business investments: (approx. 100.0 billion yen)
●Domestic plants (extracting/drying/granulation/packaging)●Tianjin Tsumura Pharmaceuticals (extracting/drying)

Renew existing facilities: 10.0 billion yen
China Business capital investment: (approx. 15.0 billion yen + M&A)
●Traditional Chinese Medicine Research Center ●Build an IT infrastructure

Increase production/sales capacity:
90.0 billion yen(Strengthen capacity, including
efficiency enhancements)
Boost efficiency/labor-saving:
10.0 billion yen
IT investments: 4.0 billion yen

OtherStrengthen production capacity
Build a production system that will support the
expansion of the Kampo market
Improve productivity leveraging
automation and DX
Develop innovative automation facilities
Boost efficiency/realize labor saving/suppress arise in CoGS

■R&D: Allocate funds mainly to new disease domains, to personalize Kampo treatments, andin pre-symptomatic disease domains
Total R&D investment: approx. 24.0 billion yen
25

Financial Strategy
Aim to improve corporate value by creating cash flows from operating
activities and through growth investments
Shareholder
Returns

Expand business scale andimprove profit margins
Improve inventory turnoverby using SCM and enhancelogistics efficiency

Foundation
investment

Operating CF

Bolster balance sheet
management at the
China Business

Procurement for
growth investments

Continue to pay out astable dividend
Establish business foundations
・IT infrastructure reforms
・Maintain and renew existing facilities

Investment in future growth

Growthinvestment
Interestbearing debt

・Strengthen production capacity
・Build the Traditional Chinese
Medicine Research Center・DX investment
・Sustainability investment
・M&A investment in China

Execute disciplined
investments by managing
investment valuations

26

First Medium-Term Management Plan: Strategic Challenges
GrowthEarnings power(Expand business scale)(Enhance profit margins)

Operating profit
marginGross profit

SG&A ratio

Growth investments forthe future

Invested capitalturnover rate
Working capitalturnover rate

Maintain[Strategic challenges]

Fixed asset
turnover rate

1

Continuous expansion of the Kampo market
through the provision of Kampo solutions to suit
individual physicians

2

Establishment of Kampo evidence and promotionof scientific study of pre-symptomatic diseases
through KAMPOmics

3

Expansion of sales of crude drug and drug pieces
in China and entry to business of traditional
Chinese medicinal products

4

Revamp of IT platform and promotion of utilizationof AI and robots in crude drug sorting andmanufacturing processes for transformation of the
Kampo value chain

5

Creation of value through organization capital andhuman capital and implementation of job
satisfaction reform
Initiatives for realization of the Sustainability Vision27

1Continuous expansion of the Kampo market through theprovision of Kampo solutions to suit individual physicians

28Increase the percentage of physicians that write 10 or more
Kampo prescriptions to over 50%

Physicians thatwrite 10 or moreprescriptions

Physicians that write

Over 50%*

basic prescriptions in

all treatment areas- FY2031

43％*
35％*

26.2%*

Number ofclinical
physicians

320,000 people

330,000 people

330,000 people

330,000 people

FY2021

FY2022

FY2023

FY2024*Survey by Tsumura

Source: <Number of clinical physicians> Prepared by Tsumura based on “Physician Supply and Demand” data from the 19th Subcommittee on Physician
Supply and Demand, which is part of the Ministry of Health, Labour and Welfare’s Study Group on Medical Practitioner Supply and Demand29Kampo Digital Solutions
Realize first-rate customer-oriented experiences through optimal channels for information
required by individual medical practitioners and provision at the appropriate time
●Online Kampo salon

Efficacy

SafetyDissemination of online
lectures
Video library
Product information

Side-effect information
Storage/management
methodRaw material crude drug
information

Data collection and integration

Quality
Tsumura crude drug
GACP
Formulation
homogeneity

Data analysis●Online Kampo MR interviews●Tsumura virtual Kampo MRs●Kampo AI chat bot

Optimalmeasures/proposals

Actions●Integrated data base・Customer information ・Market, competitors

・Site views

・Proprietary sales

・Lecture participation ・Activities history30

Important Domains & Drug-Fostering Program/Growing Formulations
Rapid improvement in quantitative and qualitative information provision, mainly in the drug-fostering program andgrowing formulations and basic prescriptions for treatment areas in the three important domains of “geriatric health,”“cancer (supportive care)” and “women’s health.”

Geriatric health domain

Cancer domain(supportive care*)

Women’s health domain

Psychiatric and neurologicaldisorders

Peripheral symptoms forfrailty

Digestive systemdiseases

Mitigation of side effects,
etc.

Diseases specific to
women

Other

Yokukansan D
Yokukansankachim I
pihangeNinjin’yoeito G

Rikkunshito D

Rikkunshito D

Kamishoyosan G

Daikenchuto D

Kamikihito G

Daikenchuto D

Hangeshashinto D

Kamikihito

Goreisan G+ related formulations

Hochuekkito G+ related formulations

Goshajinkigan D

Goshajinkigan D

Peripheral symptoms
for circulatory disorders

Hochuekkito G

Tokishakuya I
kusan

ShakuyakuIkanzoto+ related formulations

Goreisan G

Kamikihito G

Respiratory diseases

Bakumondoto I+ related formulations+ related formulations JuzentaihotoI+ related formulations + related formulations*Supportive care: Treatments, including
the alleviation of symptoms associated withcancer and due to cancer therapy+ related formulations
D Drug-fostering program formulations:

G Growing formulations:

Focusing on the structure of diseases in recent years, intreatment domains with a high degree of medical needs,
there are patients in dire distress of finding new drug
therapies; narrow down target to patients in whichprescription Kampo formulations are demonstrating specificeffects and prescribe to build evidence (scientific basis)

As focal formulations to follow the five drug-fostering
program formulations, aim for write ups in treatment
guidelines by building evidence (safety and efficacy data,etc.) in domains with a low treatment of satisfaction and a
low degree of contribution to medicine

I

Important formulations:
Important formulations following drugfostering program formulations andgrowing formulations for the penetration of
Kampo in important domains

31

Focal Areas in the Important Domains
Cancer domain

Geriatric health domain
Necessary support for frailty

Necessary support forcancer survivors

Requiresnursing care

Mental pain

Holistic
pain*

Social pain

Frail

Necessary support for infertility**

Physical pain

HealthyPre-frail

Women’s health domain(supportive care)

Irregular/difficult
Menopause
menstruation
Cold
AnemiaInfertility
sensitivity
Symptoms during pregnancy andbefore/after child birth

Hinder the activities
of womenLow child birth

Spiritual pain

Insurance coverageof infertility
treatments*Holistic pain is a concept advocated by British
physician Cicely Saunders. The diagram was preparedby Tsumura in accordance with this concept.

Flow of support in the society overall**Require support for both men and women32

2

Establishment of Kampo evidence and promotion of scientificstudy of pre-symptomatic diseases through KAMPOmics

33

Research on the Personalization of Kampo Treatments(Propose New Treatment Methods)

To build a platform to personalize Kampo treatments
Joint research with academia

Alliances with business partners

Development/trial start ofdiagnostic support tools

Exams based on Kampo medicine (four exams)

Candidate domains

Inquiry

Inspection

Listening andsmelling exam

Made up of various
questions, including
subjective symptoms,
illnesses experienced thus
far, food preferences,
lifestyle, work, andmenstrual conditions.

Facial color/expressions,attitude, posture andbody shape are mainly
examined.

Examination mainly of thevolume and tone of the patient’s
voice, manner of speaking, how
the patient coughs, phlegm
conditions (manner in which isgets clogged/stopped up), andrespiratory sounds.
Body odor and halitosis are also
checked.

Tongue inspection is also
conducted.

Palpation
Examination of conditions
through touching.
This is largely broken
down into a “pulse exam”
and a “abdominal exam.”

Women’s healthdomain*Successively deploy to other areas
34

Initiatives for the Scientific Study of Pre-symptomatic Diseases
For the three preventive measures for pre-symptomatic diseases (treat disease before symptoms appear, preventchange into existing disease and post-healing recovery)

Scientifically understandpre-symptomatic diseases Definition
Example in geriatrichealth domain
Collect andanalyze
information

CancerStudy using intron retention, acondition of a pre-symptomatic
disease that causes aging
Precursor mRNA

Seniors

Women

Administrationof Kampo

IntronKAMPOmicsⓇ＊*Combines research on cutting-edge technologies (metabolome,
genetics, intestinal flora, systems biology, etc.), a strength of Tsumura, with Kampo medicine, a traditional
medicine practiced in Japan, to form a proprietary research package to comprehensively understandmulti-component, complex Kampo medicines. This is registered trademark of Tsumura.

Normal mRNA

Splicing

Intron retention in mRNA
There are cases where intron is retained
due to a splicing error or a biologicalabnormal response35Research to Expand Standard Kampo Treatments(Expand and Delve into Existing Research)
Enrich evidence package

Expand treatment guidelines

Evidence
package

Meta-analysis

RCT(Randomcomparison trial)

Drugs
Pharmacoki
neticsSurvey on
frequency ofside-effects

Rikkunshito

◯

◯

◯

◯

Yokukansan

◯

◯

◯

◯

Daikenchuto

◯

◯

◯

◯

***

◯

◯

◯

◯

Number of write-ups in treatment guidelines
for Type B* or higher Kampo formulations

104

130

Enrich types of formulations/domain/evidence

Quality improvement

Quantity expansion〈Listed formulations/disease〉
Improve degree ofrecommendation intreatment guidelines〈Unlisted formulations/disease〉
New write-ups intreatment guidelines

FY2021

FY2024*From the “Treatment Guidelines Task Force” of EBM Committee, Japan Society for Oriental Medicine
Type A: Quoted papers exists, there is grading of evidence and recommendations, also write-ups on this are included
Type B: Quoted papers exists but there is no grading for evidence and recommendation
Type C: There are no quoted papers or evidence and recommendation grading36

3

Expansion of sales of crude drug and drug pieces in China andentry to business of traditional Chinese medicinal products37Milestones in the China Business
Aim to become a traditional Chinese medicine company that is a leader in the development of the traditional
Chinese medicine industry, and target an overseas sales ratio of 50%

Formulation
platform

Crude drug
platform

Research
platform

FY2022-24

FY2025-27

FY2028-31

Enter the traditional Chinese
medical products business

Build foundation for the
traditional Chinese medical
products business

Establish a brand as a
traditional Chinese medical
product company

Acquire traditional Chinese
medical product companies
Application for classicalprescription Chinese medicines

External sales ratio of over 50%

Expand sales of crude drugs,
drug pieces and“Yakushokudogen“products

Establish brands for crude
drugs, drug pieces and“Yakushokudogen”products

Ratio of external sales
Over 50%

Increase public hospital sales
channels(including M&A)

Establish the
Traditional Chinese
Medicine ResearchCenterEnhance functions ofSales image

Industry TOP10Over
RMB7.0 billion

Crude drug/drug piececompany that is a leader inindustry development

Sales image

Top share in China

Over
RMB3.0 billion

Evidence-building

the Traditional

for traditional

Chinese Medicine

Chinese medical

Research Center

products
38

Expand the Crude Drug Platform business●Increase the number of items supplied by leveraging the strengths

Crude(pricing, quality, volume) of Tsumura
drug●Accelerate market penetration by the Tsumura brand by strengthening
platform management of the crude drug supply chain
Raw material
crude drugs

Drug pieces“Yakushokudogen”
products

Strengthen highlycompetitive items

Establish a brand forhigh-quality drug pieces

Promote new productdevelopment
Build the Tsumura brand◆ Continue to expand public hospital◆ Develop high added-value products◆ No. 1 Chinese ginseng brand◆ Broaden other superior items◆ Strengthen GACP management(Safety/security)

sales channels◆ Boost Ping An Health’s online sales◆ Expand online sales◆ Build a trusted brand◆ Promote drug piece supply services◆ Be a leader in industry standards
39

4

Revamp of IT platform and promotion of utilization of AI and robots
in crude drug sorting and manufacturing processes fortransformation of the Kampo value chain

40

Build a Foundation to Improve Labor Productivity
In anticipation of the realization of a smart factory, improve labor productivity 20% (vs. FY2021)

Activities to go
fully automatedAutomation of facilities by
employing cutting-edge
technologies(Deploy existing technologies,
improve capacity, andpromote development of
new technologies)●Horizontal deployment of AI technologies in the mixing process●Remote support using AR and VR●Implementation of receptacle exchange system●Construction of a manufacturing building in light of new
automation technologies●Develop and evaluate automated facilities for detaching storage
containers lids
●Evaluate and implement automated facilities for quality testing●Suppress troubles using predictive maintenance●Introduce a data collection and analysis system

Effectively utilize data
and develop a new
manufacturing method

Collect and implement thevisualization of data

●Develop an optimized raw material package●Develop an innovative manufacturing method test, develop amanagement method

Convert to continuous
value creation
operations

Save on labor,
alleviate workload●Promote multi-skilled workers, improve skill level●Use DX for safety training and knowledge education
41

Achieve the Practical Use of Crude Drug AI AutomatedSelector and Strengthen/Employ GACP
Crude drug AI automated selector

Strengthen and employ GACP information

Implement at 4
manufacturing plants
Ishioka Center
YUBARI TSUMURA
SHENZHEN TSUMURA
CHINA MEDICO COPORATION

Link crude drug production
information and quality information●Boost efficiency of
selection operations●Reduce work headcount●Improve productivity●Secure quality and safety
Traceability
Digitalize information
42

IT Infrastructure Reforms●Digitalize the Kampo value chain●Realize data-driven management

Introduce an integrated
core system

Automated crude drug lot
Introduce instruction system

Supply chain plans

Crude drug
procurement process

Production process

Sales process

Accumulate/integrate data in real time
Centrally management group company
information on the cloud

Sales support

SupplyanddemandIndividual
systemProduction

Purchasing/inventory

Sales

Accounting

Cost ofBookgoods sold closing

AssetsBudgetIntegrated core system
Establish a management IT infrastructure that will be the core of DX

HR

Other

Individual
system43

5Creation of value through organization capital and humancapital and implementation of job satisfaction reform

44

Cultivate Management Personnel
Train personnel that will implement philosophy-based management and drive the Tsumura Group

Training program

Toughassignments

Management
personnel

Global management
personnel
Selection

Assessment
Candidates fordivision head45

Foster Corporate Culture
Nurture corporate culture that heightens individual job satisfaction and exerts one’s own“potential capabilities” by creating an organization driven by its philosophy

Instillphilosophy
Off-site meeting

Train to beresourceful(Liberal Arts)

Coaching
LecturesDialogue that focuses on goals and values
Improve job
satisfaction

Exert potential
capabilities
46

Initiatives for realization of the Sustainability Vision

47

Environmental Goals in the First Medium-Term Management Plan
●FY2031 Targets in Sustainability Vision

50% reduction in greenhouse gas emissions
Circulation of water and waste (crude drug residue)
Conversion to environmentally friendly packaging materials
FY2020CO2 emission reduction rate (vs. FY2020)
Basic unit for energy intensity(year-on-year)

No.of items using crude drugs grown in the wild
Basic unit for water intake intensity**
Amount of plastic use(vs. FY 2020)(vs. FY2020)(vs. FY2020)

Basic unit for industrial waste emissions (vs. FY2020)*Crude drugs grown in the wild only: 18 items;
Crude drugs grown in the wild + cultivated products: 16 items

FY202496,487t

(3)%

ー

(1)%

34 items*

33 items or less

113.01t/t(10)%3,037.07t/t(10)%1.76t/t(50)%**Amount of water intake/powdered extract only for the
Shizuoka and Ibaraki Plants

48

Targeting an Improvement in Ratings from
Environment-related Rating Agencies

Improve CDP climate change evaluation●Apply to acquire SBT certification●Basic content analysis/disclosure for TCFD

●Achieve environmental goals in the First Medium-Term
Management Plan

49

FY 2022 Earnings Forecast【Million yen】

FY 2021
Results

FY 2022
Forecast

YoY
AmountChange129,546

138,500＋8,953＋6.9%

Domestic business－

124,300－－

China business－

14,200－－22,37620,800(1,576)(7.0)％

Domestic business－

21,200－－China business

－

(400)

－

－

25,904

21,200(4,704)(18.2)%

18,83615,000(3,836)(20.4)％

64 yen64 yenNet sales

Operating Profit

Ordinary Profit
Profit attributableto owners of parent

Dividends （per share）
EPS

246.2 yen

196.1 yen

ROE

8.2 %

6.0 ％

(Note) The above forecasts were prepared based on the information available as of the dateof publication of this presentation. Accordingly, the impact of risks that cannot be predicted
at this time, including the impact on socio-economic activities from the further spread of
COVID-19, have not been factored in. Actual earnings performance may differ from theforecasts stated herein owing to various factors going forward. We will disclose trends andconditions in a timely and proper manner should there be any changes in the circumstances
surrounding our company.

50

Shareholder Returns
Policy◼ We aim to improve our corporate value by continually expanding domestic businessand through growth investments in the China business, and by building foundations.
Accordingly, we plan to implement stable dividends, taking into account factors such as
medium/long-term profit levels and cash flow conditions.
45.0%

100

32.1%

35.9% 35.7%

31.9% 33.5%

35.6%

32.6%

31.9%

40.0%

35.0%

80

26.0％

25.0%

30.0%

60

40

25.0%

32

32

32

32

32

32

32

32

32

32

20.0%

15.0%

20

From Oct. to Mar.
From Apr. to Sept.

10.0%

32

32

32

32

32

32

32

32

32

0

32

Dividends payout ratio
5.0%

0.0%

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022forecast
2022

Note: The FY 2021 year-end dividend and payout ratio (forecast) are an estimate based on the assumption that the dividend resolution isapproved at the 86th Ordinary General Meeting of Shareholders.

51

Inquires about these materials
Corporate Communications Dept.
Investor Relations Groupinvestor_madoguchi@mail.tsumura.co.jp
Cautionary items regarding forecasts⚫ The materials and information provided in this presentation contain so-called forward-looking
statements. Readers should be aware that the realization of these statements can be affected by avariety of risks and uncertainties and that actual results could differ significantly.

⚫ Changes in Japan or other foreign countries related to healthcare insurance systems or regulations
set by medical treatment authorities on drug prices or other aspects of healthcare or in interest andforeign exchange rates could negatively impact the Company’s performance or financial position.
⚫ In the unlikely event that sales of the Company’s core products currently on the market be halted orshould sales substantially decline due to a defect, unforeseen side effect or some other factor, there
could be a major impact on the Company’s performance or financial position.

52

appendix

Key Points in Performance
Sales and profits increased due to growth in domestic and overseas sales.

Net sales

129,546

million yen

Achievement
rate

101.6％

YoY＋11.3％◼ Domestic sales totaled 119,567 million yen, increased 8.6% year-on-year.
◼ Sales of the 129 prescription Kampo products totaled 114,165 million yen, increased 8.1% year-on-year.
◼ Sales of healthcare products including OTC Kampo medicines totaled 3,915 million yen ,increased 29.8%
year-on-year.
◼ Overseas sales totaled 9,978 million yen, increased 56.9 % year-on-year.

Operating profit
Operatingprofit margin

22,37617.3

million yen

Achievement
rate

106.1％

YoY＋15.4％％

Comparison
with theRevised plan

＋0.8ptYoY+0.7pt◼ The cost-to-sales ratio was 48.7%, a climb of 0.6pts year-on-year, mainly impact of increased depreciation
burden due to Increased manufacturing costs, and external sales in China.
◼ The SG&A ratio totaled 34.0%, a decline of 1.3pt year-on-year, mainly impact of improvement due to sales
growth.

Ordinary profit

25,904

million yen

Achievementrate

110.7％

YoY＋24.1％

113.5％

YoY＋22.9％◼ The impact of the foreign exchange gain: 2,474 million yen

Profit attributable toowners of parent

18,836

million yen

Achievement
rate

54

Factors Triggering Changes in Operating Profit (YoY)（ Million yen ）+6,821(820)(3,007)

Changes in sales ：＋6,821 Breakdown
Domestic＋4,942

Overseas＋1,879Changes in cost-to-sales ：(820) Breakdown
Sales composition（Domestic）＋224

Crude drug cost（Domestic）＋1,744

Processing cost etc(1,574)（Domestic）

Outside sales in China

22,376

19,382

FY 2020
OperatingprofitProfit impact due Profit impact due Profit impact
to changes in from changes into changes incost-to-sales
SG&A expenses
sales

FY 2021
Operatingprofit(1,214)

Changes in SG& A expenses:( 3,007)
Breakdown

Sales-related expense(736)

R&D expense(682)

Salary allowance(340)

Advertising expense

(274)

Other

(972)
55

Financial Condition/Cash Flow Position（ Million yen ）Total net assets

319,063204,273
114,789
85,894
48,38037,513
233,169

350,981229,420
121,561
92,87145,875
46,996258,109

31,91725,1466,771
6,977(2,505)
9,482
24,940Equity ratio

68.3％

68.3%

0

FY 2020

FY 2020(March 2021)(March 2021)

80,755
13,93913,39653,41992,751
10,247
13,614
68,889Total assets
Current assets
Non-current assets

Total liabilities
Current liabilities
Non-current liabilities

Work in process
Raw materials andsupplies

Change11,996(3,691)
218
15,469

△91

△81
＋38

675

596

Operating activities

Merchandise andfinished goods+213

Cash and cash equivalents at
beginning of period

Inventories

ChangeCash and cash
equivalents at end of
period(March 2021)

Impact of exchange ratetranslations(March 2021)

Financing activities

FY 2020

Investing activities

FY 2020（ Million yen ）56

Comparison with the Prescription Pharmaceutical Market
Overall
FY2020FY2019

10.0%
6.0%
2.0%

(2.0)%FY2021

7.9% 7.7%

8.9%
1.2%
2.9% 5.9%1.6% 1.2%
1.4%
2.3%

0.6% 0.2%(6.0)%
Prescription pharmaceutical market
Tsumura(YoY/drug price basis)(10.0)%

1Q

2Q

3Q

Gap with market

2.2% 1.5%
2.5%

4.2%

（4Q only:＋3.5pt）

4Q

1Q

2Q

3Q

4Q

1Q

2Q

5.0%

3.8%

2021年度

9.1%

7.6%

2.0% 1.6% 2.1% 1.8%(5.0)%

8.7% 7.5%7.8%

6.0%

0.7% 2.3%1.9%2.4%(1.0)%(3.3)% (3.0)%(3.2)%(2.9)%(5.4)%
2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

2021年度

10.5%

12.0%
9.0%

(10.0)%
1Q

4Q

2020年度

2019年度3.4% 2.3%

0.0%

0.6%

3Q

Hospital market (HP)

2020年度

7.1%

10.0%

＋4.0pt

2.9% 3.6%(1.9)%(1.0)%(2.5)%(5.1)%

General clinics (GP)2019年度

6.6% 7.1%

4.5%

2.7%

4.7%

4.3%

6.4%

4.1%5.1%

1.6%(0.3)%(1.4)%(1.7)%

3.0%

3.1% 3.4% 2.7%3.7%
1.4%(3.0)%
0.1%(0.2)%(0.3)%(1.5)%(1.9)%(6.0)%(2.4)%(4.8)%
0.0%

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

Copyright © 2022 IQVIA.「JPM 2019年4月～2022年3月」をもとに当社が独自に集計 無断転載禁止

Increase in prescription opportunities owing to e-promotions
Increase in the number of physicians that write Kampo prescriptions owing to theimplementation of e-promotions
Third Medium-Term Management Plan

Number of physicians who newlyprescribed Kampo*1(Number of cases of detailing impact)
500,000(Million yen)360

Increase of around

400,000

15,000people*3350

300,000

epromotions

200,000(Annual moving average:
Number of physicians for which there was
Approximation)
an increase in Kampo prescriptions*2

340

Daily salesMR
activities

Increase of around

100,000

32,000330

320people*3310

0*Number of cases of detailing impact: Number of cases of information recognition from various channels, including MR activities and the Internet

March 2022

February 2022

January 2022

December 2021

November 2021

October 2021

September 2021

August 2021

July 2021

June 2021

May 2021

April 2021

March 2021

*1：Confirmed number of doctors converted from non-prescribing to Kampo prescribing doctors*2：Confirmed number of growth in prescriptions written by doctors already writing Kampo prescriptions*3：Increase up to March 31, 2022, starting from April 1, 2021

300
February 2021

January 2021

December 2020

November 2020

October 2020

September 2020

August 2020

July 2020

June 2020

May 2020

April 2020

March 2020

February 2020

January 2020

December 2019

November 2019

October 2019

September 2019

August 2019

July 2019

June 2019

May 2019

April 2019

March 2019

February 2019

January 2019

December 2018

November 2018

October 2018

September 2018

August 2018

July 2018

June 2018

May 2018

April 2018

*Survey by Tsumura

INTAGE Healthcare Inc. survey, Impact Track

58

COVID-19 impact
Positive impact in FY 2021 by addressing needs with a changes in disease structure
Increase reflecting changes inliving environment•••

Anxiety/insomnia (6 formulations)Dizziness (2 formulations)
Loss of appetite, fatigue (2 formulations)

Increase owing to theuse of masks•

Skin irritation, acne (4 formulations)

115%

Formulations with apositive impact

126%
129 prescriptions
113%

105%

102%

FY 2018

103%

FY 2019105%

FY 2020

Formulations with anegative impact(Shipment and quantity basis: Growth rate)

Decrease due to measures toprevent infections•

FY 2021

88%

88%

Common cold, influenza and hay fever (13 formulations)

Prescriptions for Bakumondoto,
Shosaikotokakikyosekko, etc.
turning toward recovery
59

COVID-19 Related Symptoms and Prescription Opportunities
Diseases for which prescription opportunities have increased
PsychiatricdisordersDizziness

Skin diseases

Anxiety and insomnia

Dizziness due tophysical andpsychiatric disorders

Acne and dermatitis
due to the use ofmasks

Hangebyakujutsuten
mato
Ryokeijutsukanto(Goreisan)*Keishibukuryogankayokuinin
Jumihaidokuto
Seijobofuto
Keigairengyoto

Kamishoyosan
Kamikihito
Hangekobokuto
Saikokaryukotsuboreito
Total sales for six
formulations

Supplements

Prescription group used to treat a deterioration in
health conditions, including post-illness fatigue, loss ofappetite and decline in stamina

Hochuekkito Juzentaihoto

Diseases for which prescription
opportunities have decreased
Decrease in the number of respiratory disease patients
due to infection prevention measures

Kakkonto、Shoseiryuto、Keishito、Jinsoin、
MaobushisaishintoTotal of five formulations

Trends in the monetary impact owing
to a fluctuation in prescription
opportunities (FY 2021)

25

23.6

(Hundred million yen)

20
15
10
5
0
-5

(1.6)

*

(Amount: year-on-year / shipment basis）*Calculated only for 5 prescriptions
decreased from the previous year

*Goreisan prescription opportunities are also increasing for treatment in areas other than dizziness therefore it has been excluded from the basis of calculations

60