TSUMURA & CO.
Second Quarter Business Resultsfor Fiscal 2019
(From April 1, 2019 to September 30, 2019)

November 7, 2019

Muneki Handa
Director and Excecutive Officer, CFO

2Q, FY2019

2Q Consolidated Performance for Fiscal 2019
FY 2019
2Q Plan

FY 2019
2Q

Achievement

FY 20182Q（¥ million）
Vs. FY 2018 2Q
AmountChangeNet sales

61,50060,802

98.9%

58,268

2,533

4.3%

Operating profit

8,100

9,776

120.7%

8,950

826

9.2%

Operating profit margin

13.2%

16.1%

-15.4％--

Ordinary profit

8,700

9,856

113.3%

9,566

290

3.0%

Profit attributable toowners of parent

6,000

7,037

117.3%

7,082(44)(0.6)%

Sales by product

FY 2019
2Q PlanDividends
per share¥32

FY 2019
2Q¥32

FY 2018
2Q¥32

Prescription
Kampo
Products
95.6%

Other prescription
pharmaceutical
Products
0.4%
OTC medicines
2.2%
Other
1.8%

2

2Q, FY2019

Key Points in Performance
Net sales were up year-on-year but profits were down marginally.
Net sales undershot plans but profits at all levels achieved plans.
Consolidated net sales¥60,802 million

98.9％

YoY

4.3％

120.7％

YoY

9.2％

YoY+0.7pt

Vs. planned

 Net sales of the 129 prescription Kampo products rose 4.2% year-on-year.
On a yen-basis, sales rose for 87 prescriptions.
 Net sales of OTC medicines increased 15.9% year-on-year.

Operating profit

Operating profit margin¥9,776 million
16.1 ％

Vs. planned The cost-to-sales ratio stood at 40.9%, up 0.5% year-on-year. Although crude drug-related costs weredown, this rise reflected impact from unrealized profit. The cost-to-sales ratio also undershot plans by 0.9pt,
due to a delay in the timing of impact from unrealized profit.
 The cost-to-SG&A ratio was 43.0%, down 1.2pt from a year earlier, owing to a rise in sales and despite theincrease in sales rebates and R&D costs. The cost-to-SG&A ratio was also 2.0pt lower than planned, owing
mainly to a delay in the timing of payment of R&D costs and expenditures.

Ordinary profit¥9,856 million

Vs. planned

113.3％

YoY

3.0％

Profit attributable toowners of parent¥7,037 million

Vs. planned

117.3％

YoY(0.6)％

 A gain on the sale of investment securities (¥324 million) was posted as extraordinary income.
Owing to this, 2Q net income was down 0.6% year-on-year but up 17.3% versus plans.

32Q, FY2019

Factors for changes in Operating Profit（¥ million）+1,510

Profit impact from changes insales cost

(335)
(349)
9,776

Decrease of
crude drug cost+486

Increase of
unrealized profit(670)

Other(151)

Profit impact from changes inSG&A expenses

8,950

FY 2018
2Q
Operatingprofit（¥ million）

Profit impact Profit impact Profit impact
from changes from changes from changesin SG&A
in sales costin salesexpenses
marginFY 2019
2Q
Operatingprofit

Sales promotion
expenses(238)

R&D expenses(142)

Personnel expenses(113)

Other＋144

4

2Q, FY2019

Financial Condition / Cash Flow Position
Balance Sheet（¥ million）
As of March2019

As of
September

Change287,010(312)

Total net assets

190,027
97,295
81,18133,32047,861
206,141

187,678
99,33180,17033,222
46,948206,839(2,349)2,036(1,010)
(97)
(912)
697

Equity Ratio

70.2%

70.6%

0.4pt

Current assets

Non-current assets

Total liabilities
Current liabilities

Non-current liabilities（ ¥ billion）

Effect ofexchange
Investing Financing rate
Operating Activities Activities Changes

2019287,322

Total assets

Cash Flow Position

Activities

+8.6

+4.7

(2.5)

(0.3)

66.8

56.2

（¥ million）
Balance Sheet

Inventories

As of March2019

51,808

As ofSeptember

2019

56,726（Merchandise andfinishedgoods）

9,382

7,258

（Work in process）

11,125

13,493（Raw materials
and stores ）31,29935,974

Change4,917
Cash and cash
(2,124) equivalents
at beginning of2,367
period4,675

Cash and cash
equivalents
at end of period

52Q, FY2019

Roadmap to Realizing Our Long-Term Vision
2018

2019

2021

Third medium-term
management plan

Growthinvestments
Consolidated Sales

120.9billion yen

Consolidated Sales
Over135billion yen

Sustainably expanding
the Kampo market
Building the foundation
for the Chinese business

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

Rapidprogress

Overseas
sales ratio
Over50％

Domestic Business●Establishing a Kampo
medicine business
Having one in every two doctors
writing over 10 Kampo prescriptionsChinese Business●Contributing to thehealth of China’s citizens
Aiming to become a number one
Chinese medicine company-Becoming the most trusted Chinese
medicine company in China-

Strategic Challenges
１．Sustainably expanding the Kampo market and establishing presence
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 management and developing diverse human resources
５．Promoting SDGs through the Kampo Value Chain

6

2Q, FY2019

Sales performance of prescription Kampo products（¥ million）
Salesrank

Product No. / name

FY 2018 2Q

FY 2019 2Q

YoY Change

100

Daikenchuto

5,226

5,262

36

0.7%

254

Yokukansan

3,848

3,953

104

2.7%

343

Rikkunshito

3,559

3,719

160

4.5%

9

107

Goshajinkigan

1,806

1,831

25

1.4%

22

14

Hangeshashinto

670

717

47

7.0%

Total sales of the five Drug-fosteringformulations

15,110

15,484373

2.5%

Drug-fosteringformulations *1

141

Hochuekkito

3,680

3,670

(9)

(0.3)%

568

Shakuyakukanzo
to2,629

2,724

94

3.6%

829

Bakumondoto

2,004

2,210

206

10.3%

624

Kamishoyosan

2,263

2,348

84

3.7%

717

Goreisan

2,112

2,318

206

9.8%

Total sales of the five Growing
formulations

12,691

13,273581

4.6%

Total of 129 prescription Kampo
products

55,79958,141

2,341

4.2%

Growing
formulations *2

4

Major factors
triggering
underperformancein 1H※ Sales of “DrugFostering” program
formulations, which
account for 25% of
total sales, grew
2.5% YoY(Total sales growthfor overallprescription Kampo
products was 4.2%)*1 Looking at the recent structure of disease, the Company has selected certain diseases in fields where medical treatment needs are high that are difficult to treat with Western drugs and that Kampo
products have demonstrated special efficacy for. The Company will establish a base of scientific evidence related to treating these diseases with Kampo medicine.
*2 A growth driver that aims 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 toward treatment and the contribution of medicine are low.

2Q, FY2019

Sales Strategy for Daikenchuto “While showing year-on-year growth, mitigation of the sense ofabdominal distention also must be an appealing feature.”“Chronic constipation symptoms that are particularly bothersome to patients, and symptoms heavily considered by doctors in diagnosis”

Q.Please indicate the three most significant
symptoms of chronic constipation you consider
forNumberdiagnosis.
of doctors (n = 393)

Q. Please indicate the three most troublesome
symptoms of your chronic constipation.
Number of patients (n = 700)

Symptoms that bother patients

1st2nd3rd

Symptoms heavily considered by doctors for diagnosis

Sense of abdominal
distension

Consistency ofstool
Decreased numberof bowel movements

Patient survey: An Internet
questionnaire was conducted from Jan.
19 to 27, 2017. The subjects consistedof those with chronic constipation whowere registered in the Rakuten
Research Panel and had persistent
symptoms considered related tochronic constipation for at least 6months. In total, 700 patients weresurveyed: 500 patients who weretreated at medical institutions and 200
patients who were taking OTCmedicines.

Difficulty in taking
bowel movements
Sense ofincomplete bowel
movements
Necessity ofexcessive straining
Discomfort at the anus
during bowel
movements

Abdominal pain
Frequent bowel
movements
OthersNone

Doctor survey: An Internet
questionnaire was conducted from Jan.
18 to 23, 2017. The subjects consistedof 393 doctors who were registered in
the M3 Panel, and who examined atleast 10 chronic constipation patients
per month and provided
pharmacotherapy to patients.
Excerpt from Hiroto MIWA et al. Therapeutic Research. 2017,38(11), p.1101-1110.

Promoting its effects to mitigate the sense of abdominal distention
associated with constipation in the growing “constipation” market

82Q, FY2019

Sales Strategy for Daikenchuto■Opinions of doctors on abdominal surgery

Q. It is important to improve blood flow in the intestinal
tract in the perioperative period. (n = 177）

Totally agree

AgreeSurgeons regard “improved intestinal blood flow and enterobacterial conditions”
as important in perioperative management.
Questionnaire conducted on m3.com member doctors (Aug. 2019)

Daikenchuto, with its action of improving intestinal blood flow, may
be promising in satisfying medical demands in perioperative management
to enable early ambulation and early discharge.
【Major benefit promoted in the past】

Enhancement of enterokinesis

Widerapplication

Improvement ofintestinal blood flow92Q, FY2019

Sales Strategy for Rikkunshito
Medicinal action of Rikkunshito
・Enterokinesis enhancement（Canine）
・Suppression of decreased
・Action on gastric adaptive relaxation gastric mucosal blood flow （Rat）（in vitro）
・Action on appetite stimulation（Mouse and rat）
・Action on gastric mucosal injury （Rat）

Prescription

Rikkunshito

FY2019Rikkunshito features diversified actions, andits efficacy for upper abdominal symptoms offunctional dyspepsia (FD) with complicatedpathology has been proven in a double-blind
comparison study.

FY2020

FY2021

Targeting strategy: Provide information using materials such as the“DREAM Study”*

Hold academic lectures centering on gastroenterology
Offer web lectures and real lectures

Hangeshashinto

Documentation of new evidential information →Providing more effective sales promotion

Enhancing presence as a remedy for upper gastrointestinal diseases* DREAM Study: Multiple facility, double-blind comparison study on the efficacy and safety of Rikkunshito in functional dyspepsia patients

102Q, FY2019

Sales Strategy for Yokukansan
Yokukansansole promotion

Propose prescription
for various symptoms
of dementia

Widerapplication■Institutions employing Yokukansan■Peripheral symptoms anddementia disease course

Institutions
employing 54
Yokukansan

Weight loss

Hypobulia

Weight loss

False recognition Anxiety /depression

Prodromalphase

Phase I

Wandering

Improper behavior

Delusion

Disinhibition

Weight loss

Hallucinations Repetitive behavior

Phase IIAbulia

Phase III

Approx. 44,000

Institutions
employing 108
Ninjinyoeito
Institution
employing bothmedicines

institutions
Approx. 21,000

institutions
Approx. 7,500

institutions■Proposed prescriptions according to the symptoms of dementia

・54 Yokukansan（Indications: Neurosis, nervousness, etc.)

・108 Ninjinyoeito（Indications: Fatigue, anorexia, etc.）

・83 Yokukansankachinpihange（Indications: Neurosis, nervousness, etc.）

・137 Kamikihito（ Indications: Insomnia, dysphoria, etc.）11

2Q, FY2019

Approaches in the Kampo Medicine Seminar

KAMPO Mega Web Lecture
17,878 doctors participated by viewing.（Held on Sep. 25, 2019）→Invite them to seminars in their nearest areas.
Introductory Seminar for Postgraduates in Kampo Medicine
In FY2019, 33 seminars will be held throughout Japan.
1,062 participated in the seminars in the April to September period. →Among them, 512 were new participants.

Introductory Research Seminar for each domain
Introductory seminars are held in Urological Kampo, Obstetrical &Gynecological Kampo, and Neurosurgical Kampo.
12

2Q, FY2019

Approaches to “doctors prescribing 10 or more Kampo products”
BeforeImmediately after graduation
graduation(Trainees)(Students)
Improvement, establishment, and evolution of Kampo medicine education

Physicians
interested inKampo but with noKampo prescription
experience

Physiciansprescribing alimited number ofKampo products

Want to learn
about Kampo!

Want to broaden
treatment
methods!

Physiciansprescribing alimited number ofKampo products

Prescribe Kampo products according to
the patient’s condition and symptoms

Creating a healthcare
environment where all
patients can receive treatmentthat includes Kampo
medicine where appropriate
in any healthcare institution
or medical specialty in Japan.

Physiciansprescribing alimited number ofKampo products

Kampo Medicine Seminars

Physicians prescribing ten or more
Kampo products

Evidencebased
medicineapproach

Drug fostering program
formulations and growing
formulations

Kampo medicine
approach・Lectures(introductions toKampo)
・Clinical training(hospital wards,outpatient care)
・Workshop on
professor/lecturer
training at schools
・Study groups atschools (school clubs,etc.)

Western medicine approach

University
medicaldepartments,
medicalcolleges

Physicians withno Kampo
prescription
experience

Post-graduation (Doctors)

Approaches to “doctors prescribing 10 or more Kampo products”
are successfully underway.

132Q, FY2019

Key Sales Measures in the 2nd Half of the Year
Item

Gastrointestinal
domainDetails
・Daikenchuto: Promote benefits of its effects to mitigate the sense of abdominal
distention associated with constipation.
Promoting its action to improve intestinal blood flow, and holding presentations
for multidisciplinary personnel
・Rikkunshito: Utilize dual materials* with Daikenchuto, and enhance presence inthe upper gastrointestinal prokinetic agent market.

Geriatric field・Yokukansan: Propose prescription according to various symptoms of dementia.
・Provide prescription information related to problems with the elderly with regard
to “eating, sleeping, and excretion.”

Web Lecture
Introductory
seminar・Invite viewers of the Web Lecture to the introductory seminar.
・Hold the second Web Lecture and provide a follow-up plan.
・Follow up new participants among doctors participating in the introductory
seminar in the 1st half of the year.
* Dual material: Material that details two prescriptions at thesame time.

Continuously provide information to attain “sustainable expansion of the Kampo market”
142Q, FY2019

FY2019 Performance Forecasts

2Q, FY2019

FY2019 Performance Forecasts
 No changes have been made from the results forecast
announced on May 10, 2019.
FY2018Net sales
Operating profit
Operating profit margin
Ordinary profit
Profit attributable toowners of parent

120,906
18,52015.3％
19,702125,000
17,00013.6％
18,00014,593

12,300FY2018Dividends
Per shareEPSROE

FY2019（¥ million）

YoY Change
AmountChange4,093
3.4％(1,520)(8.2)％(1,702)(8.6)％(2,293)(15.7)％FY2019Forecast¥64¥64¥190
7.4％

¥160
6.0％

162Q, FY2019

Return of Profits to Shareholders

2Q, FY2019

Return of Profits to Shareholders
Policy• We seek to increase corporate value through the sustainable expansion ofthe Kampo business and investments to build business foundations in China• We will bear in mind the state of the mid-to-long term profit levels and cash
flow to ensure stable dividends
39.8%

Dividend history

10035.9%

80

40.0%

35.7%

32.1%

31.9%

33.5%

35.0%

28.4%

30.0%

25.0%

25.0% From Oct.

60

4020

45.0%

32

32

32

32

32

32

32

32

20.0%

to Mar.

15.0% From Apr.
10.0%

30

32

32

32

32

32

32

3205.0%
0.0%

2012

2013

2014

2015

2016

2017

2018

2019 Forecasts

The year-end dividend and dividend payout ratio for FY2019 are based on the assumption that the dividend item will be approvedat the 84th annual shareholders’ meeting

to Sept.

Dividends
payoutratio

18

2Q, FY2019

TSUMURA & CO.
Investor Relations Group
Corporate Communications Dept.

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 a varietyof risks and uncertainties and that actual results could differ significantly.
• Changes in the healthcare insurance systems or regulations set by medical treatment authorities on
drug prices or other aspects of healthcare or in interest 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 theCompany’s performance or financial position.