Financial Briefing for 2Q Results (for Investors)
13:00-14:00, November 8, 2021
<Q&A Summary>Q.
Is the factor underpinning the growth in sales of prescription Kampo
products impact from a growth in prescriptions related to COVID-19 or an
increase in doctors prescribing new Kampo formulations reflecting epromotions? What is your analysis for the sustainability of sales growth after
COVID-19 winds down?

A.
According to our analysis, net sales rose ¥1.16 billion reflecting an increase inprescription opportunities related to Kampo medicines to treat COVID-19-related
symptoms. This reflects benefits from new information provision activities throughe-promotions. These are mutually related. It is difficult to distinctly separate theindividual percentage of respective impact.
After COVID-19 winds down, there is, for instance, a possibility that skin irritations
will decline in tandem with a decline in the ratio of mask wearers.
Given the pace of prescription opportunities is expanding, including an increase indoctors prescribing Kampo as one treatment choice for mental disorders or dizziness,
we anticipate a certain level of continued sales growth.

A.
We are now able to deliver beneficial information via e-promotions to doctors
working at hospitals, to whom we have previously been unable to deliver Kampo
information. The opportunities to gather information from the Internet is increasing,
mainly among young doctors. Tsumura’s medical site also is expanding its online
lectures and video content, and increasing viewership numbers and the number ofcases of information recognition. Even after COVID-19 winds down, we aim to
maintain ongoing growth for Kampo products.

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Q.
In the China Business, it is my understanding that Tsumura aims to expand
its market through M&A of companies dealing in OTC traditional Chinese
medical products (for general consumers). Is priority placed on M&A of thosecompanies with classical prescription Chinese medicines?

A.
In China, there is not clear distinction between OTCs and prescription
pharmaceuticals like there is in Japan. The target for M&A are companies thatpossess OTCs or prescription pharmaceuticals for which the Tsumura Group cannot
newly acquire manufacturing and sales approval. Although the drugs are alreadyapproved, it is the concept of the Tsumura Group to unearth classical prescription
Chinese medical products that are not being sold to contribute to the health of thecitizens of China. Among these prescriptions, there are both OTCs and prescription
pharmaceuticals. At present, OTCs account for the majority. There is also thepossibility that some of these prescription medical products can be converted intoOTCs.

Q.
It is my understanding that Ping An Tsumura Pharmaceutical Co., Ltd., which
was consolidated, will not post profit in FY 2021, due to unrealized gains. Is
the ¥670 million decline in overseas external sales due to an increase in cost?

A.
In 1H, profit will not be generated due to intercompany eliminations as unrealizedgains. However, we anticipate profit will gradually be generated from 2H. As youpointed out, \670 million is due to the increase in the Chinese external business.

2Q.
Do you plan to see profit contribution in the full fiscal year of FY2022 owing
totheeliminationoftheunrealizedgains

atPingAn

TsumuraPharmaceutical?

A.
In FY2022, it is without doubt that profit will be generated as the inventory cycle
for a certain period will be completed. However, given the possibility of fluctuations
due to sales and inventory trends, we cannot say definitely if we will assimilate all
the profit during FY2022.

Q.
At the presentation scheduled for March 2022, will you touch upon theprogress in M&A in the China Business or issues such as the timeline?

A.
Regarding the vision, we plan to divide our 10-year vision by milestones.
In the China Business, we plan to show our ideas for the next step in realizing thetiming for an M&A.
Q.
Should performance remain brisk in the domestic business and China
Business, will there be concern about manufacturing capacity?

A.
There is no issue with the manufacturing capacity for the scale of sales and sales
growth in external sales in China at present. In the prescription Kampo products
business in Japan, we plan to carry out manufacturing at the Tianjin plant which isscheduled to start operations in FY 2022. In light of this, manufacturing capacity is
not a concern.

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Q.
Is there a risk of deterioration in the expense-to-sales ratio in 2-3 years fromnow should the yen continue to depreciate in value?

A.
We plan to enter into forward contracts for the next three years. Our goal is tostabilize our procurement expense.
Meanwhile, in the medium/long term, should the yen continue to depreciate in value,
it is our opinion that it will be difficult to avoid impact on the cost of sales.

Q.
Is it possible to divide the positive impact from COVID-19-relatedprescriptions by general practitioner (GP) and hospital (HP) sales routes? Are
more patients being treated for side/after effects at general practitioners asopposed to hospitals?

A.
Formulations related to COVID-19 have a major positive impact mainly at generalpractitioners. Patients search for medical facilities to get treated on an outpatientbasis for COVID-19 side/after effects and the vast majority get treated at a generalpractitioner.

Q.
In your forecast revisions, you forecast a 1H net sales growth of ¥4.0 billion,
and a 2H net sales growth of ¥1.0 billion. Meanwhile, you forecast a 1H
operating profit growth of ¥2.9 billion and a full fiscal year operating profit
growth of ¥1.6 billion. This appears to be a downward revision of ¥1.3 billion
to 2H operating profit. Why is the reason for your cautious outlook for 2Hearnings?

4A.
We continue to plan for sales growth. In 1H, SG&A expenses were ¥1.0 billion lower
than plans. However, of this, ¥400 million was R&D expense, sales system repair
expense, and expense related to lectures, for which posting has been delayed to2H. Also, from 2H FY 2020, we are seeing investment benefits. In 2H FY 2021, weplan to actively invest, mainly in e-promotions.

Q.
There was a dilution in share value of around 10% due to the implementationof a third-party allotment to raise capital for the Ping An Insurance Group inChina. Did this garner a better evaluation for ROI?

A.
We plan active investments, including M&A moving forward. We aim to garner
better evaluations for our ROI. At present, we do not believe investors will makethis evaluation.

Q.
Are you still positioning the China Business as a growth business? Is there apossibility that the timing of monetization of the China Business will bepushed back?

A.
There are rising needs for quality for the raw material crude drugs and drug piecesin the crude drug platform. In the field of botanical/herbal drugs, where the qualityof prescription pharmaceuticals is determined based on crude drug quality, we plan
to leverage the strengths of the Tsumura Group, which has been tackling quality
improvements from before. Furthermore, we aim for a large sales scale. We arenegotiating M&A deals to enter the market for traditional Chinese medical products.
Given that crude drugs will become more valuable further out, there is no change
in our belief that the China Business is promising. At the March 2022 presentation,5we plan to convey our ideas on the China Business, which are outlined in the Longterm Business Vision 2031.

Q.
What have you ranked Sustainability Vision 2050 as a more dominantconcept over the Long-term Business Vision 2031? Also, how do you interpret
climate change risks?

A.
We have positioned the Sustainability Vision 2050 as the superordinate concept ofthe Long-term Business Vision 2031 as it is our belief that we should be sensitive
to changes in the natural environment and crisis to achieve sustainable growth at
the Tsumura Group, a handler of crude drugs that are the best of nature.
Climate change possesses the potential to greatly impact our business strategy
and financial health. As measures to alleviate climate change risk, Tsumura istackling the duplication of crude drug cultivation sites, nurturing of seeds that are
resilient to climate change, and innovations to crude drug cultivation technologies.
Also, given that large amounts of water are used during the Kampo formulation
manufacturing process, thus far we have reused this water for purposes otherthan manufacturing processes. However, going forward, we plan to undertake
recycling by reusing water during the extraction process, which uses the largest
amount of water. In the past, there has not been a situation where we had
difficultly procuring crude drugs. However, moving forward, we plan to confront
issues with the natural environment through our business operations to realize ourco-existence with nature.

[Important points]
The details in these materials were not transcribed as is from the Q&A session
at our financial results briefing. Taking the purpose of these materials into
account, this is an abridged version.

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