Third Quarter Business Resultsfor Fiscal 2022
February 6, 2023
Director, and CFO

Muneki Handa

agenda01

Third Quarter Business Results for FY 2022

02

Initiatives and Progress for
Domestic Business and China Business03

FY 2022 Earnings Forecast2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)
3

3Q Business Results for FY 2022
【Million yen】

3Q
FY 2021
results

3Q
FY2022
results

YoY

AmountChange98,382

107,076+8,694+8.8%

Domestic business－

96,355－－China business－

10,721－－

Operating profit

18,829Domestic business－

17,882－－China business

－

（159）

－

－

Sales

17,723 （1,106） （5.9）%

Ordinary profit

21,074

21,410

+335

+1.6%

Profit15,38915,875

+486

+3.2%

attributable to owners of parent
PL translation rate (CNY)

16.78

19.41

*Forex rate at the time overseas subsidiaries’ PLs were incorporated; differsfrom the import rate for raw material crude drugs

+2.63

－

Ratio to total sales

Prescription
Kampo Products
86.0%
External sales by
consolidated subsidiaries
10.7%
OTC Kampo etc 3.1%
Other prescription
pharmaceuticals 0.2%

4

Key Points in Performance
Sales and profit attributable to owners of parent rose owing to growth
in Japan and in the China business (but operating profit was down)
Net sales

107,076

million yen

YoY

＋8.8％

◼ Domestic business sales of the 129 prescription Kampo products: 91,941 million yen, rose 5.3％ year-on-year
Sales of OTC Kampo formulations and other healthcare products: 3,358 million yen, increased 18.8％ year-onyear◼ China business sales: 10,721 million yen

Operating profit
Operating profit
margin17,723
16.6

million yen

YoY(5.9％)％

YoY(2.5pt)◼ Cost-to-sales ratio: 50.9％, up 2.1pt year-on-year; Mainly impact from an expansion in external sales in China
and soaring cost for materials other than raw material crude drugs◼ SG&A ratio: 32.5％, up 0.4pt year-on-year; Chiefly reflects one-off expense for full-scale operations at the
Tianjin Plant

Ordinary profit

21,410

million yen

YoY

＋1.6％

◼ Foreign exchange gain primarily related to loans to overseas subsidiaries: 2,906 million yen, up 1,485 million
yen year-on-year (impact from the yen’s devaluation)

Profitattributable to owners of parent

15,875

million yen

YoY

＋3.2％

◼ Extraordinary income: Refund margin owing to a reduction in paid-in capital at affiliates: 463 million yen

5Factors Triggering Changes in Operating Profit (YoY)（ Million yen ）（ Million yen ）Breakdown of change in net sales：+3,140+3,140（766）（2,465）（1,015）

Domestic+2,684

Overseas+456

Breakdown of change in cost-to-sales：（766）

Crude drug procurement cost（49）

Raw material expense（other than raw material crude drugs）（365）

Processing expense, etc.
Outside sales in China

18,829Profit impact
3Q FY2021
due
to changes
Operating profit
in sales

17,723

Profit impact Profit impact Profit impact
3Q FY 2022
from changes
due todue toOperating profit
in SG&A
exchangechanges in
expensesrate
cost-to-sales

+17
（369）

Breakdown of change in SG&A expense（ 2,465）

Depreciation（incl. one-off expense at Tianjin Plant）

（644）

R&D

（403）

Advertising（140）

Salary allowance（incl. one-off expense at Tianjin Plant）（116）

Sales promotions（109）

Other (Mainly rise in volume of activities, system introduction) （1,053）
Foreign exchange impact：（1,015）

6

Financial Condition/Cash Flow Position（ Million yen ）FY 2021(March 2022)

FY 2022
3Q(March 2022)

Inventories
Merchandise andfinished goods
Work in process
Raw materials andsupplies

△124

675

（4.0）pt

Change8,327
92,751 101,079
10,247
9,077 （1,169）
457
13,614
14,0729,040
68,88977,929Of which,
Exchange rate

7,528
406
236
6,886

Cash and cash
equivalents at end of
periodFY 20223Q

Non-current liabilities+89

Impact of exchange ratetranslations

FY 2021

Current liabilities

Financing activities

64.3％

Total liabilities+244

Investing activities

68.3％

Non-current assets

49,977400,958
41,542
270,9628,434
129,995
28,404
121,276
43,696 （2,179）
30,58377,58021,572
279,682

Operating activities

Equity ratio

Current assets（ Hundred million yen ）937+53

Cash and cash equivalents at
beginning of period

Total net assets

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

Total assets

ChangeBond issuance: 30 billion yen (Sep. 8, 2022)7

agenda01

Third Quarter Business Results for FY 2022

02

Initiatives and Progress for
Domestic Business and China Business03

FY 2022 Earnings Forecast

8

Domestic Business: Product Supply Trends■ Sharp rise in demand for seasonal prescriptions owing to intense summer heat
(150％ YoY)

Product
supplytrends■ Rapid increase in demand for common cold-related prescriptions due to
COVID-19 (130% - 300％ YoY)
*Decline in production due to halt in operations at the Shanghai Plant in tandemwith the lockdown of Shanghai (March 21-May 5, 2022)→ Implemented substitute production at plants in Japan in line with BCP (business continuity plan)

Restricted shipments of some products from August 29, 2022
*At present restricting shipments for 28 products■ Increase in headcount

Expanded number of production workers at each plant (Ibaraki, Shizuoka,

Shanghai)■ Boost the number of work days

In addition to the conventional continuous 24-hour operation

Measuresmanned by three shifts, operating on holidays and during the Lunar New Year holiday, etc.
to lift■ Improve operating capacity Shortened time for switching products, etc.
shipment ■ Move forward the start of shipments at the Tianjin Plant Complete validation and acquire
manufacturing approval earlier than scheduled
restrictions
From end of March: Expect to*However, possible changes due to the conditions ofsuccessively lift restrictions
spread of influenza and COVID-19
9

Progress in the Launch of the Tianjin Plant
In Phase 1, implementing process validation (PV), with plans to commence shipments in 4Q
FY2023
Aim to start shipments earlier by speeding up the completion of PV and acquiring
manufacturing approval earlier than planned■Tianjin Plant profile
Purpose of
construction
Company nameLocation
Investment

Increase production of Kampo powdered extract (intermediate products) for
domestic business
Increase production sites to two production sites in Japan (Ibaraki,
Shizuoka) and two production sites in China (Shanghai, Tianjin)
Tianjin Tsumura Pharmaceuticals Co., Ltd.
Tianjin, China
Phase 1: approx. 15.0 billion yen; Phase 2: approx. 10.0 billion yen;Phase 3: approx. 15.0 billion yen

Production output 2,250t/year*Full-scale production by Phase 3■Phase 1 launch schedule
Start construction(April 2019)

Plant
construction

Commence PV Launch shipments(August 2022)

Trial run(slated for 4Q FY2023)

Full-scale operations
Acquiremanufacturing
approval■Accounting treatment for
manufacturing cost
・Start of trial run up to start of PV→ SG&A
・Start of PV and thereafter→ Inventory/cost
10

Shipment Volume after Shipment
Restrictions (Prescription Kampo Products)
Sales of the 129 prescription Kampo formulations maintained a growth of 105%even after shipment restrictions
105％ YoY
Aug-Dec
2021

Aug-Dec
2022

1,050

1,102

（10,000 units*）（10,000 units）

106％ YoY780（10,000 units）

827（10,000 units）

102％ YoY

269（10,000 units）

120 prescription Kampo
formulations

275（10,000 units）

Items for which shipments Items for which shipments
were not restrictedwere restricted*1 unit: Standard package (1 box) (1 box contains 9 weeks dosage)

11

Comparison with the Prescription Pharmaceutical Market
Grew 3.3% YoY on an NHI drug price basis; growth was sluggish due
to impact from restricted shipments(YoY/NHI drug price basis)

All sales channels
Tsumura

7.9%

9.6%

7.7%
6.6%

7.1%

5.5% (excl. restricted
shipment items)

5.4%

Prescription
pharmaceutical
2.5%
market

4.2%

1Q

2Q

FY2021

4.6%
3.6%

3.3%

2.9%

Market driven by
COVID-19 treatments
and test kits

1.3%

3Q

4Q

3.3%

1Q

2Q

3Q

FY2022
Copyright © 2022 IQVIA. Proprietarily compiled based on “JPM April 2021 – December 2022”

Copying prohibited

12

Sales of Drug-fostering Program Formulations/Growing
Formulations（ Million yen ）Net sales
Product No./formulation nameRanking

FY 2021 3Q

FY 2022 3Q

YoY

100 Daikenchuto

7,334

7,482

+147

+2.0%

3

54 Yokukansan

5,678

5,687

+9

+0.2%

4

43 Rikkunshito

5,548

5,644

+96

+1.7%

8

107 Goshajinkigan

2,687

2,633

（54）

（2.0）%

24

14 Hangeshashinto

1,052

1,078

+26

+2.5%

Total sales for drug-fostering program formulations

22,301

22,527

+225

+1.0%

41 Hochuekkito

5,655

6,096

+441

+7.8%

5

17 Goreisan

4,111

4,821

+710

+17.3%

6

24 Kamishoyosan

3,752

3,935

+183

+4.9%

16

108 Ninjin’yoeito

1,488

1,624

+135

+9.1%

17

137 Kamikihito

1,332

1,600

+267

+20.1%

Total sales for growing formulations

16,34018,078+1,738+10.6%

Total sales for 119 formulations other than drugfostering program and growing formulations

48,65051,335+2,684+5.5%

Total sales for 129 prescription Kampo products

87,293

91,941+4,648+5.3%

Drug-fostering program
formulations

1

Growing formulations

2*Shipments of Goshajinkigan restricted from August 2022

Ratio to total sales
Drug-fostering
programformulations

25%
129
prescription
119 formulations
other than drugfostering programand growing
formulations

Growing
formulations

20%

55%

13

COVID-19 Impact (1)Rise in demand for common cold-related formulations due to increase in COVID-19
patients
Number of new COVID-19 patients & total sales for the 4 common cold-related Kampo formulations
Number of new
positives

Restricted shipment of acetaminophen(Million yen)

650
600
550
500

Restricted shipment of Kampo
formulations

700 (10,000 people)
600

Kakkonto
Maoto
Maobushisaishinto
Shosaikotokakikyosekko

500

450

400

400

300

350

200

300
100

250
200

0

BA.2

*Shipments of Kakkonto, Maoto, Maobushisaishinto, and Shosaikotokakikyosekko were restrictedfrom August 2022

BA.5

BA.5 derived typeBar graph: MHLW open data: Number of new positives (by day)Line graph: Actual sales (Invoice price: Tsumura data)

14

COVID-19 Impact (2)Prescriptions being written for symptoms related to COVID-19 and a recovery incommon cold-related prescriptions(Shipment basis: Growth rate)

117%

110%

107%

113%
129 prescription
Kampo formulations
107%

Rise due to a change inliving environment••••

Anxiety, insomnia (6 formulations)
Fatigue (2 formulations)Dizziness (2 formulations)
Skin irritation and acne due towearing a mask (4 formulations)

Rise due to spread of
Omicron•Common cold, influenza, etc.
(13 formulations)97%

FY20203Q

FY2021
3Q

FY2022
3Q
15

Provide Kampo Solutions Suited to Each Medical Practitioner
Build a system that addresses the need for information on how to properly use Kampo products

e-Promotions
Expand the Medical Site・Seminars on properuse of Kampo【Goal of the First Mediumterm Management Plan】

・Kampo on-line salon, etc.

Get 50% or more of
doctors to write 10 ormore Kampo
prescriptions

MR activities
Activities to promote thewriting of prescriptions
and to establish use
・Propose proper use
based on Kampo custom file・ Hold lectures, study groups, etc.

“Kampo custom file” tobetter understand theproper use of Kampo

16

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
17

Manufacturing Platform: Enter the Traditional Chinese
Medicine Market【Goal for the First Medium-term Management Plan】

Enter the traditional Chinese medicine market: M&A of traditional Chinese
medicine companies, apply to commercially launch classical prescriptions
M&A process for traditional Chinese
medicine companies
Long list

TOP 100 Chinese
pharmaceutical/traditi
onal Chinese medicine
companies, etc.

Selection criteria

approx. 100
companies•

Individual data•approx. 40
companies

Acquire majority ownership (*to ensure that a quality
assurance system is secured)•••

Status of ownership of licenses for classicalformulations
Status of existing traditional Chinese medicine
business
Financial indicators
Understanding of the Tsumura Group philosophy

Continuing concrete negotiations with several companies*Signed a letter of intent to establish a joint venture with Jianmin Pharmaceutical Group Co., Ltd. (August 3, 2022)
18

Crude Drug Platform: Expand Business Scale【Goal for the First Medium-term Management Plan】

Sales CAGR of 30% reflecting an expansion in sales of crude drugs, drug
pieces and “Yakushokudogen” products
Raw material
crude drugs

Sales CAGR
(Plan)

14.2

30%

Drug pieces(crude drug pieces)billionyen

Yakushokudogenproducts

2021

2022

2024

First medium-term
management plan

Strengthen highly competitive items• No. 1 ginseng brand• Expand lineup of superior items• Enhance GACP management• Lead the establishment of industry
standards
Establish high-quality drug piece
brand• Expand public hospital sales channels• Expand Ping An Health sales channels• Promote drug piece services

Build a brand that promotes thedevelopment of new products• Develop high added value products• Expand online sales channels• Build a trustworthy brand
19

China Business Sales (Crude Drug Platform)• Sales, mainly of raw material crude drugs, rose

• Although the number of COVID-19 patients rose temporarily, there was not impact
on the supply of raw material crude drugs and Kampo extract powder (intermediate
products) to Japan and to sales in the China business52.4％
growth*approx. 10.7 billion yen

approx. 7
billion yen

Raw material
crude drugs
Drug pieces(crude drug pieces）“Yakushokudogen”
products
3Q FY2021

3Q FY2022*Local currency basis: 31.7％ growth20

agenda01

Third Quarter Business Results for FY 2022

02

Initiatives and Progress for
Domestic Business and China Business03

FY 2022 Earnings Forecast21

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 yenEPS

246.2 yen

196.1 yen

ROE

8.2 %

6.0 ％

Net sales

Operating Profit

Ordinary Profit
Profit attributableto owners of parent

Dividends （per share）(Note) Foreign exchange impact (non-operating profit) is
not factored into the earnings forecast as it isdifficult to make reasonable calculations given
trends in the foreign exchange market.
22

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 2022 year-end dividend and payout ratio (forecast) are an estimate based on the assumption that the dividend resolution isapproved at the 87th Ordinary General Meeting of Shareholders.

23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.

24

Appendix

Comparison with the Prescription Pharmaceutical Market
TsumuraPrescription pharmaceutical market(YoY/drug price basis)

12%

9.6%

10%

7.9%

7.7%

8%
6%
Overall

4%

6.6%

4.2%

2.9%

2.5%

7.1%
5.4%
3.6%

4.6%

3.3%

1.3%

2%

3.3%

0%
-2%
1Q
FY2021

2Q

3Q

8%

11.1%
9.1%

6%
0.7%

8.7%

2.3%

7.5%

1.9%

7.8%

2.4%

6%
6.3%

5.2%

-4%

4.1%

3.0%

FY2021

2Q

2Q

3Q

3Q

4Q

3Q

6.4%
4.7%

4.1%

5.1%
3.9%

4%

2%

1.4%

1%
1Q

1Q
FY2022

Hospital market (HP)

16%
Generalclinics (GP)
11%

4Q

3.1%

3.4%

2.7%

3.7%

0%
1Q

2Q

3Q

4Q

1.1%
1.1%
1Q

3.2%
2Q

3.8%

-0.3%
3Q

1Q

2Q

FY2022

FY2021
FY2022-4%
Copyright © 2022 IQVIA. Proprietary calculation by Tsumura based on “JPM Apr. 2022 – Dec. 2022”-2%

Reproduction prohibited26