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

Muneki Handa

1

agenda01

Third Quarter Business Results for FY 2022

02

Initiatives and Progress for
Domestic Business and China Business03

FY 2022 Earnings Forecast

2Page 2 is our agenda for today.
Today, I will present a run-down of third quarter business resultsfor FY 2022, initiatives and progress for the domestic business
and China business, and our earnings forecasts for FY 2022.

2

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

Page 3 outlines our roadmap for realizing the TSUMURA VISION“Cho-WA” 2031, which we announced in May 2022.
The First Medium-Term Management Plan, which will run throughFY 2024, is positioned as the stage for making upfront
investments and building foundations to realize this vision.

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）

－

－

Ordinary profit

21,074

21,410

+335

+1.6%

Profit15,38915,875

+486

+3.2%

16.78

19.41

+2.63

－

Sales

attributable to owners of parent
PL translation rate (CNY)17,723 （1,106） （5.9）%*Forex rate at the time overseas subsidiaries’ PLs were incorporated; differsfrom the import rate for raw material crude drugs

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%

4Page 4 is a summary of earnings performance in the third quarterof FY 2022.
Sales came to 107,076 million yen, a rise of 8.8％ year-on-year.
This breaks down to sales in the domestic business of 96,355
million yen, and sales in the China Business of 10,721 million yen.
The breakdown of sales is shown in the graph above on the right.
Operating profit amounted to 17,723 million yen, a decrease of
5.9％ year-on-year.
Meanwhile, ordinary profit was 21,410 million yen, a rise of 1.6％
year-on-year,and profit attributable to owners of parent totaled
15,875 million yen, a growth of 3.2% year-on-year.

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

5Page 5 is our key points in performance.
In the domestic business, sales of the 129 prescription Kampo products stood at 91,941
million yen, an expansion of 5.3％ year-on-year.
In addition to growth owing to planned e-promotion benefits, there was a growth inprescriptions for the following: heat stroke/summer fatigue formulations due to the intenseheat during the summer months, common cold-related formulations, including those forfever an coughs, in tandem with an expansion in the spread of COVID-19, formulations
related mainly to cough, fatigue and anxiety due to an increase in the number of patients
experiencing after-effects.
Reflecting this, demand substantially surpassed our forecast. Consequently, owing to thecooperation of pharmaceutical wholesalers and distributors, we restricted shipments of a
portion of our products from August 29, 2022.
I will explain the status of restricted shipments later on.
Meanwhile, sales of OTC Kampo formulations and other healthcare products totaled 3,358
million yen, an increase of 18.8% year-on-year owing to an expansion in the number
pharmacies and drugstores handling our products, and a growth in COVID-19-related
formulations.
Sales in the China business were 10,721 million yen thanks to an expansion in sales of raw
material crude drugs in the crude drug platform.
The cost-to-sales ratio was 50.9%, an improvement of 2.1pts year-on-year.
This was chiefly attributable to an increase in external sales in the China business andsoaring prices for raw materials other than crude drugs.
The SG&A ratio stood at 32.5%, a rise of 0.4pt year-on-year.
This primarily reflected one-off expenses for full-fledged operations at the Tianjin Plant.
Consequently, operating profit came to 17,723 million yen, a decline of 5.9% year-on-year.
The increase in ordinary profit reflects impact from a gap in forex translations related toloans to overseas subsidiaries due to depreciation in the value of the yen.
In addition, the refund margin owing to a reduction in paid-in capital at affiliates, in tandemwith their liquidation, was 463 million yen.
Accordingly, profit attributable to owners of parent totaled 15,875 million yen, a growth of
3.2% year-on-year.

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）
+17

Processing expense, etc.

（369）

Outside sales in China

18,829Profit impact
3Q FY2021
Operating profitdue to changes
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

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）
（109）

Sales promotions

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

6

Page 6 covers factors triggering changes in operating profit.
I will only explain the key points.
Operating profit was 17.7 billion yen, a decrease of 1.1 billion yen year-onyear.
A growth in sales had a positive impact of 3.1 billion yen.
This breaks down to a positive impact from domestic sales of 2.6 billion yen
and a positive impact from overseas sales of 400 million yen.
There was a negative impact of 700 million yen due to an increase in costto-sales.
This primarily breaks down to a negative impact of 300 million yen due to arise in external sales in the China business, and a negative impact of 300
million yen reflecting soaring prices for raw materials, other than crude
drugs.
There was a negative impact of 2.4 billion yen due to an expansion in
expenses.
As one-off expense mainly for operations at the Tianjin Plant, there was anegative impact of 1.0 billion yen due to an increase in depreciation expenseand salaries and various allowances.
There was also a negative impact of 1.0 billion yen due to the cheap yen.
There was negative impact from forex translations for SG&A costs mainly atoverseas subsidiaries.

6

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

FY 2022
3Q

Inventories
Merchandise andfinished goods
Work in process
Raw materials andsupplies

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 2022
3Q(March 2022)△124

Impact of exchange ratetranslations

FY 2021

Non-current liabilities+89

Financing activities

64.3％

Current liabilities+244

Investing activities

68.3％

Total liabilities（ Hundred million yen ）937+53

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
Non-current assets

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

Cash and cash equivalents at
beginning of period

Total net assets

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

Total assets

Change7

Page 7 displays our financial condition and cash flows.
I will only explain the key points here as well.
Current assets increased 41.5 billion yen, mainly due to a rise of
26.1 billion yen in cash and deposits in tandem with the issuanceof bonds and a rise of 8.3 billion yen in inventory assets chiefly
due to forex translations.
Non-current assets increased 8.4 billion yen reflecting impact
from capex in tandem with plant construction at Tianjin Tsumura
and system-related investment in tandem with IT infrastructurereforms.
Non-current liabilities saw an increase due to a 30 billion yen
bond issuance, which was implemented in September.
Owing to this, the equity ratio was 64.3%, a decline of 4.0pts.
Our cash flows are shown in the waterfall graph on the right.

7

agenda01

Third Quarter Business Results for FY 2022

02

Initiatives and Progress for
Domestic Business and China Business03

FY 2022 Earnings Forecast

8

I will now explain the second item in the agenda for today, theInitiatives and Progress for Domestic Business and China Business.

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
9Page 9 shown product supply trends.
The factors resulting in restricted shipments are:1) a sharp increase in demand for seasonal formulations, including Seishoekkito, due to theintense summer heat, and2) a rise in demand for common cold-related formulations in tandem with a sharp increase in
COVID-19 Omicron variant patients.
Furthermore, orders for formulations to treat coughs and fatigue, which are after-effects of
COVID-19, rapidly surpassed our forecast.

Amid this backdrop, the Shanghai Plant was shut down for around 6 weeks due to the
lockdown of Shanghai. Accordingly, this resulted in a drop in production.
Owing to these factors, there are concerns of a risk of retail inventories being unevenly
distributed due to new use at medical institutions and large-scale orders, and this situation
obstructed the stable supply to patients currently under treatment.
Based on a policy to supply products to patients continuing to undergo treatment and priority
on stable supply of product for which there are no alternatives, shipments of some products
were restricted from August 29, 2022.
We are addressing the situation to boost production capacity and lift restrictions on
shipments.
Specifically, we are undertaking activities to bolster headcount at each plant, increase thenumber of work days by working on holidays, improving operating capacity mainly by
shortening the time for switching product items in production, and accelerating the shipment
timing at the Tianjin Plant, which is moving forward with preparations for operations.
Our policy for lifting restrictions on shipments will be decided based on production plans,
COVID-19 patient number trends, and influenza epidemic trends.
At present, we plan to successively lift our restrictions from the end of March.
Our employees will continue to work as one and pour energies into establishing a production
system that will provide stable supply.

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

Page 10 shows the progress being made in the launch of the Tianjin Plant toboost production capacity.
We are moving forward with construction of the Tianjin Plant to increase
production of Kampo powdered extract, an intermediate product, for thedomestic business.
We are planning Phases 1 to 3 for construction of the Tianjin Plant, in
anticipation of further expansion of the Kampo market.
Ultimately, this production site will be our largest in China, topping the scaleof the Shanghai Plant.
In Phase 1, construction has already been completed. At present, we are
implementing process validation to acquire approval.
At present, we are planning to start shipments in 4Q FY 2023. We plan tostart shipments earlier that planned by completing process validation earlyand by acquiring approval earlier than scheduled.
We also plan to aggressively introduce automation technology going forward,
and replace visual confirmation and machine operations with AI, and to pushforward with the automation of inspection operations, with the goal of
reducing the number of workers at the plant.
Furthermore, regarding upstream processes such as crude drug selection, weplan to improve productivity by pushing forward with the development oftechnologies related to automation,and implementing automation andunmanned operations throughout the value chain.
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

1,050（10,000 units*）

Aug-Dec
2022

1,102（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

Page 11 covers the shipment volume of prescription Kampo
products after shipment restrictions.
We restricted shipments for some products from August 2022.
We retained our shipment volume for the 129 prescription Kampo
formulations, for which shipment volume was up 105% year-onyear. Of this, the growth in shipment volume for restricted
shipment items was 102%.
We are shipping a volume that tops the same period a year earlier,in an effort to deliver products to patients that are continuing toundergo treatment. We plan to continue to boost production.

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

Page 12 shows a comparison with the prescription pharmaceuticalmarket.
This shows the year-on-year growth rate on a NHI drug pricebasis for all sales channels to hospitals and general clinics.
Up to 2Q, Tsumura beat the market. However, due to the impact
from restricted shipments, the growth rate in 3Q was +3.3%,
which was on a par with the market.
The growth rate, excluding those products for which shipments
have been restricted, was +5.5%.
Growth of the prescription pharmaceutical market was shored up
by COVID-19 treatments and test kits owing to the spread of
COVID-19.
The appendix contains a comparison by sales channel.

12

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

FY 2021 3Q

FY 2022 3Q

YoY

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%

Drug-fostering program
formulations

100 Daikenchuto

1

Growing formulations

2

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%

Ratio to total sales
Drug-fostering
programformulations

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

Growing
formulations

20%

55%

*Shipments of Goshajinkigan restricted from August 2022

13

Page 13 outlines the sales of the drug-fostering program formulations/growing
formulations.

Sales for the 129 prescription Kampo products totaled 91.9 billion, a growth of
5.3% year-on-year.
Sales of drug-fostering program formulations only grew 1.0% year-on-year, due
to impact from restricted shipments.
Sales growth for Growing Formulations was 10.6% year-on-year owing to the
sharp rise in demand for Goreisan, Hochuekkito and Kamikihito.
Demand for Goreisan is continuing to grow owing to measures we have been
implementing, such as the hosting of lectures in the cardiovascular domain.
Hochuekkito and Kamikihito sales are continuing to grow to address the need totreat fatigue, psychological anxiety and insomnia related to the after-effects of
COVID-19.
Total sales for 119 formulations other than drug-fostering program and growing
formulations were 51.3 billion yen, a rise of 5.5% year-on-year.
Sales of common cold-related formulations also grew. This reflected seasonal
symptoms such as a lack of appetite and summer weight loss due to the intenseheat in July and August, and also due to an expansion in the spread of theOmicron variant.

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

Page 14 outlines the impact to common cold-related formulations
due to COVID-19.
Demand rose for common cold-related formulations in tandemwith an increase in the number of COVID-19 patients.
There was special demand for the four representative common
cold-related formulations during the summer months from July to
September, when infections spread due to the Omicron BA.5
variant.
Although this one-off demand wound down due to a decline inpatients, in and after November, when COVID-19 spread due tothe BA.5-derivative, demand once again climbed.

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

Page 15 also focuses on the impact of COVID-19.
There are prescriptions for a variety of symptoms arising related
to COVID-19. The demand for common cold-related formulations,which had declined mainly due to the wearing of masks and a
voluntary ban on leaving the house, is recovering.
Demand for 14 formulations, mainly those used to treat anxiety,insomnia, fatigue, dizziness, skin irritation and acne, exhibited
growth that sharply outperformed the growth of the 129
prescription Kampo products.
Regarding the after-effects from the Omicron variant of COVID-19,
in contrast with the after-effects of the Delta variant, there wassaid to be an in increase in the percentage of people infected with
COVID-19 that claimed they experienced sleep disorder
symptoms. Consequently, demand for formulations related to thetreatment of “anxiety and insomnia” grew 120% in comparison
with FY 2020.
Kamikihito is typical example of one of our Growing Formulations.
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

Page 16 is on the provision of Kampo solutions that are suited toeach medical practitioner.
We are partially limiting those promotional activities that target
those products for which shipments are being restricted.
Meanwhile, there is an increase in the number of doctors
participating in “seminars that address the need for information
on how to properly use Kampo products,” a series being offeredby the Tsumura Medical Site, given the high level of demand for
information related to the proper use of Kampo based on
symptoms.
We are also seeing a rise in requests from doctors for theprovision of “Kampo custom files,” a system for filing by symptom
leaflets that are being used for instruction in our seminars.
One of our goals in the first Medium-Term Management Plan is tosecure more than 50% of doctors who write 10 or more Kampo
prescriptions. To achieve this goal, we are building a system that
doctors can use to obtain information that is required by each
medical practitioner from optimal channels and at the adequate
timing.
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 of

Evidence-building

the Traditional
Chinese Medicine
Research Centerfor traditional
Chinese medical
products

Sales 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

17Page 17 shows the milestones for the China business.
We are pushing forward with the deployment of businesses forthe formulation, crude drug and research platforms in the China
business. In TSUMURA VISION “Cho-WA” 2031, we aim toachieve an overseas sales ratio of 50%. Our goal is to become acompany that supplies and leads the industry for traditional
Chinese medical 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

Page 18 presents activities for entering the traditional Chinese
medicine market via the formulation platform.
In the first Medium-Term Management Plan, our goal is to build afoundation for the traditional Chinese medicine business by quickly
implementing the M&A of traditional Chinese medicine companies.
The conditions for our M&A deals are to acquire a majority
ownership in a company that possesses the rights to classicalprescriptions and has the understanding of the Tsumura Group’s
philosophy. At present, we are continuing to carry out concrete
negotiations with several companies.
We aim to reap the fruit of these negotiations as soon as possible.
We are pushing forward with negotiations and will report promptly
once we are at the stage where we can make disclosure.

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 brand19

Page 19 is a summary of the activities for expanding business
operations in the crude drug platform.
In the crude drug platform, in the first Medium-Term Management
Plan we are aiming to achieve a CAGR for sales of 30%.
The crude drug platform business is composed of three categories,
as shown on the right, raw material crude drugs, drug pieces andYakushokudogen products. We are promoting sales activities
based on strategies for each of these categories.

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

Page 20 is a rundown of sales trends in the China business.

Sales in the China business were approximately 10.7 billion yen, a growth of
52.4% year-on-year, owing to the expansion of sales mainly for raw material
crude drugs.
In raw material crude drugs, we are implementing sales activities that focus
on quality. We continue to retain a high growth rate owing to the success weare having nurturing new customers and expanding the number of sales
items among existing customers.
In drug pieces, sales are declining for existing products due to impact from achange in business strategies at Ping An Health, a major sales channel.
Meanwhile, in public hospital sales channels, which we aim to expand in themedium/long term, growth is smooth even during COVID-19.
In addition to the development of products that suit the needs of Ping An
Health, we also plan to expand sales by developing public hospital sales
channels.
In December 2022, COVID-19 spread due to changes in the zero coronavirus
policy.
We saw a temporary increase in the number of employees at our affiliates in
China that came down with COVID-19. However, we were able to maintainnormal operations mainly by reviewing working shifts. At this stage, there
has been no major impact to the supply of raw material crude drugs andKampo extract powder (intermediate products) to Japan and to sales at the
China business.
Going forward, we plan to continue to closely monitor these conditions.
20

agenda01

Third Quarter Business Results for FY 2022

02

Initiatives and Progress for
Domestic Business and China Business03

FY 2022 Earnings Forecast21

Lastly, this is our earnings forecast for FY 2022.

21

FY 2022 Earnings Forecast【Million yen】

FY 2021
ResultsYoY

FY 2022
Forecast

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

Page 22 outlines full-year earnings forecast for FY 2022.
We have not revised our full-fiscal year forecast for FY 2022, fromthe forecast we released at the start of the fiscal year, given theongoing impact from restricted shipments.
We forecast sales of 138.5 billion yen.
In cost-to-sales, raw material prices continue to soar. There is apossibility this will worsen further than expected.
However, we aim to achieve operating profit of 21.2 billion yen bycontrolling our SG&A expense.
We note that as it is difficult to reasonably estimate non-operating
items due to conditions in the forex market, this has not beenfactored into our earnings forecast.

There is a likelihood that ordinary profit and profit attributable toowners of parent will be shored up by gains on forex translationsin the event the value of the yen remains low.

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

15 .0 %

20

From Oct. to Mar.

20 .0 %

From Apr. to Sept.

10 .0 %

32

32

32

32

32

32

32

32

32

2013

2014

2015

2016

2017

2018

2019

2020

2021

0

32

Dividends payout ratio
5. 0%

0. 0%

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

The last slide covers shareholder returns.
In addition to sustainable expansion of the Kampo business inJapan, we plan to improve corporate value through thestrengthening of the foundation of the China business, inparticular through the implementation of growth investments in
M&A in the China business.
It is our policy to pay out a stable dividend by factoring inmedium/long-term profit levels and cash flow trends.
We ask for your continued support.
Thank you for listening.

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

24

Appendix

25

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%

4.1%

3.0%
1Q
FY2021

2Q

2Q

3Q

3Q

4Q

1Q
FY2022

2Q

3Q

6.4%
4.7%

4.1%

5.1%
3.9%

3.8%

4%
2%

1.4%

1%
-4%

1Q
FY2022

Hospital market (HP)

16%
Generalclinics (GP)
11%

4Q

3.1%

3.4%

2.7%

3.7%

0%
-2%

-4%

1.1%

3.2%

1.1%
1Q
FY2021

2Q

3Q

4Q

1Q

2Q

-0.3%
3Q

FY2022

Copyright © 2022 IQVIA. Proprietary calculation by Tsumura based on “JPM Apr. 2022 – Dec. 2022”
Reproduction prohibited26

26