First Quarter Business Resultsfor Fiscal 2023

August 4, 2023
Director, and CFO

Muneki Handa

agenda01

First Quarter Business Results for FY 2023

02

Initiatives and Progress for Domestic Business03

Initiatives and Progress for China Business

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

1Q Business Results for FY 2023
【Million yen】

1Q
FY 2022
results

1Q
FY 2023
results

Progress
Rate

YoY

1H planAmount（vs. 1H plan）

ChangeRatio to total sales

34,41737,036+2,618+7.6%

74,00050.0％

Domestic business

31,562

32,988+1,426+4.5%

65,90050.1％

China business

2,855

4,047

+1,191+41.7%

8,100

50.0％

6,353

4,684

(1,668)(26.3)%

9,500

49.3％

Domestic business

6,404

4,684

(1,719)(26.9)％

9,900

47.3％

China business

(50)

0

+51

－

(400)

－

8,665

5,989

(2,676)(30.9)%

9,800

61.1％

China business：
Crude Drug Platform 10.9%

6,632

4,332

(2,300)(34.7)%

6,800

63.7％

Domestic business：OTC Kampo etc. 2.3%

18.32

19.36

+1.04

－

－

－

Sales

Operating profit

Ordinary profit
Profitattributable to owners ofparentPL translation rate (CNY)

Domestic business：
Prescription Kampo
Products

86.0%

Domestic business：
Other prescription
pharmaceuticals 0.8%

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

4Key Points in Performance
・Net sales rose reflecting growth in the domestic and China businesses
・Profit declined chiefly due to impact from unrealized gains, a rise in the cost of procuring
crude drugs, and impact from a depreciation in the yen’s value

37,036

Net sales◼

Domestic businessmillion yen

YoY

＋7.6％

Progress rate
(vs. 1H plan)

50.0％

Total sales for the 129 prescription Kampo products: 31,838 million yen, up 5.2% year-on-year
Total sales of the OTC Kampo formulations and other healthcare products: 837 million yen, down 7.2% year-on-year◼

China business

Operating profit
Operating profit margin

Raw material crude drugs, drug pieces, Yakushokudogen products, etc. : 4,047 million yen, rose 41.7% year-on-year

4,684
12.6

million yen

YoY(26.3)％％

YoY(5.9)pt

Progress rate
(vs. 1H plan)

49.3％

◼

Cost-to-sales ratio: 54.9%, +7.1pt YoY: In the same period of the previous year, unrealized gains contracted due to the lockdown of Shanghai;
Unrealized gain is expected to rise in FY2023 owing to an increase in inventory; In addition, there is impact from crude drug procurement costs
and devaluation of the yen◼

SG&A ratio: 32.4%, (1.3)pt YoY: Sales growth offset growth investments, mainly in the DX transformation for Kampo value chain

Ordinary profit
◼

5,989

million yen

YoY(30.9)％

Foreign exchange gain primarily related to loans to overseas subsidiaries: 929 million yen, down 1,070
million yen year-on-year

Profit attributable toowners of parent

4,332

million yen

YoY(34.7)％

Progress rate
(vs. 1H plan)

61.1％*Foreign exchange gain not posted in plan

Progress rate
(vs. 1H plan)

63.7％
5

Factors Triggering Changes in Operating Profit (YoY)(Million yen)

(Million yen)
Sales increase+957(1,986)+957

Domestic business+789

China business+168

Cost of sales increase
Impact of
unrealized
gains

Domestic business: Unit sales price (of which NHI price revision
impact was +395)(308)

Domestic business: Raw material crude drug cost (of which(332)

impact of unrealized gains was (1,278))

4,684

6,353

Rise inexpensesForeign
1Q FY 2023
exchange
Operating profit
impact+554(1,709)Domestic business: Raw material expenses(262)

Domestic business: Processing expense, etc. (of which energy
expense was (297); One-off expense at Tianjin Plant (277))(474)

China business: Increase in crude drug PF sales(95)

Rise in expenses

1Q FY 2022
Cost of sales
Operating profit Sales increase
increase(1,986)(308)

R&D expense(71)

Salary allowance(71)

Sales promotion expense+14

Depreciation（Of which, decrease in temporary expenses at the Tianjin Plant＋251）+246

Other（Of which, system introduction expenses etc(185) ,activities expenses(127)）(426)

Foreign exchange (yen depreciation) impact

(332)

6

Crude Drug Procurement Cost: Impact of Unrealized GainsThe one-off increase in unrealized gains owing primarily to the handling of alift on restricted shipments is expected to head toward a decline in and after
2Q
Inventory rose owing to an
expansion in production ahead ofthe lift of restricted shipments

Trends in unrealized gains

9billion yen

Decline in inventory
due to the lockdownof Shanghai

Increase(Deterioration in
cost-to-sales)

1Q
FY 20222Q
FY2022

Decrease

3Q
FY 2022

4Q
FY 2022

1Q
FY 2023(Improvement incost-to-sales)(3) billion yen

7Raw Material & Energy Expense Trends（billion yen）

25

Raw material expense

Raw material expense

Energy expense

・It's been risen from FY2022 due to theeffects of inflation and the depreciation of theyen, and will be expected to be nearly flat after
the 2Q of FY2023

20

15

10

Energy expense
・Sharp rise started from FY 2022, andpeaked in 3Q FY 2022

50
1Q
FY 2021

2Q

3Q

4Q

1Q
FY 2022

2Q

3Q

4Q

1Q
FY 2023

・Level in 2Q FY 2023 expected to be on parwith the level in 1Q FY 2023

8

Financial Condition/Cash Flow Position（Million yen）

FY 2022（March 2023）

FY 2023
1Q

Change8,623

Current assets

268,320

272,369

4,048

Non-current assets

128,492

133,067

4,574

124,566

126,345

1,779

Current liabilities

47,20549,402

2,197

Non-current liabilities

77,361

76,943(418)

272,246

279,091

6,844

63.5％

63.2%

(0.3)pt

Total liabilities

Total net assets

Equity ratio

101,726

107,501

5,774

1,306

Merchandise and finishedgoods

11,257

12,6591,402

83Work in process

14,43017,064

2,633

66

Raw materials andsupplies

76,03877,777

1,738

1,156

Inventories

Financing activities

Of which,
Exchange rate

Investing activities

1Q

Change(15)

Operating activities（March 2023）

FY 2023（Million yen）

Cash and cash equivalents at
beginning of period

FY 2022

(49)

+7

889

Cash and cash equivalents
at end of period

405,437(1)

Impact of exchange ratetranslations

396,813

Total assets

947

9

agenda01

First Quarter Business Results for FY 2023

02

Initiatives and Progress for Domestic
Business

03

Initiatives and Progress for China Business

10Comparison with the Prescription Pharmaceutical Market
Growth rate recovered owing to the lifting of restricted shipment items (23 items)
in JuneAll sales channels

Status for lifting ofrestricted shipments

August 2022
Start of restricted
9.6%
shipments

June 5: 22 items (restrictions lifted)
June 30: 1 item (restriction lifted)(YoY/NHI drug price basis)

9.3%

5.4%

4.1%

Tsumura4.4%

Prescription
pharmaceuticalmarket

1.8%

4.3%
2.6%
0.7%

1.3%

FY 2022

7.1%

3.3%
3.3%

1Q

6.5%

1.3%
(0.1)%

2Q

3Q

4Q

1Q

FY 2023

April

May

June

1Q FY 2023

Copyright © 2023 IQVIA. Proprietarily compiled based on “JPM April 2021 – June 2023” Copying prohibited

11

Sales of Restricted Shipment Items
・Sales of common-cold formulations declined in the winter months due to the start of
shipment restrictions in and after the end of August 2022
・ Sales of restricted shipment items recovered from June owing to a lift on restricted
shipments(Million yen)

11,000

Increase in demandfor common-cold
formulations during
the summer season

50

Sales 45of restricted
shipment
40 items
Number of restricted
35 items
shipment

10,000Started restricted
shipments at the end of
August 2022

9,000

30

28

8,000

April 2023: Lift 25
restrictions on 4
items
June 2023: Lift20
restrictions on 23
items

28
23

7,000

15

10restriction on
Lift
all items at the5
end of July 2023

6,000

1
5,000

0
1Q
FY 20222022年度

2Q

3Q

4Q

1Q

2Q

FY 20232023年度12

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

FY 2022 1Q

FY 2023 １Q

YoY

100 Daikenchuto

2,505

2,515

+9

+0.4%

2

54 Yokukansan

1,933

1,940

+6

＋0.4%

4

43 Rikkunshito

1,860

1,861

+1

+0.1%

9

107 Goshajinkigan

932

995

+62

+6.7%

23

14 Hangeshashinto

359

370

+11

+3.2%

Total sales for drug-fostering program formulations

7,591

7,683

+92

+1.2%

Drug-fostering program
formulations

1

41 Hochuekkito

1,881

1,931

+49

+2.6%

5

17 Goreisan

1,542

1,801

+259

+16.8%

6

24 Kamishoyosan

1,296

1,305

+9

+0.7%

17

137 Kamikihito

501

590

+88

+17.7%

18

108 Ninjin’yoeito

507

561

+54

+10.6%

Total sales for growing formulations

5,730

6,191

+461

+8.0%

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

16,956

17,964+1,007+5.9%

Total sales for 129 prescription Kampo products

30,277

31,838+1,560+5.2%

Growing formulations

3*Restricted shipments of Goshajinkigan to April 2, 2023

Ratio to total sales

Drug-fostering
programformulations

24%
129
prescription
119 formulations
other than drugfostering programand growing
formulations

Growing
formulations

20%

56%

13

Status of Information Provision Activities after the Lift of Shipment
Restrictions
Partial restrictions, including Web video streaming, after the implementation of shipment
restrictions, and resumption of activities after the lifting of shipment restrictions
Trends of the number of cases of detailing impactMR
activities

Web video
streaming

Web lectures

Partial restriction on
Web video
streaming

e-promotion

Information provision
activities returning to priorlevels owing to lifting of
shipment restrictions
MR activities

Apr
4月

May
5月

Jun
6月

Jul
7月

Aug
8月

Sep
9月

Oct
10月

Nov
11月

Dec
12月

2022
2022年
＊Number of cases of detailing impact: Cases of information perception from each channel, including MR activities and the Internet＊e-promotion: Information provision, including WEB lectures and video streaming＊MR activities: Information provision via MRs + in-person lectures

Jan
1月

Feb
2月

Mar
3月

Apr
4月

May
5月

Jun
6月

2023
2023年

MR activities trending
toward recovery as
COVID-19 downgraded toa Class 5 common
infection disease

Intage Healthcare Survey “Impact Track”

14

Boost Production Capacity for Domestic Business: Launching the
Tianjin Plant (Tianjin Tsumura Pharmaceuticals Co., Ltd.)・Phase 1 construction is going through procedures tofrontload the timing of the start of shipments
・Phase 2 and Phase 3 construction is in progress as planned

Phase
2

Phase
1

Production capacity for Kampo
powdered extract (intermediate product) torise about 35% owing to full-fledged
operations from Phase 1 to Phase 3

Phase 1 construction
Phase
3・Kampo powdered extract production facilities,
warehouse, utilities, etc.
・Investment: approx. 15.0 billion yen
・Scheduled to start shipments in FY 2023

Phase 2 construction

・Kampo powdered extract production facilities
・Investment: approx. 8.5 billion yen
・Complete construction: January 2024 (tentative)

Phase 3 construction

・Kampo powdered extract production facilities, quality
control functions, etc.
・Investment: approx. 14.0 billion yen
・Complete construction: March 2025 (tentative)

Site area of the Tianjin Plant: approx. 60,000㎡
15

agenda01

First Quarter Business Results for FY 2023

02

Initiatives and Progress for Domestic Business03

Initiatives and Progress for China Business16

Crude Drug Platform
Sales growth, mainly for mainstay raw material crude drugs, through quality-oriented sales activities
Raw material crude
drugs

41.7％

Drug pieces(Crude drug pieces)

growth＊1H plan81 billion yen

40billion yen

28
Sales for prescription-use andas an OTC to hospitals andpharmacies

Sales to traditional
Chinese medical products
companies as a raw
material

billionyen
Raw material crude drugs

Yakushokudogenproducts

Drug pieces(Crude drug pieces)
Yakushokudogenproducts

1Q
FY2022
Sales of health food products togeneral consumers

1Q
FY2023*Local current basis: 34.1% growth17Formulation Platform: July 31 Release

Background

Notification of the signing of an agreement related to the transfer of equity interest in
Shaanxi Unisplendour Life Care Pharmaceutical Co., Ltd. by Ping An Tsumura Inc.
•

Signed an agreement on the transfer of equity interest on April 13 (acquisition of total equity in Shaanxi
Unisplendour Life Care Pharmaceutical Co., Ltd (Unisplendour)•

After the completion of all procedures for this project (May 9, 2023), we were contacted by the government of
Baoji City, Shaanxi Province regarding differences in interpretation of national policy and related laws andregulations, etc. by the department in charge of the project at the Baoji municipal government.
Following this, we repeatedly held discussions with the department in charge of the project at the Baoji
municipality, and determined that conditions had not been satisfied for the continued implementation of thisproject.
We understand and respect the opinions of the Baoji municipal government and transferred equity in
Unisplendour.

••Equity transfer
partners： Shenzhen Hua Yu Tai Asset Management Co., Ltd., Baoji Investment (Group) Co., Ltd.

No. of shares sold： 100％ of the equity interest in Unisplendour

Sales price： 254,788 thousand RMB

Agreement date

： July 27, 2023

Earnings impact： Mild impact to FY 2023 consolidated earnings at Tsumura
18

Vision for China BusinessStable procurement/supply of
raw material crude drugs

Contribute to the health of China’s citizens

Recuperation(Prevention)

Health & Medicine
business

Nutrition (food)
Exercise
Sleep

Traditional Chinese medical
products business

Raw material crude drugs
Traditional Chinese
medicine drug pieces

Gingseng
Three preventive measuresfor pre-symptomatic
diseasesYakushokudogen nutritional
ingredients

Health foods by function

Beverage by function

Pre-symptomatic
treatment(Prevention of presymptomatic
Prevent disease
Prevent recurrencediseases)from becoming(Post-healing
seriousrecovery),(Prevent changes inexisting diseases),

Treatment
Expand standard
Kampo treatments
Personalization oftreatments

Drug piece added-value service“Personalized medicine,” etc.
OTC versions of traditional
Chinese medicines

Apply for classical prescription
Chinese medicine
19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.

20

Appendix

Curbing of the NHI Drug Price Revision Ratio
・We plan to continue to promote the “value” of our prescription Kampo products and make proposals to
related ministries in collaboration with industry groups

・In recent years, the reduction rate has been curtailed. In April 2023, a positive revision was implemented.
NHI drug price revision trends (％)

Tsumura+2.3

Prescription pharmaceuticals overall
2012

2014

2016

2018

2019

2020

( 0.4)

2021

2022
2023

0.0
( 0.9)( 1.8)( 3.8)(6.0)( 3.0)( 3.0)( 3.1)
(4.4)

(5.6)

(4.4)

(5.6)
(6.7)
(7.5)
22