Business Results for Fiscal 2023

May 10, 2024

TSUMURA & CO.

Agenda01

Moving Towards Realizing the Long-Term Management
Vision―TSUMURA VISION “Cho-WA” 2031

02

Business Results for Fiscal 2023 and Earnings
Forecast for Fiscal 2024

03

Progress in US development (TU-100)2Moving Towards Realizing the Long-Term
Management Vision―TSUMURA VISION“Cho-WA” 2031
President & Representative Director, CEO

Terukazu KatoAiming to Establish a Global Standard for Pharmaceuticals
Derived from Natural Ingredients【Corporate Purpose】 “Lively Living for Everyone” 【Corporate Value】“Best of Nature and Science”

4Realization of a Global Quality for Pharmaceuticals Derived
from Natural Ingredients
Pharmaceutical requirements: Possesses therapeutic benefits (efficacy) but noside effects (safety)
Degree to which requirements are fulfilled: Confirmed in studies (clinical trials)
Investigational new drug (IND): Gold standard quality
The efficacy and safety of pharmaceutical products is guaranteed through theconstant supply to the front lines of medicine of pharmaceutical products that areequivalent to INDs evaluated in clinical trials.

Good quality pharmaceutical products arethose products for which the efficacy and safety is guaranteed to be constantly
equivalent to those that have been clinically confirmed⇒ Pharmaceutical products that have been standardized to guarantee their
medical reproducibility
Dr. Yukihiro Goda, Honorary Director, National Institute of Health Sciences (NIHS) 5

Standardization to guarantee medical reproducibility[High level of difficulty]

6

Roadmap for achieving the TSUMURA VISION “Cho-WA” 2031

7

Three Important Medical Domains that are Urgent Issues
in Japan8

Increasing trend of diseases in related fields with the increasein the elderly population
Estimated that the number of patients with dementia , chronic heart failure and frail istrending upward in tandem with the increase in the number of elderly

Domain related to the elderly

Elderly Population
Estimate of the
population aged 65
and older

Estimate forchronic heart failure

Estimate fordementia(10,000 people)(10,000 people)

953

3,928
3,534

131

Estimate for frail(including pre-frail)(10,000 people)(10,000 people)

125

631

Pre-frail
1749

1868

frail

2020

2040

Prepared by Tsumura based on a population
estimate for Japan (National Institute of Populationand Social Security Research)

2020

2040

Prepared by Tsumura based on theComprehensive Strategy for the
Promotion of Dementia Measures(Ministry of Health, Labour and Welfare)

2020

2040

Prepared by Tsumura based on
Okura Y et al.Circ J 2008;72:489-491

307

328

2020

2035

Prepared by Tsumura based on theTokyo Metropolitan Institute ofGerontology and Geriatric Medicine 2020

9

Domain related to the Elderly, Contributing to the Extensionof a Healthy Life Expectancy
Research pipeline for drug-fostering program formulations and growing formulations
Increase indementia patients(Million
9,000yen)

TJ-54 Yokukansan

8,000

7,000

6,000

5,000

Increase in patientswith heart failure

TJ-17 Goreisan

Edema due to chronic
heart failure

Expand bybuilding evidence

Large-scaleclinical research

4,000

3,000

TJ-108 Ninijn’yoeito

TJ-137 Kamikihito

2,000

1,000

Early intervention for
dementia patientsthat are frail

Frail research

0
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

10

China Business：Milestones in Each of the Platforms
Vision for the China business:
Contributing to the health of the citizens of China

Formulation
platform

Crude drug
platform

Research
platform

First medium-term
management plan
FY2022-2024

Second medium-term
management plan
FY2025-2027

Enter the traditional Chinese
medicinal products business

Build a foundation for the
traditional Chinese medicinal
products business

M&A of a traditional Chinese
medicinal products company
Apply for classical prescriptions

Establish a brand as a
traditional Chinese medicinal
products company

External sales ratio: More than 50%

Industry top 10

Increase sales of crude drugs,
drug pieces, andYakushokudogen product
External sales ratio:
More than 50%

Establish a brand for crude drugs,
drug pieces, and Yakushokudogenproducts
Expand sales routes to public
hospitals(including M&A)

Crude drug and drug piececompany that leads theindustry’s
Development

Establish the Traditional Chinese
Medicine Research Center

Expand the functions of theTraditional Chinese Medicine
Research Center

Build evidence in traditional
Chinese medicinal products

Third medium-term
management plan
FY2028-2031
Sales outlook

RMB 7 billion
or moreSales outlook

RMB 3 billion
or moreLeading share in China

11

China Business/Crude Drug PF: Products/Services Owing toHigh-Quality Crude Drugs
Crude drug PF
visionFY 2023
FY 2019
Net sales
330 millionyen

01

Net sales18.7 billion
yen

Acquire recognition for crude drug
quality by expanding sales channels,
mainly for raw material crude drugs●2019
Sales function: Established Pingcun (Shenzhen) Medical Ltd.
Manufacturing function: Pingcun Zhongying (Hebei)
Pharmaceutical Co., Ltd.
●2020
Core functions: Acquisition of Ping An Tsumura
Pharma Inc.

Sales image
3 billion yuan

Raw material
crude drugs■Sales growth underpinned by a CAGR of 30％ (First Medium-Term
Management Plan)■Expand customers that recognize the value of our quality(Approx. 60.0
billion yen)

02

Expand high value-added services
and sales to a high profit-margin
customer base

■ Expand drug pieces, drug piece added-value services■Develop new products based on the concept ofYakushokudogen

Drug pieces(Crude drug
pieces)Fluid extract for use
by traditional
Chinese doctors

New Yakushokudogenproducts

Strengthen crude drug procurement function for Japan and for China (fortify collaboration systems with local production companies)
12

Sustainability Targets 2031
Sustainability Vision : Living with nature for tomorrow.

13

Improve Evaluations by Environment-related Rating
Agencies
FY2021First Medium-Term
Management PlanFY 2022 - FY 2024

Second Medium-Term
Management PlanFY 2025 - FY 2027

Third Medium-Term
Management PlanFY 2028 - FY 2031

Acquire SBT certification
Application

B-

Declaration ofsupportCertification acquisition

Execute certification plan

Improve CDP climate change evaluation
B or higher A- or higher

A- or higher

Expand information disclosure based on TCFD recommendations
Analysis and disclosure of basic content

Further improve the level of analysis and disclosure

CDP 2023 evaluation ranking
Climate change: Aー Water security: Aー

Request response addressing “climate change”
and “water security”
14Agenda01

Moving Towards Realizing the Long-Term Management
Vision―TSUMURA VISION “Cho-WA” 2031

02

Business Results for Fiscal 2023 and Earnings
Forecast for Fiscal 2024

03

Progress in US development (TU-100)

15

Business Results for Fiscal 2023 andEarnings Forecast for Fiscal 2024

Director, and CFO

Muneki Handa

Business Results for FY 2023
【Million yen】

Revised forecast
for FY 2023
（Revised on
February 6）

FY2023
results

YoY
Vs.planned

AmountChange99.2％ +10,801+7.7％

152,000

150,845

Domestic business

133,300

132,099

99.1%+7,400+5.9%

China business

18,70018,745100.2%+3,400+22.2%

Sales

Operatingprofit19,50020,017102.7％（899）（4.3)％

Domestic business

20,10020,531102.1%（658）（3.1%）

China business

（600）

（514）

－

（240）

－

Ordinary profit
Profitattributable to owners ofparentPL translation rate (CNY)22,40023,493104.9%+40

16,20016,707103.1%

+225

19.00

19.83

－

+0.28

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

+0.2％
+1.4％
－

Ratio to total sales

Prescription
Kampo Products
83.8%

China business：
Crude Drug Platform 12.4%
Domestic business：OTC Kampo etc. 2.9%
Domestic business：
Other prescription
pharmaceuticals 0.9%
17Key Points in Performance
Net sales and profits at each level nearly in line with revised plan
Net sales

150,845

million yen

Achievement rate

99.2%

YoY

+7.7%

◼ Domestic business Total sales of the 129 prescription Kampo products：126,357 million yen,up 5.9％ year-on-year
Total sales of OTC Kampo formulations and other healthcare products： 4,439 million yen, up 11.9％ year-on-year◼ China business

Operating profit
Operating profit margin

Raw material crude drugs, drug pieces, Yakushokudogen products, etc.：18,745million yen,up 22.2% year-on-year

20,017

million yen

13.3

%

Achievement rate
vs. Plan

102.7%

YoY(4.3)%+0.5ptYoY(1.6)pt

Cost-to-sales ratio: 54.4%, down 0.5pt vs. plan and a rise of 3.2pt year-on-year
Versus plan: Manufacturing input was small for powdered extracts at the Tianjin Plant Year-on-year: Impact mainly due to a rise in
crude drug procurement expense, depreciation in the value of the yen against major currencies, and raw material expenses
continuing to trend at a high level
SG&A ratio: 32.4%, up 0.2pt vs. plan and down 1.4pt year-on-year
Year-on-year: Sales growth absorbed growth investments, including the DX of R&D and the Kampo Value Chain

Ordinary profit◼

23,493

million yen

Achievement rate

104.9%

YoY+0.2%

Foreign exchange gain primarily related to loans to overseas subsidiaries: 2,193 million yen, up 684 million yen year-on-year*Foreign exchange gains of 1,338 million yen were recorded at the time of the February 7 revised forecast revision.

Profit attributable toowners of parent

16,707

million yen

Achievement rate

103.1%

YoY+1.4%

Posted extraordinary loss (impairment loss and COVID-19 related loss) in the prior fiscal year18Factors Triggering Changes in Operating Profit (YoY)(Million yen)

Sales increase: +4,427 million yen(Million yen)Domestic business+3,900+527

China business+4,427（2,775）

Decrease in cost of sales: （2,775） million yen（1,310）(1,241)

20,017

20,916

Domestic Business Sales Composition(including NHI price revision impact)+2,178Domestic business: Crude drug procurement cost（of which unrealized profit was (2,109)）(4,361)

Domestic business: Raw material expenses(871)

Domestic business: Processing expense, etc.
(of which energy expense was ＋526, otherproductivity improvements, etc.)+982

China business: Increase in sales ratio(703)

Expense increase: (1,310) million yen

FY 2022
Operating profit

Sales
increase

Cost of sales
decrease

Expenseincrease

Foreignexchange
impactFY 2023
OperatingprofitR&D cost(683)

Salary allowance(224)

Sales promotion expense(175)

Depreciation (of which there was a decline in oneoff expense at the Tianjin Plant +720)+474

Other (of which system introduction expense, etc.
(371), activities expense (402))(702)

Foreign exchange (yen depreciation) impact: (1,241) million yen

19Financial Condition/Cash Flow Position for FY 2023
（Million yen）

FY 2022

FY2023

Change（March 2023）（March2024）

396,813428,254

31,440Current assets

268,320

281,292

12,971

Non-current assets

128,492

146,961

18,469124,566

132,889

8,322

Current liabilities

47,20568,557

21,352

Non-current liabilities

77,36164,332(13,029)

272,246

295,364

23,118

63.5％

63.2%

(0.3)pt

Total assets

Total liabilities

Total net assets

Equity ratio（44）

117,617

15,889589

Merchandise and finishedgoods

11,257

12,139881

290

Work in process

14,43018,3093,878

142

Raw materials andsupplies

76,03887,168

11,130156

780

Cash and cash equivalents
at end of period

101,726+14

Impact of exchange ratetranslations（March2024）

Financing activities

Of which,
Exchange rate

（March 2023）

Inventories（193）

Investing activities

Change+56

Operating activities

FY2023947

Cash and cash equivalents at
beginning of period

FY 2022（100 million yen）

20

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

FY 2022

FY 2023

YoY

100 Daikenchuto

9,739

9,851

+111

＋1.1%

3

43 Rikkunshito

7,300

7,454

+153

＋2.1%

4

54 Yokukansan

7,380

7,447

+66

＋0.9%

9

107 Goshajinkigan

3,421

3,698

+276

＋8.1%

24

14 Hangeshashinto

1,390

1,448

+57

＋4.2%

Total sales for drug-fostering program formulations

29,23329,899

+666

＋2.3%

129

41 Hochuekkito

7,727

7,956

+228

＋3.0%

prescription

5

17 Goreisan

6,208

6

24 Kamishoyosan1718

Drug-fostering program
formulations

1

Growing formulations

2

6,869

+660

＋10.6%

5,050

5,117

+66

＋1.3%

108 Ninjin’yoeito

2,128

2,305

+177

＋8.3%

137 Kamikihito

2,067

2,290

+223

＋10.8%

Total sales for growing formulations

23,182

24,539+1,356＋5.9%

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

66,946

71,918+4,971＋7.4%

Total sales for 129 prescription Kampo products

119,362

126,357+6,994＋5.9%

Ratio to total sales

Drug-fostering
programformulations

24%

119 formulations
other than drugfostering programand growing
formulations

Growing
formulations

19%

57%

21

China Business: Crude Drug Platform Business Sales Expansion

By expanding sales of Crude Drug Platform ,we have achieved our business plan in China.
22.2％

growth＊ChineseNet salesbusiness

18.75 billion yen

Crude drug
platform

0.98 billion yen

Operating profit

Crude drug platform products
Raw material
crude drugs

Formulation platform, IT
infrastructure investments, etc.

Chinesebusiness✓ Operating profit in the crude drug
platform continued to increase

Drug pieces

Yakushokudogenproducts

Expenses, etc.

Operating profit（0.51）billion yen*Local currency basis: 20.4% growth

Sales totraditional
Chinese medical
products
companies as araw material

Sales forprescription-use
and as an OTC
to hospitals andpharmacies

Sales of health foodproducts made fromcrude drugs to
general consumers

22Earnings Forecast for Fiscal 2024

FY 2024 Earnings Forecast
Forecast of increased sales and profit /First Medium-Term Management Plan is expected toachieve its numerical targets
First Medium-Term
YoY
FY 2023
FY 2024
Management Plan
[Million yen]
Results
Earnings Forecast
Numerical targets
AmountChange(fiscal 2024)

150,845

185,000+34,154+22.6%

Domestic business

132,099

China business

18,745

163,400
21,600+31,300+2,854+23.7%+15.2%

20,01739,500+19,482+97.3%

Domestic business

20,531China business（514）

39,49010+18,958+524+92.2%－

Ordinary profit

23,49339,500+16,006+68.1%

Profit attributable to owners ofparent16,70728,500+11,792+70.6%

Income statement exchange rate
(JPY/RMB)

19.83

21.00

+1.17

－

ROE

6.4%

10.0%

Net sales

Operating profit

EPS

219.83円

375.35円

Net sales:¥162.0billion

Operating profit:¥29.0billion
ROE:
8％
Versus the First Medium-Term
Management Plan
Although there was negative impact froma rise in a portion of crude drug
expenses, mainly wild crude drugs, a
depreciation in the yen’s value against
major currencies, and ongoing highexpenses for raw materials and energy,
we expect to achieve all our indicators(sales, operating profit, ROE) in the First
Medium-Term Management Plan owing toa boost in drug prices reflecting therecalculation of unprofitable products（Note）・Foreign exchange impact (non-operating profit) was notfactored into the earnings forecast given the difficulty to reasonably
calculate this impact based on the status of the forex market.

24

FY 2024: Factors Triggering Changes in Operating Profit in theDomestic Business• Although factors in the external environment, including inflation, continue to be harsh, we
look for profit growth owing to NHI drug price revisions (recalculation of unprofitable products)• Plan to implement investment, mainly to strengthen the stable supply system
+27

(2.4)
Rise in unit
prices of somecrude drugs,
including wild
crude drugs andJapanese
peppers(0.6)
Raw material
expenseremains highStrengthen
competitive
purchasingsystem20.5

Impact from arise inmanufacturing
inputs for
extracts at the
Tianjin Plant,
etc.
Cost
reduction
through
improved
production
efficiencyt

Expansion ofcultivation andreduction of unit
cost throughautomation

+1.9

(0.9)

(1.7)

(4.3)

Rise in cost of
crude drug
imports due to
weak yen, etc.

39.5
billion yen

Stabilization
throughcurrency
hedgingbillion yen

FY 2023
Domestic
business
Operating profit

Sales increase

NHI drug pricerevision

Crude drug
procurement cost

Raw material
expenseProcessing expense,
etc.

Exchange rate

Investment, mainly tostrengthen the stablesupply system

FY 2024
Domestic
business
Operating profit(forecast)25

Domestic Business :The Status of Expansion for Information
Provision Activities
In FY 2023, detailing impact rose 140% versus the previous year, in particular epromotion growth was up 180%
In FY 2024, we plan to further expand information provision activities, mainly
through e-promotions
Detailing impact
Proprietary
medicalsite■ MR activities ■ e-promotions

e-promotions

Medicalplatform
etc.

Mobile app

Seminar

Breifing/

MR activities

presentations

Interviews

FY2019FY2020

FY2021

FY2022

FY2023

Forecast for FY
2024*Number of cases of detailing impact: Number of cases of information recognition from various channels, including MR activities and the Internet*e-promotions: Information provision, mainly through online lectures and video streaming*MR activities: Information provision via MRs + in-person lectures
INTAGE Healthcare Inc. survey, Impact Track

26

Domestic business: Trends in the Number of Physicians
Writing 10 or More Prescriptions for Kampo Pharmaceuticals
The number of physicians writing 10 or more prescriptions for Kampo pharmaceuticals

increased by approximately 23,000 physicians, a ratio of 39%
Aim to achieve a ratio of 50%-plus, owing to the implementation of hybrid promotions*Trend in the number of physicians writing 10 or moreprescriptions for Kampo pharmaceuticals*Survey by Tsumura

320,000 clinicalphysicians

50%
approx. 84,000
physicians

26%
End of FY2021

approx. 104,000
physicians

approx. 127,000
physicians

32％

39%

32%

End of FY2022

32%

End of FY2023

Over
50%

End of FY2024

First Medium-Term Management Plan

27

China business: Achieve operating profit• In the crude drug platform, we estimate sales CAGR of 30%• In FY 2024, we plan an improvement in the operating profit margin owing to an
expansion in scale that focuses on profitability

Net sales and operating profit margin in
the crude drug platform

Crude drug platform policy“Expand scale focusing on
profitability”• Emphasis on improving profit
margins• Expand sales mainly to business
partners that recognize the valueof high quality

25,00021.6 billion yen
18.7 billion yen

20,000(forecast)

0.3
0.25

Net0.2sales

15.3 billion yen
15,0000.15

9.9 billion yen
10,0005.2%

6%-plus 0.1
Operating profit
0.05
margin

5,000

0

0

2021

2022

2023

2024
28

Invest to further strengthen the stable supply system
Capex
34.0 billion yen■ Accelerate the bolstering of production capacity,
Improved productivity through automation,
newly establish a warehouse, etc.
Main investment activities

Total
investment

FY 2024 investment
amount*Approx. +15.0 billion yen YoY

PeriodTianjin Plant Phase 2 and Phase 3
construction(Manufacturing of Kampo powdered
extracts)

25.0 billion yen

9.5 billion yen

FY 2021 - FY 2026

Newly establish a manufacturing
process for Kampo powered extracts,
and a granulation packaging process

68.0 billion yen

10.5 billion yen

FY 2024 - FY 2027

Yubari Tsumura
Expand a crude drug warehouse

2.5 billion yen

1.5 billion yen

FY 2023 - FY 2025

■Additional manufacturing costs
Main activities

FY 2024 increase in value

Hike headcount to newly establish
manufacturing line, etc.

+1.0 billion yen

Strengthen prevention and maintenance,
secure warehouse, etc.

+1.5 billion yen

Expense:+2.5
billion yen YoY

29

Initiatives for the Visualization of Non-financial Value of Tsumura’s
Business Operations(1) Value of pharmaceutical products derived
from natural ingredients(2) Value in the Kampo value chain(3) Value of the organization and humancapitalApproach for Visualization Using an Optimal Analytic Method
ImpactAccounting

Yanagimodel*1

Value
relevance
Analysis*2

VTA (Value
Tree Analysis)*1: Model developed by Ryohei Yanagi employed in the “CFO Policy (CHUOKEIZAI-SHA HOLDINGS, INC. 2020)”*2: One analytic method in Digital ESG Data Analytics of ABEAM Consulting Ltd.

Other

30

Initiatives for the visualization of the relevance of prefinancial capital and corporate value improvement
Goal: Visualization of the relevance of initiatives related to pre-financial capital and thecorporate value improvement
Analyze issues through visualization to contribute to the improvement of initiatives

Analytic method: Overview (Yanagi model) analysis *1
・Value relevance analysis(Implement analysis: ABEAM Consulting Ltd., Digital ESG Data Analytics)◆ Example of analysis: Results of overview analysis (excerpt)

Employment

Work-life balance◆ Promotion rate (female employees)◆ Paid leave acquisition rate (All employees)

1% increase → PBR improved 0.27% after two years

Employee health◆ Health checkup rate
1% increase → PBR improved 12.72% after three years

1% increase → PBR improved 7.37% after two years◆ Average number of days of childcare leave taken (female
employees)
1% increase → PBR improved 1.25% after one year

◆ Average period of childcare leave taken (female employees)
1% increase → PBR improved 0.28% after two years

Implemented the aforementioned analysis (overview analysis/value relevance analysis) in FY2023 In the overview analysis, confirmed items with apositive correlation to pre-financial capital and PBR.
Implementing a detailed analysis of the results. In accordance with the analytical results, extract issues from each initiative to contribute toimprovements. Results of detailed analysis is scheduled to be disclosed. Plan to continue to implement this analysis.
*1: Analysis using the ABEAM Consulting Ltd. Digital ESG Platform in accordance with the model developed by Ryohei Yanagi based on the “CFO Policy(CHUOKEIZAI-SHA HOLDINGS, INC. 2020)”

31

ROE Improvement: Quickly Realize a Positive Equity Spread Early
On and Expand
Announced on November 7, 2023

ROE=

Earnings
power

×

Total
assetsturnoverrate

×•Secure financial
soundness and pursue an
optimal capitalcomposition•

Use interest-bearing debt•

Equity ratio of 50%-plus

FY 2024 Target Level•

Net sales growth•

CCC improvement

ROE 10％•

Reduce cost of goods sold••Curb the SG&A ratio

Manageable level ofcash and deposits•

The China business aims tosecure a profit margin thatis equivalent to or higher
than the profit margin in
the domestic business•

Sale of crossshareholdings•

Improving capital
investment efficiency

Existing
businesses

ROE of 8%
or moreFinancialleverageetc.

*Cost of equity: approx. 7%
Calculate using the CAPM
Risk free rate: 2%; Risk premium: 6%, β value: approx. 0.8*Equity spread = ROE － Cost of equity

32

Capital Efficiency Improvement: Initiatives to Improve the Balance
Sheet
Improved B/S by curtailing the collection site for accounts receivables anddecreasing cross-shareholdings

Curtail the collection site foraccounts receivables
Negotiate with business partners oncollection sites for accounts receivables andReduce in stages byapproximately 20%

Decrease cross-shareholdings
Based on a policy with a principle of zero

From FY 2024, aim to realize fullfledged reduction and cut by halfearly on*Excluding shares with a purpose of forming a capital and business alliance33

Cash allocation
In addition to the Operating CF, create cash by improving the balance sheet, and allocate
to the further growth of shareholder returns and business operations

Cash allocation(FY2024)
Operating CF
20 billion yen

Cash allocation(FY2023)
Operating CF
5.6billion yen

16.6 billion yen

Business
infrastructure
investment
Growthinvestment
20 billion yen

Other

Shareholder returns

Cash inCash out

Balance sheet
management

Balance sheet
management
30 billion yen

Business
infrastructure
investment
Growthinvestment
38 billion yen＋α
Shareholder
returns

9billion yen

Bond redemption+ Borrowings

15 billion yen

Cash inCash out

5.1billion yen

34

Shareholder returns
3.6%• In FY 2023, per-share dividend hiked to 85 yen
180• In FY 2024, we expect to payout a dividend of 136 yen in accordancewith the shareholder return160policy• Aim for the realization of a DOE of 5%
140

Target level
Published on November 7, 2023

Existing Businesses

DOE of 4％-plus

Fiscal year40
end
dividend

20
Interimdividend

yen per share
2.5%+51 yen per
Dividend hike

+21 yen per

85

share

yen per share

Dividend hike

60

3.0%

share

100

＝Dividend payout ratio of
50％ × ROE of 10％

2.0%

DOE（％）

80

136

2.5%

120

DOE 5％

3.5%

64 yen per

64 yen per

share

share

2.0%

68

1.5%

1.0%

50
0.5%

32

32

68
32

32

35

0.0%

-0.5%

0

-1.0%

2013
- 2021
2021

2022

2023

2024
forecast
35

Agenda01

Moving Towards Realizing the Long-Term Management
Vision―TSUMURA VISION “Cho-WA” 2031

02

Business Results for Fiscal 2023 andEarnings Forecast for Fiscal 2024

03

Progress in US development (TU-100)36

Progress in US development (TU-100)

Head of the International Pharmaceutical Research & Development Division

Atsushi Kaneko
TU-100: Developmental and investigational drug manufactured from a crude drug with the same composition as Daikenchuto for the domestic market

Today’s Agenda
1. Complete Patient Enrollment for the Late Phase II Trial for TU-100
2.

Tackle TU-100 US Development

3.

Outlook Going Forward

38

Chapter 1
Complete Patient Enrollment for the Late
Phase II Trial for TU-100

39

1-1. Summary and Trends for the TU-100 Trial
https://clinicaltrials.gov/ct2/show/NCT04742907?term=TU-100&cntry=US&draw=2&rank=7

Target disease: Postoperative ileus (POI)
Trial format: Multi-center, randomized, double-blind, placebo-controlled trial
Target cases: 402 cases
Group structure: 15g/day group, 7.5g/day group, placebo group
Patient enrollment period: July 2021 - March 2024 (Two years and eightmonths)Main endpoints: Recovery time for gastrointestinal functions

The COVID-19 pandemic broke out in and after 2020. And given that rivals
halted and/or suspended development,
we completed patient enrollment with a target sample size of 402
cases in March 2024!
40

1-2. TU-100 US Development System

Proceed as an amazing “single team”

Digestive surgeons in US(Global KOL well-versed in POI)

Digestive surgeons in Japan(Physicians that well-versed in POI andprescribesTU-100)
Tsumura International
Pharmaceutical Research& Development
Project member

Former FDA examiner(FDA application consultation)

Consultant well-versed in FDA
applications related to CMC
CMC: Chemistry, Manufacturing and Control

Medical consultants(Experience in developing POI
treatment)

World-leading global CRO

US pharmaceuticalaffairs consultant
41

1-3. Initiatives for the TU-100 Trial

Multi-center, randomized, doubleblind, placebo-controlled trial, being
participated in by 43 medical centersin the US

Direct and detailed
communication withcenters participating in
the trial

Execute under a strict
safety management
system by setting up adata safety monitoring
committee

Secure Kampo formulation
manufacturing management
technology and reliability tominimize lot-to-lot variation
Provide a placebo drug thatutilizes the same manufacturingknowhow

Reconfirm medical needs to treat POI and expectations in herbal medicines
42

Chapter 2
Tackle TU-100 US Development43

2-1. Origin of TU-100 US Development

In the US, domains in which the use of Western
drug treatment is a difficult, we aim to help
treatment for US patients through the developmentof Kampo formulations that will have a specificeffect for diseases!

44

2-2. History of TU-100 US Development

Going from unscientific to scientifically verified
2007 - 2015

Obtaining Evidence for
Daikenchuto*
Stomach andesophagus team

2009
Daikenchuto adorned the introduction of“SURGERY,” a US medical journal
Kono T, Surgery 2009

Liver surgery
team

2016
Release “botanical drug development guidance”, which wasrevised by the US FDA
2016
Launch the “Study group on the Future Vision
for Kampo—Responsibility for People’s Healthand Healthcare” in collaboration with industry,
government, academia and related organizations

Colon team
Clinical
pharmacology
team
Basic
pharmacology

Scientific evaluation of safety andefficacy of Daikenchuto in thegastrointestinal area

Kampo medicine symposium at the World
Congress of ISS/SIC
Australia (2009)
Finland (2013)#DKT Forum: Established in 2007 with the purpose of building up
clinical evidence for diseases and symptoms targeted by Daikenchuto
owing to support from gastrointestinal surgeons who are KOLs.
Announced research results, including at academic conferences inJapan and abroad, opportunity to promote the international
development of Kampo medicine.

2018
Consolidate TU-100 US
development into POI
Move on to late phase II
trial!

Recommendations from the “Study Groupon the Future Vision for Kampo—
Responsibility for People’s Health and
Healthcare” (Section 5)
Promote overseas deployment of

Kampo formulations

Boost the degree of international focus on Kampo medicines45

2-3. Survey on the marketability and treatments for POI disease
POI (Postoperative ileus) is an unmet medical need
POI is a• Pathological condition that impairs the peristaltic action of the intestinal
tract due to abdominal surgery• There are main causal factors and the progression of the disease iscomplex

US market evaluation of POI medicines: US HCUP database• The probability of POI occurring is high in digestive system surgeries
Colectomy: 14.90%, other types of gastrointestinal resections: 18.63%• The number of digestive system surgeries to continue to increase going forward• The only treatment for POI is Alvimopan (μ-opioid receptor antagonist)
This data are the results of an analysis implemented in 2021 based on IQVIA data and a survey.
IQVIA assumes no responsibility for any impact brought about from the use of these results.

46

2-4. Unique Mechanism of Action of TU-100

Three mechanismsof action
・Kubota K, Neurogastroenterol
Motil. 2019
・Yoshikawa K, Surg Today 2012

✓ Multi-component/multi-targeted
drug therapy✓ Enrich clinical and basic research✓ Component crude drugs and main
pharmacological ingredients・Japanese peppers

Promotes
intestinal motilityhydroxy α-sanshool

TU-100
Increase inintestinal
blood flow
・Kono T, Am J Physiol Gastrointest
Liver Physiol. 2013
・Suzuki K, PLoS One. 2021

Anti-inflammatory

・Ueno N, PLoS One. 2019
・T Hayakawa,
J Smooth Muscle Res. 1999

・Dried ginger[6]-shogaol

・Ginseng
ginsenoside Rb1

Pharmacological effects owing tocompound actions47

2-5. Transition in US FDA Botanical Drug Guidance
US FDA released the first edition of the “Botanical Drug Guidance” in June 2004
Guidance for Industry on Botanical Drug Products
Measures to promote the development of herbal/botanical pharmaceuticalproducts after presenting clinical evidence on the same level as a small-moleculesynthetic drug:→ Many herbal (botanical) drug manufacturers around the world applied for clinical trials
and tackled development in the US→ Issues arise that are unique to the quality control and clinical evidence regarding herbal(botanical) medicine (product)
December 2016: Released a revised edition of the “Botanical Drug Development Guidance”
Botanical Drug Development: Guidance for Industry
Keyword: Totality of the Evidence
Regarding the ambiguity of safety and efficacy unique to botanical medicines(products), clarify evidence with respect to clinical evaluations,chemical/manufacturing management, management of raw material crude
drugs, and biological quality control, and mutually request consistent
management controls:→ Promote development of botanical medicine (products) that fulfills the standardization ofhigh quality, naturally including those dealing with safety and efficacy

48

2-6. Development Requirements for Botanical Medicines (Products)
Sought by the US FDA
Source: Revised Botanical Drug Development Guidance 2016 materials released by the US FDA

Approach unique to herbal medicines with large fluctuations in quality
Drug quality control
Selection of production area/GACPGACP: Good Agricultural and Collection Practice
CMC: Chemistry, Manufacturing and Control

Management items forsynthetic drugs
Phase Ⅲ clinical trial
Verification of the span ofcomponent control

Totality of
the Evidence

CMC development
Manufacturingmethod/quality assessment
Management of all active
components
Management of all component
ingredients

Clinical trials of several batches

Bioassay development
Quantification of drug efficacy

In herbal (botanical) medicines(products), full-scale
management is not possible

Evaluate everything objectively/comprehensively, and derive highly reliable quality control methods49

2-7. Development Requirements for Botanical Medicines (Products)
Sought by the US FDA: Drug quality control
GACP: Good Agricultural and Collection Practice
GACP, basic structuresource: Tsumura INTEGRATED REPORT 2023

Furthermore, the FDA requires the following:✓ Develop a DNA testing method to confirm original (source) plants

Scientific✓ Identify specific compounds from among plant species, and quantify as a management indicator✓ Select and fix focus on several crude drug production areas that are geographically adjacent→ Conduct a comprehensive physical chemistry examination of each crude drug lot, acquire crude drug quality in set
production areas over a 3-5 year period, and geographically manage over time the quality originating from eachproduction area

Specific

Stable supply of
uniform crude
drugs
50

2-8. Development Requirements for Botanical Medicines (Products)
Sought by the US FDA: CMC development
Features of botanical medicines: Variations between lots inevitable
CMC: Chemistry, Manufacturing and Control• Multi-components (mix of diverse compounds)• Extremely difficult to identify all substance levels• Differences between lots, including variety of raw material plants, cultivation areas,
harvest years, weather and agricultural methods

Physical and chemical analysis of the TU-100 powdered extract

Meanwhile, the optimal strength of Tsumura is
its “crude drug production control/lot

management technology”

The assessment of the validity of thewidth in variation is determined bymaking a comparison with the results ofclinical trials and bioassay trials

51

2-9. Obtained Results and Ripple Effect owing to US
Development of TU-100 ❶Results

Ripple effect

1. Clinical trial on safety/efficacy

Acquire evidence for TU-100 and deepen
understanding of pharmacology

2. Intestinal bacteria research

Accumulate knowhow for intestinal bacteria
research

3. Human blood pharmacokinetics

Pioneer of the same trial method for plant
extraction formulations. → Enhance package
insert4. Survey on frequency of sideeffects

Quantify safety data for Kampo medicine
owing to a scale of data consisting of 3,000
cases

5. Build a crude drug reference
database

Establish a method for a raw material crude
drug lot comparison and management using a
principal component analysis

6. Systemize the quality control
method in accordance with
global standards

Implement PIC/S GMP andGACP in Kampo
manufacturing

PIC/S : Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme.
GMP: Good Manufacturing Practice. Standards related to manufacturing management and quality control

Expand/apply toother Kampo
medicines

Improve thequality of
Kampo
medicine

GACP: Good Agricultural and Collection Practices.

52

2-10. Results Obtained from the US Development of TU-100❷
Build up evidence for TU-100
Accumulate pharmaceuticaldevelopment knowhow
•
•
•
•
•
•

Clinical trial on safety/efficacy
Intestinal bacteria research
Human pharmacokinetics trial
Survey on frequency of side-effects
Build a crude drug reference database
Systemize the quality control method in
accordance with global standards

Positive results
for the Kampo
industry overall

TSUMURA VISION
Realize “Cho-WA” 2031

Results[PHC] Personalized Health Care[PDS] Pre-symptomatic Disease
and Science[PAD] Potential-Abilities Development

Realize the recommendations of the “Study Group on the Future Vision for
Kampo—Responsibility for People’s Health and Healthcare” (Section 5)+

Recommendation 5: Promote the overseas deployment
of Kampo formulations

Recommendation 1: Necessity of Kampo formulations in medicine
Recommendation 2: Promote research with respect to Kampo
formulations, etc.

PHC：Personalized Health Care, PDS ：Pre-symptomatic Disease and Science, PAD：Potential-Abilities Development
53

Chapter 3
Outlook Going Forward54

3-1. Short-Term Plan
• Analysis of TU-100 clinical trial data (summer)• Address FDA inquiries on the CMC※１ development strategy• Propose alliance activity policy

Reset the master schedule for TU-100 US
development
Development activities for Phase III trial※２※１

CMC: Chemistry, Manufacturing and Control※2

Assuming success of late stage PII clinical trial

55

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.

56

Appendix

Domestic Business: NHI Price Revision Ratio
In the NHI price revision in FY2024, 66 prescriptions will be subject to recalculation of unprofitable products, with a weighted average increase of+21.6%.
2024

＋21.6
20.0

Changes in NHI price revision rate (%)
TSUMURAOverall Ethical Drugs
2023

+2.3
2012

2014

(3.0)

(3.0)

(3.8)
(6.0)

2016

(5.6)

2018

(3.1)

2020

2019

(1.8)

(0.4)

(4.4)

(5.6)
(7.5)

2021

0.0

2022

(0.9)

(4.4)

(4.6)
(6.7)

Revision rates for 2021 and 2023 are not disclosed because they are mid-year revisions.
58

Raw Material & Energy Expense Trends
Expense for raw materials used in the manufacturing of Kampo
formulations and energy remain high level(100 million yen)
35

Soaring30

FY2022

Normal25

Remain highFY2023

EnergyexpenseFY202120
15

Rawmaterial
expense

10
5
0

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

59

Crude Drug Procurement Costs:
Procurement Price Index of Raw Raw Crude Drugs from China
400

100%
90%

350

80%
300

241 190250

230 217

156

200

150

234

188 202 194 189 202

223 223 239

100

36 36

50

60%
50%

84.6
79.6
78.4
77.8
71 72

100 117 110 110

70%

50.4

40%
30%
20%
10%

0

2006

2007

2008

2009

2010

2011

2012

4

6

2013

2014

Ratio of proprietarily

系列3
自社管理圃場比率
managed fields

0%

2015

2016

2017

系列1
Tsumuraprice index
当社価格指数

2018

2019

2020

2021

2022

2023

系列2
Market price index
市場価格指数*1 Tsumura price index: Average weighted price based on the amount used by the Tsumura Group (2006 indexed at 100)
*2 Proprietarily managed fields: Direct guidance by the Tsumura Group on cultivation can be performed, making it possible to grasp costs incurred during cultivation and set prices
based on this. In the medium and long term, in comparison with the market, it will be possible to realize superior and stable procurement of high quality andhigh value crude drugs.

©2022 TSUMURA & CO. All Rights Reserved.

60

Crude drug procurement cost: Trends in unrealized profit
Resume operation of a portion of manufacturing lines at the Shanghai Plant, which
was shut down for renewal construction, and increase unrealized profit owing to arecovery in the inventory for intermediate products in line with the start of
shipments of powdered extract from the Tianjin Plant which acquired a license (inline with plan)
2.5 billion yen

Trends inunrealized profit
Halt all manufacturing lines forapproximately two months intandem with renewal construction
at the Shanghai Plant
Unrealized profit declined due
to decrease in inventory forintermediate products

Increase(deterioration in costof goods sold)

0.4 billion yen

FY 2022
4Q

FY 2023
1Q

FY 2023
2Q

FY 2023
3Q

FY 2023
4Q
61

Domestic Business: Increase in production capacity
・In fiscal 2024, we will increase production capacity through full operation of thefirst phase in Tianjin and completion of the renewal of the Shanghai plant.
・Promote construction and early operation of the 2nd and 3rd phases in Tianjin
Tianjin 2nd
Phase Fulloperation※

Production Capacity
Tianjin 1st
Phase Fulloperation※

Tianjin 2nd phase construction

Tianjin 3rd phase construction*Time until full operation
・Completion of construction → Validation→ Full operation: about 1.5 years
・Full operation → Full operation:
approx. 1.5 years

Shanghai Plant to be shut down
for renewal※ to be completed andscheduled to resume operations
in summer 2024.

2022

2023

2024

2025

2026

2027

2028

62