Third Quarter Business Resultsfor Fiscal 2020

Feburary 8, 2021(Monday)

Director,
Managing Executive Officer and CFO

Muneki Handa

1Third Quarter Business Results for FY 2020
(Million yen)

FY 2020
3Q actual

Net sales

FY 2019
3Q actual

YoY

AmountChange99,482

95,185+4,296+4.5%

17,560(17.7%)

16,151(17.0%)+1,409+8.7%

Ordinary
profit18,136

16,675+1,461+8.8%

Profitattributable

13,356

11,690+1,665+14.2%

Operatingprofit(Operating profit
margin)to owners of parent

0%

Ratio to total sales

20%

40%

80%

100%

Prescription Kampo Products

91.6%
0.4%

医療用漢方製剤60%

Other prescription pharmaceuticals

Healthcare

3.3%

4.7%

External sales by consolidated subsidiaries

2■Third Quarter Business Results for Fiscal 2020
Page 2 shows a summary of third quarter business results in FY 2020.
As we announced at our earnings presentation on February 5, we revised
our earnings forecast, the details of which I will explain later.
As you can see, in the third quarter, net sales and profit rose year-on-year
despite impact from COVID-19.
Net sales totaled ¥99.4 billion, a growth of 4.5% year-on-year.
Operating profit was ¥17.5 billion, an increase of 8.7% year-on-year,
ordinary profit came to ¥18.1 billion, an expansion of 8.8%, and quarterly
profit attributable to owners of parent totaled ¥13.3 billion, a growth of
14.2%.
Our operating profit margin rose 0.7pts year-on-year.
The graph for sales ratios shows that external sales by consolidated
subsidiaries accounted for 4.7% of total sales, with external sales by
consolidated subsidiaries in China making up 3.9% of total sales.

2Key Points in Performance
Consequently, net sales and profits were up in comparison withthe same period a year earlier.

Net sales

99,482

million yen

YoY

+4.5%

◼

Net sales rose 4.5% year-on-year owing to the consolidation of a subsidiary in China.

◼

Sales of the 129 prescription Kampo products climbed 0.5% year-on-year.

◼

Sales of healthcare products including OTC Kampo medicines increased 17.4% year-on-year.

Operating profit

17,560Operating profit
margin17.7%

million yen

YOY

+8.7%

YOY

+0.7pt◼

The cost-to-sales ratio was 41.5%, a rise of 0.4pt year-on-year. Although crude drug-related
costs were absorbed by a rise in NHI drug price revisions, the increase in the cost-to-sales
ratio reflects impact from external sales in China.

◼

The SG&A ratio totaled 40.8%, a decline of 1.1pt year-on-year, mainly reflecting unused
expenses in tandem with restricted activities due to impact from COVID-19.

Ordinary profit

18,136

million yen

YOY

+8.8%

Profit attributable

13,356

million yen

YOY+14.2%

to owners of parent

3■Key Points in Performance
Page 3 depicts key points in performance.
Net sales totaled ¥4.2 billion, a growth of 4.5% year-on-year. This reflects acontribution of ¥3.5 billion from external sales owing by Ping An Tsumura
Pharmaceutical Co., Ltd. (former Tianjin China Medico Technology Co., Ltd.),
which became a consolidated subsidiary in March 2020.
Sales of the 129 prescription Kampo products climbed 0.5% year-on-year.
This was despite the two NHI drug price revisions in October 2019 and April
2020, and impact from a curb in medical exams at and restrictions on
visitations to medical institutions.
Sales in healthcare, which includes OTC medicines, rose 17.4% year-on-year
owing to brisk store and online sales.
The cost-to-sales ratio was 41.5%, a rise of 0.4pts year-on-year.
Although we absorbed impact from NHI drug price revisions with a decline incrude drug-related costs, the cost-to-sales ratio rose on impact fromexternal sales in China.

The SG&A ratio was 40.8%, a decline of 1.1pts year-on-year.
In addition to a reduction in expenses due to COVID-19, we reallocatedresources, including the establishment of a new environment. However,there was a substantial decrease in expenses in tandem with a change inactivities.
3

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

FY 2019
3Q

FY 2020
3Q

YoY

Drug-fostering program
formulations

1

100

Daikenchuto

8,023

8,005

(18)

(0.2)%

2

54

Yokukansan

6,028

6,068

40

0.7%

4

43

Rikkunshito

5,726

5,806

80

1.4%

8

107

Goshajinkigan

2,813

2,786

(27)

(1.0)%

24

14

Hangeshashinto

1,094

1,093

(1)

(0.1)%

23,68523,75973

0.3%

Total sales for drug-fostering program formulations

41

Hochuekkito

5,589

5,986

396

7.1%

5

68

Shakuyakukanzoto

4,112

3,956

(156)

(3.8)%

9

29

Bakumondoto

3,682

2,714

(967) (26.3)%

724

Kamishoyosan

3,621

3,765

143

4.0%

6

17

Goreisan

3,522

3,850

328

9.3%

Total sales for growing formulations

20,52820,273(255)(1.2)％

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

46,507

47,108600

1.3%

Total sales for 129 prescription Kampo products

90,722

91,141419

0.5%Growing formulations

3

4■Sales of Prescription Kampo Products (Drug-fostering
Program/Growing Formulations)Page 4 outlines sales of drug-fostering program formulations and growing
formulations.
Sales of the 129 prescription Kampo products stood at ¥91.1 billion, up
0.5% year-on-year. This was despite impact from NHI drug price revisions.
Sales of drug-fostering program formulations came to ¥23.7 billion, a rise of
0.3% year-on-year.
Sales of the growing formulations came to ¥20.2 billion, a decline of 1.2%
year-on-year.
The number of patients with a common cold or influenza decreased.
Reflecting this factor, Bakumondoto sales, one of our cold-related
formulations, dropped sharply year-on-year.
Sales of the 129 prescription Kampo products, on a volume basis, grew
1.6% year-on-year.

4

COVID-19 Impact■ Comparison with the prescription pharmaceutical market
Prescription
pharmaceutical market(3.2)%

Tsumura

+1.6%
(YoY)

(Drug price basis)

Gap with market: 4.8pt
Copyright © 2021 IQVIA.
Estimated based on IQVIA JPM Apr.2019-Dec.2020.
Reprinted with permission■ Sales trends by sales channel(Actual sale/selling price basis)

General clinics+2.3%(Ratio to total sales: 77%)

(YoY)

Hospitals(Ratio to total sales: 23%)(2.6)%(YoY)

Although prescriptions for cold-related products
declined, prescription growth was positive mainly forthe treatment of skin diseases and mental disorders
Substantial impact due to restricted activities
Decline mainly in the number of outpatients andsurgeries performed
5■COVID-19 Impact
Page 5 covers the impact of COVID-19.
The growth rate year-on-year on an NHI drug price and actual sales basis
was +1.6%, a gap of 4.8pts with the negative 3.2% growth of theprescription pharmaceuticals market.
Looking at sales trends by sales channel, sales to general practitioners (GP)rose 2.3%. Although there was a drop in sales of cold-related formulations,prescription growth was positive, mainly for the treatment of skin diseases
and mental disorders.
Sales to hospitals (HP) were down 2.6%. This reflects the ongoing sales
activity restrictions as well as continued impact from a decline in the numberof surgeries and outpatients.

5Positive/Negative COVID-19 Impact
Skin irritation due to change in living
environment and due to the use of masks
3,056
Million yen（67prescription）+

Hochuekkito(Fatigue, decline in stamina)

Bofutsushosan (Obesity)
Kakkonto (Headache, fever)Jumihaidokuto (Dermatitis)

3Q (Oct-Dec)

Hangekobokuto(Anxiety, insomnia)

Kamishoyosan(Irritability, anxiety)

Shosaikotokakikyosekko (Tonsillitis) Maoto－

Shoseiryuto(Bronchitis, nasal inflammation)(2,637)
Million yen（62prescription）

Bakumondoto(Cough, bronchitis)(Influenza, rheum/catarrh)

Chikujountanto(Influenza, common cold)

Decline in the number of patients with
influenza or the common cold

6

■Positive/Negative COVID-19 Impact
On page 6, we will discuss the positive and negative impacts of COVID-19.
There is rising anticipation that Kampo will alleviate symptoms but on theother hand there was also negative impact.
In the third quarter, of the 129 prescription Kampo products, the number ofgrowth prescriptions on a shipment value basis is as follows. We arranged
those prescriptions, for which we analyzed COVID-19 impact was particularly
large, by the degree of change year-on-year.
As you can see, as a positive impact, these prescriptions exhibited
substantial growth owing to obesity in tandem with changes in the living
environment and skin irritation due to the use of masks.
As a negative impact, demand for cold-related formulations, including
Bakumondoto, dropped sharply, mainly due to a decline in patients with thecommon cold or influenza.
As shown in the portion in the bold lines, in the third quarter (three months),
sales of formulations related to mental disorders, including mental instability,
grew. Meanwhile, sales of formulations with indications mainly for influenza
declined.
6Factors Triggering Changes in Operating Profit(YoY)(Million yen)

+2,528(Million yen)

Changes in sales cost margin：(410) Breakdown

(410)
(709)
17,560

Unit selling price/composition(497)

Crude drug cost/
Raw material cost

+1,492

Processing cost+198

External sales in China

16,151(1,603)

Changes in SG& A expenses：(709)Breakdown

Profit impact
Profit impact
3Q FY 2019
3Q FY 2020
Profit impact
Operating due to changes due to changes from changes in Operating
in
sales
cost
SG&A expenses
in salesprofitprofitmarginSales-related expenses(495)

R&D expenses(184)

Travel/transportation
expenses

+677

Other

(707)
7

■Factors Triggering Changes in Operating Profit (YoY)
Page 7 features factors triggering changes in operating profit.
Operating profit increased to ¥17.5 billion, a rise of ¥1.4 billion year-on-year.
Factors include a positive impact of ¥2.5 billion owing to sales growth, ofwhich there was a contribution of ¥2.1 billion from external sales in China.
Impact due to an increase in a cost-to-sales ratio detracted from operating
profit by ¥400 million. Although the decline in crude drug-related and raw
material expenses absorbed the increase in impact from sales unit price andmix owing to NHI drug price revisions, there was the impact from externalsales by a subsidiary in China which was newly consolidated in FY 2020.
Impact due to an increase in expenses was a negative ¥700 million. Travel
and transportation expenses dropped approximately ¥600 million due torestrictions on sales activities. However, sales-related expenses rose intandem with an expansion in sales, including in the China Business, while
R&D expense, including that related to COVID-19, increased.

7

Financial Condition/Cash Flow Position(Million yen)

FY 2019(March 2020)

Total assets

FY 2020
3Q

ChangeNon-current assets

116,753

113,584(3,168)97,99385,356 (12,636)

Current liabilities

48,47644,995(3,481)

Non-current
liabilities

49,51640,361(9,155)

Total net assets

213,048

227,538

14,489

66.0%

68.1

2.1pt

FY 2020
3Q

ChangeTotal liabilities

Equity ratio

FY 2019(March 2020)

Inventories

73,31075,397

2,087

Merchandise andfinished goods

10,338

11,973

1,634Work in process

12,41813,4191,000

Raw materials andsupplies

50,55350,005(548)+126 (49)(97)+35 590576(1)

Cash and cash
equivalents at end of
period5,021

New consolidation

199,310Impact of exchange ratetranslations

194,288

Financing activities

Current assets

Investing activities

1,852

Operating activities

312,895

Cash and cash equivalents at
beginning of period

311,042(Hundred million yen)

8

■Financial Condition & Cash Flow Position
Page 8 covers our financial condition and cash flow position.
As you can see, this slide shows a comparison in financial condition and cash
flow position with the end of the prior fiscal year (end of March 2020). I will
explain the key points.
In current assets, inventory assets increased ¥2 billion. This breaks down to anincrease of ¥1.6 billion in products, a rise of ¥1.0 billion in work in progress,
and a decrease of ¥500 million in raw materials and supplies.
The increase in products and work in progress reflects a rise in productinventory for external sales in China and impact from the No. 3 SD building at
the Ibaraki Plant, which came on line in June 2020.
Non-current assets declined ¥3.1 billion. This breaks down to an increase of¥6.3 billion in property, plant and equipment in tandem mainly with the newconsolidation of Tsumura Shengshi Pharmaceuticals in FY 2020.
Meanwhile, intangible assets decreased ¥500 million. This was primarily
attributable to a ¥9.2 billion drop in investment and other assets chiefly
accompanying the eliminations for investments and loans provided to a
subsidiary and also reflecting goodwill amortization owing to the acquisition ofequity in Ping An Tsumura Pharmaceutical Co., Ltd. (former Tianjin China
Medico Technology Co., Ltd.).
Total liabilities retreated ¥12.6 billion. This mainly reflects the repayment ofshort-term debt by a consolidated subsidiary in China.
Our equity ratio stood at 68.1%.
Our cash flow performance is as shown.

8

Roadmap to Realizing Long-Term Vision
2018

2019

2021 2022

Becoming a value-creation company that contributes to people’s
health through its Kampo business

Third Medium-Term Management Plan

Growthinvestment

Consolidated net sales

135.0 bn yen-plus

Continued expansion of the
Kampo market

Jump

Vision for Chinese
operations Ratio ofoverseas sales in FY 2027

50%-plus

Domestic business●Establish Kampo medicine business

Building foundations for
Chinese operations
Consolidated net
sales results

120.9

billion yen

FY 2020 consolidated earnings forecast(revised)

130.5 billion yen

One-in-two doctors writes 10 ormore Kampo prescriptions

Chinese operations●Contribute to health of China’s citizens
Become the most trusted traditional
Chinese medicine company in China

Strategic challenges
1. Sustainably expanding the Kampo market andestablishing a presence
2. Investing in growth and building business foundationsin China
3. Improving productivity using new technologies—AI, robotization, RPA

4. Fostering a corporate culture through philosophybased management and developing diverse humanresources
5. Promoting SDGs through the Kampo Value Chain
9■Roadmap to Realizing Long-Term Vision
Page 9 illustrates our roadmap to realizing our long-term vision.
In the Third Medium-Term Management Plan, we aim to achieve
consolidated net sales of ¥135.0 billion-plus by continuing to expand the
Kampo market in Japan and by building a foundation for the China business,with the view of making growth investment. In FY 2020, our initial plan forconsolidated net sales was ¥132.0 billion. However, we revised this to¥130.5 billion.
We aim to undertake actions to achieve this goal, despite a partial delay insome activities due to the impact from COVID-19.

9

Three Important Domains in the Domestic Market◼

Positioned geriatric health; cancer (supportive care) and women’s health as the threeimportant domains and aim to concentrate our activities in these domains◼

We plan to deploy a sales approach in the drug-fostering program formulations,
growing formulations and three important domains

Psychiatric andneurological disorders
D

Yokukansan+ related
formulations

Respiratory diseases

G Bakumondoto+ related
formulations(supportive care)

Women’s healthdomainMitigation of side effects, etc.

Diseases specific to womenCancer domain

Geriatric health domain
Digestive systemdiseasesD

Rikkunshito

D

Rikkunshito

D

DaikenchutoD

HangeshashintoD

Goshajinkigan

G Hochuekkito+ related
formulations+ related
formulations

Goreisan + related formulations

D

Drug-fostering program formulations

Kamishoyosan+ related
formulations

Other diseases and symptoms
D

Peripheral symptoms for circulatory disorders

G

G

Daikenchuto

G Goreisan+ related
formulations

G Growing formulations
10■Three Important Domains in the Domestic Market
The three important domains in the domestic market are shown on page 10.
In the three important domains in the domestic market, while being
impacted by COVID-19, we plan to deploy a sales approach by continuing to
implement the various measures we have been conducting thus far.
In the geriatric health domain, as a key measure related to dementia andfrailty, we are pouring energies into the provision of information, including
information pertaining to Yokukansan and Ninjin' yoeito.
In addition, we plan to continue to expand the Kampo market from FY 2020,
in addition to treatments for peripheral symptoms for circulatory disorders.
Circulatory disorders are frequently treated using Western medicine. Given
this, expectations are rising for the use of Kampo in the treatment ofaccompanying symptoms and symptoms that are unnamed in Western
medicine.
On January 23, 2021, we hosted the "CARDIOLOGY KAMPO DAY," an online
lecture in the field of circulatory disorders. More than 8,000 physiciansviewed the lecture. We realized just how high the level of interest wasamong cardiovascular physicians.
10Tsumura’s Ideal Information Provision

Visitations + e-promotion
Easy

Visitation activities

Real(In-hospital briefings/information provision)

Visitations
Real

VisitsDigitalDigitalMR

Difficulte-promotion

DigitalActivities via
e-promotion

Visits and interviews by MRs
Lectures and workshops heldat venues(Kampo medicine and evidence, including
practical skills*1)

Remote provision of
information(Briefing/digital pamphlet)

Online lectures/workshops(Kampo medicine and evidence)

Website for medical
practitioners(On-demand videos, CME digital*2)*1 Practical skills: Abdominal, tongue, pulse and other exams used in Kampo
diagnostics*2 CME digital : Lifetime education on Kampo medicine for medical
practitioners, including physicians(Continuing Medical Education)
11■Tsumura’s Ideal Information Provision
On page 11, we will discuss Tsumura’s ideal information provision.
We believe that due to the impact of COVID-19 even we need to make atransformation over to information provision activities that focus on the
future.
We plan to enhance our information provision activities through epromotions, in addition to information provision activities via visitations.
We will go into detail on e-promotions on the next page.

11

e-promotion= New form of information provision activitiesMR
Use various tools, including
Zoom and LINE WORKS

Remoteinterviews
Provision of
information via MR
visits to physiciansthat are difficult toapproach

Remotepresentations
Provision of information
by MRs that meet theneeds of doctors

Owned media
Website for medical
practitioners
RenewalOn-demand
videosPossible to view atanytime and as manytimes as wanted

Paid media

Online lectures
Provision of informationby lecturers to target
medical institutions
nationwide

m3.com, Nikkei Medical, etc.
12

■e-promotions
We will discuss e-promotions on page 12.
We plan to deploy the e-promotions shown here through MRs, owned media
and paid media.
One example of e-promotion benefits is that it is possible to conduct Kampo
product introductions that are not limited to a single product, and implement
presentations simultaneously regardless of the clinical department using anapproach for various symptoms. Utilizing this point, we are expanding
opportunities to provide information by holding real-time presentations thattarget medical institutions nationwide from Hokkaido to Okinawa.
At present, we are pushing forward with the renewal of our website, owned
media, for medical practitioners.
We plan to establish environments where physicians can learn about Kampo
medicine throughout their lifetime, and also arranging the environments forlearning about Kampo on videos and to view online lectures live.

12

Mega Web Lectures【Target】 Physicians that write nine or less Kampo prescriptions andphysicians that do not write Kampo prescriptions

1Q-3Q actual ■No. of times held: 6; ■Total number of viewers: 133,727
3Q themes
Are there opportunities
for the use of Kampo intreating heart failure
in seniors?
—7 symptoms and 11 formulations
to remember—Cold sensitivity and qi,
blood and fluid in women

Prescription

Lecturer

Goreisan, Mashiningan,
Hochuekkito, Daikenchuto, Dr. Junichiro Dokura
Goshajinkigan, Ninjinto, Dokura Medical Clinic
etc.

Date held
No. of viewers

October 14
23,214 viewers

Tokishigyakukagoshuyusho
December 14
Dr. Aya Maruyama
kyoto
Kasumigaseki Building Clinic 25,922 viewers
Unkeito(YoY)

Prescription

Prescription

Goreisan+9.3%

Daikenchuto(0.2)%

Mashiningan+8.7%

Unkeito(0.4)%

Hochuekkito
Tokishigyakukagoshuyu
shokyoto+7.1%

Goshajinkigan(1.0)%

Ninjinto(4.0)%+4.0%

13■Mega Web Lectures
Mega Web Lectures are covered on page 13.
Mega Web Lectures mainly target physicians that write nine or less Kampo
prescriptions and physicians that do not write Kampo prescriptions.
In FY 2020 thus far, we have held six lectures, which were viewed by a totalof 133,000 physicians. We attract around 20,000 viewers to each lecture.
The lecture held in December reached a record high of 25,000 viewers.
The table below addresses lectures held in the third quarter and depicts thechanges year-on-year for key prescriptions.
We recognized a certain degree of benefit from Mega Web Lectures thus far.
Going forward, we plan to shift to a medium-scale format and aim to further
create viewing opportunities by increasing the both number of themes invarious fields and the number of lectures to be held.

13

Area Plans and Area Online Lectures
Area plans Provide detailed information taking into consideration regional traits andfacility features“Introductory seminar on Kampo medicine” for physicians wanting to learn
about Kampo□Examples of themes: Dizziness, headaches, stress, sleep disorders, introduction to Kampo, etc.

【Area Web lectures】
Lectures held: 207 Planned/scheduled lectures: 300(Number of times)
120

102

104

2Q

3Q

100

93

80
60
40
20

1

0

1Q

4Q

□Examples of lectures held: As a result of holding lectures on Kampo at university hospitals that haveno track record in administering Kampo, there was a ripple effect tovarious areas, including new use of Kampo at related hospitals.
14■Area Plans and Area Online Lectures
We will discuss area plans and area online lectures on page 14.
As an area plan, we are continuing to provide detailed information taking
into account regional traits and facility features.
In addition to positioning geriatric health, cancer (supportive care) andwomen’s health as our three important domains, we are responding witharea plans given that there are needs for Kampo in many domains.

Area online lecturers are one type of area plan. As you can see, we held 207
lectures in Q1-Q3. We plan to hold 300 such lectures in FY 2020.
As an example of lectures held, we had university hospital physicians, whohave not given lectures on Kampo thus far, conduct lectures for the first time.
The result was a ripple effect within the area, including the new use of
Kampo at related hospitals. In this manner, we aim to contribute tosustainably expanding the Kampo market by widening the market
infrastructure for the spread of Kampo, by constantly turning out new
lecturers in various areas through area online lectures.

14Medium-term Management Plan and Vision for the
China Business

FY
2020

FY
2021
Sales
targetFY
2027

240 million yuan

Sales image 10 billion yuan(about ¥4.0 billion)(about ¥170 billion)

FY 2020 Plan & Vision for the Crude Drug Platform
Raw material crude drugs, drug pieces, raw ginseng, Yakushokudogen products, etc.
Sales
target

240 million yuan(about ¥4.0 billion)

Sales target

Front-loaded

Vision for the Formulation Platform
Classical prescription Chinese medicine complex
formulations and traditional Chinese medicine(including M&A), etc.

Sales image

3 billion yuan(about ¥51.0 billion)

Sales image 7 billion yuan(about ¥119 billion)*Exchange rate: ¥17/yuan (as of the time of the release of the Vision)

15■Medium-term Management Plan and Vision for the China Business
Page 15 illustrates the Medium-term Management Plan and Vision for the
China Business.

This is an image of sales trends. In FY 2027 we anticipate sales of 10.0 billion
yuan or roughly ¥170.0 billion. This breaks down to sales from a crude drug
platform of 3.0 billion yuan or approximately ¥51.0 billion, and 7.0 billion yuan
or about ¥119.0 billion underpinned by the formulation platform.
Thus far, we cited a "manufacturing platform." However, we have changed thisto the formulation platform, to create product value by integrating
manufacturing and sales.
In addition to the cultivation, procurement, selecting and processing, andstorage of raw material crude drugs, the crude drug platform will also handle
the sales function, mainly for raw material crude drugs, drug pieces andYakushokudogen products.
Going forward, the formulation platform is in charge of the manufacturingfunction, including classical prescription Chinese medicine complex
formulations for the China business, as well as the function for manufacturing
extract powders for Tsumura.
That said, we are frontloading our FY 2021 sales plan of 240 million yuan, or
around ¥4.0 billion, to FY 2020. In comparison with this plan, sales at Ping An
Tsumura Pharmaceutical (former Tianjin China Medico Technology) in the third
quarter posted sales of ¥3.5 billion.

15

Revisions to FY 2020 Earnings Forecast(Million yen)

Initial plan

Net sales
OperatingprofitOrdinary
profitProfit attributableto owners of parent

YoY

Comparison with initial plan

AmountChangeAmount Change

132,000

130,500(1,500)(1.1)％+7,251+5.9%

17,00019,300+2,300+13.5%

+423

+2.2%

17,90020,200+2,300+12.8%

+550

+2.8%

13,00015,000+2,000+15.4%+1,234+9.0%

Initial plan

Operatingprofit margin

Revised
plan

12.9%

Revisedplan

FY 2019

14.8%

15.3%
¥64

Dividend¥64(per share)¥64(forecast)(forecast)

EPS¥169.92¥196.06¥179.96

ROE

6.2%

7.1%

6.8%

(Note) The above forecasts were prepared based on
the information available as of the date of publicationof this presentation. Accordingly, the impact of risks
that cannot be predicted at this time, including theimpact on socio-economic activities from the further
spread of COVID-19, have not been factored in. Actual
earnings performance may differ from the forecasts
stated herein owing to various factors going forward.
We will disclose trends and conditions in a timely andproper manner should there be any changes in thecircumstances surrounding our company.

16■Revision to Earnings Forecast
On page 16, we discuss revisions to FY 2020 earnings forecast.

Although we are maintaining brisk sales in the China business, we
downwardly revised our initial plan for net sales due to impact from COVID-19
in the domestic prescription pharmaceutical business. Accordingly, we reduced
our net sales forecast to ¥130.5 billion, down ¥1.5 billion from our initial plan.
We estimated that total SG&A expenses are likely to undershoot our forecast
at the start of the fiscal year. We reallocated resources to the establishment of
a new environment reflecting a change in activities primarily attributable to
COVID-19 impact.
In light of this, we forecast operating profit of ¥19.3 billion, ¥2.3 billion higher
than our initial plan, and ordinary profit of ¥20.2 billion, a rise of ¥2.3 billion
above our initial plan. We estimate profit attributable to owners of parent of¥15.0 billion, an increase of ¥2.0 billion in comparison with our initial plan.
Based on this, our operating profit margin estimate is 14.8%, a rise of 1.9pts
above our initial plan.
We did not revise our initial plan for our dividends.
Our forecast for EPS is ¥196.06 and ROE is 7.1%.
Actual earnings performance may differ from the forecasts stated hereinowing to various factors going forward.
We will disclose information in a timely and proper manner should there be
any changes in trends.

16

Shareholder Returns
Policy◼ We aim to improve our corporate value by continually expanding our
Kampo business and through growth investments in the China
business, and by building foundations. Accordingly, we plan toimplement stable dividends, taking into account factors such as
medium/long-term profit levels and cash flow conditions.

100
80

28.4％

32.1%

35.9% 35.7%

31.9% 33.5%

35.6%

45 .0

32.6%
40 .0

35 .0

25.0%

30 .0

60
40

to Mar.

25 .0

32

32

32

32

32

32

32

32

32

20 .0

15 .0

20

From Oct.

From Apr.
to Sept.

10 .0

30

32

32

32

32

32

32

32

32

0

5.0

0.0

2012

2013

2014

2015

2016

2017

2018

2019

2020
forecast
2020

Dividends
payout ratio

Note: The FY 2020 year-end dividend and payout ratio (forecast) are an estimate based on the assumption that thedividend resolution is approved at the 85th Ordinary General Meeting of Shareholders.
17■Shareholder Returns
We will cover shareholder returns on page 17.
We still aim to improve our corporate value by continuing to expand our
Kampo business, through growth investments in the China business, and bybuilding foundations. Accordingly, in line with our basic policy to improve
corporate value, we plan to implement stable dividends, taking into accountfactors including medium/long-term profit levels and cash flow trends.

We are targeting an annual dividend of ¥64 and a payout ratio of 32.6%,
reflecting the previously discussed earnings forecast.
Thank you for listening.

17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 interestand foreign 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 haltedor should 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.

18

18

appendix

19

Scale of the Traditional Chinese Medicine Market
in China
Traditional Chinese
medical products

Crude drug pieces

193.3 billion yuan(about ¥3 trillion)(Domestic production value)
about ¥3.5 billion*

458.7 billion yuan

FY 2019652 billion
yuan(about ¥10.2 trillion)(about ¥7.2 trillion)(Domestic production value)
about ¥179.5 billion*

Exchange rate: ¥15.7/yuan(as of the end of December 2019)

Source: National Bureau of Statistics of China, Ministry of Industry and Information Technology (MIIT)

Terminology

Definition

Corresponding terminology for
Kampo medicine(Meanings are not always the same)

Chinese medicine

Medicines used in traditional Chinese medicine (traditional
Chinese medical products, drug pieces, etc.)

Kampo, crude drug pieces, crude
drugs

Drug pieces

Same meaning as crude drug pieces, Use as a decoction

Crude drug pieces

Traditional Chinese
medical products

Drugs in the form of granules, pills or other shapes basedon the theories of traditional Chinese medicine(Manufacturing of classicalprescription Chinese medicine
complex formulations )(Drugs in the form of granules, pills or other shapes basedon old traditional Chinese medical books)

Kampo extract formulations, crude
drug production(Kampo extract formulations)*Source: Production statistics, including for Kampo formulations, Japan Kampo Medicine Manufacturers Association

20

20

China Business: Diagram of Capital Ties
Structure of the China business and capital ties:
Ownership ratios

as of the end of December 2020

Tsumura100％
Tsumura China Inc.

stablished in December 2016

56％
100％

Ping An Tsumura Inc.
80％

51％

100％

Pingcun (Shenzhen)
Medicine Co., Ltd.

Pingcun Zhongying(Hebei)Pharmaceuticals Co.,Ltd.
established inJune 2019

Pingcun(Shenzhen)
Medicine Co.,Ltd.

equity acquisition in
March 2020

97.65％

Shenzhen Tsumura
Pharmaceuticals Co., Ltd.
established in March 1991
Procurement, selection andprocessing, and storage of raw
material crude drugs and crude
drug pieces (drug pieces)
Sales in China of raw material
crude drugs and crude drug pieces(drug pieces)

established in June 2018

ShengshiPharmaceuticals Co., Ltd.
equity acquisitionin March 2020

Procurement, selection andprocessing, and storage of raw
material crude drugs and crude
drug pieces (drug pieces)
Sales in China of raw material
crude drugs and crude drug pieces(drug pieces)

established in
April 2019

Cultivation,
Sales ofprocurement, selection pharmaceuticals andand processing, andfood products
storage of raw material
crude drugs

100％

63％

TsumuraShengshiPharmaceuticals
Co., Ltd.
established in
March 2018

ShanghaiTsumuraPharmaceuticals
Co., Ltd.
established in July
2001

Kampo powdered
extracts
Manufacturing oftraditional Chinese
medical products

Manufacturing of
Kampo powdered
extracts*In August 2020, changed name to Ping An Tsumura Pharmaceuticals
Co., Ltd. from Tianjin China Medico Technology Co., Ltd.

Newly added subsidiary since 2019
Crude drug PF

Formulation PF
21

21

Roadmap for the Chinese Business Vision (image)
2019

Ping An Tsumura
PharmaceuticalCo., Ltd.

PingcunZhongyingPingcun Medical

Crude drug platform

ShenzhenTsumura2020

2021 2022 ～2027

Manufacturing and sales of raw material crude drugs and drug pieces (FY 2018 onward)
Manufacturing and sales of raw material crude drugs and drug pieces
Manufacturing of food products,
including raw material crude drugs and Yakushokudogen products

Sales of food products, including Yakushokudogen products
Manufacturing of Kampo powdered extract (for Tsumura)

TsumuraShengshi

Traditional
Chinese medical
products
Company

Formulation platform

ShanghaiTsumuraStart up operations at Tianjin Plant in 2022

Ping An Tsumura
Traditional Chinese
Medicine ResearchCenter (working name)

Manufacturing of classical prescription
Chinese medicine complex formulations

Manufacturing of Kampo powdered extract (for Tsumura)
Manufacturing of classical prescription
Chinese medicine complex formulations

M&A

M&A

Existing products at M&A partners (traditional Chinese medical
products) and acquisition of sales channels

Manufacturing of classical prescription
Chinese medicine complex formulations
Establish Traditional Chinese Medicine
Research Center (working name)*

Operation*Change name to Traditional Chinese Medicine Research Center (working name)2222