Business Results for Fiscal 2021

May 11, 2022
President and Representative Director, CEO

Terukazu Kato1

agenda01

FY2021 Business Results Overview

02

Third Medium-Term Management Plan
（FY2019－FY2021) Summary

03

First Medium-Term Management Plan
（FY2022－FY2024)

2

2

FY2021 Business Results Overview
Both sales and profit exceeded the revised plan,sales and profit growth year-on-year.
【Million yen】

Net sales

FY 2021
Revised PlanFY 2021
Results

Achievementrate

FY 2020
Results

YoY
AmountChange127,500

129,546101.6%

116,413 +13,132 +11.3%

Domestic

117,800

119,567

101.5%

110,053+9,514+8.6%

Overseas

9,700

9,978

102.9%

6,360+3,618+56.9%

21,10022,376106.1%

19,382

16.5％

17.3％

－

16.6％

－

－

Ordinary Profit

23,40025,904110.7%

20,866+5,038+24.1%

Profit attributable

16,60018,836113.5%

15,332+3,504 +22.9%

Operating Profit
Operating Profit Margin

to owners of parent

Other prescription pharmaceuticals 0.4%

Ratio to total sales

Prescription Kampo Products 88.1%+2,994 +15.4%

3.0% Healthcare
8.5%

External sales by consolidated subsidiaries 3

As you can see, this slide is an overview of earnings in fiscal 2021.
Net sales totaled ¥129.5 billion. This breaks down to domestic sales of¥119.5 billion and overseas sales of ¥9.9 billion.
We achieved our plans in both cases.
Net sales prior to the application of revenue recognition standards werean all-time high of ¥145.3 billion.
Meanwhile we achieved our plans for operating profit and profit
attributable to owners of parent, posting ¥22.3 billion and ¥18.8 billion,
respectively.
Gain on forex translation shored up ordinary profit and net profit (profit
attributable to owners of parent).
We marked an all-time high net profit of ¥18.8 billion.
Year-on-year, net sales grew 11%, operating profit was up 15%, and net
profit increased 22%.
These growth rates were all high in comparison with the previous year.
Looking at a breakdown of sales, prescription Kampo products
successfully broke above 90% level of total sales.

3Sales of Drug-fostering Program Formulations/Growing
Formulations（ Million yen）

Net
sales
Ranking

Product No./formulation name

FY 2020

FY 2021

YoY

Drug-fostering
program formulations

1

100 Daikenchuto

9,251

9,569

+318

+3.4%

2

54 Yokukansan

7,017

7,379

+362

+5.2%

4

43 Rikkunshito

6,676

7,231

+555

+8.3%

8

107 Goshajinkigan

3,229

3,509

+279

+8.6%

23

14 Hangeshashinto

1,257

1,358

+101

+8.0%

27,432

29,048 +1,616+5.9%

41 Hochuekkito

6,793

7,232

+439

5

17 Goreisan

4,413

5,298

+884 +20.0%

6

24 Kamishoyosan

4,336

4,833

+496 +11.4%

7

68 Shakuyakukanzoto

4,524

4,763

+238

+5.3%

10

29 Bakumondoto

3,127

3,258

+130

+4.2%

Total sales for growing formulations

23,19625,385 +2,189+9.4%

Total sales for 119 formulations other than drug-fostering
program and growing formulations

54,93859,730 +4,792+8.7%

105,567 114,165 +8,597+8.1%

Total sales for drug-fostering program formulations

Growing formulations

3

Total sales for 129 prescription Kampo products+6.5%* The 2020 results have been rearranged to the amount after applying new accounting revenue recognition standards.

Ratio to total sales
119
formulations
other than drugfostering
program andgrowingprescription
formulations

129

52%

Drugfostering
programformulations

26%

Growing
formulations

22%

4

Next, I will cover net sales results for prescription Kampo profits and for
products in the drug-fostering program and growing formulations.
Sales of the 129 prescription Kampo products totaled ¥114.1 billion, an
increase of 8.1% year-on-year.
Sales of the five products in the drug-fostering program came to ¥29.0
billion, a growth of 5.9% year-on-year, and sales for the five growing
formulations were ¥25.3 billion, an increase of 9.4%. Meanwhile, sales ofthe other 119 formulations amounted to ¥59.7 billion, an expansion of
8.7%.
Overall, sales of 110 formulations out of the 129 prescription Kampo
products rose versus the previous year.
The breakdown of sales was nearly the same as a year earlier. Drugfostering program products accounted for 26% of the 129 prescription
Kampo product sales, growing formations made up 22%, and others
represented 52%.
Refer to the Appendix for other information.

4

Third Medium-Term Management Plan
（FY2019－FY2021) Summary

I will now give an overall briefing on the three years covered under theThird Medium-Term Management Plan.
Looking back at the three-year period from fiscal 2019 to fiscal 2021,
since the confirmation of the outbreak of COVID-19 in Wuhan City, Hubei
Prefecture, China in early December 2019, we devoted ourselves into
pouring energies into the stable procurement of raw material crude drugs
and stable supply of Kampo formulations.
As the first M&A deal conducted by Ping An Tsumura Inc., our joint
venture established in June 2018 with the Ping An Insurance (Group)
Company of China, Ltd., in November 2019, we signed a letter of intent
to form a business alliance with Tianjin China Medico Technology Co.,Ltd.
In February 2020, we signed an agreement to transfer equity, in which we
secured 80% ownership, thus converting the company into a Tsumura
subsidiary.
Following this, we named the company Ping An Tsumura Medicine Co.,
Ltd.

5

Numerical Targets in the 3rd Medium-Term Management Plan
Achieved all numerical targets in 2021

Plan

Sales

Operating Profit

ROE

Over

Over

120

19

Over

Billion yen

Billion yen

6%

After applying revenue
recognition accounting standards【Exchange rate】
16.5yen to the Chinese yuan

(Disclosed initial plan: over 135billion yen)

Results

129.5

22.3

Billion yen

Billion yen

8.2%【Exchange rate】
17.0yen to the Chinese yuan
6

The numeric targets for fiscal 2021 in the Third MediumTerm Management Plan are as shown.
We achieved all of these targets.
We attained the plans for the pharmaceutical business,healthcare business and all businesses in the crude drug
platforms at Ping An Tsumura Medicine Co., Ltd. and
Shenzhen Tsumura Medicine Co., Ltd.

6Strategic Challenges
Creating New Value Through Innovations in Kampo －Next Stage－

1

Ongoing expansion of the Kampo market and establishment ofpresence therein

2

Investing in growth and building business foundations in China

3

Improving productivity using new technology (AI, Automation, RPA)

4

Fostering a corporate culture through philosophy-based managementand developing diverse human resources

5

Promoting SDGs through the Kampo Value Chain
7

Next, I will brief you on the five strategic challenges
shown here that are promoted as quantitative goals in
the Third Medium-Term Management Plan.

7

①-1．Sales Growth Underpinned by e-promotions
Sales growth in tandem with an increase in the number of cases of information recognition
owing to e-promotions
Third Medium-Term Management Plan
(Number of cases of detailing impact)(Million yen)

Number of cases of epromotion recognition
reaching over 50%

500,000

400,000

360

350

e-promotions
340

Daily sales

300,000(Annual moving average: Approximation)

330
200,000
320

MR
activitie

100,000

310

0March 2022

January 2022

February 2022

December 2021

October 2021

November 2021

September 2021

July 2021

August 2021

May 2021

June 2021

April 2021

March 2021

January 2021

February 2021

December 2020

October 2020

November 2020

September 2020

July 2020

August 2020

May 2020

June 2020

April 2020

March 2020

January 2020

February 2020

December 2019

October 2019

November 2019

September 2019

July 2019

August 2019

May 2019

June 2019

April 2019

March 2019

January 2019

February 2019

December 2018

October 2018

November 2018

July 2018

August 2018

September 2018

May 2018

June 2018

April 2018

300

INTAGE Healthcare Inc. survey, Impact Track*Number of cases of detailing impact: Number of cases of information recognition from various channels, including MR activities and the Internet*MR activities: Detailing, online interviews, in-hospital briefings, etc. conducted by MRs e-promotion: Activities to provide information online that does not go through MRs.

8

Strategic challenge ① focuses on expanding the Kampo market andestablishing a market presence.
In the COVID-19 environment, we undertook a reform to information
provision activities.
We are defining MR activities as face-to-face and online interviews withphysicians and presentations.
As shown here, the number of cases in which physicians recognized
information and the impact from detailing increased, as shown based on
MR activities, the green bar graph, and e-promotions, including video
streaming and online lectures, from each channel, as denoted by theorange bar graph.
In tandem with this, daily sales also grew, as depicted by the brown line
graph.
In particular, the number of cases of recognition in 4Q e-promotions,which were fortified in fiscal 2021, exceeded 50% of overall promotions.

8

①-2. Trends in the Number of Physicians Writing 10 or More
Prescription Kampo Pharmaceuticals
The number of physicians who wrote 10 or more prescriptions are increasing
but underperformed target
Targetover 50 %Actual26 %Third Medium-Term Management Plan

50%
Physicians whowrite 10 or more
Kampo prescriptions

11%

14%

16%

FY2018FY2018

FY2019FY
2019

FY2020
FY
2020*Survey by Tsumura

26%

About 84,000 people

FY2021FY
2021
9In Vision 2021, our goal is to “contribute to therealization of a medical care setting where citizens canreceive Kampo treatment as needed at any medical
facility or clinic in Japan.
To this end, our business strategy to “establish Kampo
medicine” aims to achieve a percentage of 50%-plus or
one-in-two physicians that write 10 or more Kampo
prescriptions.
This percentage was 26% as of the end of fiscal 2021.

9

②-1. Overseas Sales Trends
In the China Business, made progress in building a foundation for the crude drug
platform and exceeded initial plans
Plan About ¥4.0 billion

About ¥

About ¥

6.3 billion

Actual9.9 billion
6%

other

19%

drug pieces

75% raw material
crude drugs
About ¥

About ¥9.9 billion

Product lineup and sales
channel expansion•

Develop new customers,
Expand existing customer sales•

Expand sales of drug pieces via
public hospitals and online sales
channels (mainly at Ping An Health)

300 million

FY2019FY
2019

FY2020FY
2020

FY2021FY
2021
10In strategic challenge ②, growth investment and thebuilding of business foundations in China, we madeprogress in building a foundation for the crude drug
platform as of the end of fiscal 2019.
We also expanding raw material crude drug sales andonline sales, including sales via Ping An Health.
In light of this, the sales ratio for drug pieces was 19%,an increase of 3 points versus a year earlier.

10②-2. Investments and Financing in the China Business
Underperformed the scheduled amount reflecting delays in the M&A for traditional Chinese
medicine companies, and the construction of the Tianjin Plant and the Traditional Chinese
Medicine Research Center
Plan ¥50.0-¥100.0 billion
Actual About ¥29.0 billion
Complete acquisition of Ping
An Tsumura PharmaceuticalSlated to start operations in FY 2022

Acquisition amount: About ¥18.0 billion•

As the crude drug platform, salesof raw material crude drugs and“Yakushokudogen” products

Construct the Traditional
Chinese Medicine
Research Center

Construct the
Tianjin Plant••

Production plant for powdered extracts
Scheduled manufacturing of traditional
Chinese medical products in the futureSlated to start operations in FY 2024••

R&D, analysis and evaluation functions
Evidence for traditional Chinese
medical products further out
Shoulder the building of packages
11

Investment in the China Business sharply undershot
plans by around ¥29.0 billion.
This reflects factors such as the sole M&A deal carriedout was for Tianjin China Medico Technology in the
crude drug platform and the traditional Chinese medicine
company was not yet completed in the formulation
platform, and delays in the construction of the Tianjin
Plant and Traditional Chinese Medicine Research Center.
The Tianjin Plant is scheduled to be operational in sometime in fiscal 2022 and the Traditional Chinese Medicine
Research Center is slated to start operations in fiscal
2024.

11

③. Capital Investments to Improve Production
Capacity and Productivity
Boost production capacity and improve labor productivity
Plan ¥22.0 billion

Actual About ¥17.0 billion

No. 3 SD Building at
the Ibaraki Plant••

Introduce robotic technologies into processes,
including injecting crude drugs into devices for cutting,weighing and extraction
Achieve automation/robotization of all manufacturing
processes for Kampo formulations••

Domestic plants
Research/cultivationrelated facilities

AI automated crude
drug selector(Under development)••

Automatically remove defective products
during the crude drugs selection process
Improve the efficiency of selection operations,
reduce workers
12Regarding strategic challenge ③ , improving productivity using newtechnologies—AI, robotization, and RPA—, at existing businesses inJapan, we implemented capital investments to improve production
capacity and productivity.
Consequently, we invested around ¥17.0 billion versus a plan of ¥22.0
billion.

At the No. 3 SD building at the Ibaraki Plant that launched operations infiscal 2020, given the irregular shape of crude drugs, automation wasdeemed difficult.
However, we achieved automation and labor saving by introducing
robotic technologies in the processes, including injecting crude drugs into
devices for cutting, weighing and extraction.
Going forward, we plan to introduce and expand these technologies at allsites to realize a series of automation and robotics in all manufacturing
processes for Kampo formulations.
In addition, in the selection of crude drugs, owing to the development ofan AI-driven crude drug selection device, we have made progress indevelopment to the point where we are able to reduce the average
number of workers from 4-5 employees per line down to 2.
We aim to make further cutbacks to manpower.
12

④. Foster a Corporate Culture through Philosophy-based
Management and Developing Diverse Human Resources
Established the Tsumura Academy in 2019 as an institution for training personnel internallyImplement a program to train
management personnel

Increased ratio of female managers

Basic management lecture

As of April 2022: 7.4%

・Employees that completed the course
33 people (of which 5 were women)
・Employees currently taking the course
43 people (of which 11 were women)

Directors, Executive Officer,
General Managers
Produce management
personnel

Division head

Third Medium-Term
Management Plan

7.4%
5.2%

5.9%

6.3%

Basic management
lecture(3-year period)

Chiefs/section
heads

General staff

Advance(3-year period)

Basic(3-year period)

April 2022
April
2021 2021年度
April
2018年度
2019 2019年度
April 2020 2020年度
FY2020
FY2021*Tsumura standalone figures

13

Strategic challenge ④ is the fostering of a corporate culture
through philosophy-based management and the development ofdiverse human resources.
In 2019, we established the Tsumura Academy as an in-house
institution for training personnel.
As of the end of fiscal 2021, 33 people completed the threeyear basic management course and 43 were still taking thecourse.
Several candidates have already been selected for the positionof director.
In addition, the ratio of female managers increased 2.2 points to
7.4% over the three-year period.
Going forward, we plan to further enhance this ratio.

13

⑤. Promoting SDGs through the Kampo Value Chain

Upgrade materiality
Endorse TCFD
Set up the “Sustainability Committee,” chairedby the Co-COO, Director
Tsumura Materiality

14

Regarding Strategic Challenge ⑤, Implement SDGs via
the Kampo Value Chain, Tsumura aims to enhance its
version of materiality.
In October 2021, we endorsed the Task Force on
Climate-related Financial Disclosures (TCFD) andestablished the Sustainability Committee.

14

Investment and Financing (Summary)
Total investment and financing: About ¥66.0 billion
Plan

ActualExisting businesses,
capital investment●Domestic plants●Facilities related to research/cultivation¥22.0 billion

・Construction of the No. 3 SD Building at
the Ibaraki Plant
About ¥17.0 billion

China Business
Investments and Financing●Traditional Chinese Medicine Research Center●Tianjin Plant●Traditional Chinese medical products business(M&A, etc.)

Main topics

・Acquire Ping An Tsumura Pharmaceutical¥50.0 100.0 billion

・Delays with the Tianjin Plant, Traditional
Chinese Medicine Research Center
About ¥29.0 billion

・M&A postponement
・Increase in number of write-ups in clinicalguidelines

R&D●Basic /clinical research●US development●Crude drug cultivation research・Embark on late Phase II in US development(TU-100)
・Implement the upland cultivation of ginseng¥20.0 billion

About¥20.0 billion

・COVID-19-related research

15

The total investment stipulated in the Third Medium-Term
Management Plan was around ¥66.0 billion, including the
aforementioned capital investments.
In R&D, we saw benefits, including an increase in write-ups intreatment guidelines and the implementation of uplandcultivation of ginseng.
In US development, we are increasing the number of clinical
trial facilities.
However, overall progress in this area is slow due to impact
from COVID-19.
Meanwhile, we newly added the EFE (Ephedrine alkaloids-free
Ephedra Herb extract) formulation research pertaining to
COVID-19.
In light of this, our total R&D spending is nearly on par withplans.

15

First Medium-Term Management Plan (FY2022-2024)

Laying the Foundations for Creating a
Future that Achieves “Cho-WA” (harmony)

I will now present the First Medium-Term Management
Plan, which is based on the theme of laying thefoundation for creating a future that achieves Cho-WA.

16

TSUMURA Group DNA Pyramid17

In accordance with the new TSUMURA Group DNA
Pyramid shown here, we aim to implement our purpose,
which is to promote “lively living for everyone,” andcontinue management based on the basic philosophy
composed of the management philosophy and corporate
mission, and management to realize two visions.

17Vision & Strategy Diagram
Sustainability
VisionLiving with nature for tomorrow.

Long-term
management
visionCreating a Future that Achieves “Cho-WA” (harmony)

Business vision

Business strategy

Medium-Term
Management PlanTSUMURA VISION “Cho-WA” 2031
Prescription Kampo
Products

Chineseoperations

Patients can receive Kampo
treatments suited to them
individually at any medical
institution/clinicaldepartment

Contributing to the health ofthe citizens of China

Establish the Kampo
medicine business

Become a trusted traditional Chinese
medicine company in China

Realize a medical setting where one-in-two
physicians will write “basic prescriptions in
all treatment areas” in accordance with
Kampo medicine

Contributing to the health of thecitizens of China
Recognized as a traditional
Chinese medicine company

Strategic challenges

Vision for eachdivision/department

Strategies foreach division/
department

Realize a business scale/sales worth RMB10 billion

KGIs/KPIs for eachdivision/department
18

To realize the basic philosophy by promoting our
purpose, we established the TSUMURA VISION “ChoWA” 2031, which is based on the theme of ourSustainability Vision, “Living with nature for tomorrow”
and the long-term management vision, “Cho-WA:
Creating a Future of Harmony.” We plan to implement
these as the two vital components of our corporate
management.
To realize these two visions, we clarified our individual
business visions and business strategies, andestablished numeric targets and strategic challenges for
the First Medium-Term Management Plan by
backcasting.

18

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)
19This slide shows the roadmap for the realization of the
TSUMURA VISION “Cho-WA” 2031.
The First Medium-Term Management Plan, which spans
three years up to fiscal 2024, is positioned as a stage for
upfront investments and building foundations to realize“Cho-WA” in 2031.

19

Long-term Image of Investments and Finances
1st stage

2nd stage

3rd stage

FY2022-2024

FY2025-2027

FY2028-2031—Germination——Growth——Flowering—Upfront investments

Business/operations
getting into full swing

ROI getting intofull swing

Financial
infrastructure

Capitalinvestment/in
vestment inresearch,
M&A, etc.

Growth investment
Secure production capacity forsales expansion

Depreciation
expenseFoundation
investment
20

This is an image of the investments and financing for the “Cho-WA” 2031
roadmap.
In the 1st Stage, we plan to execute upfront investments, including
research investments mainly for new disease domains for Kampo
treatments and for production facilities for the smartification of plants, tosupport ongoing stable growth in the domestic Kampo business.
In the China Business, we aim to realize M&A with traditional Chinese
medical product companies in the next 1-2 years, in addition to
expanding the crude drug platform business.
As shown, in the first three years we plan to execute upfront investments.
In the following three years, we will implement full-fledged business
operations and facility utilization.
Then in the final four years, we aim for the full-fledged recovery of
benefits from the upfront investments.

20

Numerical targets (FY2024)

Net sales

Operating profit

ROE

162

29

8

billion yen

billion yen%

Assumption: (NHI price revisions) FY2022, FY2023, FY2024(Exchange rate) FY2022
19.5 yen/RMB, 125.0 yen/USD
FY2023-2024 19.0 yen/RMB, 120.0 yen/USD
21

The numeric targets in the First Medium-Term
Management Plan are net sales of ¥162.0 billion,
operating profit of ¥29.0 billion and an ROE of 8%.

21

Create Future Cash Flows
Improve medium/long-term corporate value

GrowthEarnings power(Expand business scale)(Enhance profit margins)

Growth investments
for the future

Operating profit
marginGross profit rate
Sales growth rate
CoGS rate
NHI drug price revision rate

SG&A ratio
Personnel expense rate
Activities expense
Other expenses

Invested capitalturnover rate
Working capitalturnover rate

MaintainInventory turnover rate
Accounts receivable turnover rate
Accounts payable turnover rate

Execute strategic challenges

Maintain

Fixed asset
turnover rate
Tangible fixed asset turnover rate
Intangible fixed asset turnover rate

22

In “Cho-WA” 2031, our focus is on generating future cash flows.
In addition to plans to expand the domestic business and the crude drug
platform business in China, we also aim to reduce our SG&A expense tosales ratio by building a business foundation and expanding scale
through M&A deals with traditional Chinese medicine companies in theformulation platform, curbing the decline in gross profit margin by
reducing the CoGS ratio in tandem with an expansion in the scale ofsales and production, and by scaling down SG&A expenses.
Reflecting these measures, we anticipate an improvement in ouroperating profit margin.
Meanwhile, although we aim to improve our inventory turnover byenhancing the SCM system, from the perspective of our BCP (business
continuity plan), we expect negative factors, including impact from arevision to manageable inventory levels and forex.
In light of this, we aim to maintain our inventory turnover at its present
level.
Fixed asses turnover is trending downward mainly reflecting upfront
investments for production facilities and IT systems.
However, we plan to minimize the decline in the rate of turnover forinvested capital primarily by vertical start-ups.

22

Growth (expand business scale)
Sales by business
FY2022-2024
CAGR

China Business(Formulation platform)

30%
Growth●Enter the traditional Chinese
medical products business

China Business(Crude drug platform)●Contribute to high growth andsteady profit

5%

GrowthDomestic business●Stable growth and pioneering
new domains related to Kampo

2021

2022

2024

First Medium-Term
Management Plan

Second/Third Medium-Term
Management Plan (2025-2031)
23

In “Cho-WA” 2031, we target the creating of future cash flows
by promoting a 50% ratio of overseas sales, and by expanding
the scale of growth and businesses.
The expansion of business scale in the three-year period of theFirst Medium-Term Management plan targets ongoing stable
growth in the domestic Kampo products business in tandemwith an increase in the number of physicians prescribing Kampo
formulations and an expansion in the market.
In the crude drug platform business in China, we aim for highgrowth, mainly reflecting an expansion in sales channels for
drug pieces.
The planned figures have not been factored in.
However, in the formulations platform in China we will build afoundation through M&A with traditional Chinese medical
product companies for quick implementation.

23

Earnings power (Enhance profit margins)
Further improve earnings power inthe domestic business

Consolidated operating
profit margin
Operating profit margin

18%

17%
15%

Rapid yen depreciationin value
Soaring materials cost
Initial impact of newplant operations

2017

2018

2019

2020

2021

*In 2017-2019, estimates applied retroactively
for revenue recognition standards

Earnings
power

2022

2023

Sales

Realize sales growth that outperforms
previous performance
Sales growth rate for the 129 prescription Kampo products(annual average)

2017-2021: +3.8% ⇒ 2022-2024: +5.4%

Selling
priceContinue to promote selling prices for Tsumura
Kampo formulations

Cost ofgoods
soldCurb the rise in CoGS by improving productivity

R&D

Implement controls by planting seeds for the
future and narrowing down R&D themes

Personnel

Improve added value per person and implement
controls for optimum personnel

ExpenseRealize a full-fledged management of costbenefits and scale down expense to proper levels

2024

First Medium-Term
Management Plan

24

In “Cho-WA” 2031, our goal is to promote the smartification ofplants and the doubling of productivity to improve our earnings
strength and profit margins.
Regarding an improvement in profit margin in the three years in
the First Medium-Term Management Plan, we forecast atemporary decline in the operating profit margin, owing mainly
to impact from the capacity utilization at the Tianjin Plant,soaring resource prices and forex impact.
However, we aim for a consolidated operating profit margin of
18%, owing to an expansion in scale as well as CoGS reflecting
an improvement in productivity, curtailment of SG&A expense,
and an enhancement of profit margins in the crude drug
platform business in China.

24

Growth investments for the future■Boost production capacity and improve productivity via automation and DX
Capital investment/DX investment:
approx. 115.0 billion yen

Domestic business investments: (approx. 100.0 billion yen)
●Domestic plants (extracting/drying/granulation/packaging)●Tianjin Tsumura Pharmaceuticals (extracting/drying)

Renew existing facilities: 10.0 billion yen
China Business capital investment: (approx. 15.0 billion yen + M&A)
●Traditional Chinese Medicine Research Center

Increase production/sales capacity:
90.0 billion yen(Strengthen capacity, including
efficiency enhancements)
Boost efficiency/labor-saving:
10.0 billion yen
IT investments: 4.0 billion yen
Other●Build an IT infrastructure

Strengthen production capacity
Build a production system that will support the
expansion of the Kampo market
Improve productivity leveraging
automation and DX
Develop innovative automation facilities
Boost efficiency/realize labor saving/suppress arise in CoGS

■R&D: Allocate funds mainly to new disease domains, to personalize Kampo treatments, andin pre-symptomatic disease domains
Total R&D investment: approx. 24.0 billion yen
25

In “Cho-WA” 2031, we plan to focus on upfront investments in the threeyear period of the First Medium-Term Management Plan to expand thescale of growth and business in the future.
Investment to strengthen production capacity and in automation anddigitalization is around ¥115.0 billion.
Of these investments, investments related to the domestic business isabout ¥100.0 billion, including for domestic SD, granulation, packaging
processes and SD processes at the Tianjin Tsumura Plant, China.
Investment related to the China Business is scheduled to beapproximately ¥15.0 billion owing to construction of the Traditional
Chinese Medicine Research Center and for the building of an IT
infrastructure.
Note that this investment plan does not include M&A investments.
We plan R&D investments of around ¥24.0 billion, the total for the First
Medium-Term Management Plan.
We plan to allocate this for the new disease domain, personal Kampo
treatments and for the pre-symptomatic disease domain.

25

Financial Strategy
Aim to improve corporate value by creating cash flows from operating
activities and through growth investments
Shareholder
Returns

Expand business scale andimprove profit margins
Improve inventory turnoverby using SCM and enhancelogistics efficiency

Foundation
investment

Operating CF

Bolster balance sheet
management at the
China Business

Procurement for
growth investments

Continue to pay out astable dividend
Establish business foundations
・IT infrastructure reforms
・Maintain and renew existing facilities

Investment in future growth

Growthinvestment
Interestbearing debt

・Strengthen production capacity
・Build the Traditional Chinese
Medicine Research Center・DX investment
・Sustainability investment
・M&A investment in China

Execute disciplined
investments by managing
investment valuations

26

Next, I will discuss our finance strategy.
As shown, for large-scale investments to growth, which I
explained earlier, we plan to stably generate cash flows
from operating activities and for fund procurement.

We plan to execute disciplined investments bymaintaining our financial health and based on strict
investment valuations.

26

First Medium-Term Management Plan: Strategic Challenges
GrowthEarnings power(Expand business scale)(Enhance profit margins)

Operating profit
marginGross profit

SG&A ratio

Growth investments forthe future

Invested capitalturnover rate
Working capitalturnover rate

Maintain[Strategic challenges]

Fixed asset
turnover rate

1

Continuous expansion of the Kampo market
through the provision of Kampo solutions to suit
individual physicians

2

Establishment of Kampo evidence and promotionof scientific study of pre-symptomatic diseases
through KAMPOmics

3

Expansion of sales of crude drug and drug pieces
in China and entry to business of traditional
Chinese medicinal products

4

Revamp of IT platform and promotion of utilizationof AI and robots in crude drug sorting andmanufacturing processes for transformation of the
Kampo value chain

5

Creation of value through organization capital andhuman capital and implementation of job
satisfaction reform
Initiatives for realization of the Sustainability Vision27

We established the strategic challenges shown in
combination with the numeric targets in the First
Medium-Term Management Plan.

27

1Continuous expansion of the Kampo market through theprovision of Kampo solutions to suit individual physicians

28

I will explain Strategic Challenge ❶ , Continuous
expansion of the Kampo market through the provision of
Kampo solutions to suit individual physicians.

28Increase the percentage of physicians that write 10 or more
Kampo prescriptions to over 50%

Physicians thatwrite 10 or moreprescriptions

Physicians that write

Over 50%*

basic prescriptions in
all treatment areas- FY2031

43％*
35％*

26.2%*

Number ofclinical
physicians

320,000 people

330,000 people

330,000 people

330,000 people

FY2021

FY2022

FY2023

FY2024*Survey by Tsumura

Source: <Number of clinical physicians> Prepared by Tsumura based on “Physician Supply and Demand” data from the 19th Subcommittee on Physician
Supply and Demand, which is part of the Ministry of Health, Labour and Welfare’s Study Group on Medical Practitioner Supply and Demand29

In VISION 2021, our goal is to achieve a trend where“one-in-two physicians (50%) writes 10 or more
Kampo prescriptions.”
As of the end of fiscal 2021, we achieved 26.2%.

By the end of fiscal 2024, the end of the First MediumTerm Management Plan, we aim to achieve a
percentage of 50%-plus of the physicians that write 10
or more Kampo prescriptions by advancing andinstilling information provision activities using digitalsolutions.

29Kampo Digital Solutions
Realize first-rate customer-oriented experiences through optimal channels for information
required by individual medical practitioners and provision at the appropriate time
●Online Kampo salon

Efficacy

SafetyDissemination of online
lectures
Video library
Product information

Side-effect information
Storage/management
methodRaw material crude drug
information

Data collection and integration

Quality
Tsumura crude drug
GACP
Formulation
homogeneity

Data analysis●Online Kampo MR interviews●Tsumura virtual Kampo MRs●Kampo AI chat bot

Optimalmeasures/proposals

Actions●Integrated data base・Customer information ・Market, competitors
・Site views

・Proprietary sales

・Lecture participation

・Activities history30

As a digital solution for Kampo, we aim to realize further
advancements in hybrid promotions, as shown, primarily
for the expansion of the Tsumura medical website, which
is our Kampo information platform.
We plan to tackle measures to see that each and every
medical practitioner obtains and uses necessary
information for optimal channels at the appropriate time.

30

Important Domains & Drug-Fostering Program/Growing Formulations
Rapid improvement in quantitative and qualitative information provision, mainly in the drug-fostering program andgrowing formulations and basic prescriptions for treatment areas in the three important domains of “geriatric health,”“cancer (supportive care)” and “women’s health.”

Geriatric health domain

Cancer domain(supportive care*)

Women’s health domain

Psychiatric and neurologicaldisorders

Peripheral symptoms forfrailty

Digestive systemdiseases

Mitigation of side effects,
etc.

Diseases specific to
women

Other

Yokukansan D
Yokukansankachim I
pihangeNinjin’yoeito G

Rikkunshito D

Rikkunshito D

Kamishoyosan G

Daikenchuto D

Kamikihito G

Daikenchuto D

Hangeshashinto D

Kamikihito

Goreisan G+ related formulations

Hochuekkito G+ related formulations

Goshajinkigan D

Goshajinkigan D

Peripheral symptoms
for circulatory disorders

Hochuekkito G

Tokishakuya I
kusan

ShakuyakuIkanzoto+ related formulations

Goreisan G

Kamikihito G+ related formulations+ related formulations

Respiratory diseases

Bakumondoto I+ related formulations+ related formulations Juzentaihoto

I*Supportive care: Treatments, including
the alleviation of symptoms associated withcancer and due to cancer therapy+ related formulations
D Drug-fostering program formulations:
Focusing on the structure of diseases in recent years, intreatment domains with a high degree of medical needs,
there are patients in dire distress of finding new drug
therapies; narrow down target to patients in whichprescription Kampo formulations are demonstrating specificeffects and prescribe to build evidence (scientific basis)

G Growing formulations:
As focal formulations to follow the five drug-fostering
program formulations, aim for write ups in treatment
guidelines by building evidence (safety and efficacy data,etc.) in domains with a low treatment of satisfaction and a
low degree of contribution to medicine

I

Important formulations:
Important formulations following drugfostering program formulations andgrowing formulations for the penetration of
Kampo in important domains

31

We aim to make rapid improvement in quantitative andqualitative information provision, mainly in the drugfostering program and growing formulations and basicprescriptions for treatment in “geriatric health,” “cancer(supportive care)” and “women’s health,” which continue
to be urgent social issues in Japan.
In growing formulations, we plan to replace some of ourformulations to position and further instill Bakumondotoand Shakuyakukanzoto as important formulations on top
of making Ningin’yoeito and Kamikihito as new growth
drivers.

31

Focal Areas in the Important Domains
Cancer domain

Geriatric health domain
Necessary support for frailty

Necessary support forcancer survivors

Mental pain

Holistic
pain*

Social pain

Frail

Necessary support for infertility**

Physical pain

HealthyPre-frail

Women’s health domain(supportive care)

Spiritual pain

Requiresnursing care

*Holistic pain is a concept advocated by British
physician Cicely Saunders. The diagram was preparedby Tsumura in accordance with this concept.

Irregular/difficult
Menopause
menstruation
Cold
AnemiaInfertility
sensitivity
Symptoms during pregnancy andbefore/after child birth

Hinder the activities
of womenLow child birthInsurance coverageof infertility
treatments
Flow of support in the society overall**Require support for both men and women
32

In the geriatric health domain, we are focusing on frailty, one of thediseases related to aging, and also related to preventing changes inexisting diseases and suppressing a disease from becoming serious in
the three preventive measures for pre-symptomatic diseases.
We estimate a rapid rise in number of frail/pre-frail patients in tandemwith the acceleration of aging.
In 2031, we forecast the number of patients with frailty of 3.15 million
people, and 19.39 million people with pre-frailty symptoms, which areinterpreted as the stage prior to frailty and potential candidates for frailty.
In the cancer domain, we aim to undertake the improvement of QOL andto assist patients to get back to society, not only through cancer
treatment but also by using Kampo to alleviate total pain, including
physical distress, mental distress, social distress and spiritual distresssuffered by cancer patients and cancer survivors.
In women’s health, we plan to fortify the provision of information tofacilitate the improvement of symptoms with the use of Kampo.
In addition to pre-menstrual symptoms, this will apply to cases of infertility,
where basic treatments are now covered by insurance, and cases where
women are unable to exert their skills to the fullest due to mental andphysical distress that is being caused by various factors.

32

2

Establishment of Kampo evidence and promotion of scientificstudy of pre-symptomatic diseases through KAMPOmics

33

Next I will explain strategic challenge ❷ ,Establishment of Kampo evidence and promotionof scientific study of pre-symptomatic diseases
through KAMPOmics.

33

Research on the Personalization of Kampo Treatments(Propose New Treatment Methods)

To build a platform to personalize Kampo treatments
Joint research with academia

Alliances with business partners

Development/trial start ofdiagnostic support tools

Exams based on Kampo medicine (four exams)

Candidate domains

Inquiry

Inspection

Listening andsmelling exam

Made up of various
questions, including
subjective symptoms,
illnesses experienced thus
far, food preferences,
lifestyle, work, andmenstrual conditions.

Facial color/expressions,attitude, posture andbody shape are mainly
examined.

Examination mainly of thevolume and tone of the patient’s
voice, manner of speaking, how
the patient coughs, phlegm
conditions (manner in which isgets clogged/stopped up), andrespiratory sounds.
Body odor and halitosis are also
checked.

Tongue inspection is also
conducted.

Palpation
Examination of conditions
through touching.
This is largely broken
down into a “pulse exam”
and a “abdominal exam.”

Women’s healthdomain*Successively deploy to other areas
34

This slide shows four exams for Kampo treatment which
are effective diagnostic methods based on Kampo
medicine which focus on the individual symptoms ofpatients.

In the First Medium-Term Management Plan, to build aplatform for the personalization of Kampo treatments, weplan to collaborate with academic institutions andbusiness partners to roll out the development and trial
implementation of a diagnostic support tool to be used invisual exams and questionnaires in the women’s healthdomain.

34

Initiatives for the Scientific Study of Pre-symptomatic Diseases
For the three preventive measures for pre-symptomatic diseases (treat disease before symptoms appear, preventchange into existing disease and post-healing recovery)

Scientifically understandpre-symptomatic diseases

Definition
Example in geriatrichealth domain

Collect andanalyze
information

CancerStudy using intron retention, acondition of a pre-symptomatic
disease that causes aging
Precursor mRNA

Seniors

Women

Administrationof Kampo

IntronKAMPOmicsⓇ＊*Combines research on cutting-edge technologies (metabolome,
genetics, intestinal flora, systems biology, etc.), a strength of Tsumura, with Kampo medicine, a traditional
medicine practiced in Japan, to form a proprietary research package to comprehensively understandmulti-component, complex Kampo medicines. This is registered trademark of Tsumura.

Normal mRNA

Splicing

Intron retention in mRNA
There are cases where intron is retained
due to a splicing error or a biologicalabnormal response35

As an initiative to tackle the scientific study of presymptomatic diseases, we aim to first understand anddefine the condition of being “pre-symptomatic” in theFirst Medium-Term Management Plan.
As one initiative, we are scientifically grasping generelated information, e.g. intron retention, of a body that is
heading towards aging and jointly implementing
research with academic institutions regarding the use of
intron retention as a yardstick for measuring the degreeof being “pre-symptomatic.” We are beginning to see a
response.

35

Research to Expand Standard Kampo Treatments(Expand and Delve into Existing Research)
Enrich evidence package
Evidence
packageExpand treatment guidelines

Meta-analysis

RCT(Randomcomparison trial)

Drugs
Pharmacoki
neticsSurvey on
frequency ofside-effects

Rikkunshito

◯

◯

◯

◯

Yokukansan

◯

◯

◯

◯

Daikenchuto

◯

◯

◯

◯

***

◯

◯

◯

◯

Number of write-ups in treatment guidelines
for Type B* or higher Kampo formulations

104

130

Enrich types of formulations/domain/evidence

Quality improvement

Quantity expansion〈Listed formulations/disease〉
Improve degree ofrecommendation intreatment guidelines〈Unlisted formulations/disease〉
New write-ups intreatment guidelines

FY2021

FY2024*From the “Treatment Guidelines Task Force” of EBM Committee, Japan Society for Oriental Medicine
Type A: Quoted papers exists, there is grading of evidence and recommendations, also write-ups on this are included
Type B: Quoted papers exists but there is no grading for evidence and recommendation
Type C: There are no quoted papers or evidence and recommendation grading

36

Write-ups in treatment guidelines are essential for the
expansion of standard Kampo treatments. We aim to for
new write-ups and to improve the degree ofrecommendations by further accumulating evidence
mainly for efficacy and safety.
In the First Medium-Term Management Plan, we aim toachieve 130 write-ups in treatment guidelines for Kampo
treatments and plan to realize research benefits.

36

3Expansion of sales of crude drug and drug pieces in China andentry to business of traditional Chinese medicinal products

37

I will now discuss strategic challenge ❸ , expansion ofsales of crude drug and drug pieces in China andentry to business of traditional Chinese medicinal
products.

37

Milestones in the China Business
Aim to become a traditional Chinese medicine company that is a leader in the development of the traditional
Chinese medicine industry, and target an overseas sales ratio of 50%

Formulation
platform

Crude drug
platform

Research
platform

FY2022-24

FY2025-27

FY2028-31

Enter the traditional Chinese
medical products business

Build foundation for the
traditional Chinese medical
products business

Establish a brand as a
traditional Chinese medical
product company

Acquire traditional Chinese
medical product companies
Application for classicalprescription Chinese medicines

External sales ratio of over 50%

Expand sales of crude drugs,
drug pieces and“Yakushokudogen“products

Establish brands for crude
drugs, drug pieces and“Yakushokudogen”products

Ratio of external sales
Over 50%

Increase public hospital sales
channels(including M&A)

Establish the
Traditional Chinese
Medicine ResearchCenterSales image

Industry TOP10Over
RMB7.0 billion

Crude drug/drug piececompany that is a leader inindustry development

Sales image

Top share in China

Enhance functions of

Evidence-building

the Traditional
Chinese Medicine
Research Centerfor traditional
Chinese medical
products

Over
RMB3.0 billion

38

In “Cho-WA” 2031, we aim for an overseas sales ratio of 50%
and plan to become a traditional Chinese medicine company
that leads the development of the traditional Chinese medicine
industry.
In the formulation platform, we have not factored in numerictargets. However, in the First Medium-Term Management Plan
we aim for the early implementation of M&A deals withtraditional Chinese medicine companies to build a foundationfor our traditional Chinese medicine business.
In the research platform, we will establish the Traditional
Chinese Medicine Research Center, which is behind schedule,
and plan to successively expand its functions, including R&D,
and analysis and evaluations.

38

Expand the Crude Drug Platform business●Increase the number of items supplied by leveraging the strengths

Crude(pricing, quality, volume) of Tsumura
drug●Accelerate market penetration by the Tsumura brand by strengthening
platform management of the crude drug supply chain◆

Raw material
crude drugs

Drug pieces“Yakushokudogen”
products

Strengthen highlycompetitive items

Establish a brand forhigh-quality drug pieces

Promote new productdevelopment
Build the Tsumura brandNo. 1 Chinese ginseng brand◆ Continue to expand public hospital◆ Develop high added-value products◆

Broaden other superior items◆

Strengthen GACP management(Safety/security)◆

sales channels◆ Boost Ping An Health’s online sales◆ Expand online sales◆ Build a trusted brand◆ Promote drug piece supply services

Be a leader in industry standards
39

In the crude drug platform business, in the First Medium-Term
Management Plan we will focus on growing scale to achieve an externalsales ratio of 50%-plus through the broadening of our product lineup,
including raw material crude drugs, drug pieces and Yakushokudogenproducts, and sales channels.
In raw material crude drugs, we aim to become a leading company in the
crude drug industry, including being a leader in the establishment ofindustry standards.
In drug pieces, we plan to build a position as a leading company in highquality drug pieces by continuing to expand, mainly in public hospitalsales channels, online sales and added-value services, mainly for priority
items.
In the business for Yakushokudogen products, our goal is to utilize
superior crude drugs, including ginseng, develop high value-added
products that are in line with the treatment and prevention needs of thecitizens of China, and utilize the sales channels of Ping An Insurance.

39

4

Revamp of IT platform and promotion of utilization of AI and robots
in crude drug sorting and manufacturing processes fortransformation of the Kampo value chain

40

I will now talk about strategic challenge ❹, revamp of IT
platform and promotion of utilization of AI and robots incrude drug sorting and manufacturing processes fortransformation of the Kampo value chain.

40Build a Foundation to Improve Labor Productivity
In anticipation of the realization of a smart factory, improve labor productivity 20% (vs. FY2021)

Activities to go
fully automatedAutomation of facilities by
employing cutting-edge
technologies(Deploy existing technologies,
improve capacity, andpromote development of
new technologies)●Horizontal deployment of AI technologies in the mixing process●Remote support using AR and VR●Implementation of receptacle exchange system●Construction of a manufacturing building in light of new
automation technologies●Develop and evaluate automated facilities for detaching storage
containers lids
●Evaluate and implement automated facilities for quality testing●Suppress troubles using predictive maintenance●Introduce a data collection and analysis system

Effectively utilize data
and develop a new
manufacturing method

Collect and implement thevisualization of data

●Develop an optimized raw material package●Develop an innovative manufacturing method test, develop amanagement method

Convert to continuous
value creation
operations

Save on labor,
alleviate workload●Promote multi-skilled workers, improve skill level●Use DX for safety training and knowledge education
41

In “Cho-WA” 2031, our goal here is the doubling ofproductivity through the smartification of plants.
In the First Medium-Term Management Plan, we plan toaccumulate data and implement the visualization of data tobuild a new production system through automation of facilities
via cutting-edge technology and the effective use of data,
and aim to save on labor and alleviate the workload to shift tovalue-creation operations.
Through this, we plan to improve our labor productivity by
20% versus fiscal 2021.

41

Achieve the Practical Use of Crude Drug AI AutomatedSelector and Strengthen/Employ GACP
Crude drug AI automated selector

Strengthen and employ GACP information

Implement at 4
manufacturing plants
Ishioka Center
YUBARI TSUMURA
SHENZHEN TSUMURA
CHINA MEDICO CORPORATION

Link crude drug production
information and quality information●Boost efficiency of
selection operations●Reduce work headcount●Improve productivity●Secure quality and safety
Traceability
Digitalize information
42

In the crude drug supply chain, we are already developing an
AI-driven crude drug selection device.
In the First Medium-Term Management Plan, by deploying thisdevice at the four manufacturing sites, namely Ishioka Center,Yubari Tsumura, Shenzhen Tsumura and China Medico
Corporation, plan to boost the efficiency of the selection
process and shift to value-creation operations by workers.
In addition, we look to move forward with research that
contributes mainly to productivity improvements, and the
securing of quality and safety at a higher dimension.
This includes utilizing various information related to crude drug
cultivation that is accumulated by using the Tsumura crude drug
GACP.
This information includes data on yield improvements, pest
control measures and linked to agritech.

42

IT Infrastructure Reforms
Introduce an integrated
core system●Digitalize the Kampo value chain●Realize data-driven management
Automated crude drug lot
Introduce instruction system

Supply chain plans

Crude drug
procurement process

Production process

Sales process

Accumulate/integrate data in real time
Centrally management group company
information on the cloud

Sales support

SupplyanddemandIndividual
systemProduction

Purchasing/inventory

Sales

Accounting

Cost ofBookgoods sold closing

AssetsBudgetIntegrated core system
Establish a management IT infrastructure that will be the core of DX

HR

Other

Individual
system43

In “Cho-WA” 2031, we are promoting the digitalization of the Kampo
value chain.
In the First Medium-Term Management Plan, we plan to complete theintroduction of an integrated core system, which will become its
foundation.
We need to deliver the necessary types, amount and balance of raw
material crude drugs to manufacturing plants and input them into
manufacturing at the right time to ensure quality and uniformity in the
manufacturing of Kampo formulations. The raw material crude drug
supply chain is very long and diverse.
We also aim to achieve manageable inventories in appropriate locations
and the enhancement of crude drug processing efficiency by realizing
appropriate control over the supply chain by employing a system thatmainly utilizes AI and sensor technologies.
In the First Medium-Term Management Plan, we plan to complete theintroduction of a system that automatically gives lot orders for crude
drugs. This will become a core system.

43

5Creation of value through organization capital and humancapital and implementation of job satisfaction reform

44

Here is strategic challenge ❺, creation of value throughorganization
capitaland
humancapitaland
implementation of job satisfaction reform.

44

Cultivate Management Personnel
Train personnel that will implement philosophy-based management and drive the Tsumura Group

Training program

Toughassignments

Management
personnel

Global management
personnel
Selection

Assessment
Candidates fordivision head45

We are conducting training for group management personnel andcultivating our corporate culture, mainly at the Tsumura Academy, which
is an in-house institute for human resources training.
We are implementing three 3-year training programs. The first is the“basic program.” This program mainly targets mid-level employees. The
aim is to continuously produce management personnel that will
implement philosophy-based and vision-based management that
promotes the purpose of the Company and will become impetus for the
Tsumura Group. Second is the “advanced program,” which will target
junior management-level personnel. Last is the “basic management
course,” which is a program that aims to train personnel to become
management for the next-generation.
Tsumura is implementing a cycle so that employees that participated in
the programs can implement what they learned. Challenges with highhurdles and tough assignments are assigned, personnel assessments
are carried out and then personnel are selected.
In the First Medium-Term Management Plan, we plan to implement thiscycle to enhance this system.

45

Foster Corporate Culture
Nurture corporate culture that heightens individual job satisfaction and exerts one’s own“potential capabilities” by creating an organization driven by its philosophy

Instillphilosophy
Off-site meeting

Train to beresourceful(Liberal Arts)

Coaching
LecturesDialogue that focuses on goals and values
Improve job
satisfaction

Exert potential
capabilities
46

The nurturing of our corporate culture will focus training for
employees so that they learn to be independent and think forthemselves. This training will consist of off-site meetings toinstill our corporate philosophy and training on being resourcefuland on coaching.

In the Tsumura Group overall, we aim to cultivate a culture of
dialogue that will propel goals and values. We are also
undertaking organizational development by implementing teambuilding meetings based on coaching in each department.
Our goal is to nurture a corporate culture that heightens
individual job satisfaction and exerts the “potential capabilities”
of an individual by creating an organization driven by its
philosophy.

46

Initiatives for realization of the Sustainability Vision

47

Lastly, I will explain our initiatives to realize theSustainability Vision.

47

Environmental Goals in the First Medium-Term Management Plan
●FY2031 Targets in Sustainability Vision

50% reduction in greenhouse gas emissions
Circulation of water and waste (crude drug residue)
Conversion to environmentally friendly packaging materials
FY2020CO2 emission reduction rate (vs. FY2020)
Basic unit for energy intensity(year-on-year)

No.of items using crude drugs grown in the wild
Basic unit for water intake intensity**
Amount of plastic use(vs. FY 2020)(vs. FY2020)(vs. FY2020)

Basic unit for industrial waste emissions (vs. FY2020)*Crude drugs grown in the wild only: 18 items;
Crude drugs grown in the wild + cultivated products: 16 items

FY202496,487t

(3)%

ー

(1)%

34 items*

33 items or less

113.01t/t(10)%3,037.07t/t(10)%1.76t/t(50)%**Amount of water intake/powdered extract only for the
Shizuoka and Ibaraki Plants

48

We are promoting a “50% reduction in greenhouse gas
emissions,” “the switch to environmentally-friendly
packaging materials,” and “the recycling of water andwaste materials (crude drug residuals) as our fiscal 2031
targets in the Sustainability Vision.
In the First Medium-Term Management Plan, we have
set the environmental goals, including the reduction of
CO2 emissions, as shown here.
We are implementing activities to achieve goals for each
item.

48

Targeting an Improvement in Ratings from
Environment-related Rating Agencies

Improve CDP climate change evaluation●Apply to acquire SBT certification●Basic content analysis/disclosure for TCFD
●Achieve environmental goals in the First Medium-Term
Management Plan

49

In addition, along with familiarizing everyone outside of
the Company with the activities of Tsumura, we believe
Tsumura’s accountability also includes obtaining
evaluations of our position with the global framework.
We plan to undertake activities to improve theevaluations/rating we receive from environment-related
rating agencies.
This ends my presentation of the First Medium-Term
Management Plan.

49

FY 2022 Earnings Forecast【Million yen】

FY 2021
Results

FY 2022
Forecast

YoY
AmountChange129,546

138,500＋8,953＋6.9%

Domestic business－

124,300－－

China business－

14,200－－22,37620,800(1,576)(7.0)％

Domestic business－

21,200－－China business

－

(400)

－

－

25,904

21,200(4,704)(18.2)%

18,83615,000(3,836)(20.4)％

64 yen64 yenEPS

246.2 yen

196.1 yen

ROE

8.2 %

6.0 ％

Net sales

Operating Profit

Ordinary Profit
Profit attributableto owners of parent

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

50

This is our forecast for fiscal 2022.
We forecast net sales of ¥138.5 billion, operating profitof ¥20.8 billion, ordinary profit of ¥21.2 billion, profit
attributable to owners of parent of ¥15.0 billion, and an
ROE of 6.0%.

50

Shareholder Returns
Policy◼ We aim to improve our corporate value by continually expanding domestic businessand through growth investments in the China business, and by building foundations.
Accordingly, we plan to implement stable dividends, taking into account factors such as
medium/long-term profit levels and cash flow conditions.
45 .0 %

100

32.1%

35.9% 35.7%

31.9% 33.5%

35.6%

32.6%

31.9%

40 .0 %

35 .0 %

80

26.0％

25.0%

30 .0 %

60

40

25 .0 %

32

32

32

32

32

32

32

32

32

32

15 .0 %

20

From Oct. to Mar.

20 .0 %

From Apr. to Sept.

10 .0 %

32

32

32

32

32

32

32

32

32

2013

2014

2015

2016

2017

2018

2019

2020

2021

0

32

Dividends payout ratio
5. 0%

0. 0%

2022forecast
2022

Note: The FY 2021 year-end dividend and payout ratio (forecast) are an estimate based on the assumption that the dividend resolution isapproved at the 86th Ordinary General Meeting of Shareholders.

51

We reiterate the same shareholder return policy we havebeen implementing thus far. In addition to the further
expansion of the Kampo business in Japan, Tsumura
plans to execute growth investments, including M&A
deals, in the China Business, and will take steps toimprove its corporate value through the strengthening offoundations in the China Business.
We ask that everyone continue to provide us with theirsupport.

51

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.

52

52

appendix

53

Key Points in Performance
Sales and profits increased due to growth in domestic and overseas sales.

Net sales

129,546

million yen

Achievement
rate

101.6％

YoY＋11.3％◼ Domestic sales totaled 119,567 million yen, increased 8.6% year-on-year.
◼ Sales of the 129 prescription Kampo products totaled 114,165 million yen, increased 8.1% year-on-year.

◼ Sales of healthcare products including OTC Kampo medicines totaled 3,915 million yen ,increased 29.8%
year-on-year.
◼ Overseas sales totaled 9,978 million yen, increased 56.9 % year-on-year.

Operating profit
Operatingprofit margin

22,37617.3

million yen

Achievement
rate

106.1％

YoY＋15.4％％

Comparison
with theRevised plan

＋0.8ptYoY+0.7pt◼ The cost-to-sales ratio was 48.7%, a climb of 0.6pts year-on-year, mainly impact of increased depreciation
burden due to Increased manufacturing costs, and external sales in China.
◼ The SG&A ratio totaled 34.0%, a decline of 1.3pt year-on-year, mainly impact of improvement due to sales
growth.

Ordinary profit

25,904

million yen

Achievementrate

110.7％

YoY＋24.1％

113.5％

YoY＋22.9％◼ The impact of the foreign exchange gain: 2,474 million yen

Profit attributable toowners of parent

18,836

million yen

Achievement
rate

54

54

Factors Triggering Changes in Operating Profit (YoY)（ Million yen ）+6,821(820)(3,007)

Changes in sales ：＋6,821 Breakdown

Domestic＋4,942

Overseas＋1,879Changes in cost-to-sales ：(820) Breakdown
Sales composition（Domestic）＋224

Crude drug cost（Domestic）＋1,744

Processing cost etc(1,574)（Domestic）

Outside sales in China

22,376

19,382

FY 2020
OperatingprofitProfit impact due Profit impact due Profit impact
to changes in from changes into changes incost-to-sales
SG&A expenses
sales

FY 2021
Operatingprofit(1,214)

Changes in SG& A expenses:( 3,007)
Breakdown

Sales-related expense(736)

R&D expense(682)

Salary allowance(340)

Advertising expense

(274)

Other

(972)
55

55

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

Total net assets

319,063204,273
114,789
85,894
48,38037,513
233,169

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

31,91725,1466,771
6,977(2,505)
9,482
24,940Equity ratio

68.3％

68.3%

0

Total assets
Current assets
Non-current assets

Total liabilities
Current liabilities
Non-current liabilities

11,996(3,691)
218
15,469

△81
＋38

675

596

Financing activities

92,751
10,247
13,614
68,889Change△91

Investing activities

Work in process
Raw materials andsupplies

80,755
13,93913,39653,419+213

Operating activities

Merchandise andfinished goods

FY 2020(March 2021)

ChangeCash and cash equivalents at
beginning of period

Inventories

FY 2020(March 2021)（ Million yen ）Cash and cash
equivalents at end of
periodFY 2020

Impact of exchange ratetranslations

FY 2020

56

56

Comparison with the Prescription Pharmaceutical Market
Overall
FY2020FY2019

10.0%
6.0%
2.0%
(2.0)%FY2021

7.9% 7.7%

8.9%
2.9% 5.9% 1.6% 1.2%
1.4%
2.3%

0.6% 0.2%(6.0)%
Prescription pharmaceutical market
Tsumura(YoY/drug price basis)(10.0)%

1Q

2Q

3Q

Gap with market
4.2%

2.5%

4Q

1Q

2Q

3Q

（4Q only:＋3.5pt）

4Q

1Q

2Q

5.0%

3.8%
7.6%

0.0%
(5.0)%

9.1%

2.0% 1.6% 2.1% 1.8%

8.7% 7.5%7.8%

3.4% 2.3%

6.0%

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

2021年度

10.5%

12.0%
9.0%

(10.0)%
1Q

4Q

2020年度

2019年度

0.7% 2.3%1.9% 2.4%
(1.0)%(3.3)% (3.0)%(3.2)%(2.9)%(5.4)%

0.6%

3Q

Hospital market (HP)2021年度

2020年度

7.1%

10.0%

＋4.0pt

2.9% 3.6%(1.9)%(1.0)%(2.5)%(5.1)%

General clinics (GP)2019年度

6.6% 7.1%

1.2% 2.2% 1.5%

4.5%

2.7%

4.7%

4.3%

6.4%

4.1%5.1%

1.6%(0.3)%(1.4)%(1.7)%

3.0%

3.1% 3.4% 2.7%3.7%
1.4%
0.1%(0.2)%(0.3)%(1.5)%(1.9)%(6.0)%(2.4)%(4.8)%
0.0%(3.0)%

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

Copyright © 2022 IQVIA.「JPM 2019年4月～2022年3月」をもとに当社が独自に集計

2Q

3Q

4Q

無断転載禁止57

Increase in prescription opportunities owing to e-promotions
Increase in the number of physicians that write Kampo prescriptions owing to theimplementation of e-promotions
Third Medium-Term Management Plan

Number of physicians who newlyprescribed Kampo*1(Number of cases of detailing impact)
500,000(Million yen)360

Increase of around

400,000

15,000people*3350

300,000

epromotions

200,000(Annual moving average:
Number of physicians for which there was
Approximation)
an increase in Kampo prescriptions*2

340

Daily salesMR
activities

Increase of around

100,000

32,000

330

320

*3
people310

0*Number of cases of detailing impact: Number of cases of information recognition from various channels, including MR activities and the Internet

March 2022

January 2022

February 2022

December 2021

October 2021

November 2021

September 2021

July 2021

August 2021

May 2021

June 2021

April 2021

March 2021

January 2021

*1：Confirmed number of doctors converted from non-prescribing to Kampo prescribing doctors*2：Confirmed number of growth in prescriptions written by doctors already writing Kampo prescriptions*3：Increase up to March 31, 2022, starting from April 1, 2021

300
February 2021

December 2020

October 2020

November 2020

September 2020

July 2020

August 2020

May 2020

June 2020

April 2020

March 2020

January 2020

February 2020

December 2019

October 2019

November 2019

September 2019

July 2019

August 2019

May 2019

June 2019

April 2019

March 2019

January 2019

February 2019

December 2018

October 2018

November 2018

July 2018

August 2018

September 2018

May 2018

June 2018

April 2018

*Survey by Tsumura

INTAGE Healthcare Inc. survey, Impact Track58■e-プロモーションによる処方機会の増加
また、e-プロモーションの推進により、漢方薬を処方する医師が増加しました。
2021年度の1年間では、新規に漢方薬を処方した医師数は約15,000人増加し、漢方薬の処方数が増加した医師数も約32,000人増加しました。
e-プロモーションの推進により、これまでコンタクトできなかった医師をはじめ、より多くの医師に情報提供できる環境が整いつつあり、
今後もe-プロモーションを拡充することで、漢方薬を処方する医師の増加を加速させていきます。

58

COVID-19 impact
Positive impact in FY 2021 by addressing needs with a changes in disease structure
Increase reflecting changes inliving environment•••

Anxiety/insomnia (6 formulations)Dizziness (2 formulations)
Loss of appetite, fatigue (2 formulations)

Increase owing to theuse of masks•

Skin irritation, acne (4 formulations)

115%

Formulations with apositive impact

126%
129 prescriptions
113%

105%

102%

FY 2018

103%

FY 2019105%

FY 2020

Formulations with anegative impact(Shipment and quantity basis: Growth rate)

Decrease due to measures toprevent infections•

FY 2021

88%

88%

Common cold, influenza and hay fever (13 formulations)

Prescriptions for Bakumondoto,
Shosaikotokakikyosekko, etc.
turning toward recovery
59■COVID-19の影響
第3期中期経営計画の期間において、COVID-19により疾病構造に大きな変化がありました。
こちらは、 COVID-19によりプラスの影響、マイナスの影響を受けた処方と医療用
漢方製剤全129処方の数量ベースの伸長率を比較したグラフです。
COVID-19の流行が始まった2019年度から、感染予防対策でのマスク着用による肌荒れ、にきび等の疾患が増加しました。さらに、2020年度からは外出機会の減少など、生活環境の変化による不安感、不眠、めまい、食欲不振、倦怠感などの疾患が増加したことで、129処方全体の伸長率を大きく上回りました。
一方で、感染予防対策により風邪、インフルエンザ、花粉症などの疾患が減少し、関連処方はマイナス影響を受けました。2021年度に数量ベースで横ばいとなっている要因としては、麦門冬湯、小柴胡湯加桔梗石膏などの処方が回復に転じたためです。

59

COVID-19 Related Symptoms and Prescription Opportunities
Diseases for which prescription opportunities have increased
PsychiatricdisordersDizziness

Skin diseases

Anxiety and insomnia

Dizziness due tophysical andpsychiatric disorders

Acne and dermatitis
due to the use ofmasks

Hangebyakujutsuten
mato
Ryokeijutsukanto(Goreisan)*Keishibukuryogankayokuinin
Jumihaidokuto
Seijobofuto
Keigairengyoto

Kamishoyosan
Kamikihito
Hangekobokuto
Saikokaryukotsuboreito
Total sales for six
formulations

Supplements

Prescription group used to treat a deterioration in
health conditions, including post-illness fatigue, loss ofappetite and decline in stamina

Hochuekkito Juzentaihoto

Diseases for which prescription
opportunities have decreased
Decrease in the number of respiratory disease patients
due to infection prevention measures

Kakkonto、Shoseiryuto、Keishito、Jinsoin、
MaobushisaishintoTotal of five formulations

Trends in the monetary impact owing
to a fluctuation in prescription
opportunities (FY 2021)

25

23.6

(Hundred million yen)

20
15
10
5
0
-5

(1.6)

*

(Amount: year-on-year / shipment basis）*Calculated only for 5 prescriptions
decreased from the previous year

*Goreisan prescription opportunities are also increasing for treatment in areas other than dizziness therefore it has been excluded from the basis of calculations

60

60