May 12, 2023

SEIKAGAKU CORPORATION
Consolidated Financial Results (Japan GAAP) (Summary)for the Fiscal 2022
(Year Ended March 31, 2023)
Listed exchanges: Tokyo Stock Exchange (Prime Market)
Stock code number: 4548
URL: https://www.seikagaku.co.jp/en/
Date of ordinary general meeting of shareholders (Planned): June 20, 2023
Date of dividend payment (Planned): June 21, 2023
(All amounts have been rounded down to the nearest million yen)

1. Consolidated Financial Results for the Fiscal 2022(from April 1, 2022 to March 31, 2023)(1) Consolidated Financial Results
Net sales
Millions ofYen(Percentages indicate changes from the prior fiscal year)
Net income attributable toOrdinary income
owners of parent
Millions ofMillions of
%
%
Yen
Yen

Operating income%

Millions ofYen%

Fiscal 2022

33,456

(4.0)

2,114

(53.0)

3,069(43.1)

2,236(40.1)

Fiscal 2021

34,851

25.7

4,495

99.9

5,395

78.4

3,733

(12.4)(Note) Comprehensive income:Fiscal 2022:
Fiscal 2021:

3,921 million yen[(14.3) % ]4,573 million yen[(10.7) % ]Net income per
share

Diluted net
income per share

Return on equity

Ordinary income
as a percentage of
total assets

Operating income
as a percentage ofnet sales

Yen

Yen

%

%

%

Fiscal 2022

40.49

-

3.3

4.1

6.3

Fiscal 2021

66.32

-

5.7

7.4

12.9

(2) Consolidated Financial Position
Total assets

Total equity

Equity ratio

Millions of Yen

Millions of Yen%

Total equity
per share
Yen

Fiscal 2022

75,62567,21688.9

1,232.41

Fiscal 2021

75,244

66,34088.2

1,179.46

Net cash flows fromoperating activities

Net cash flows frominvesting activities

Net cash flows fromfinancing activities

Cash and cash
equivalents at the endof fiscal year

Millions of Yen

Millions of Yen

Millions of Yen

Millions of Yen(Reference) Shareholders’ Equity:
Fiscal 2022:
Fiscal 2021:

67,216 million yen
66,340 million yen(3) Consolidated Cash Flows

Fiscal 2022

1,574

Fiscal 2021

8,192
1

3,365

(3,244)25,798870(2,151)

23,367

2. Dividends
1st Quarter
Yen

Dividends per share
3rd Quarter
Yen-

Fiscal Year-end
Yen
15.00

AnnualYen
30.00

Fiscal 2021-

2nd Quarter
Yen
15.00

Fiscal 2022

-

13.00

-

13.00

26.00

Fiscal 2023
(Forecast)

-

13.00

-

13.00

26.00

Total dividend payments(Annual)Millions of Yen

Dividend payout ratio(Consolidated)%

Dividends as a percentage of
total equity (Consolidated)%

Fiscal 2021

1,687

45.2

2.6

Fiscal 2022

1,426

64.2

2.2

Fiscal 2023
(Forecast)

97.8

3. Forecast of Consolidated Financial Results for Fiscal 2023 (from April 1, 2023 to March 31, 2024)
Net sales

Fiscal 2023

Operating income

Millionsof Yen%32,550(2.7)

Millionsof Yen100(Percentages indicate changes from the prior fiscal year)
Net income
Net income
Ordinary income
attributable toper shareowners of parent
Millionsof Yen%(95.3)

1,550%

Millionsof Yen(49.5)

1,450%(35.2)

Yen

26.59* Notes(1) Changes in the status of material subsidiaries during the period: No(2) Changes in accounting principles, changes in accounting estimates, and retrospective restatements(a) Changes in accounting principles accompanying revisions in accounting standards: Yes(b) Changes other than those in (a) above: No(c) Changes in accounting estimates: No(d) Retrospective restatements: No(3) Number of shares issued (common stock):(a) Number of shares at the end of the period(including treasury stock)(b) Number of treasury stock at the end of theperiod(c) Average number of shares issued during theperiodAs of March 31,2023
As of March 31,
2023
Fiscal 2022

2

56,814,093 shares
2,273,029 shares
55,239,983 shares

As of March 31,2022
As of March 31,
2022
Fiscal 2021

56,814,093 shares
567,822 shares
56,299,803 shares

(Reference) Non-Consolidated Financial Results
Non-Consolidated Financial Results for Fiscal 2022 (from April 1, 2022 to March 31, 2023)(1) Non-Consolidated Financial Results(Percentages indicate changes from the prior fiscal year)
Net sales
Millions of
Yen

Operating income
Millions ofYen%

Ordinary income
Millions of
Yen%

Net income
Millions of
Yen

%

%

Fiscal 2022

22,091(12.3)

0(100.0)1,845(50.2)

1,798(28.0)

Fiscal 2021

25,178

19.6

2,273

73.3

3,703

87.4

2,496

(28.5)Net income per share

Diluted net income per
share

Yen

Yen

Fiscal 2022

32.55

-

Fiscal 2021

44.34

-

(2) Non-Consolidated Financial Position
Total assets

Total Equity

Equity ratio

Total Equity per share

Millions of Yen

Millions of Yen%

Yen

Fiscal 2022

63,06856,67289.9

1,039.07

Fiscal 2021

64,64458,01089.7

1,031.37(Reference) Shareholders’ Equity:
Fiscal 2022:
Fiscal 2021:

56,672 million yen
58,010 million yen*This financial reports are not subject to audit of the certified public accountant and audit firm.
*The above forecast has been prepared on the basis of economic circumstances, market trends, and other assumptions
made at the time of release of this document. Actual results may differ from the forecast due to a variety of factors.

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1. Analysis of Results of Operations
Results of operations for the current fiscal year
In the fiscal year ended March 31, 2023 (fiscal 2022), net sales were ¥33,456 million, down 4.0% year on year.
The result is attributable to a substantial decline in royalty income and a decline in sales in the pharmaceuticalbusiness due to the impact of National Health Insurance (NHI) drug price reductions in Japan, despite thepositive impact of yen depreciation on the results from the LAL business and overseas pharmaceuticals.
Operating income fell 53.0% year on year to ¥2,114 million as a result of the sales decrease, notwithstanding
a decrease in R&D expenses accompanying completion of subject enrollment in an additional clinical study
underway in the U.S. for SI-6603, a treatment for lumbar disc herniation. Ordinary income and net income
attributable to owners of parent fell 43.1% to ¥3,069 million and 40.1% to ¥2,236 million, respectively.

1) Net sales by segment
Pharmaceutical Business- Domestic Pharmaceuticals (¥11,271 million, down 1.5% year on year)
Deliveries to medical institutions of ARTZ, a joint function improvement agent for knee osteoarthritis, increased
year on year thanks to successful measures to promote switching from competing products. The Company’ssales fell due to the impact of NHI drug price reductions, despite an increase in shipment volume due to higherdeliveries to medical institutions and the impact of shipment timing.
The Company’s sales of the joint function improvement agent JOYCLU increased year on year, reflecting
higher deliveries to medical institutions. The Company issued a Dear Healthcare Professionals Letter of Rapid
Safety Communication (Blue Letter) about JOYCLU on June 1, 2021 and is continuing cooperative efforts withsales partner Ono Pharmaceutical Co., Ltd. to proactively gather side effects reports and other information andprovide safety-related information. Also, since April 2022 the Company has been conducting a clinical study toidentify the cause of side effects with the cooperation of specialists and medical institutions.
Deliveries to medical institutions of the OPEGAN series of ophthalmic viscoelastic devices increased year on
year due to a gradual return to the pre-COVID market growth trend and the impact of limited shipments ofcompeting products. The Company’s sales were at the prior-year level as a result of shipment volume increase,
despite the impact of NHI drug price reductions.
The Company’s sales of MucoUp, a submucosal injection agent for endoscopic surgery, decreased due to theimpact of an NHI reimbursement price revision.
Although deliveries to medical institutions of HERNICORE, a treatment for lumbar disc herniation,
remained at the prior-year level, the Company’s sales rose due to the impact of shipment timing.

- Overseas Pharmaceuticals (¥8,534 million, up 11.5% year on year)
Local sales volume in the U.S. of Gel-One, an intra-articular single-injection viscosupplement for the treatmentof knee osteoarthritis, decreased year on year, reflecting the impact of a health insurance system change
implemented in July 2022. The Company’s sales increased substantially, fueled by the impact of yen
depreciation.
Local sales volume in the U.S. of SUPARTZ FX, an intra-articular 5-injection viscosupplement for thetreatment of knee osteoarthritis, rose due to a changing market environment accompanying a health insurance
system change. The Company’s sales increased, reflecting the impact of yen depreciation.
Local sales volume in China of ARTZ fell sharply because of the impact of factors including limitation ofaccess to outpatient services accompanying the renewed spread of COVID-19. The Company’s sales declined
substantially, reflecting the absence of shipments in the first quarter due to a packaging material change and adecrease in local sales volume.

- Bulk Products and Contract Development and Manufacturing Organization (¥2,916 million, up
11.9% year on year)
Sales increased due to higher sales of bulk products and the impact of yen depreciation on sales of contractdevelopment and manufacturing and other services of overseas subsidiary Dalton Chemical Laboratories, Inc.
As a result of these developments and a steep decline in royalty income (¥1 million, down 100.0% year on year),4

sales from the Pharmaceuticals business segment fell 11.6% year on year to ¥22,723 million.

LAL Business
Sales from the LAL business segment increased 17.2% year on year to ¥10,732 million, reflecting the impact ofyen depreciation on sales of reagents and diagnostics at overseas subsidiary Associates of Cape Cod, Inc. as well
as steady sales in Japan.

2) Research and Development Activities
To contribute to healthy and fulfilling lives for people around the world, the Seikagaku Group focuses its
research and development on glycoscience as its area of specialization and aims to create original
pharmaceuticals and medical devices.
The Group will aim to achieve early and continuous launching of new products, which hold the key to futurebusiness growth, by focusing on application of Seikagaku’s original glycoscience-related basic technologies tocreate new development themes in existing fields as well as innovative research themes, including in new disease
areas, and by pursuing various alliances.
Total R&D expenses in fiscal 2022 were ¥7,951 million, or 23.8% of net sales (excluding royalties), and thenumber of R&D personnel was 196, or 20.1% of the total number of employees, at March 31, 2023.
The status of progress of principal R&D activities is described below.

SI-6603 (treatment for lumbar disc herniation: developed in the U.S.)
Follow-up observation in an additional Phase III clinical study was completed in March 2023, and preparations
for results analysis are underway.
SI-6603, which contains condoliase as its active pharmaceutical ingredient, is a therapeutic agent directly
injected into the lumbar disc. It does not require general anesthesia and is less invasive to the patient thansurgical treatment. Since a single-injection treatment is expected to improve the symptoms of lumbar discherniation, the Company aims to provide SI-6603 as a new treatment option.

SI-614 (treatment for dry eye: developed in the U.S.)
Subject enrollment has been completed for a Phase III clinical study being conducted since May 2022 with theobjective of evaluating efficacy and safety. After obtaining data from the clinical study currently underway, theCompany plans to select a sales partner and conduct a second Phase III clinical study and a long-term study.
SI-614 is a substance produced by introducing a hydrophobic group into hyaluronic acid using Seikagaku’s
own proprietary technology. Ocular instillation of SI-614 in patients is expected to improve symptoms of dry eye
by stabilizing the tear film and promoting corneal epithelial wound healing. Through development of SI-614, theCompany aims to provide a new option for the treatment of dry eye.

SI-613 (treatment for osteoarthritis: developed in the U.S., China, and South Korea)
SI-613-ETP (treatment for enthesopathy: developed in Japan)
SI-613
The Company will consider the future direction for development in the U.S., China, and South Korea whileassessing progress with identification of the cause of shock or anaphylaxis of JOYCLE.
SI-613-ETP
The primary efficacy endpoint in a late-stage Phase II clinical trial in Japan of SI-613-ETP for the treatment
enthesopathy was not met, and the Company will prioritize identification of the cause of shock or anaphylaxis of
JOYCLE. For these reasons, development of SI-613-ETP was discontinued in February 2022.
SI-613 is a formulation in which hyaluronic acid and diclofenac (an anti-inflammatory agent) are chemicallybound using Seikagaku’s own proprietary technology. It is expected to improve symptoms associated withosteoarthritis and enthesopathy by releasing diclofenac by hydrolysis.

SI-722 (treatment for interstitial cystitis: developed in the U.S.)
Seikagaku is considering the policy on future development based on data obtained in Phase I/II clinical studies.
5SI-722 is a novel chemical compound in which a steroid is conjugated with chondroitin sulfate using
Seikagaku's proprietary glycosaminoglycan modification technology and drug delivery systems. SI-722 injected
into the bladder is thought to demonstrate long-lasting improvement in the conditions of frequent urination andbladder pain by releasing a steroid with an anti-inflammatory effect.

SI-449 (adhesion barrier: developed in Japan)
Subject enrollment for a pivotal study in the field of gastroenterological surgery was completed in September
2022. The study is being conducted to confirm efficacy (prevention of adhesion formation), safety, and usability
in gastroenterological surgery
A pilot study in the field of gynecology was initiated in November 2021 for the purpose of expanding thescope of application of SI-449 by confirming usability and safety in gynecology.
SI-449 is a powdered medical device whose main ingredient is cross-linked chondroitin sulfate developed
using Seikagaku’s own proprietary glycosaminoglycan cross-linking technology. It has the property of absorbing
moisture and swelling, and is expected to prevent post-operative adhesion formation by forming a barrier
between the surgical wound site and surrounding tissues after application. The Company will proceed with
development of SI-449 with a view to introducing it globally, not only in Japan.

2. Forecasts for Fiscal 2023
For fiscal 2023, the Company forecasts net sales of ¥32,550 million, a decline of 2.7% from the previous year, toresult from lower sales from overseas pharmaceuticals and the LAL business in addition to the impact of NHI
drug price decreases in Japan. This would be despite a projected sales volume increase for domestic
pharmaceuticals and an expected increase in royalty income.
As for the earnings outlook, the Company forecasts operating income to decline 95.3% year on year to 100
million yen due to the expected sales decrease coupled with cost increases in connection with production system
expansion and soaring fuel costs. Ordinary income is projected to decline less steeply than operating income, by
49.5% to ¥1,550 million, thanks to an expected increase in non-operating income, while net income attributableto owners of parent is projected to decline by 35.2% to ¥1,450 million.
The Company forecasts R&D expenses of ¥7,200 million, a decrease of 9.5% year on year, and a ratio of
R&D expenses to net sales (excluding royalty income) of 22.6%.
The exchange rate assumption used in the forecast of consolidated financial results for fiscal 2023 is ¥130 to
the U.S. dollar.
Note: The above forecast has been prepared on the basis of economic circumstances, market trends, and otherassumptions made at the time of release of this document. Actual results may differ from the forecast due to avariety of factors.

3. Issues Facing the Company
While the abrupt changes to the business environment surrounding the pharmaceuticals industry are continues tobe extremely difficult, progress in measures to control medical expenses of starting with a drastic reform of the
NHI drug pricing system in Japan, intensity of competition among firms the diversifying of treatment options,and degree of difficulty of new drug development increases in the inside cost of research and development whichrises. A flexible response to these times of drastic change in the operating environment will be necessary for
Seikagaku to maintain a constant growth trajectory. Also, fulfilment of social responsibilities, starting withsustainability promotion, is increasingly important for the sustainable development of society and enhancementof corporate value, and responding to this societal trend is a matter of urgent importance.

Overview of the mid-term management plan (fiscal 2022 to fiscal 2025)
1) Background of the new mid-term management plan
Seikagaku has positioned the four-year period beginning with the fiscal year ended March 31, 2023 (fiscal 2022)6

as “A period for achieving growth” and formulated a new mid-term management plan. By implementing key
measures set out in the plan on the basis of a profit foundation solidified during the period of the previous
management plan, Seikagaku will aim to maintain a constant growth trajectory and achieve record-high businessresults in the final year of the plan.

2) Key measures
Seikagaku will implement the following five key measures to nurture the capability to maintain a constant
growth trajectory.
① Accelerate R&D utilizing unique drug-discovery technologies
Apply Seikagaku’s own GAG*-related basic technologies to create new drugs that patients truly need, with
an emphasis on unmet medical needs, by focusing on creation of new development themes in existing fields
and creation of innovative research themes, including in new disease areas. Also, to increase the probabilityof success of these efforts, pursue various alliances aimed at making early progress. At the same time,advance existing pipelines with the aim of obtaining approval and introducing in the U.S. SI-6603 (atreatment for lumbar disc herniation), completing a Phase III clinical study in the U.S. of SI-614 (a treatment
for dry eye), and obtaining approval in Japan and initiating a clinical study in the U.S. of SI-449 (an adhesion
barrier).
*GAG: Glycosaminoglycans, such as hyaluronic acid and chondroitin sulfate, which are structural components know as
glycoconjugates.

② Maximize the product value of SI-6603 (treatment for lumbar disc herniation)
Take maximum advantage of SEIKAGAKU NORTH AMERICA CORPORATION, established in Canada
for the purpose of obtaining approval in the U.S. and launching SI-6603, a treatment for lumbar discherniation, to ensure a prompt and accurate NDA and response to regulatory review. Also proceed with sales
preparations and pursue maximization of product value through early penetration at medical institutions inclose cooperation with the sales partner.
③ Maintain and enhance the business value of joint function improving agents
Strive to maintain and enhance the business potential of the core products that support business management
by increasing the presence of Seikagaku products in the mainstay domestic market for joint function
improving agents. Since the domestic pharmaceuticals business is greatly affected by NHI drug pricereductions, cost structure improvement is essential. Seikagaku will further proceed with product material
specification changes, which help ensure continuity of product supply, manufacturing process efficiency
improvement, and other measures. Seikagaku will also continue gathering and providing safety informationon the joint function improving agent JOYCLU with the aim of contributing to appropriate prescription on
the basis of clinical research findings.
④ Construct a global production system
Further reinforce a stable supply of products on the basis of an appropriate and efficient production system
by making Dalton Chemical Laboratories, Inc.(Toronto, Canada) and the Seikagaku Takahagi Plant (Ibaraki
Prefecture, Japan) dual production bases, including transfer of production of some products.
⑤ Expand the LAL business through recombinant technologies
Aim to create new value in cooperation with overseas subsidiary Associates of Cape Cod, Inc. byaccumulating reliable scientific data utilizing PyroSmart NextGen® recombinant LAL reagent and promoting
development of new diagnostic reagents utilizing recombinant technologies and by developing andimproving measurement equipment and software in collaboration with an affiliated company.
In addition, enhancement of employee engagement along with organizational strengthening and human resource
development will be critical factors for carrying out the above five key measures. Seikagaku will work tosolidify and improve the foundation for achieving sustained growth by stepping up the development of humanresources, the heart and soul of the Group’s businesses, and actively investing to create an environment that
promotes employee growth.
73) Sustainability
Seikagaku has identified six material issues as important issues that should be addressed on a priority basis in theinterest of achieving sustainable development of society and enhancement of corporate value. Seikagaku willcontinue to focus on these material issues, which will become the foundation for the key measures in the
mid-term management plan, strengthen development of medical-related businesses as well as ESG (Environment,
Social, Government) initiatives, and aim to contribute to solving social issues through close communication with
supply chain partners and stakeholders.

Progress with the New Mid-Term Management Plan (in fiscal 2022)
Progress against the new mid-term management plan in fiscal 2022 is as described below.
Progress was made with “Accelerate R&D utilizing unique drug-discovery technologies,” the first of five key
measures set out in the management plan. Follow-up observation in a Phase III additional clinical study in the
U.S. for SI-6603 (a treatment for lumbar disc herniation) was completed in March 2023, and preparations forresults analysis are underway. Also, there was steady advancement in the development pipelines for SI-449 (anadhesion barrier) and SI-614 (a treatment for dry eye), as indicated by completion of subject enrollment for apivotal clinical study in Japan of SI-449 in September 2022 and for a Phase III clinical study in the U.S. for
SI-614 in February 2023. Seikagaku will continue efforts to achieve the development objectives for eachpipeline.
To achieve the second key measure, “Maximize the product value of SI-6603 (treatment for lumbar discherniation),” Seikagaku will aim to accelerate U.S. Food and Drug Administration (FDA) approval by ensuringsmooth communications with the FDA utilizing Canadian subsidiary SEIKAGAKU NORTH AMERICACORPORATION while conducting the abovementioned clinical study.
Initiatives to implement the third key measure, “Maintain and enhance the business value of joint function
improving agents,” include building an expanded production system for the purpose of maintaining a stablesupply of ARTZ (a joint function improvement agent) and measures underway for the early realization of
product material specification changes aimed at cost structure improvement. Seikagaku also continues to gather
and provide safety information on the joint function improving agent JOYCLU and is conducting clinicalresearch to promptly identify the cause of side effects.
Seikagaku is proceeding with arrangements to make Dalton and the Takahagi Plant dual production bases inorder to “Construct a global production system,” the fourth key measure in the management plan. Constructionof a production system at Canadian subsidiary Dalton Chemical Laboratories, Inc. is under consideration.
With regard to “Expand the LAL business through recombinant technologies,” the fifth key measure,
Seikagaku continues to accumulate scientific data relating to PyroSmart NextGen® recombinant LAL reagent
and is implementing measures to achieve market penetration for this product, such as co-authoring of academic
papers with overseas subsidiary Associates of Cape Cod, Inc. Another objective is to expand the market for
Fungitell, an in-vitro diagnostic reagent, by increasing the number of countries where the product is sold andfurther accelerating new expansion into the hospital market.
Each of the key measures in the mid-term management plan progressed mostly according to plan in fiscal
2022. Seikagaku will continue to assiduously implement the key measures to ensure that the Group maintains a
constant growth trajectory in order to achieve the targets set out for the final year of the plan.
Seikagaku also considers initiatives relating to sustainability an important priority and has designed andimplemented effective measures based on the Basic Policy on Sustainability instituted in 2021 and the six
identified sustainability issues and expanded their scope of application to subsidiaries. In January 2023,
Seikagaku established the Supply Chain Management Department with the aim of helping solve social problems
by practicing sustainable raw materials procurement and providing a stable supply of products in cooperation
with suppliers. To address one of the environmental issues, Seikagaku has revised upwards its CO2 emissions
reduction target and is implementing measures to achieve the new target. Going forward, in addition to thesemeasures, Seikagaku will promote initiatives to address sustainability-related issues in areas including respectfor human rights, consideration of the working environment for employees, fair and appropriate trading withbusiness partners, and enhancement of corporate governance and will proactively disclose information to ensure8

sufficient communication with stakeholders.

4. Dividend Policy
As a means of ensuing sustainable profit growth and improving corporate value, Seikagaku believes in the
sharing of profits with its shareholders.Management regards the return of profits to shareholders as an importantpriority and, while taking an annual dividend of ¥26 per share as the basis, will consider dividend increases,
taking into account the trend in business performance, the financial position, and other factors. Also, while
taking into consideration future business expansion and the total return ratio, Seikagaku will weigh the purchaseof treasury stock when appropriate.
In addition, in order to solidify the business foundation and improve capital efficiency, the Company will
make efficient and active business investments in R&D for creating new value, in production systemdevelopment, and in sustainable activities and will flexibly make strategic investments that offering prospects for
future growth and synergy effects.
In accordance with the above dividend policy, the Company plans to pay a year-end dividend for the fiscal
year ended March 31, 2023 of ¥13 per share. As a result, the annual dividend forecast is ¥26 per share,(representing a dividend payout ratio of 64.2%), including an interim dividend of ¥13 (resolved at a meeting of
the Board of Directors Held on November 8, 2022). The Company plans to pay an annual dividend of ¥26 pershare for the fiscal year ending March 31, 2024 (including an interim dividend of ¥13).
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