Financial Briefing (for Analysts and Institutional Investors)
13:00-13:55, May 12, 2021

<Q&A Summary>
Q: Does the 7.0 billion yuan (about ¥119.0 billion) sales target for theformulation platform mainly consist of traditional Chinese medical products?
Or does it primarily consist of classical prescription Chinese medicine
formulations? (Page 30 of the materials)
A: The formulation platform mainly consists of traditional Chinese medical products.
In the event of an M&A deal, we plan to sell the traditional Chinese medical products
possessed by the target company. There are not many classical prescription Chinese
medicine complex formulation products and the market is also not very large. We
plan to utilize Tsumura knowhow here to expand the market. In light of this, atpresent we are screening target companies that possess classical prescription
Chinese medicine complex formulations and negotiating M&A deals. Ultimately, weplan to handle classical prescription Chinese medicine combination formulations. At
the same time, there are cases where an acquisition target possesses traditional
Chinese medical products that are not classical prescription Chinese medicine
combination formulations. Owing to this, at this stage it is difficult to convey factors,including definite ratios. We aim to contribute to the health and medical care of thecitizens of China with traditional Chinese medical products and classical prescription
Chinese medicine complex formulations. There are not many companies in Chinathat handle these two types of formulations so I believe that Tsumura can play asupportive role.
Q: Centralized purchasing is being implemented in China. There is talk of ahigh possibility that this will also apply to traditional Chinese medicalproducts. Assuming that centralized purchasing is applied to traditional
Chinese medical products, will this impact the China Business in themedium/long term.
A: We have reached an agreement with the Ping An Insurance Group. We plan tobuild a brand for general consumers and aspire to contribute to the health ofconsumers. In China, the centralized purchasing movement is recognized as being
similar to the trend for prescription pharmaceuticals in Japan. We cannot
quantitatively show the degree of impact. However, as a current trend, we aretaking into account the need to sufficiently consider factors, including ratios, forbusiness development, while also closely monitoring centralized purchasing trends.
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Q: I assume that companies that supply traditional Chinese medical products
to hospitals are also included in M&A targets. However, can we assume there
will be no progress with M&A deals until the centralized purchasing issue issolved?
A: The impact will differ depending on the type of traditional Chinese medicalproducts possessed by a target company. It is not that we are not dealing withprescription pharmaceuticals. We have reached an agreement with the Ping An
Insurance Group to establish a brand for products for general consumers. We plan
to select M&A targets taking this into account. We plan to implement M&A whileclosely monitoring trends in centralized purchasing.
Q: It is my opinion that the yen will continue to depreciation in value intandem with the prolonged impact of COVID-19. What impact will forex haveon the China Business, including the inventories held by subsidiaries inChina? In FY 2020, what degree of forex impact did you experience?
A: Conventionally, the majority of impact to earnings from forex translations arefrom purchasing denominated in foreign currency. Therefore, the impression isnegative when the yen depreciates in value. However, as we will be posting sales
denominated in foreign currency, the impact to the income statement will beminimal owing to offset accounting. We enter into forex forward contracts whenimporting raw material crude drugs and extract powder. Owing to this strategy, weare basically not exposed to impact from actual spot market rates. Based on hedge
accounting rules, we are implementing forex forward contracts in line withprocurement plans for crude drugs and extract powder while closely observing thetiming of hedging, including monitoring forex trends based on remittance plans.

Q: There was substantial negative impact to cold-related prescriptions.
However, are you incorporating plans for a recovery in the cold-related
market, which is an uncertainty? In addition, sales in the GP market werebrisk in comparison with the pharmaceuticals market. However, sales werenegative in the HP market. Taking into account the experience during
COVID-19 in FY 2021, what changes do you plan to make to sales
activities? (Page 9 and 13 of the materials)

2A: Although there was positive impact from COVID-19, the negative impact to coldrelated prescriptions exceeded this. The negative impact totaled ¥2.6 billion. In FY
2020, we underperformed our plan for sales activity costs (mainly travel andtransportation costs, lecture costs, etc.) due to the impact of COVID-19. Byreallocating capital (resources), we were able to put in place a system that canaddress e-promotions. We plan to deploy sales activities by leveraging a new
approach to information provision, mainly in the HP market.
A: In FY 2021 as well, we put together a plan in which we estimate cold-related
formulations will not make a rapid recovery. In HP sales, although there wereexternal factors, including a decrease in the number of surgeries, we believe a major
factor was a delay in the establishment of an online information provision system.
From December 2020, we started introducing contents that can be provided digitally.
Thus far, we have provided information to around 30,000 doctors working athospitals. In addition to visitations, we plan to deploy information provision activities
through e-promotions. In addition, in April 2021 we renewed our website for
medical practitioners and aim to realize a system that facilitates the implementationof Web lectures. Ultimately, our goal is to realize sales activities in which each MR
carries out information provision using a new approach.
Q: What is the reason you added “peripheral symptoms for frailty related tothe geriatric health domain in the three important domains? Is this being
impacted by COVID-19? (Page 16 of the materials)
A: Frailty is regarded as a social issue. Originally, Kampo products were frequentlyused to boost the stamina of individuals in a frail state. In light of this, further
expansion of sales activities targeting geriatric disorders will contribute to solvingsocial issues. We plan to address Japan’s goal to extend the healthy life span of its
citizens by three or more years by 2040 with Kampo.
Q: For M&As, what financial ratios do you envisage for net assets, including
intangible assets and goodwill?
A: It is difficult to showcase direct financial ratios as the impact to goodwill will differ
depending on the M&A target, acquisition price and business format. We have only
completed 30%-40% of the investment plans in the three-year medium-term
management. The primary reason for this is that the lack of successful M&A deals.
We are pushing forward with negotiations to realize M&A deals that are incorporated
into the medium-term management plan.
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Q: FY 2021 is the financial year of the current Medium-term Management
Plan. What is the vision you plan to outline in the next Medium-termManagement Plan? Is it correct to understand that Tsumura is outlining aplan for monetization, including returns on upfront investments carried outin China thus far?
A: We are deploying measures, including M&A and capex, focusing on monetizing
the China Business. In the China Business, we are aiming to achieve sales of ¥10.0
billion under our next the Long-term Vision 2031. We plan to disclose this in a planthat takes the Long-Term Vision into account.
Q: What level of debt do you forecast? Also, what types of disciplinary rules
are in place internally?
A: We established the current Medium-term Management Plan after alreadycompleting fund procurement therefore we plan to adequately allocate funds basedon our current financial position. However, there is a possibility that we will not beable to cover investments for all business infrastructures and in the next Mediumterm Management Plan with the funds we have procured. Should this be the case,we will implement a financial strategy that includes maintaining our credit rating.
Q: In the Long-term Vision 2031, Tsumura aims to achieve a sales goal for
the China Business of 10.0 billion yuan (roughly ¥170.0 billion) in FY 2027.
It is correct to assume you plan to grow the China Business to work toward
this goal?

Also, is it correct to understand that concrete sales for the China

Business will be disclosed at the next full fiscal year financial results or when
you disclose the Long-term Vision for 2031?
A: About the contents toward the sales image of 10 billion yuan in 2027
We plan to disclose details when we disclose the Long-term Vision 2031 and the
new Medium-term Management Plan.

[Important points]
The details in these materials were not transcribed as is from the Q&A session atour financial results briefing. Taking the purpose of these materials into account,
this is an abridged version.

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