TSUMURA & CO.
New Medium-Term Management Plan (Fiscal 2016–Fiscal 2021)

Creating New Value
Through Innovations in Kampo
May 13, 2016

President, Representative Director

Terukazu Kato

Philosophy-Based Management

Philosophy

Vision• Basic Direction

Tradition andInnovation
Goal/Plan“Human Resource”
Individuals

Corporate Philosophy: Basic value/beliefs
The Best of Nature and Science
Corporate Mission: Aim to continue to be a necessary
company for Society
To contribute to the unparalleled medical therapeutic
power of the combination of Kampo medicine andWestern medicine
Vision for 2021: Long-term business vision
The “Kampo” Company
The “People” Company
The “Global Niche” Company
New medium-term management plan
Creating new value through innovations in Kampo
Organizational foundation
Organization comprising people that share Tsumura’s beliefs andmission, follow the same direction as the Company’s vision, andstrive for self-fulfillment

TSUMURA-DNA PYRAMID

2

Long-Term Business Vision “Vision for 2021”

Aim to be a value-creation company that contributes to people’s healththrough its Kampo business

The “Kampo”
Company
Contributing to creating a healthcare
environment where all patients canreceive treatment that includes“Kampo” medicine where appropriate in any healthcare institution or
medical specialty in Japan.

The “People”
Company“Kampo” medicine is a pioneering
field with no previous examples tobuild on worldwide. Therefore, weshall evolve into a corporate group
comprised of “people” with professional skills that can independently
pave the way forward for our Kampo
business and is trusted by all.

The “Global Niche”
Company
Leveraging the technology and know-how
of the Tsumura Group to their full extent, we
will take on the challenge of developing andlaunching TU-100 (Daikenchuto) in the U.S.
pharmaceutical market as well as creating
new businesses in China.

3

Fiscal 2012–Fiscal 2015
Overview of the Previous Medium-Term
Management PlanFiscal 2012–Fiscal 2015 Overview of the Previous Medium-Term Management Plan

Outline and Quantitative Reflection
1. Expanding the Kampo
Medicine Market
Expand the prescription Kampo
product market in Japan
Consolidated: ¥ billion

2. Enhancing Earning Power
Reform the Company’s cost structure
through the introduction of newtechnology and other measures
Fiscal 2015
targetFY 2012
results

FY 2013
results

3. Executing Effective Financial
and Capital Policies
Increase corporate value by executing
effective financial and capital policies
FY 2014
results

Fiscal 2015
results

Compared toinitial plan

Net sales

123.0

105.6

110.0

110.4

112.6

–10.4

Operating profit

29.5

23.1

22.4

19.4

19.8

–9.7

Operating profit margin (%)

24.0

21.9

20.4

17.6

17.6

–6.4

Net income

19.0

15.3

18.0

14.0

12.5

–6.5

EPS (Yen)

269

217

255

199

178

–91

ROE (%)

14.0

14.1

14.5

10.1

8.3

–5.7

Sales of 129 Kampo formulations

118.0

99.4

102.6

105.1

107.5

–10.5

Of which, five “drug fostering
program” formulations

38.6

26.2

28.0

28.5

29.1

–9.5

Record-highoperatingincomeRecord-highnet income

5Fiscal 2012–Fiscal 2015 Overview of the Previous Medium-Term Management Plan

Reasons for Failing to Reach Planned Targets

1

Slowdown in growth of “drug fostering program” formulations

2

Worsening costs due to the reoccurring rise in crude drug prices

3

Worsening costs due to foreign exchange of depreciating yen

Insufficient emphasis and concentration on promotion of medical specialists in the “drug fostering program” domain
Ineffective utilization of new scientific evidence (turning evidence into marketable materials, etc.)

Rise in cost of raw materials for crude drugs from 2013 and on brought about by higher prices for ginseng and othermaterials starting from 2011 Worsening costs

Rise in procurement costs for raw material crude drugs in China due to the rapid weakening of the yenfrom 2013 and on Worsening costs

6

Fiscal 2012–Fiscal 2015 Overview of the Previous Medium-Term Management Plan

Changes in the Operating Environment

Reoccurring rise in price for certain raw material crude drugs
Volatile foreign exchange rate and rapid depreciation of the yen
Impact on cost of sales ratio (disparity from plan)
Fiscal 2015
Initial plan

34.7%

Results

40.0% +5.3 pts

FactorEffectCrude drug price (rising unit cost)+3.5 pts

Crude drug price (foreign exchange rate)+1.6 pts

Other (increasing production efficiency,
reducing production volumes, etc.)+0.2 pts

Total+5.3 pts

7

Fiscal 2012–Fiscal 2015

Overview of the Previous Medium-Term Management Plan

Quantitative Results and Issues in Three Strategic Challenges

Strategy

Results

Expanding the Kampo Medicine Market

Enhancing Earning Power

Executing Effective Financial andCapital Policies＞ Actively implemented Kampo medicine seminars, lectures, and briefings＞ Established new manufacturingsystem that uses less manpower and is more efficient＞ Revised non-operating assets＞ Carried out a stable dividend＞ Promoted clinical research throughdouble-blind, placebo-controlled
studies at multiple institutions as wellas basic research, produced
high-quality scientific evidence＞ Created scientific quality evaluation
method for TU-100 (Daikenchuto)

Remainingissues• Utilization of evidence in the “drugfostering program” formulations,especially TJ-43 (Rikkunshito)• Implementation of Phase II clinicaltests for TU-100＞ Expanded Cultivated Land
under Own Management area

＞ Strategically stockpiled raw
material crude drugs＞ Controlled sales, general andadministrative expenses by
increasing business efficiency• Marketing efficiency
improvements• Cultivating crude drugs
Technological development andactual production for raw material crude drugs• Yet to achieve ROE of 14%• Inventory control for raw
material crude drugs

8Fiscal 2016–Fiscal 2021
Outline of New Medium-Term Management PlanFiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan

Issues and Opportunities Tsumura Faces within the New Plan

IssuesOpportunities

Impact of fluctuating foreign exchange rates and rising crude drug prices on profits, drug price revisions
Rapidly aging society, longer healthy life expectancies, countermeasures for dementia, countermeasuresfor cancer, promotion of the active role of females in the workplace→ Changes in disease structure (diseases of the elderly, diseases specific to women)

Measures by the Ministry of Health, Labour and Welfare＞ Kenko Nippon 21 (second stage)

Healthy life expectancies, prevention of outbreak and worsening of lifestyle diseases＞ New Orange Plan

Promotion of measures to care for dementia＞ Comprehensive Regional Care System Promotion of general physicians and home healthcare＞ Comprehensive Strategy to Strengthen the Pharmaceutical Industry➡ Strategy states that there is a need for the stable provision of high-quality products in regard to the essential and traditional pharmaceuticals that support medical treatment, such as vaccines, intravenous pharmaceuticals, Kampo products,
and external-use pharmaceuticals.
＞ Plan to Accelerate Countermeasures for Cancer➡ Strategy states the importance of promoting research related to supportive care that uses nutritional therapy, rehabilitation, and Kampo medicine from the perspective of reducing postoperative complications and prognostic symptoms

10

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan

Themes of the New Medium-Term Management Plan
and Roadmap to Realizing Long-Term Vision

JUMP
STEP
HOP

Vision for
2021

Creating New Value
Through Innovations in Kampo

Strengthening the
growth base to achieve
greater value creation

First Medium-Term Management Plan

Second Medium-Term Management Plan

Third Medium-Term Management Plan

2012

2016

2019

2015

2018

2021

New Medium-Term Management Plan

11

Fiscal 2016–Fiscal 2021

Outline of New Medium-Term Management Plan

Numerical Targets
FY2018FY2021

Net sales¥120 billion¥135 billion

Operating profit¥14 billion¥19 billion

11.5%

14%

¥10 billion¥13 billion

EPS

¥140

¥185

ROE

6%

8%

Operating profit margin
Net income

Preconditions
Drug price revisions:Fiscal 2016, 2017, 2018 and 2020
Foreign exchange rates:¥115 = 1 US$＞ Aim for stable growth in the Kampo business despite expectations of the adverse impact of drug price revisions＞ While the influence from soaring raw material crude drug prices will continue, aim for recovery in regard to
profits after levels bottom out in fiscal 2018 and growth at a gradual speed thereafter＞ Numerical targets for fiscal 2021 are slated to be announced again at the start of the third stage ofthe medium-term management plan (fiscal 2019) based on changes in the operating environment

12

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan

Strength to Turn Adverse Operating Conditions into GrowthLong-Term

Initial plan for growth

Actual growthBusiness Vision
Aim to be a valuecreation company that
contributes to people’s
health through its Kampo
medicine business
The “Kampo”
Company
The “People”

Planning(starting point)

Company

Resilience

The “Global Niche”
Company

13

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan

Strategic Challenges 1–3

1

Expansion and stable growthin the Kampo market

2

Continued reinforcement of profitability
and maximization of cash flow

3

Taking on the challenge of
new businesses in China

14Strategic Challenge 1:
Expansion and Stable Growthin the Kampo Market

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 1: Expansion and Stable Growth in the Kampo Market

Basic Strategy to Expand the Kampo Market
Appropriate provision of information such as scientific evidence, guidelines, and proper use of different
formulations based on the Kampo medicine style(Basic activities: interviews, briefings, and Kampo seminars)
HP market (university hospitals, designated hospitals for clinical training, etc.)
Promotion activities centered on scientific evidence
Focus on medical specialists in important domains ➡ Develop demand for new formulations

GP market (general practitioners, clinics, etc.)
MedicalRepresentatives
(MRs)

Three
Important
Domains

Promotion activities based on the Kampo medicine styleEnhance the Kampo proficiency level of GPs, primarily with existing clients➡ Increase quantity of formulations, have GPs prescribe multiple formulations

1. Geriatric health
2. Cancer domain (supportive care)
3. Women’s health16

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 1: Expansion and Stable Growth in the Kampo Market

Expansion of “Drug Fostering Program” Formulations and “Growing” Formulations

Elderly
Three
Important
Domains

CancerFemale“Drug Fostering
Program”*1 Formulations“Growing”
Formulations*2

TJ-100 (Daikenchuto)

TJ-41 (Hochuekkito)

TJ-54 (Yokukansan)

TJ-68 (Shakuyakukanzoto)

TJ-43 (Rikkunshito)

TJ-29 (Bakumondoto)

TJ-107 (Goshajinkigan)

TJ-24 (Kamishoyosan)

TJ-14 (Hangeshashinto)

TJ-17 (Goreisan)Prioritize unmet medical needs
BPSD, frailty, supportive care for cancer (postoperative dysfunction, loss of appetite, stomatitis), menopausal disorders, etc

Aim to have three formulations, TU-100 (Daikenchuto), TJ-54 (Yokukansan), andTJ-43 (Rikkunshito), with over ¥10.0 billion in sales by fiscal 2021
*1 Looking at the recent structure of disease, the Company has selected certain diseases in fields where medical treatment needs are high that are difficult to treat with
Western drugs and that Kampo products have demonstrated special efficacy for.
The Company will establish a base of scientific evidence related to treating these
diseases with Kampo medicine.

*2 A growth driver that aims to be listed in medical treatment guidelines as a strategic
formulation following the five “drug fostering” program formulations through theestablishment of scientific evidence (data on safety, efficacy, etc.) in fields wheresatisfaction toward treatment and the contribution of medicine are low.

17

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 1: Expansion and Stable Growth in the Kampo Market

Enhancement of Evidence Collection
Establish evidence of safety and efficacy ➡ Enhance package inserts
Further develop “Drug fostering program” formulations followed by “Growing” formulations ➡ Publish medical treatment guidelines
Collect clinical EBM, action mechanisms, side effect frequency surveys, ADME, and health economic data
Metaanalysis

RCT

Actionmechanisms

Side effectfrequency
surveys

ADME

Publish guidelines (include recommendations for
Kampo medicine)

TJ-100(Daikenchuto)

Papersubmitted

23

◎

◎

◎

Pediatric chronic functional constipation disease,systemic sclerosis

TJ-54(Yokukansan)

1

12

◎

◎

◎

Dementia disease

TJ-43(Rikkunshito)

̶

16

◎

Ongoing◎Functional gastrointestinal disease, the diagnosis
and treatment of psychosomatic diseases, GERD

TJ-107(Goshajinkigan)

̶

14

△

̶

○

Benign prostatic hyperplasia, overactive
bladder syndrome

TJ-14(Hangeshashinto)

̶

5

○

̶

̶

̶

18

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 1: Expansion and Stable Growth in the Kampo Market

New Approach for Establishing Evidence
Leverage new technologies (IT, new analysis methods, network analysis, etc.) to accelerate researchon Kampo medicine and Kampo formulations

System biology
Metabolomics

Kampo action
mechanism clarification

Intestinal bacteria

Kampo healtheconomic effects, etc.

Improve trust toward Kampo
medicine, contribute toestablishing Kampo medicine
in the medical setting

Big data
System biology：University of Oxford’s Innovative Systems Biology
The Systems Biology Institute (SBI)

Metabolomics：Kobe University’s Division of Metabolomics Research

Intestinal bacteria：University of Chicago’s Digestive Diseases Center

Big data：University of Tokyo’s Health Services Research Course

19Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 1: Expansion and Stable Growth in the Kampo Market

Supporting Education Related to Kampo Medicine for Doctors
and Providing Information to Consumers
Supporting Kampo medicine education before, immediately after, and post-graduation
Before graduation
調達

Immediately after生産
graduation

Post-graduation
販売

Improvement, establishment, and evolution of Kampo medicine education
At university medical departments,
medical colleges

Designated hospitals for clinical training,and other medical institutions

Medical students

Physicians-in-training• Lectures (introductions to Kampo)• Clinical training (hospital wards, outpatient care)• Workshop on professor/lecturer training at schools• Study groups at schools (school club, etc.)• Kampo studies geared toward physiciansin-training

Changes in the external environment for medical education
Significant revisions to the medical education curriculumin Japan inspired by the World Federation for Medical
Education’s global standards

Kampo Medicine Seminars

Clinical physicians
Introductory training
Follow-up
Advanced training
Instructor training

Increase in the amount of clinicalteaching accompanying qualitative
improvements in medical education

Aim for increasing
physicians whoprescribe over 10
formulations

Clinical teaching on Kampo medicine being
implemented at all medical faculties
and schools in Japan

Transmission of information to consumers
Activities geared toward the elderly

Activities targeting cancer patients

Activities geared toward females

20

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 1: Expansion and Stable Growth in the Kampo Market

Development of TU-100 (Daikenchuto) in the U.S.
Previous medium-term management plan
FY2012

Quality control

FY2013

Endpoint search clinical trials (IBS patients)
Scheduled to be completed in fiscal 2016

FY2016FY2017

Efficacy and safety

Responder trials(patients with Crohn’s disease)
PII (early stage)
Fiscal 2011–fiscal 2014
Side effects*1

FY2018 and after• Agree on quality control systems• Establish database for crude drug quality

PII (early stage)

Endpoint search clinical trials (patients with laparoscopic
colectomy)
Scheduled to be completed in fiscal 2017 PII (early stage)

POI

Safety, etc.

FY2015

Through meetings with FDA, agree on quality evaluation
methods using biological assessments and HPLC-FP

IBS

Crohn’sdiseaseFY2014

New medium-term management plan

Plan to decide on
direction and schedule
for the late stage of PII
and on in fiscal 2018
after finishing andanalyzing all of the earlystage of PII for IBS/POI
and Crohn’s disease

ADME*2*1 Submit results of surveys on the frequency of side effect manifestation to the FDA*2 Submit clinical pharmacokinetic results on healthy U.S. citizens to the FDA

IBS: Irritable bowel syndrome, POI: Postoperative Ileus

21Strategic Challenge 2:
Continued Reinforcement of Profitability
and Maximization of Cash Flow

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 2: Continued Reinforcement of Profitability and Maximization of Cash Flow

Management
indicators

Countermeasures

Issues

Improvement of Profits Seen in Supply Chain / Overview of Cash Flow Maximization
Procurement

Production

Sale＞ Soaring crude drug prices＞ Impact of fluctuating foreign exchange rates＞ Continuous measures to reduce cost in order to
respond to soaring crude drug prices, the impactof the weakening yen, and increases in depreciation
expenses＞ Impact of drug price revisions＞ Expansion of Cultivated Land underOwn Management area

＞ Improve production capacity at existing facilities＞ Continually introduce and expand new production
technologies＞ Narrow down important
domains and formulations＞ Rising inventory, worsening turnover rate

＞ Reinforcement and streamlining ofpurchasing structure based on theprinciple of competition＞ Revise capital investment projects and timing＞ Improve accuracy of demandand sales estimations＞ Crude drug inventory control

Optimization of the Group’s supply chain

Crude drug prices

Inventory turnover rate

Labor productivity

Sales, general andadministrative
expenses ratio

23

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 2: Continued Reinforcement of Profitability and Maximization of Cash Flow

Innovations in Crude Drug Procurement that Realize Stable Prices and Enhanced Quality AssuranceContinuous expansion of Cultivated Land under Own
Management area

Cultivated Land under Own Management-Produced
volume to total commissioned volume ratio

36%

36%

38%

2015

2016

2017

Result

Plan

43%

2018

(FY)

* Includes negotiated cultivation in China and contract
cultivation in Japan

Aim for a Cultivated Land under Own Management-Produced volume
ratio of 50% in fiscal 2021
Reinforce and streamline purchasing structure based on the principle of competition
Pursue crude drug quality and further enhancement of systems to ensure safety24

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 2: Continued Reinforcement of Profitability and Maximization of Cash Flow

Innovations in Manufacturing Systems that Realize Improved Production Capacity

Establishment of foundation where the effects of cost reductions can be anticipated through the introduction of
automated equipment that uses less manpower in the previous medium-term management plan
Expanded introduction of new production technologies＞ Improvement of basic production capabilities at existing facilities
Optimization of operating systems for production (revise number of operating days, non-operating times, etc.)
Reduction of difficulties and waste＞ Continuous introduction and expansion of new production technologies

Development of new granulation systems and high-speed filling machines ➡ Gradual introduction to new manufacturing buildings• Support for PIC/S GMP • Further improvement of granule and product quality• Promotion of automatization and reduced manpower

Effect of improved labor productivity (throughout all processes)
Aim for 30% increase in fiscal 2021 compared to fiscal 2015

＞ Capital investment
Scheduled average amount for fiscal 2016–fiscal 2018: ¥10 billion a year
Scheduled average amount for fiscal 2019–fiscal 2021: ¥8 billion a year

25

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 2: Continued Reinforcement of Profitability and Maximization of Cash Flow

Innovations in SCM that Realize Optimization of Groupwide Supply Chain

Philosophy
VisionManagement plans
Demandestimations

Manufacturing andsales plans

Share targets/budgetProcurement plans

Inventory
plans

Cost
accounting

Share plan details/
results

Action plans

Manufacturing
plans

Crude drug
processing plans

Crude drugtransfer plans

Automatize andaccelerate plan
formulation

Capitalinvestment
plans

Crude drug
commission plans

Automatize andenhance collaborationin plan formulation＞ Accelerate plan formation, work to shorten rolling periods, promptly anticipate future risks＞ Optimize the entire supply chain by bolstering cooperation between both “management and factory floor” and“divisions and bases”
26

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 2: Continued Reinforcement of Profitability and Maximization of Cash Flow

Effective Allocation of Resources
Allocate resources in a way that reflects the intention of management froma medium- to long-term perspective

Research and development expenses
Total amount for fiscal 2016–fiscal 2021 (six-year period): ¥45.0 billion
Basic/clinical research in Japan, development in the U.S., research on crude drug cultivation, etc.
Concentrated investment in the necessary projects for future growth
Enhanced cost efficiency
Continued promotion of optimizing primarily fixed costs, which occurred in the first medium-term management plan

Aim for a sales, general and administrative expense ratioof less than 40% in fiscal 2021
27

Strategic Challenge 3:
Taking on the Challenge of New Businesses in China

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan ＜ Strategic Challenge 3: Taking on the Challenge of New Businesses in China

Taking on the Challenge of New Businesses in China

1.

Entering the business for traditional Chinese medicine
compound granules (single crude drug extract granules)

3.

Entering into the crude drug pieces business> Establish a joint venture with Shanghai Traditional Chinese Medicine Co., Ltd.,a subsidiary of Shanghai Pharmaceuticals Holding Co., Ltd.

> Engage in sale of crude drug pieces to external customers in China through SHENZENTSUMURA MEDECINE, a 100% subsidiary of the Company> Build a procurement structure for raw material crude drugs centered on SHENZENTSUMURA MEDECINE CO., LTD. and China Medico Corporation> Cooperate with China Medico Corporation in the mutual supply and processing of
raw material crude drugs

2.

Entering a business collaboration agreement with
China Medico Co., Ltd.

> Strengthen the Company’s supply and procurement relationship for raw material
crude drugs used in Kampo preparation> Strengthen the Company’s technical support to China Medico Corporation> Conduct joint research on ginseng and other key crude drugs, manage production
sites for such crude drugs, and establish a stable, long-term supply structure

4.

Planning the establishment of a holding company in China> Control and management of supply chain, human resources, and capital in China
spanning from existing businesses to new businesses, such as production of
traditional Chinese medicine compound granules and export of crude drugs andextracts to Japan> Engage in joint development of a Chinese crude drug pieces business(Jointly implementing businesses with SHENZEN TSUMURA MEDECINE, a 100%
subsidiary of the Company)> Continually explore strategy for new joint businesses> Bolster relationship with China Medico Corporation by dispatching directors from
Tsumura to the China Medico Group (scheduled to begin during fiscal 2016)＞ Contributing to China, where the Company procures crude drugs, and the health of Chinese people＞ Taking on the challenge of entering the Chinese market
29

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan

The Tsumura Group’s Point of View on ESG
Tsumura Group’s Distinctive Initiatives Related to ESG
Tsumura Group contributes to building sustainable society through its mainstay “Kampo and crude drug” business

Environment• Initiatives for protecting crude drug raw materials and the natural environment
Continuous research on the cultivation of wild-grown crude drugs• Initiatives toward the environment in order to realize a recycling-oriented society
Maintain zero emissions (100% recycling rate of industrial waste)• Establish and implement environmental targets that are based on the Tsumura Environmental Policy and Tsumura
Environmental Principle

Society• Contribute to the revitalization of the primary industry through crude drug cultivation (utilization of unused agricultural land andexpansion of Cultivated Land under Own Management area, etc.)• Contribute to medical care in such social issue domains as geriatric health, cancer treatment (supportive care, palliative care),and women’s health• Promote diversity among Group directors and employees and create opportunities for the employment of persons with disabilities

Governance• Establish and operate a highly effective corporate governance system• Give consideration to the establishment of a nomination/numeration advisory committee• Director remuneration
Performance-linked stock compensation• Dialogue with shareholders and other investors
Promote a policy to continuously and proactively engage in dialogue with shareholders and other investors (including dialogue
with outside directors) through the Company’s IR activities in order to establish long-term, trust-based relationships with them30

Fiscal 2016–Fiscal 2021 Outline of New Medium-Term Management Plan

Capital and Financial Measures
Guided by the stable business strategy of the Tsumura Group, the Company secures a solid financial structure while actively
conducting business investments that contribute to the improvement of corporate value over the medium to long term
Fiscal 2016–fiscal 2021 (six-year period)

Cash flows• Capital investments:¥55.0 billion• Investments and loans (new company related to China):¥6.0 billion• Shareholder returns (dividends):¥27.0 billion

In total, expecting roughly ¥88.0 billion in cash outflows• Expecting ¥96.0 billion in cash flows from operating activities
Fiscal 2016–fiscal 2021 (six-year period)

Major capital• Ibaraki Plant

investments• Shizuoka Plant New granulation and packaging facilities, etc.:

Approx. ¥4.2 billion• Facilities related to cultivation:

Approx. ¥4.0 billion

Shareholder
returns

Efficiency

Standard-based facility (first term, second term):

Approx. ¥17.0 billion• Promote a policy to improve corporate value through capital investments in order to realize the continuous development
and growth of “Kampo”• Promote a policy to consider medium- to long-term profit levels and cash flows as well as carry out a stable dividend• Promote a policy to acquire treasury stock in a flexible manner after making efforts in shareholder returns based on examinations andrevisions for an optimal capital structure as well as giving comprehensive consideration to market trends, etc.
• The Tsumura Group evaluates each individual investment giving consideration to risks and profitability that accompany the investment.
At the same time, the Group works to maintain and improve investment efficiency• Aim for ROE of 8% by fiscal 2021

31

Reference

Crude Drug Prices
Overall procurement price of crude
drugs produced in China
Representation of weighted average of actual prices

from production region to affiliated company
when 2006 price is set as 100

241

234

230

190

217

156
100 117

110

2006

2008

2007

Our Target

110

2009

2011
(1) Local demand in China increased;(2) Unfavorable weather;(3) Speculative investment
cornering market

2010

2011

2012

2013
Price increase of ginseng, etc

2013

2014

2015

2018

2021

2015
Drop in ginseng prices thatexceeded expectations
1. Declining trend of purchases for
speculative gains
2. Increase in supply to market

32TSUMURA & CO.
Investor Relations Group
Corporation Communications Dept.

Cautionary items regarding forecasts• The materials and information provided in this presentation contain so-called forward-looking statements. Readers should
be aware that realization of these statements can be affected by a variety of risks and uncertainties and that actual results
could differ significantly.
• Changes in the healthcare insurance systems or regulations set by medical treatment authorities on drug prices or otheraspects of healthcare or in interest and foreign exchange rates could impact negatively on the Company’s performance or
financial position.
• In the unlikely event that sales of the Company’s core products were halted or declined substantially due to a defect, unforeseen side effect or some other factor, it would have a major impact on the Company’s performance or financial position.