NEWS RELEASE

November 6, 2019

Name of Listed Company:

TSUMURA & CO.

Exchange:Tokyo Stock Exchange

Code:4540

URL:https://www.tsumura.co.jp

Representative:

President,Representative Director and CEO

Name: Terukazu Kato

Contact:

Head of Corporate Communications Dept.

Name: Yosuke Tsuchiya

Telephone: 81-3-6361-7100

Tsumura Announces Establishment of Conclusion of Letter of Intent for Capital Alliance withTianjin China Medico Technology Co., Ltd. by Ping An Tsumura Inc.
Tsumura & Co. (Headquarters: Tokyo, Japan; President & CEO: Terukazu Kato; hereafter, “Tsumura”)
announces that at a meeting held on November 6, 2019, its Board of Directors passed a resolution
concluding a letter of intent regarding Tianjin China Medico Technology Co., Ltd. (hereafter, “ChinaMedico”) becoming a subsidiary of Ping An Tsumura Inc. (hereafter, “Ping An Tsumura”), a groupcompany in China, through a capital alliance after a discussion with Gang Li, Chairman of China Medico.
Tsumura and China Medico have developed the alliance based on the Business Alliance Agreement
signed on May 11, 2016. After reaching a basic agreement on a new partnership concept, we have begun
specific discussions.

1. Outline of capital alliance(1) Purpose and reasons of capital alliance
1. Purpose of capital alliance1) Strengthening of the stable supply system of crude drugs for export to Japan
2) Expansion of business in China by acquiring experienced human resources in the traditional
Chinese medicine industry
3) Strengthening of the stable supply system of crude drugs for business in China (includingtraditional Chinese medicinal products)

2. Reasons of capital alliance
China Medico has been in business with Tsumura Group since its establishment in 2011 as themain supplier of crude drugs in China, while Tsumura has been a major customer to China Medico,accounting for about 70% of its sales. In 2016, Tsumura and China Medico signed a comprehensive
business alliance agreement and have promoted the supply and procurement of crude drugs, researchon crude drug cultivation and processing, quality control of crude drugs, and overall management ofplace of production of crude drugs. In March 2018, Tsumura established TSUMURA SHENGSHIPHARMACEUTICAL CO., LTD, a joint venture in Tianjin, China, and is preparing to enter theKampo extract powder (intermediate for Kampo preparation) and the traditional Chinese medicinal
product business.
To contribute to the health of the Chinese people, Tsumura and China Medico will share Tsumura’s
knowhow in the Kampo and crude drug business and China Medico's unique knowledge to work on
traditional Chinese medicine and other businesses with their strengthened relationship, and continue
to combine their strengths in a variety of fields, including technology and market routes.
Considering the need to share important information in the future as well as the current mutual
business dependency, Tsumura determined that it would be important to hold a certain number ofChina Medico’s shares and decided to enter into a capital alliance along with the business alliance.
Tsumura and China Medico will establish a strong long-term strategic partnership and aim to be aleading company in crude drugs and related fields.

(2) Outline of capital alliance
1) Ping An Tsumura Inc., Tsumura’s group company in China, will receive part of China Medico’s
shares held by Chairman Gang Li and all shares held by other shareholders, resulting in holding
80% of shares in China Medico.
2) After receiving an investment from Ping An Tsumura Inc., China Medico will become a subsidiaryof Ping An Tsumura Inc. However, its management will continue to be entrusted to Mr. Gang Li.
Tsumura expects Mr. Gang Li, as general manager of the joint venture, to exhibit excellent
management skills with expertise on the traditional Chinese medicine industry with a wide rangeof duties.

2. Outline of China Medico（1）

Name of company

Tianjin China Medico Technology Co., Ltd.

（2）

Location

Room 206, 2nd Floor, No. 18, Gaofu Rd, Binhai Science Park, Binhai
New Coastal Area, Tianjin, China

（3）
（4）
（5）
（6）
（7）

Representative
Business description

CapitalDate of foundation
Major shareholder andstockholding（8）

Li Gang, Chairman
Production, manufacturing, sales of traditional Chinese medicine andchinese crude drug pieces
174 million RMB (approximately 2.69 billion yen)
1 RMB = 15.46 yen
July 13, 2011
Li Gang, Chairman of China Medico: 65.82%

Relationship between Tsumura and China Medico
Capital relationship

N/A

Personal relationship

N/A

Transactional

Tsumura has procured raw crude drugs for Kampo preparations mainly

relationshipfrom China Medico.
China Medico does not fall under a related party of Tsumura. ChinaStatus as related party

Medico’s related parties and affiliated companies do not fall underTsumura’s related parties.

Business performance and financial condition over the last three years (1 RMB = 15.46 yen)
2016
Total Sales

2017

2018

657 million RMB

703 million RMB

931 million RMB(10,157million yen)

(10,868 million yen)

(14,393 million yen)

498 million RMB

505 million RMB

664 million RMB(7,699 million yen)

(7,807 million yen)

(10,265million yen)

159 million RMB

198 million RMB

267 million RMB(2,458 million yen)

(3,061million yen)

(4,127 million yen)

62 million RMB

84 million RMB

110 million RMB(958million yen)

(1,298 million yen)

(1,700 million yen)

82 million RMB

95 million RMB

117 million RMB(1,267 million yen)

(1,468 million yen)

(1,808 million yen)

82 million RMB

94 million RMB

117 million RMB(1,267 million yen)

(1,453 million yen)

(1,808 million yen)

940 million RMB

983 million RMB

1,913 million RMB(14,532 million yen)

(15,197 million yen)

(29,574 million yen)

272 million RMB

267 million RMB

292 million RMB(4,205 million yen)

(4,127 million yen)

(4,514 million yen)

1,213 million RMB

1,250 million RMB

2,205 million RMB(18,752 million yen)

(19,325 million yen)

(34,089 million yen)

651 million RMB

616 million RMB

1,429 million RMB(10,064 million yen)

(9,523 million yen)

(22,092 million yen)

225 million RMB222 million RMB

247 million RMB(3,478 million yen)

(3,432 million yen)

(3,818 million yen)

336 million RMB

411 million RMB

528 million RMB(5,194 million yen)

(6,354 million yen)

(8,162 million yen)

Total liabilities and net

1,213 million RMB

1,250 million RMB

2,205 million RMB

assets(18,752 million yen)

(19,325 million yen)

(34,089 million yen)

Sales to Tsumura

Sales to others

Operating profit

Ordinary profit

Net profit

Current assets

Non-current assets

Total assets

Current liabilities

Non-current liabilities

Net assets

3. Outline of Ping An Tsumura
Name of company

Ping An Tsumura Inc.

Location

Shenzhen, Guangdong Province, China

Representative

Tung Hoi, Chairman

Capital1,000 million RMB (approximately 15.46 billion yen) 1 RMB = 15.46 yen
Business related to strengthening of crude drug procurement system
Business related to analytical research with a focus on traditional ChineseBusiness description

medicine
Business related to traditional Chinese medicine, health food, healthcare-related daily necessities and other business fields

Date of establishment

June 8, 2018

Investment ratio

Tsumura China Inc.56%, Shanghai Pingpu Investment Co., Ltd. 44%* Capital relationship diagram

4. Future schedule
Based on this letter of intent, Tsumura and China Medico will proceed with specific discussions andconclude joint venture agreements by December 2019.

5. Impact on the business performance
The impact of this transaction on Tsumura's consolidated business results for the fiscal year ending
March 2020 will be disclosed as soon as it is clear.