First Quarter Business Resultsfor Fiscal Year 2020
Conference Call

August 6, 2020 (Thursday)

TSUMURA & CO.

Muneki Handa
Director,
Managing Executive Officer and CFO

1

Summary of 1Q FY 2020 Consolidated Performance(million yen)
1Q
FY 2020

Vs. 1Q FY 2019

1Q
FY 2019

AmountChange1H
FY 2020plan

Net sales

31,76830,6991,068

Operating profit(Operating profit
margin)5,732(18.0%)

5,230(17.0%)

502

9.6%

9,100

Ordinary profit

5,750

5,401

348

6.5%

9,400

Profit attributable toowners of parent

4,045

3,903

141

3.6%

6,800

0%

20%

40%

60%

3.5% 64,200

80%

100%

Sales by product92.6%

Prescription Kampo Products
OTC medicines

0.4%

3.1%

3.9%

Other prescription pharmaceutical products
Outside sales at consolidated subsidiaries©2020 TSUMURA & CO.

2■Summary of consolidated performance in 1Q FY 2020
Page 2 is an overview of our consolidated performance in 1Q FY 2020.
During the period under review, we booked net sales of ¥31.768 billion, a rise of 3.5%
year-on-year.
This was an achievement rate of 49.5% versus our plan for the first half.
Operating profit came to ¥5.732 billion, a growth of 9.6% versus the same period ayear earlier.
This is a high achievement rate of 63.0% versus our 1H plan. However, this is
primarily attributable to a low level of spending, as we did not use the earmarked
expenses due to restrained activities that were a result of the spread of COVID-19.
Ordinary profit was ¥5.75 billion, an increase of 6.5% from year earlier.
Profit attributable to owners of parent totaled ¥4.045 billion, an improvement of 3.6%
year-on-year.

2Key Points in Performance
Net sales and profit were up year-on-year.
(million yen)

Net sales

31,768 million yen

YoY

+3.5%

 Net sales rose 3.5% year-on-year reflecting a newly consolidated subsidiary in China.
 Net sales of the 129 prescription Kampo products decreased 0.2% year-on-year.
 Net sales of OTC medicines increased 37.4% year-on-year.

Operating profit

5,732 million yen

Operating profit
margin18.0 %





YoY

+9.6%

YoY

+1.0pt

The cost-to-sales ratio stood at 42.1%, up 1.6pt year-on-year. Although crude drug-related costs offset a rise
triggered by the NHI drug price revision, the cost-to-sales ratio deteriorated due to negative impact from anincrease in outside sales at subsidiaries.
The SG&A ratio was 39.9%, down 2.6pt versus a year earlier, mainly reflecting unused expenses in tandemwith the self-restraint of activities due to the spread of COVID-19.

Ordinary profit

5,750 million yen

YoY

+6.5%

Profitattributable toowners of parent

4,045 million yen

YoY

+3.6%

©2020 TSUMURA & CO.

3■Key Points
Page 3 covers the key points in performance.
Net sales growth in the quarter under review was 3.5% year-on-year.
This mainly reflects the inclusion of a subsidiary in China into the scope of
consolidation.
Net sales of the 129 prescription Kampo products decreased 0.2% in contrast withthe same period a year earlier.
Domestic healthcare sales, including OTC Kampo products, were brisk, expanding
37.4% versus the previous year.
The cost-to-sales ratio stood at 42.1%.
In a year-on-year comparison, although crude drug-related costs offset a rise
triggered by the NHI drug price revision, the cost-to-sales ratio deteriorated 1.6pt due
to negative impact from an increase in outside sales at subsidiaries.
The SG&A ratio was 39.9%.
The ratio contracted 2.6pt year-on-year mainly reflecting unused expenses in tandemwith the self-restraint of activities due to the spread of COVID-19.

3

Factor for changes to Operating Profit (YoY comparison)+636(million yen)

（506）
+372

5,732

Profit impact from changes
in sales cost margin
Sales composition(254)

Crude drug cost

(62)

Processing cost

191

Increase in outside
(381)
sales
Profit impact fromchanges in SG&A expenses
Sales-related
99
expenses

5,230

1Q FY 2019
Operatingprofit(million yen)

Profit impact Profit impact
from changes from changes
in salesin sales cost
marginProfit impact 1Q FY 2020
from changes Operatingin SG&A
profitexpenses

R&D expenses

28

Personnel expenses

22

Other

223

©2020 TSUMURA & CO.

4■Factors for changes in Operating Profit (Year-on-Year Comparison)
Page 4 covers factors for changes in operating profit.
Net sales increased ¥1.068 billion year-on-year.
This positively impacted operating profit ¥636 million.
The impact from a change in the cost-to-sales ratio was a negative ¥506 million.
This mainly breaks down toa positive impact to operating profit of ¥129 million owing to a decline in crude drugrelated cost, and a negative impact to operating profit of ¥381 million reflecting an
increase in outside sales and a ¥254 million impact to sales composition, mainly intandem with the NHI drug price revisions.
In SG&A expenses, as I mentioned earlier, expenses went unused due to a selfimposed restraint on activities due to the spread of COVID-19. This contributed ¥372
million to operating profit.
Accordingly, operating profit totaled ¥5.732 billion in 1Q FY 2020.

4

Financial Condition/Cash Flow Position(million yen)

FY 2019(3/2020)

1Q
FY 2020

Change311,042

312,668

1,625

Current assets

194,288

201,075

6,786

Non-current assets

116,753

111,592(5,160)Total liabilities

97,993

100,268

2,275

Current liabilities

48,47650,953

2,477

Non-current liabilities

49,51649,314(202)

213,048

212,399(649)

Equity Ratio

66.0%

65.7%

(0.3)pt

Inventories

FY 2019(3/2020)
73,310

1Q
FY 2020
75,163

10,33810,456

12,418

14,20450,55350,502

Total assets

Total net assets（Merchandise andfinished goods）（Work in process）（Raw materials
and stores ）(billion yen)

FinancingNew
activities
consolidation
Investing
Effect ofOperating activities
exchange+3.5 65.3
activities
rate+1.2 （1.8） changes

+5.4

（0.6）

57.6

Change1,852
118
Cash and cash

1,785 equivalents at(50) beginning of
periodCash and cash
equivalents
at end of period©2020 TSUMURA & CO.

5■Financial Condition
Page 5 outlines our financial condition and Cash Flow Position
Total assets in the quarter under review were ¥312.668 billion, an increase of ¥1.625
billion versus the end of March 2020.
Current assets increased ¥6.786 billion, versus the end of March 2020, primarily
attributable to an increase in cash and deposits, although notes and accounts
receivable-trade declined.
Non-current assets decreased ¥5.16 billion, versus the end of March 2020.
Although there was an increase in buildings and structures, there was a decline ininvestments and other assets reflecting the new inclusion of Tsumura Shengshi
Pharmaceuticals Co., Ltd. in the scope of consolidation during the current fiscal year.
Liabilities came to ¥100.268 billion, an increase of ¥2.275 billion versus the end of
March 2020.
Current liabilities increased ¥2.477 billion in comparison with the March 31, 2020.
This was mainly attributable to a rise in other current liabilities, although notes andaccounts payable-trade dropped.
Non-current liabilities were down ¥202 million, versus the end of March 2020.
Net assets totaled ¥212.399 billion, a fall of ¥649 million versus the end of March
2020.
Accordingly, our equity ratio stood at 65.7%.
Our cash flows are as shown in the chart above.
5

Roadmap for the Realization of the Long-term Management Vision
2018

2021 2022

2019

Third Medium-Term
Management Plan
Growthinvestment

Consolidated net sales
Over

135.0bn yen

Sustainably expanding
the Kampo market
Building foundations for
the China business
Consolidated
net sales

FY 2020 consolidated net sales forecast

120.9bn yen

132.0bn yen

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

Rapid
Progress

China businessvision for 2027
Overseas sales ratio

Over 50%

Domestic business●Establish Kampo medicine
business
Having one in every two doctors
writing over 10 Kampo prescriptions

China business●Contribute to health of
China’s citizens
Becoming the most trusted Chinese
medicine company in China

Strategic issues
1. Sustainably expanding the Kampo market and establishing a presence
2. Investing in growth and building business foundations in China
3. Improving productivity using new technologies (AI, automation, RPA)

4. Fostering a corporate culture through philosophy-based
management and developing diverse human resources
5. Promoting the SDGs through the Kampo Value Chain©2020 TSUMURA & CO.

6■Roadmap for the Realization of the Long-term Management Vision
Page 6 covers the roadmap to realizing our long-term vision.
In the third medium-term management plan, we aim for consolidated net sales of¥135 billion as we position this period as a growth investment stage and look tocontinue achieving expansion in the domestic Kampo market and build foundations
for businesses in China.

6

Sales of prescription Kampo products(Drug-fostering and Growing formulations)(million yen)Salesranking

Product No./name

1Q FY 2019

1Q FY 2020

YoY

Drug-fostering
program formulations

1

100

Daikenchuto

2,662

2,664

2

0.1%

2

54

Yokukansan

1,995

1,987

(8)

(0.4)%

3

43

Rikkunshito

1,872

1,860

(12)

(0.7)%

9107

Goshajinkigan

936

916

(19)

(2.1)%

22

14

Hangeshashinto

364

350

(14)

(3.9)%

7,831

7,779

(52)

(0.7)%

Total drug-fostering program formulations

Growing
formulations

4

41

Hochuekkito

1,761

1,972

211

12.0%

5

68

Shakuyakukanzoto

1,340

1,263

(76)

(5.7)%

6

29

Bakumondoto

1,188

906

(281)

(23.7)%

724

Kamishoyosan

1,165

1,164

(0)

(0.1)%

8

17

Goreisan

1,118

1,152

34

3.1%

Total growing formulations

6,574

6,461

(113)

(1.7)%

Total sales for 119 prescriptions other thandrug-fostering and growing prescription
formulations

15,073

15,16894

0.6%

Total sales for 129 prescription Kampo
formulations

29,48029,408(71)(0.2)%©2020 TSUMURA & CO.

7■Sales of prescription Kampo drugs (Drug-fostering and Growing formulations)Page 7 outlines sales of prescription Kampo drugs.
Sales of the 129 prescription Kampo formulations totaled ¥29.408 billion, a decreaseof 0.2% or ¥71 million year-on-year.
Sales of drug-fostering formulations were ¥7.779 billion, down 0.7%, and sales ofgrowing formulations totaled ¥6.461 billion, a decline of 1.7%.
Total sales for the 119 prescriptions other than drug-fostering and growing
prescription formulations stood at ¥15.168 billion, an increase of 0.6%.

7

COVID-19 Impact■FY 2020 Monthly Shipments
120.0

100.0

Total
累計

80.0

単月
Month

60.0
April

May

June

■1Q FY 2020 Sales Growth YoY by Sales Channel (actual)
101.3

110.0

97.3

90.0

GP

HP
70.0

■Sales (Shipments) YoY for prescriptions mentioned in the “Concept of Kampo
treatments for COVID-19” (special contribution)(million yen)

2019-1Q

YoY

2020-1Q

Kakkonto

754

879

124

+16.5%

Hochuekkito

1,761

1,972

211

+12.0%＊source： The Japanese Association for Infectious Diseases©2020 TSUMURA & CO.

8■COVID-19 Impact
On page 8 we discuss the impact of COVID-19.
The line graph depicts disclosed monthly results. Tsumura standalone sales based on
shipments were up year-on-year.
By month, sales were up 10% in April, down 13.4% in May and up 1.5% in June. This brings
cumulative growth for 1Q to 0.6%.
In April, sales increased due to growth in Kampo prescriptions, which can be expected to
improve symptoms in patients with COVID-19,
and a rise in long-term prescriptions. In May, sales decreased sharply due to a reactionary
drop in long-term prescriptions and due to fewer people going in for medical exams due to
COVID-19, and the restriction of visits to MR from medical institutions.
In June, shipments gradually improved, except in inner-city areas including Tokyo, Nagoya,
Osaka and Fukuoka.
The bar graph shows actual year-on-year sales growth by sales channel in 1Q.
Sales to HPs were brisk, down only 2.7% despite the absence of activities to provide
information. We believe this reflects constant activities to provide information, including thestrengthening of activities to provide information on Daikenchuto to HPs in 2H FY 2019.
In sales to GPs, in areas outside of inner-city areas, there was an increase in visits at therequest of medical workers. Consequently, there was a growth of 1.3%, and sales aregradually making a recovery.
Looking at sales YoY on a shipment basis for prescriptions mentioned in the “Concepts for
Kampo treatments for COVID-19” (special contribution), some of these prescriptions grew
year-on-year. In specific, sales rose for prescriptions for Kakkonto and Hochuekkito, among
other Kampo products.

8Kampo Mega Web Lectures
Kampo Mega Web lectures mainly target doctors that write 10 or less Kampo
prescriptions and doctors that do not write Kampo prescriptions
Theme

Prescription

FY 2019
Kampo is a MUST for Clinical Physicians

Shakuyakukanzoto,
Hochuekkito, etc.

Mastering Kampo Extracts

Maobushisaishinto,
Kakkonto, etc.

Acute respiratory tract infection & Kampo

Maoto,
Bakumondoto, etc.

LecturerDr. Masanori Niimi(School of Medicine, Teikyo
University)

Date

No. ofviewers

Sept. 25, 201917,878Dec. 16, 201918,855Mar. 23, 2020

17,354

Dr. Masanori Niimi(School of Medicine, Teikyo
University)

Dr. Shigeki Nabeshima(School of Medicine,
Fukuoka University)

FY 2020
Easy-to-understand Kampo mainly for colds, dizziness and Maobushisaishinto,
Dr. Sadahiro Senpuku
Ryokeijutsukanto, etc. (Senpuku CL)
Apr. 23, 2020
stressMaoto,
Support and application of Kampo for acute febrile disease Saikokeishikankyoto, Dr. Shin Takayama
Jun. 8, 2020
Diagnosing the common cold today(Tohoku University)
etc.
Using Kampo to deal with changes in the external
Seishoekkito,
Dr. Shuji Ono
Jun. 25, 2020
environment (summer/stress)
Hochuekkito, etc.
(Ono Clinic)
Dr. Noriaki Manabe
Evidence of Kampo treatment derived from guidelines
Rikkunshito,(Kawasaki Medical
Jul. 2, 2020
―Mainly for functional gastrointestinal disorders―
Daikenchuto, etc.
School)July 3-Sep.
Goreisan,Dr. Shuji Ono,30, 2020
Kampo Lesson
Seishoekkito,
Supervisor
Heat stroke/summer fatigue
On-demand
Hochuekkito(Ono Clinic)
streaming

23,917
19,63920,3062,0729©2020 TSUMURA & CO.

-

9■Kampo Mega Web Lectures
Page 9 covers Kampo Mega Web Lectures, which has been one of our activities forproviding information in and after April.
Kampo Mega Web Lectures mainly target doctors that write 10 or less Kampo
prescriptions and doctors that do not write Kampo prescriptions.
In FY 2019, we implemented 3 Kampo Mega Web Lectures. In FY 2020, we
implemented 3 lectures in 1Q and 2 in July.
As with the previous fiscal year, we are receiving good reviews and many doctors are
viewing the lectures.

9

Status of Area Online Lecture Planning
Area activities：Provide detailed information taking into account regional features and facilities➡Held area events, including an “introductory seminar on Kampo medicine after graduation”
to respond to the needs of doctors that want to learn about Kampo□HoldingCase: Video distribution by lecturers who are close-knit toeach respective region at branch offices
An 8-part lecture on Kampo （1st time ⇒ 274 people, 2nd time ⇒ 330 people）
Area online lectures held via video-streaming companies that operate on a nationwide scale→194
lectures under planning90
80

No. of events held: 10

70
60

50

企画数
No. o f plans

90

40

Events held
開催済

30

37

20

23

10
0

60
Hokkaido

9
2

3

2

3

Tohoku

Kanto

Chubu

Kinki

18

11
0

0

Chugoku, Shikoku

Kyushu©2020 TSUMURA & CO.

10■Status of Area Online Lecture PlanningOn page 10, I will discuss the status of area online lecture planning.
Area activities take into account regional traits and features of facilities to provide
detailed information and events are held by each sales offices in response to theneeds of doctors that want to learn about Kampo.
Examples of events include the eight sales offices under the supervision of one of the
branch, which is implementing an 8-part lecture on Kampo conducted by lecturers
who are close-knit to each respective region. 274 doctors listened to the 1st lectureand 330 listened to the second lecture.
Given that traditional sales visits to hospitals are still not being sufficiently carried out,
the use of online seminars is increasing and we are seeing a certain degree of benefit.
In addition, we are also embarking on new activities in line with the conditions of eacharea and medical area, including actively undertaking measures proposed by MRs.
Going forward, in addition to conducting hybrid sales activities―online activities andsales visit activities in line with requests from medical workers―we aim to further
enhance e-promotions, and implement proactive and effective activities for providing
information.

10

Framework for Building Foundations for the China Business(Progress Status)
Construction slated
for completion in
November 2021

Start inMarch 2020

Crude drug
platform
Strengthen stablesupply system for crude
drug raw materials

Implementing M&A
negotiations/survey

2027
Sales: RMB10
billion

Advancing into traditional Chinese
medicine business(China business vision:
Image of sales

M&A
Approach for traditionalprescriptions

Establish
Tianjin Factory sales system
Establish production
systemScheduled to launch
operations in 2022

Drug pieces andTCM business
PING AN HEALTHCAREAND TECHNOLOGY

Make the traditional
Chinese medicine
business a pillar

Analysis and research centerscheduled to launch operations in 2022

2019

2021
Sales: RMB240 million

Sales of crude drugs through thecrude drug platform(Medium-term management planfor China business)©2020 TSUMURA & CO.

11■Framework for Building Foundations for the China Business (Progress Status)
Page 11 covers our progress in building foundations for the China business.
Construction of the Tsumura Shengshi Pharmaceutcals’ Tianjin Plant is expected tobe completed in November 2021.
We plan to recoup the delay caused by COVID-19 and aim to start up operations in
2022.
To build a foundation for the traditional Chinese medicine business and establish asales system, we have narrowing down our M&A candidate to one company. We arepresently in negotiations and conducting a survey.
Construction of the analysis and research center is is scheduled to start operations in
2022.

11

FY 2020 Forecast(million yen)

FY 2019 results

FY 2020 forecast

Vs. FY 2019
AmountGrowthNet sales

123,248

132,000

8,751

7.1％

Operating profit

18,87617,000(1,876)(9.9)％

Operating profit
margin

15.3%

12.9%

ー

ー

Ordinary profit

19,64917,900(1,749)(8.9)％

Profit attributable toowners of parent

13,76513,000(765)(5.6)％FY 2019 results

Dividend (per share)

ＥＰＳ
ＲＯＥ

FY 2020 forecast

¥64

¥64

179.96 yen
6.8％

169.92 yen
6.2％

The impact of COVID-19 is not reflected in the above forecast as it is difficult to accurately predict the timing of COVID-19 will peakout. Assuming the peak for COVID-19, after which is gradually continues to dissipate, we estimate a negative impact to sales of 2%
to 4%. However, should it be prolonged, we will make timely and appropriate disclosure in line with changes in the situation.

©2020 TSUMURA & CO.

12■FY2020 Forecast
Page12 covers FY2020 Forecast.
The planned annual dividend is ¥64 per share.
EPS is expected to be ¥169.92 and ROE 6.2%.
Note that at this stage, it is difficult to accurately predict when COVID-19 will end,
therefore the above forecasts do not reflect the impact of COVID-19.
Assuming the peak for COVID-19, after which it gradually continues to dissipate, weestimate a negative impact to sales of 2% to 4%.
However, should it be prolonged, we will make timely and appropriate disclosure inline with changes in the situation.

12

Policy on Return of Profits to Shareholders
We seek to increase corporate value through the sustainable
expansion of the Kampo business and investments to build
business foundations in China
We will bear in mind the state of the mid-to-long term profit levels
and cash flow to ensure stable dividends
45.0
100

35.9

35.7

32.1
80

28.4

31.9

33.5

35.6

37.7

35.0
30.0

25.0

25.0

60
40
20

40.0

32

32

32

32

32

32

32

32

32

From Oct. to Mar.
From Apr. to Sept.

20.0
15.0

Dividends payout
ratio (%)

10.0

30

32

32

32

32

32

32

32

32

2012

2013

2014

2015

2016

2017

2018

2019

2020
forecast
2020予想0

5.0
0.0©2020 TSUMURA & CO.

13■Policy on Return of Profits to Shareholders
Page13 covers return of profits to shareholders.
We plan to pay a year-end dividend of ¥32. This will put the full-year dividend payout
at ¥64, including the interim dividend of ¥32.
The dividend payout ratio for FY2020 is expected to be 37.7%, based on the earnings
forecast mentioned earlier.
We will continue to strive to improve corporate value through continued expansion of
the Kampo business, and growth investment in and the building of foundation for
China business.
At the same time, taking into account mid-to long-term profit levels and cash flow, we
aim to continue to payout a stable dividend and make headway in our management of
Tsumura.

13

Inquiries about this material

TSUMURA & CO.
Corporate Communications Department
PR Group
TEL：03-6361-7100

IR Group
TEL：03-6361-7101

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 avariety of risks and uncertainties and that actual results could differ significantly. Therefore, please beaware that actual results may differ materially from these forecasts.

•

Governmental changes to the healthcare insurance systems or regulations set by medical treatment
authorities on drug prices or other aspects of healthcare in Japan or other regions, or changes ininterest 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.

14

14