(From April 1, 2017 to March 31, 2018) May 11, 2018 President, Representative Director Terukazu Kato
HOP STEP JUMP Strengthening the growth base to achieve greater value creation Creating New Value Through Innovations in Kampo First Medium-Term Management Plan 2012 2015 2016 Second Medium-Term Management Plan Third Medium-Term Management Plan 2018 Medium-Term Management Plan Strategic Challenges 1  . Expansion and stable growth in the Kampo market 2  . Continued reinforcement of profitability and maximization of cash flow 3   . Taking on the challenge of new businesses in China 2 Business Results for Fiscal 2017
(¥ million)
Sales by product Other prescription pharmaceutical products 0.4% OTC medicines 2.5% Other 1.9% 44
▷  Underperformed operating profit and ordinary profit goals due to lower than expected sales ▷  Sales and profits were up year-on-year
Consolidated net sales
¥117,879 million
2.5%ロ Net sales rose ¥2.92 billion or 2.5% owing mainly to a 2.4% growth in the sale of pharmaceutical products but was 2.3% lower than planned.
Operating profit
¥17,050 million

Operating profit margin
□ 14.5 %
The cost of sales ratio stood at 42.1%, down 0.9 points year-on-year, mainly reflecting a decline in crude drug-related costs. Meanwhile, the cost of sales ratio was 0.3 points lower than planned thanks in part to an improvement in processing costs on the back of an enhancement to productivity. ■ The SG&A ratio was 43.5%, a rise of 0.4 points year-on-year (0.5 points higher than planned). Although the ratio was properly managed, the rise reflects underperformance in sales. Ordinary profit
● Extraordinary income was posted to reflect a ¥1.49 billion gain on the sale of investment securities. 5
(¥ million) 6
beginning of period of period
1. Expansion and stable growth in the Kampo market 2. Continued reinforcement of profitability and maximization of cash flow 3. Taking on the challenge of new businesses in China 1. Expansion and stable growth in the Kampo market
1. Expansion and stable growth in the Kampo market Important Domains （Elderly, Cancer, Female） Three Drug-fostering Formulations: Sales Performance Atm to have three formulations, Daikenchuto, Yokukansan, and Rikkunshito,  with over ¥10.0 billion in sales by fiscal 2021 Fortification of Rikkunshito, in particular, is necessary 11 1. Expansion and stable growth in the Kampo market FY2017 Sales Measures
Field of Gastroenterology  ( Cancer domain ) Targeting strategy (Interviews, presentations, area lectures, etc.) Academic conference events Host academic conferences Tsumura to host research seminars for each domain 【Kampo Scientific Strategies Division】 · Product education   · Academic events   · Promotional materials 【Kampo Research & Development Division】 New evidence, including those for Rikkunshito and Daikenchuto 1. Expansion and stable growth in the Kampo market
Sales were negatively impacted as activities centered on HPs, which accounted for around 25% of the market, while activities targeting GPs, which accounts for a much larger share, were weak. 1. Expansion and stable growth in the Kampo market
Increase targets and further strengthen activities focusing on GPs
FY2018  Rikkunshito Gastroenterology Strategy Clarify target patients and conduct full-fledged implementation of strategy HP: ·Cancer domain(supportive care) · Introduce clinical pathway after surgery for gastrointestinal cancer GP: Establish first-line treatment for upper gastrointestinal tract diseases (including functional dyspepsia) 1. Expansion and stable growth in the Kampo market
¥ billion (drug price) Product B ■■■Product A ■■■ Others ■■■ Rikkunshito Copyright © 2018 Reproduction prohibited. Prepared based on IQVIA. JPM 2008-2018 March MAT 1. Expansion and stable growth in the Kampo market

Copyright © 2018 Reproduction prohibited. Prepared based on IQVIA. JPM 2008-2018 March MAT
1. Expansion and stable growth in the Kampo market
(1) Gastroenterology Strategy Expand Rikkunshito's share of market for gastrointestinal prokinetic agents Currently, there is no new development by other companies in this market A A The strength of Kampo products can be leveraged (Example: can be effectively prescribed when a patient suffers mental anxiety) Many other Kampo products, aside from Rikkunshito, can also be prescribed for gastrointestinal diseases Volume market share
DREAM Study
Multiple facility, double-blind comparison study of efficacy and safety of Rikkunshito for functional dyspepsia patients 1. Expansion and stable growth in the Kampo market Summary of DREAM Study Results 1. Significant improvement in patient satisfaction with treatment Results of primary outcomes (OTE*: stomach condition) 2. Significant improvement when stomach feels heavy after eating/easily feels full Results of secondary outcomes (PAGI-SYM) 【Ref.】Correlation between upper gastrointestinal tract condition and psychiatric symptoms Consider Hospital Anxiety and Depression Scale (HADS) for psychiatric symptoms 1. Expansion and stable growth in the Kampo market FY2018 Sales Measures Specific measures to expand market for Rikkunshito Primary domain is the upper gastrointestinal tract Multiple component drug with multiple pharmacological actions and improves various symptoms, therefore potential for use as a first-line treatment when treatments are first started Supportive therapy for cancer Rikkunshito is a ghrelin enhancer which improves appetite during the perioperative period, improves stamina and has great potential for contributing to the prevention of  post-operative complications and successful completion of treatments using anti-cancer drugs Materials will be created to illustrate the positive results of DREAM Study (end-May) and used to support MR activities. 1. Expansion and stable growth in the Kampo market
Goreisan Consolidated net sale ￥3,722 million   YoY  10.7％ In GPs, Goreisan is used in primary patients to treat ailments, including nausea and diarrhea. At HPs, there was positive benefit from information exchanges, mainly among doctors. Accordingly, sales growth was strong. Ninjin’yoeito Consolidated net sale ￥913 million   YoY 30.2％ Sales grew substantially owing to benefit from the early implementation from January of the Kamp Prescription BPSD Network Strategy, which is discussed later on. Anticipate growth in areas where there is a low level of satisfaction with treatments and low level of contribution from drugs 1. Expansion and stable growth in the Kampo market FY2018 Sales Measures (2) Kampo BPSD Network Strategy
Select an appropriate priscription for each stage of dementia BPSD: Behavioral and Psychological Symptoms of Dementia 1. Expansion and stable growth in the Kampo market
FY2018 Sales Measures
(3) Other strategies
Regional Comprehensive Care System measures
▷  Activities to boost awareness of Kampo among doctors that are key to regional comprehensive care systems
GP seminars (Kampo base camp)
Implement Kampo medicine seminars for general practitioners, board certified trainers and other doctors to contribute to the wider use of Kampo among GPs, who serve as leaders in regional comprehensive care systems Regional healthcare support workshops Recommend the use of Kampo for various illnesses suffered by elderly patients to solve regional issues and contribute to creating an environment where seniors can live their own life in a community they are familiar with ⇒Plan and hold workshops in all 47 prefectures over a 4 year period 1. Expansion and stable growth in the Kampo market
GP seminars (Kampo base camp) Kampo lectures helpful for primary care 1st  Use of Kampo in palliative care —Hangeshashinto, Hochuekkito, Rikkunshito,etc.— 2nd  Kampo in the field of gastroenterology —Goreisan, Rikkunshito, Daikenchuto, etc.— 3rd   Use of Kampo for psychological symptoms Saikokaryukotsuboreito, Yokukansan, Ninjin'yoeito, etc.— 4th   Kampo medicine diagnostic methods –Stomach exam, tongue exam, interview, etc.— Divide Japan into 8 blocks to carry out seminars 23 1. Expansion and stable growth in the Kampo market
Co-sponsor academic events (Aim to secure new users) · Beginners seminar · Follow-up seminars (Aim to increase prescriptions) Room for improvement in frequency of prescriptions written. Large market potential. Kampo boasts sufficient growth potential going forward. 1. Expansion and stable growth in the Kampo market OTC Kampo Formulations: Renewal of the Tsumura Kampo Series (March 2018) Concept Correctly convey and pass on information about Tsumura Kampo products 2. Continued reinforcement of profitability and maximization of cash flow
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 Expected purchase prices in 2016 Calculated on a used amount basis, instead of a procured amount basis 100 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ↑ Price increase of ginseng, etc. (1)  Local demand in China increased (2)  Unfavorable weather (3) Speculative investment cornering market Decline in the unit price of ginseng was greater than expected (1) Purchases for speculative purposes are settling down (2) Supply to the market is increasing ITSUMURA-& 2. Continued reinforcement of profitability and maximization of cash flow Improve Labor Productivity Effect of improved labor productivity Aim for 30% increase in FY2021 compared to FY2015 2018 Plan (FY)
3. Taking on the challenge of new businesses in China
Shenzhen Tsumura Medicine Cut crude drugs 29 TSUMURA & CO. Status of Development in the United States
Implementing clinical trials for TU-100 in three domains: IBS, POI, and Crohn’s disease
*1 Submit results of surveys on the frequency of adverse drug reaction manifestation to the FDA *2 Submit clinical pharmacokinetic results on healthy U.S. citizens to the FDA IBS: Irritable bowel syndrome, POI: Postoperative Ileus ADME:Absorption, Distribution, Metabolism, Excretion  31

Step1
● Comprehensive evaluation of obtained results (Recurrence, indicator sensitivity, patient enrollment difficulties) ●  Needs after launch (development pipeline, launch of innovative new drug)
Step2
Detailed analysis of clinical data in Japan and aboard Opinions from authoritative doctors in Japan and US Opinions from consultants (former FDA officer) Have third-party research company survey needs >  Treatment of postoperative ileus is currently a serious unmet medical need ▷  High level of need to shorten hospital stay and alleviate complications given the special attributes of US healthcare > TU-100 has sufficient potential for use as a treatment for postoperative ileus 32 TSUMURA & CO.
Target patients for development Postoperative ileus (POI) patients Advisory team comprised of specialists in Japan and experts in statistics analysis ⇒Jointly propose strategies and trials Advisory team comprised of US specialists
A A A A Pharmacokinetics (PK) trial Survey to test for frequency of side-effects Intestinal bacteria research Tackle new quality control methods Deploy results of US development in Japan DKT forum (accrue EBM data) Revitalize domestic market Improve quality control method CMC global standard for PIC/S etc. Cross-development of PK trial and survey to test for frequency of side-effects Revise package insert In line with proposal for a workshop on the vision for the future of Kampo PK:pharmacokinetics, PIC/S:Pharmaceutical Inspection Co-operation/Scheme, CMC:Chemistry, Manufacturing and Control TSUMURA & CO. Topics for ESG Activities
-After disclosing the CGC in December 2015, began implementing a proprietary evaluation to assess the efficacy of the Board of Directors from FY2016, Improve the soundness and transparency of management Fortify oversight functions of the Board of Directors FY2017 Change institutional design Transition to a company with an audit and supervisory committee Set up nomination and remuneration advisory committee Revise Board of Directors rules FY2018 Tackle various measures Evaluate the efficacy of the Board of Directors Build a problem-solving PDCA cycle 37
Plan to donate a total of ¥300 million over 3 years starting from 2017
FY2017
●Regional revitalization plan Project for the creation of Yubari’s future (1) Certified children's park development project (2)  Expansion of free childcare for kindergarteners (3)  Increase free medical care for children (4) Local personnel training programs (5) Project to support business start-ups and become certified or licensed ●Regional revitalization plan Yubari 100-year plan: Proactive agricultural and forestry industries (1) Project to develop a production infrastructure for Yubari melons (2)  Project to create local industry resources (program for raising medicinal plants) TSUMURA & CO. FY2018 Performance Forecasts
(¥ million)
Return of Profits to Shareholders

Policy
❏ To improve corporate value through capital investments in order to realize the continuous development and growth of “Kampo” □ □ To consider medium- to long-term profit levels and cash flows as well as carry out a stable dividend Aim to return profit to shareholders based on a consideration and review to ensure an optimal capital structure while flexibly implementing a share buyback program by comprehensively taking into account market trends and other factors.
Dividend history
The year-end dividend and dividend payout ratio for FY2017 are based on the assumption that the dividend item will be approved at the 82st annual shareholders’ meeting 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 other aspects 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.