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November 8, 2023 TSUMURA & CO. Today’s Agenda Purpose-driven Value Creation & Capital Policy Second Quarter Business Results for Fiscal 2023...Overview
Purpose/Corporate Philosophy 3
Board of Directors
June 2017
•Shift to Company with an Audit and Supervisory Committee •The Board of Directors will consist of a majority of independent outside directors •Established the Nomination / Remuneration Advisory Committee (Chair: Outside director) June 2021 ・Formulated a bold management policy April 2022 •Newly established the Principles and the Corporate Purpose •Formulated the Long-Term Management Vision, TSUMURA VISION “Cho-WA” 2031 •Established the Sustainability Vision •Revised the TSUMURA GROUP DNA Pyramid May 2022 ・Introduced a long-term performance-linked, stock based remuneration system September 2023 ・Updated materiality November 2023 ・Formulated the basic policy for the capital policy and a new shareholder return policy UMURA VISION "Cho-WA" 2031 4
A Kampo medicine-inspired organization, in which new value is created through the well-balanced collaboration of willing workers striving to fulfill their potential → Each employee is motivated to energetically engage in their work. As a result, their full potential is realized. Know-how and intellectual property pertaining to Kampo and crude drugs, which have been accumulated since the Company's founding → Various knowledge related to Kampo medicine and crude drug businesses is accumulated and digitalized. A source of new value and profits/centripetal force Capital emerging as a result of capital types 1 to 6 →Profits obtained are reinvested in Contribution to diseases that are difficult to treat with Western medicine → Kampo formulations are delivered to customers at a drugstore or pharmacy via pharmaceutical agencies and medical institutions, causing a positive change in society. Cultivating Dialogue Culture Focus on purposes Deleloping potential through dialogue with Purposes and values serving as Cultivation research and environmental preservation measures aimed at protecting the natural ervironment in crude drug production areas → Tsumura values the natural ervironment more than any other company, and we have established a sustainable system based on our belief that the quality of Kampo products depends on the plants growing in the fields. → Safe and reliable Kampo formulations Tsumura’s dialogue theory • Purposes and values should be harnessed to serve as centripetal forces of dislogue •Respect rules of dialogue. Actively incorporate a "mingling" (break-out) method. •Dialogue enables the sharing of questions, which is a unique practice at Tsumura.
TMPACT on Society . Realization of a society of healthy longevity •  Maintenance of a rich natural environment report for details on the process for
OUTCOME
Value created through business OUTPUT Results of business activities
Science
•  Creation of new value through pharmaceuticals and products derived from natural substances •  Sustainable, stable supply of pharmaceuticals products such as Kampo formulations, which are traditional pharmaceuticals
Nature
Sustainable procurement of raw materials (research on cultivation of crude drugs, etc.) Recycling use of resources (recycling of water and crude drug residue) Preservation of biodiversity (restoration of forests, soil, water sources Climate change countermeasures (realize carbon neutrality)
Health
Expansion of access to high quality pharmaceuticals and products derived from natural substances Expansion of the standardization of Kampo treatments and building of evidence Initiatives for personalized Kampo treatments throu cutting-edge technology Contribution to health suitable for each individual's life stage (treatment, pre-symptomatic disease, healthcare, (prevention))
Reinforcement of
business foundations
Strengthening and enhancement of corporate governance Utilization of diverse human resources Cultivation of a corporate culture that draws out potential abilities through dialogue business activities 6
TSUMURA VISION “Cho-WA” 2031 Under the title TSUMURA VISION “Cho-WA” 2031 we are working to fulfill the potential of our three Ps as we live in greater balance with nature and welcome an era in which we support well-being for every individual, using the power of nature and science, mainly in traditional medicine, with Kampo and traditional Chinese treatments at its core. Personalized Health Care This means contributing to well-being through evidence-based provision of Kampo and traditional Chinese treatments and other products and services tailored to the individual's life stage, symptoms, genetic makeup and living environment. With this we contribute to building a healthier society by establishing diagnostic methods and systems to address a given pre-symptomatic disease, defined based on evidence. Potential-Abilities Development This describes a corporate culture that employs dialogue to encourage every employee to make the most of their potential, making us a trustworthy organization as we explore Kampo and Chinese-medicine business, for which there is no other model in the world. 7 evements to be Realized under TSUMURA VISION “Cho-WA” 2031
bueuj •Capital policy (Capital efficiency/optimal capital composition) • New shareholder return policy vements to be Realized under TSUMURA VISION “Cho-WA” 2031
1. 2. 3. 4. 5. 6.
bueuj •Capital policy (Capital efficiency/optimal capital composition) • New shareholder return policy ROE Improvement: Quickly Realize a Positive Equity Spread Early On and Expand Financial leverage . . . Reduce cost of goods sold Curb the SG&A ratio
is equivalent to or higher than the profit margin in the domestic business
.
*Cost of equity:  approx. 7%
Calculate using the CAPM Risk free rate: 2%; Risk premium: 6%, β value: approx. 0.8 *Equity spread = ROE − Cost of equity 10
Image of realization FY 2022 results FY 2031 Domestic business strategy Establish the Kampo medicine business omes
usine Realize a medical setting where one-in-two physicians will write “basic prescriptions in all treatment areas” in accordance with Kampo medicine səuidວ China business strategy Become a trusted traditional Chinese medicine company in China Contributing to the health of the citizens of China Recognized as a traditional Chinese medicine company Realize a business scale/sales worth RMB10 billion Net sales 124.7 billion yen Net sales 15.3 billion yen Expand business domains through affiliations and M&A Net sales: 140.0 billion yen Existing Businesses (Domestic, China) Net sales 300 billion yen ROE 8%-plus Target Level ROE 10% Momentously Improve the Quantity, Quality and Speed of the Provision of Kampo Information through Digital Transformation (DX) ·Aim to realize a usable system by building information provision channels so that medical practitioners can obtain necessary information > Build a system to facilitate the provision of information via optimal channels
FY 2024 Vision
Aim to achieve conditions where more than 50% of the number of physicians prescribing 10 or more prescription Kampo formulations End-FY 2022   1H FY 2023   End-FY 2023  End-FY 2024 *Survey by Tsumura
FY 2031 Vision
Aim to get 50% of all physicians who write basic prescriptions in all treatment areas to prescribe Kampo formulations
In recent years, the rate of reduction has been shrinking, and in 2023 prices were upwardly revised in tandem with soaring consumer prices NHI drug price revision rate (%) Tsumura +2.3
Reduce crude drug prices by expanding domestication of crude drugs and enhancing automation and manpower reduction FY 2031 Vision Domestication of 22 crude drug items FY 2022 results: 33 wild crude drug items Raw material crude drug price index trends for the China market Wild crude drug items Rise in price due to a decrease in the volume of resources and an increase in demand Cultivated crude drug items Able to curb a rise in price *The index is the weighted average price of the China market price calculated based on the amount of usage by the Tsumura Group. The total is calculated each for the crude drugs that contain only those grown in the wild (100%) and only those cultivated (100%); FY 2012 is indexed at 100. (Prepared by Tsumura based on external data) Aim to further reduce prices... FY 2031 Vision Automation/manpower reduction of upstream production processes Reduce personnel expense per ton for raw material crude drugs by 50%
· Implement AI automated
sorting
Conduct visual selection of raw material crude drugs using an AI-driven crude drug automated selector Going forward, successively expand the sites for introduction and target crude drugs •Mechanization of processing at production sites • Embarking on research for automation of primary processing in the upstream procedures
✓ Realize low-cost plant operations Aim to more than double the physical labor productivity •  Automation mainly by using AI technologies for inspections, operations and incidental operations Reduce operator manpower via automation of visual inspections of sachets, individual boxes and outer casings •  After the completion of depreciation, operations in the long term is possible The depreciation period for SD facilities is around eight years, and the operating period is approximately 20 years Current status of processing cost structure Labor expense Depreciation expense Expense Image for 2031 Expense Future Vision Labor expense Depreciation expense Expense ✓ More than double sales per employee by improving productivity through digital transformation (DX) Aim for a SG&A ratio in the lower 20% level
Present
FY 2031 Vision
Sales Increase 15
Improve total asset turnover mainly by improving the cash conversion cycle (CCC), curtailing cash and deposits and reducing cross-shareholdings CCC improvement: Introduction of a crude drug compounding planning system Improve crude drug inventory turnover by optimizing crude drug compounding plans and crude drug transport plans China Japanוכוto thought to ※Issues before implementation Because the blending plan is created from the inventory transferred to Japan, stagnant inventory occurs Compounding plan accuracy •Calculation time: 4 hours •Calculation period: 1 month •Scope of coverage: Japan only *Manage a suitable level of inventory necessary for compounding *Improve accuracy Compounding plan accuracy •Calculation time: Instantaneously •Calculation period: More than 1 year •Scope of coverage: Japan, China
Secure financial soundness while pursuing an optimal capital composition
Generate cash by enhancing earnings power and improving the balance sheets, and allocate cash to achieve further business growth and to expand dividends up to FY 2031 Vision First Medium-Term Management Plan (FY 2022-FY 2024) Cash in Cash out
Aim to achieve an optimal dividend payout that is based on an optimal capital composition that ensures financial soundness Target level ✓ Expand dividends base on capital structure Targeting a dividend payout ratio of 40% in FY2023, increasing it gradually towards FY2031 Note: The fiscal year-end dividend for FY 2023 and the dividend payout ratio (forecast) is a forecast number as it is predicated by the approval of the dividend resolution scheduled to be passed at the 88th Ordinary General Meeting of Shareholders. 20 Today’s Agenda Purpose-driven Value Creation & Capital Policy Second Quarter Business Results for Fiscal 2023  Overview
*２ Forex rate at the time overseas subsidiaries’ PLs were incorporated; differs from the import rate for raw material crude drugs
Achieved 1H plans for sales and at each profit level Net sales 75,302
◾ Domestic business Total sales for the 129 prescription Kampo products: 63,720 million yen, rose 5.9% year-on-year Total sales of the OTC Kampo products and other healthcare products: 1,751 million yen, fell 12.6% year-on-year ◾ China business, raw material crude drugs, drug pieces, Yakushokudogen products, etc.: 9,171 million yen, rose 27.7% year- on-year
■ Cost-to-sales ratio: 54.3%, up 0.8pt vs. 1H plan and a rise of 4.0pt year-on-year Versus plan: Increase in China business sales ratio;  YoY: Mainly reflects impact from a rise in crude drug procurement expense, still high energy and raw material expenses, and a depreciation in the yen’s value versus major currencies ◾ SG&A ratio: 32.2%, down 1.4pt vs. 1H plan and a fall of 0.8pt year-on-year Versus plan and year-on-year: Sales growth absorbed growth investments, including the DX of the Kampo Value Chain Ordinary profit
(20.6)% ◾ Foreign exchange gain primarily related to loans to overseas subsidiaries: yen, down 1,969 million yen year-on-year *Forex gains are not factored into the earnings forecast. Profit attributable to owners of parent 9,005 million yen
YoY (24.3)% * Comparison with plans prior to revisions. 23
Ratio to total sales 56%

·Rise in the number of detailing impact cases owing to an expansion of the MEDiCAL SiTE •In 2H, aim for detailing impact that is above the level posted in 2Q, and promote information provision activities (1,000 cases) 2,500
Detailing impact
◾ MR activities ◾ e-promotions *Number of cases of detailing impact: Number of cases of information recognition from various channels, including MR activities and the Internet *e-promotions: Information provision, mainly through online lectures and video streaming INTAGE Healthcare Inc. survey, Impact Track *MR activities: Information provision via MRs + in-person lectures
e-promotions
. The number of detailing impact cases increases by expanding video contents on the TSUMURA MEDiCAL SiTE TSUMURA  MEDICAL SITE
The MEDiCAL SiTE is
operated by Tsumura. The environment facilitates learning about Kampo by medical practitioners at any time through the distribution of contents, mainly videos, and online lectures. 26
Achieve the 1H plan in the China business by expanding sales in the crude drug platform business 9.17 billion ven Crude drug platform Operating profit 0.45 billion ven Formulation platform, IT infrastructure investments, etc. Expenses, etc. Operating profit (210) million yen ✓ The crude drug platform business is in the black; aim for an expansion in business scale and a further improvement in operating profit margin Crude drug platform pro Sales to traditional Chinese medical products companies as a raw material Sales for prescription-use and as an OTC to hospitals and pharmacies Sales of health food products made from crude drugs to general consumers
*Local currency basis: 24.5% growth


・We are hiking our full-fiscal year dividend to ¥70 per share, from a previous ¥64 per share, in tandem with a change to our dividend policy Note: The fiscal year-end dividend for FY 2023 and the dividend payout ratio (forecast) is a forecast number as it is predicated by 29 the approval of the dividend resolution scheduled to be passed at the 88th Ordinary General Meeting of Shareholders.
Corporate Communications Dept. Investor Relations Group investor_madoguchi@mail.tsumura.co.jp
Cautionary items regarding forecasts
● The materials and information provided in this presentation contain so-called forward-looking statements. Readers should be aware that the realization of these statements can be affected by a variety of risks and uncertainties and that actual results could differ significantly. ● Changes in Japan or other foreign countries related to 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 negatively impact the Company's performance or financial position. ●  In the unlikely event that sales of the Company’s core products currently on the market be halted or should sales substantially decline due to a defect, unforeseen side effect or some other factor, there could be a major impact on the Company’s performance or financial position. onellos ana equian flo tsea Appendix
947 +6 (140) (Million yen) (16) +15 812 inəlevinpə used but unde tivitor guits 199 itivitos builse, itivitor builer   əlsviupə dsel pue qs 32
The number of physicians prescribing 10 or more prescription Kampo formulations increased by approximately 11,000 physicians, a ratio of 35%*
Raw material and energy expenses have been trending flat from 1Q (Billion yen) Raw material expense Energy expense