Mid-term Management Plan “Evolution2035 Phase1”

Early realization of bigger contributions to business results from previous mid-term business plan (KV25) themes

Delivery on KV25 investment themes

Phase2-oriented new businesses

Phase1 Initiatives for Portfolio Restructuring

• We shall invest to reform our pharmaceutical business structure away from generics and biosimilars susceptible to pricing revisions, and towards new drugs and outsourcing of contract manufacturing which should yield more stable profits​
• We shall set up a “Future Biz Center” aimed at creating new businesses for the future

Phase1 Focus Area

Pharmaceutical Business Structural Reform for 2035

Current situation

• We are entering an era in which the pharmaceutical businesses of chemical companies need to undergo reforms in order to become more specialized, etc.
• Our pharmaceutical business is specializing and heading deeper into cancer-related products and biosimilars, achieving high levels of competitive advantage and inimitability
• The pharmaceutical business is not so susceptible to changes in the economy, and can be seen a stable profit-producing cash cow

Pharmaceutical business Sales and Profitability rates

Sales are increasing, but profitability is gradually declining

As our current generic and biosimilar-based business structure is susceptible to annual drug price revisions, we can see a decline in earnings

Growth Investments for Each Mid-term Management Plan

Pharmaceutical business profits have been redirected for investments in other business growth fields, contributing to overall corporate growth but delaying the pharmaceutical business pivot

Under Evolution2035

Structural reform will see our business pivot towards new cancer-related drugs and biosimilars unaffected by drug price revisions, and contract manufacturing (CDMO) business
By advancing our own strong points, we shall increase earning power

New Organization: Future Biz Center

Plans to open a Future Biz Center directly under the president to create new business for the future
Future Biz Center Planning Office set up on April 1st , 2026 with a view to officially commencing center activities form FY2027

Organizational Vision

Innovation born from co-creation and challenge to pave the way for the future

Purpose

Concept

• Launching new businesses while expanding our current ones
• Creating new business themes in tandem with business units
• Jointly-creating at every stage: theme searching, planning, project realization

Cash In and Cash Out for Phase1

• Proiritize pharmaceutical business investment through purchasing Fuji Yakuhin’s Toyama Plant 2, introducing new licenses, and constructing the pharmaceutical factory on Takasaki Plant
• While carrying out proactive growth-oriented investments, maintain a dividend payout ratio of 40%+
  Examine use of surplus funds post-growth investments to purchase treasury stocks and return to shareholders
• In line with expansion of business scale, continually hold cash reserves of 60 bn yen

Balance Sheet Control

• ① CCC reduction（FY2025 results: 223 days ⇒ FY2028 Target: 200 days or less）
• ② Optimization of low-return assets: aim to reduce cross-shareholdings to 6%;
  　exploration of real estate and non-core business
• ③ Lowering of WACC: controlling equity ratio through debt financing and treasury stock purchases etc.
• ④ Growth investments: cash created from ①-③to be reinvested in key business and
  　new businesses for the future

Shareholder Returns Policy

• Dividend Payout Ratio of 40%+; continuation of progressive dividends Increased dividend of 66 yen per share planned for FY2025
• Flexible implementation of treasury stock purchases 11.3 million shares, equivalent to 7.06％ of the outstanding share, are planned for cancellation on May 22, 2026 15 bn yen of treasury stock purchases in FY2026, with a planned total payout ratio of 106.2%

Improving efficiency and speed, and focusing on high added-value work, to connect with sustainable growth

Increased work efficiency; improved productivity

• Reduced workforce; smart factories
• Time saved through digitalization, labor-saving, and promotion of automation to be converted into high added-value work
• Using AI and robotics to create case studies for self-operation
• Reduce R&D lead times through introduction of digital technology

Optimization of work operations and corporate functions

• Faster working pace achieved through delegation of authority and organizational restructuring

Through strengthening the human capital required to take us to where we want to be, we shall foster a corporate culture of challenge and sustainable growth.

Key Initiatives

• Defining the human resources required for sustainable growth
• Strategic recruitment, development and posting

• Developing leaders through reimagining of roles and autonomy via delegation of authority
• An HR system and policies which encourage and value a challenging spirit

“Continuously providing society with the best products through ceaseless progress and the combined forces of our consciences.”