Consolidated Financial Results for the Six-Months Period of Fiscal 2025【Script】

Meeting of FY2025 2Q Financial Results November 11, 2025

(Total: 49 minutes, Presentation: 35 minutes, Q&A: 14 minutes)

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Additionally, to help everyone gain a deeper understanding of the content presented today, we plan to distribute a written script of the session at a later date. The distributed material will include both the spoken remarks and the presentation content from today's meeting, so we would appreciate your understanding and cooperation.

First, let me introduce the Company participants attending today. Present with us are President and Representative Director, Hiroyuki Horiuchi; Managing Director, Masashi Suzudo; Director and Chief Officer of the R&D Division, Mitsuru Watanuki; Directors, Yasuhiro Umeda and Akemi Okuyama; and Corporate Officer, Chief Officer of Marketing & Sales Division, Tomoyuki Koseki. These six executives will be speaking today.

Here is the schedule for today's session. The Q&A portion will be held after all the presentations have concluded. Including the Q&A, the total duration is expected to be approximately 45 minutes.

Before we begin, I would like to note a few important points. Today's presentation will follow the materials posted on our company website. The information contained in those materials is based on data currently available to us and represents what we consider to be a reasonable assessment at this time. Please be aware that actual future results may differ significantly from these forward-looking statements.

Also, while today's presentation includes information related to pharmaceutical products, please note that the content is not intended for promotional or advertising purposes, nor should it be interpreted as providing medical advice.

With that, I would now like to invite Mr. Horiuchi to begin his presentation.

Now, I will explain the financial results for Q2 of the fiscal year ending March 2026, which we announced yesterday, November 10.

Today's agenda is as follows. I will first discuss the consolidated financial results for Q2 followed by our full-year forecast for the fiscal year ending March 2026. I will then provide an overview of the recent initiatives we have been pursuing in the area of rare diseases. After my remarks, Director and Chief Officer of the R&D Division, Mr. Mitsuru Watanuki, will explain the status of our R&D pipeline.

Let me begin with the consolidated financial results for Q2 of the fiscal year ending March 2026.

This slide shows our consolidated profit and loss performance. For Q2, we recorded lower sales and lower profit. Details will be provided in the following slides.

This slide shows the factors behind the changes in net sales compared with the previous fiscal year.

Net sales for Q2 were JPY39,356 million, representing 76.6% of the level in the same period of the previous year, resulting in a decline in revenue.

Breaking this down, sales of pharmaceuticals and medical devices both in Japan and overseas decreased significantly. The main reason for this decline was the absence of the one-time payment of approximately JPY 13,380 million received in the previous fiscal year from the transfer of intellectual property rights for NM26. Excluding this one-time payment from the prior year, sales would have actually increased by JPY 1,362 million.

The positive factors contributing to this increase included the consolidation of our newly acquired subsidiary, Aadi, with sales recorded for FYARRO; higher sales of active pharmaceutical ingredients for Ecclock destined for overseas markets; and, domestically, increased sales of Ecclock and other products.

In addition, our agricultural chemical business posted higher revenue, primarily due to increased overseas sales of our main product, Polyoxin.

Next, this slide illustrates the factors behind the changes in operating profit compared with the previous fiscal year.

Operating profit came to JPY203 million, representing a decline in profit.

As explained on the previous slide, excluding the one-time payment received in the prior fiscal year, sales increased by JPY1,362 million. Accompanying this rise in sales, the cost of sales increased by JPY506 million. SG&A expenses, excluding R&D costs, increased by JPY1,155 million, reflecting higher expenses from Aadi as a standalone entity as well as additional costs related to post-acquisition integration.

R&D expenses increased as we steadily advanced strategic investments based on our Long-Term Business Plan 2031. During this quarter, we completed three in-licensing agreements, including those for orphan drugs, which I will explain later. Major items included upfront payments for Sebetralstat, in-licensed from KalVista Pharmaceuticals, and Navenibart, in-licensed from Astria Therapeutics. Furthermore, with the expansion of our development pipeline, clinical trial expenses and costs associated with pipeline advancement also increased, resulting in a total rise of JPY5,698 million in R&D expenses.

This slide, for your reference, shows a comparison of SG&A expenses with the previous year.

As you can see from the graph, SG&A expenses rose significantly this term due to the inclusion of Aadi-related costs and upfront payments from product in-licensing. This increase was the primary factor behind the decline in profit.

Next, I will explain the performance of our main domestic prescription pharmaceuticals and medical devices.

Here we refer to the Clenafin Group, which represents the combined total of Clenafin and its authorized generic (AG).

For this group, although Clenafin was affected by the NHI drug price revision, the AG product launched in September got off to a smooth start, and as a result, total sales reached JPY9,313 million, exceeding the previous year's level. For Artz, sales amounted to JPY9,233 million, or 94.2% YoY. In addition to the impact of the drug price revision, although we continue to maintain a high market share, the overall market recovery for hyaluronic acid injections progressed slightly slower than anticipated, which contributed to this outcome.

For Seprafilm, although competition has intensified with the introduction of multiple competing products, we were able to expand usage in previously untreated cases that did not use adhesion barriers, and sales remained on par with the previous year at JPY3,519 million. Ecclock, driven by ongoing disease awareness initiatives, benefited from an expanding overall market, resulting in sales of JPY1,529 million, or 112.4% YoY.

Regarding generic products, our key product, one of the areas where we have placed the greatest focus, was affected by competition, leading to sales of JPY3,731 million, or 87.2% YoY.

This next slide presents our consolidated balance sheet and consolidated statement of cash flows.

As of the end of September, cash and cash equivalents stood at JPY57,105 million, a decrease of JPY12,980 million compared with the end of March 2025. This decrease was mainly due to our proactive execution of strategic investments and the strengthening of shareholder returns. Amortization of goodwill associated with the acquisition of Aadi began in the current fiscal year. Net assets decreased by JPY4,832 million, reflecting share repurchases and dividend payments.

As for policy shareholdings noted in the cash flow statement, we sold approximately JPY1,793 million worth of shares across two holdings. Against our reduction target of slightly over JPY6,000 million set in April 2024, this represents progress of roughly 28%.