Towa Pharmaceutical : FY2024(4th quarter) Consolidated Financial Results for the Year Ended March 31, 2025(Based on Japanese GAAP) (416K／18P)

Company name: TOWA PHARMACEUTICAL CO., LTD.

Stock exchange listing: Tokyo

Stock code: 4553 URL https://www.towayakuhin.co.jp/ Representative: President and Representative Director Itsuro Yoshida

Inquiries: Director Toshikazu Kokubun TEL 06-6900-9102 Scheduled date of ordinary general meeting of shareholders: June 25, 2025

Scheduled date to file Securities Report: June 24, 2025

Scheduled date to commence dividend payments: June 26, 2025 Preparation of supplementary material on financial results: Yes

Holding of financial results meeting: Yes (for analysts and institutional investors)

May 15, 2025

(Amounts less than one million yen are rounded down)

1. Consolidated financial results for the year ended March 31, 2025 (from April 1, 2024 to March 31, 2025)

   1. Consolidated operating results Percentages indicate year-on-year changes

      	Net sales		Operating profit		Ordinary profit		Profit attributable to owners of parent
      	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%
      Year ended March 31, 2025	259,594	13.9	23,242	31.7	26,152	6.8	18,986	17.4
      Year ended March 31, 2024	227,934	-	17,647	-	24,477	-	16,173	-

      Note : Comprehensive income For year ended March 31, 2025 : ¥18,645 million [(15.1)%]

      For year ended March 31, 2024 : ¥21,949 million [－%]

      	Earnings per share	Diluted earnings per share	Profit attributable to owners of parent/equity	Ordinary profit/total assets	Operating profit/net sales
      	Yen	Yen	%	%	%
      Year ended March 31, 2025	385.71	-	11.6	5.8	9.0
      Year ended March 31, 2024	328.59	-	11.0	6.1	7.7

      Note : The fiscal period ended March 31, 2023 represents a transitional period for the change in the fiscal period for nine consolidated subsidiaries, scoped 15-month period from January 1, 2022-March 31, 2023. Due to this method of presentation, year-on-year percentage change data is not provided for the year ended march 31, 2024.

   2. Consolidated financial position

      	Total assets	Net assets	Equity ratio	Net assets per share
      	Millions of yen	Millions of yen	%	Yen
      As of March 31, 2025	470,823	171,625	36.5	3,486.40
      As of March 31, 2024	430,653	155,893	36.2	3,167.27

      Reference : Equity As of March 31, 2025 : ¥171,625 million

      As of March 31, 2024 : ¥155,893 million

   3. Consolidated cash flows

      	Cash flows from operating activities	Cash flows from investing activities	Cash flows from financing activities	Cash and cash equivalents at end of period
      Year ended March 31, 2025 Year ended March 31, 2024	Millions of yen 23,401 8,212	Millions of yen (31,287) (40,394)	Millions of yen 21,567 35,407	Millions of yen 45,460 29,650

2. Cash dividends

   	Annual dividends per share					Total cash dividends (Total)	Dividend payout ratio (Consolidated)	Ratio of dividends to net assets (Consolidated)
   	1st quarter-end	2nd quarter-end	3rd quarter-end	Fiscal year-end	Total
   Year ended March 31, 2024 Year ended March 31, 2025	Yen	Yen	Yen	Yen	Yen	Millions of yen	%	%
   	- -	30.00 30.00	- -	30.00 40.00	60.00 70.00	2,953 3,445	18.3 18.1	2.0 2.1
   Year ending March 31, 2026 (Forecast)	-	40.00	-	40.00	80.00		22.2

3. Forecast of consolidated financial results for the year ending March 31, 2026 (from April 1, 2025 to March 31, 2026)

   Percentages indicate year-on-year changes

   	Net sales		Operating profit		Ordinary profit		Profit attributable to owners of parent		Earnings per share
   	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
   Six months ending September 30, 2025	134,500	9.0	12,000	14.1	11,100	7.4	8,000	22.0	162.52
   Full year	280,000	7.9	27,000	16.2	25,300	(3.3)	17,700	(6.8)	359.57

   .

4. Notes

   1. Changes in significant subsidiaries during the year ended March 31, 2025

      (changes in specified subsidiaries resulting in the change in scope of consolidation):

      None

   2. Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements Changes in accounting policies due to revisions to accounting standards and other regulations: Yes Changes in accounting policies due to other reasons: None

      Changes in accounting estimates: None

      Restatement of prior period financial statements: None

   3. Number of issued shares (common shares)

Total number of issued shares at the end of the period (including treasury shares) Number of treasury shares at the end of the period

Average number of shares during the period

[Reference] Overview of non-consolidated financial results

Non-consolidated financial results for the year ended March 31, 2025 (from April 1, 2024 to March 31, 2025)

1. Non-consolidated operating results Percentages indicate year-on-year changes

   	Net sales		Operating profit		Ordinary profit		Profit attributable to owners of parent
   	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%
   Year ended March 31, 2025	172,269	15.4	23,688	18.7	27,532	1.1	21,100	7.7
   Year ended March 31, 2024	149,221	20.3	19,958	114.5	27,231	218.8	19,600	209.6

   	Earnings per share	Diluted earnings per share
   	Yen	Yen
   Year ended March 31, 2025	428.66	-
   Year ended March 31, 2024	398.21	-

2. Non-consolidated financial position

   	Total assets	Net assets	Equity ratio	Net assets per share
   	Millions of yen	Millions of yen	%	Yen
   As of March 31, 2025	427,016	168,739	39.5	3,427.77
   As of March 31, 2024	383,843	150,530	39.2	3,058.31

   Reference : Equity As of March 31, 2025 : ¥168,739 million

   As of March 31, 2024 : ¥150,530 million

   Contents

   1. Overview of Operating Results and Financial Position 2

      1. Overview of operatingresults for the fiscal year under review 2

      2. Overview of financial position for the fiscal year under review 4

      3. Overview of cash flows for the fiscal year under review 4

      4. Future outlook 5

   2. Basic Approach to the Selection of Accounting Standards 6

   3. Consolidated Financial Statements and Key Notes 7

      1. Consolidatedbalancesheets 7

      2. Consolidated statements of income (cumulative) and consolidated statements of comprehensive income (cumulative) 9

         Consolidated statements of income (cumulative) 9

         Consolidated statements of comprehensive income (cumulative) 10

      3. Consolidated statements of changes in equity 11

      4. Consolidated statements of cash flows 12

      5. Notes to consolidated financial statements 14

(Notes on going concern assumption) 14

(Notes on changes in accounting policies) 14

(Notes on segment information) 14

(Notes on per share information) 16

(Notes on significant subsequent events) 16

The forward-looking statements in this document are those determined as of the end of the current consolidated accounting period.

With the corporate philosophy of "Contribute to people's health and dedicate ourselves to people's genuine smiles," the Group has been working on various issues. The aim is to establish a foundation in new markets and new businesses and realize group synergies with each subsidiary while making the domestic generic drug business its core business in accordance with the "6th Medium-term Business Plan 2024-2026 PROACTIVE III" announced in June 2024.

As a result, operating results for the fiscal year under review are as follows.

Consolidated earnings (Millions of yen)

Both sales and profits grew due to strong demand and increased sales volume at Towa Pharmaceutical, as well as the growth in business performance at Sunsho Pharmaceutical Co., Ltd. (hereinafter referred to "Sunsho"), a wholly owned subsidiary of the Company and Towa Pharma International Holdings, S.L. (hereinafter referred to as "Towa INT").

In terms of business results, net sales were 259,594 million yen (up 13.9% year on year), operating profit came to 23,242 million yen (up 31.7% year on year), ordinary profit was 26,152 million yen (up 6.8% year on year), and profit attributable to owners of parent totaled 18,986 million yen (up 17.4% year on year).

Results by segment are as follows. Segment profit of the reporting segments is the figure before amortization of goodwill.

Results by segment (Millions of yen)

Note: Segment profit is based on operating profit.

(Domestic segment)

In the generic drug industry in Japan, the Medical Insurance Committee of the Social Security Council in March 2024 set a new secondary goal to increase the value share of generic drugs to 65% or more by the end of FY2029, along with the main goal of increasing the volume share of generic drugs to 80% or more in all prefectures by the end of FY2029 while maintaining a stable supply of drugs. In addition to that, a treatment option using long-listed drugs was introduced in October 2024. Choosing this option will require an additional co-payment for some brand-name drugs for which generic drugs are available. As a result, the volume share in October-December 2024 reached 88.6% (according to the Japan Generic Medicines Association).

In the meantime, annual drug price revisions since FY2021 have been making the situation extremely severe for the pharmaceutical industry. Furthermore, due to a series of supply concerns stemming from quality problems at multiple generic drug companies that came to light in 2020, confidence in generic drugs has declined and the environment facing the generic drug industry has become increasingly tough.

Under these circumstances, The "Report of the Study Group on Industrial Structure for Achieving Stable Supply of Generic Drugs" published by the Ministry of Health, Labour and Welfare in May 2024 showed that the government will "establish an intensive reform period of about five years to ensure a manufacturing management and quality control system, secure stable supply capacity, and realize a sustainable industrial structure." In addition, the "Basic Policy on Economic and Fiscal Management and Reform 2024 (Big-Boned Policy 2024)" approved by the Cabinet in June 2024 states, "The government will work to resolve the current concerns about the supply of pharmaceuticals. Envisioning an ideal form of the generic drug industry while maintaining a stable supply of pharmaceuticals as a basis, we will promote structural reforms with a view to industry restructuring and will put in a place the relevant legal framework for a stable supply of pharmaceuticals."

Based on these policies, the government determined the scope of the FY2025 drug price revision in light of the nature of each product, with the aim of not only reducing the burden on the public, but also precisely addressing the need to promote drug discovery innovation and ensure a stable supply of drugs. As a result, generics are subject to a price revision if the discrepancy rate exceeds 1.0 times the average discrepancy rate of 5.2%. The price revision also included the first increase of the minimum drug prices since 2000, as well as a temporary recalculation of unprofitable products for drugs with particularly high medical necessity. Furthermore, companies will be evaluated for their stable supply system using all of the corporate indicators that were under consideration, and the ratings for each company are scheduled to be made public after the FY2026 drug price revision.

Under these circumstances, in order to fulfill our responsibility for a stable supply, we have introduced new facilities and increased the number of employees in the domestic generics business for increased production. The construction of Solid Formulation Facility No. 3 and Sterile Formulation Facility No. 2 at the Yamagata Plant was completed in November 2023, and shipments of products manufactured at Solid Formulation Facility No. 3 began in April 2024. We are working to increase the annual production capacity of the three plants from 14 billion tablets at the end of March 2024 to 17.5 billion tablets in FY2026.

In terms of manufacturing control and quality control, we not only comply with the GMP Ordinance, which is the standard for manufacturing control and quality control of pharmaceuticals, and other related laws and regulations, but also actively adopt international standards such as PIC/S GMP and ICH Guidelines, and work to ensure appropriate quality and safety of pharmaceuticals through our own systems and education and training. In addition to the MES (Manufacturing Execution System) and LIMS (Laboratory Information Management System) already in place, we have introduced a QMS (Quality Management System) to further improve manufacturing control and quality control. Furthermore, in order to maintain and strengthen our stable supply system, we are striving to switch to multiple purchases of APIs and audit manufacturing sites, and are continuing to strengthen governance and ensure thorough compliance throughout the entire Group, from API manufacturing to formulation manufacturing, distribution and sales.

In terms of sales, we started selling seven new products with three ingredients in June 2024 and ten new products with six ingredients in December 2024, bringing the total number of our generic drugs to 759 products with 326 ingredients (as of December 2024). In addition to that, on March 27, 2025, we received approval to manufacture and sales of "RIVALUEN® LA Patch 25.92 mg/51.84 mg". This new drug represents Japan's first extended-release Rivastigmine transdermal formulation (twice weekly dosage). Two new products with one ingredient are scheduled to be added to the list in June 2025.

As for the development of health-related businesses, in order to respond to the new medical system such as the community-based integrated care system, we will focus on the "Healthcare Passport" (that enables local medical professionals and residents to share health and medical information in both directions). We will realize diversified development of health-related businesses by forming synergies between each subsidiary and existing businesses from the viewpoint of treatment, prevention and nursing care support, and increasing products and services for maintaining and promoting health.

In the current fiscal year under review, the domestic segment posted net sales of 206,103 million yen (up 15.3% year on year) and segment profit of 27,216 million yen (up 24.3% year on year). These increases were due to