70th Business Report (From April 1, 2023 to March 31, 2024.)

Earlier from Zeria Pharmaceutical

Zeria Pharmaceutical Co., Ltd.TSE: 4559

Jul 17, 2024 at 6:40 AM UTC · Issued by Zeria Pharmaceutical Co., Ltd.

健康づくりは幸せづくり

Making Health

is Making Happiness

70th

Business Report

From April 1st, 2023 to March 31st, 2024

Securities Code•4559

Contents

To Our Shareholders…………………………………………… P.1

Summary of Our Business Operations (Consolidated)… …… P.3

Status of Research and Development………………………… P.5

Research and Development Pipeline… ……………………… P.6

Status of Production and Distribution /

Outlook for Fiscal Year 2024… ……………………………… P.7

Special Offers to Our Shareholders…………………………… P.8

Topics…………………………………………………………… P.9

Financial Statements (Consolidated)… ……………………… P.11

Company Information… ……………………………………… P.13

Share Information……………………………………………… P.14

Shareholder Memo

To Our Shareholders

We, Zeria Pharmaceutical Co., Ltd. ("Zeria") would like to express our thanks for your particular support.

We are pleased to report the business results of fiscal year 2023 (70th business operations) for the period from April 1st, 2023 to March 31st, 2024.

Chairman and CEO	President and COO
Sachiaki Ibe	Mitsuhiro Ibe

In the fiscal year under review, the Japanese economy benefited from the easing of COVID-19 restrictions on activity and other factors, driving a pickup in private consumption and improvements in the employment situation, which combined with an increase in inbound tourism demand to generate signs of recovery in business conditions. On the other hand, the outlook remains uncertain due to such factors as rising prices caused by soaring costs for energy and raw materials, yen depreciation, and the increasingly tense international situation.

In the pharmaceutical industry, the market environment for ethical pharmaceuticals has become even more severe due to strengthening of initiatives to curtail healthcare expenses, such as price revisions on a roughly annual basis and the promotion of the use of generic brand pharmaceuticals. The market environment for OTC drugs also remained severe due to factors such as increasingly fierce market competition.

Under these circumstances, in the fiscal year under review, which was the first year of the 11th Mid-Term Management Plan (fiscal year 2023 to fiscal year 2025), the Zeria Group accelerated its global expansion and achieved a significant increase in overseas sales, centered on Europe, due in part to the contribution of DIFICLIR, a therapeutic agent for Clostridioides difficile infections (domestic sales name: Dafclir). In the domestic market, although the Ethical Pharmaceuticals Business struggled due to the impact of price revisions, the Consumer Healthcare Business recorded an increase in sales as a result of the contributions from the Hepalyse range, the Chondroitin range and other major products.

As a result of these activities, net sales for the fiscal year under review were 75,725 million yen, up 10.7% from the previous fiscal year. Regarding profits, operating profit was 9,621 million yen, up 6.7% from the previous fiscal year, ordinary profit was 8,513 million yen, up 12.3% from the previous fiscal year, and profit attributable to owners of parent was 7,731 million yen, up 24.8% from the previous fiscal year.

In the fiscal year under review, the overseas sales to net sales ratio was 51.5%, compared with 47.4% in the previous fiscal year.

90,000
	75,725
	68,383
60,000	59,532

30,000
0

Fiscal Year 2021 Fiscal Year 2022 Fiscal Year 2023

12,000
		9,014	9,621
9,000		8,513
	7,579
		7,731
6,366	5,935	6,195
6,000
	3,961
3,000
0

Fiscal Year 2021 Fiscal Year 2022 Fiscal Year 2023

Summary of Our Business Operations (Consolidated)

Ethical Pharmaceuticals Business

As for the main product, Asacol, a therapeutic agent for ulcerative colitis, sales in the domestic market faced challenging circumstances, owing to the impact of the price revisions and the competitive products. Despite this, sales increased overall as a result of strong performance in overseas markets such as the UK due to growth in sales of high-dose Asacol 1600 mg tablets and the foreign exchange impact. Sales of DIFICLIR expanded substantially, especially in Europe. However, sales of Entocort, an inflammatory bowel disease therapeutic agent, declined after the launch of generic drugs in certain countries outside Japan. Sales of Acofide, a drug for functional dyspepsia, were almost on a par with the previous fiscal year.

As a result, net sales in the business amounted to 49,571 million yen (up 14.9% from the previous fiscal year).

Net sales

¥49,571million

fiscal year

up 14.9%

from the previous

Net sales of major products

Asacol

65.6%

(Net sales

composition ratio)

DIFICLIR

Other

Entocort

Acoﬁde

Asacol

¥20.9 billion

DIFICLIR

¥13.5 billion

Entocort

¥5.4 billion

Acofide

¥3.0 billion

Consolidated net sales in

Ethical Pharmaceuticals Business

(Unit: ¥million)

60,000	49,571

45,000	43,145
37,006

30,000
15,000
0

Fiscal Year 2021

Fiscal Year 2022

Fiscal Year 2023

Consumer Healthcare Business

In the Hepalyse range, the main products, both the pharmaceutical Hepalyse range and the Hepalyse W range for convenience stores performed well. Sales of the Chondroitin range and the WithOne range of herbal laxatives also increased. In addition, new products such as dermatosis treatments Prevaline αQuick Ointment and Prevaline αQuick Cream were launched during fiscal year 2023.

As a result, net sales in the business amounted to 25,998 million yen (up 3.6% from the previous fiscal year).

Net sales

¥25,998million up 3.6%

from the previous

fiscal year

Net sales of major products

	Hepalyse range
	Chondroitin
34.4%	range
WithOne range

(Net sales	Other
composition ratio)

OTC drugs

Hepalyse® W series

Hepalyse range	¥10.9 billion

Chondroitin range	¥5.7 billion
WithOne range	¥1.2 billion

Consolidated net sales in

Consumer Healthcare Business

(Unit: ¥million)

40,000
30,000	22,370	25,085	25,998

20,000
10,000
0

Fiscal Year 2021

Fiscal Year 2022

Fiscal Year 2023

Status of Research and Development

In the Research and Development division, Zeria is carefully selecting development themes and proceeding with the evaluation of multiple projects including in-licensed, centered on the priority gastrointestinal field under a global development structure in coordination with our subsidiary in Switzerland, Tillotts Pharma AG.

As for Z-100, we are steadily advancing non-clinical trials and preparing for pilot clinical studies to facilitate the clinical development for new indications.

Regarding Zeria's own original drug Z-338 (generic name: Acotiamide), licensee Faes Farma, S.A. has obtained approval for the indication of functional dyspepsia in El Salvador and Peru, and in October 2023 it started sales of the drug in Mexico. Another licensee, Meiji Seika Pharma Co., Ltd., obtained approval for the indication of functional dyspepsia in Thailand. Pharmaceutical Joint Stock Company of February 3rd ("F.T. Pharma"), a subsidiary in Vietnam, has filed an application for approval in Vietnam for the indication of functional dyspepsia. In addition, United Italian Trading Corporation has filed a new application for approval in Singapore for the indication of functional dyspepsia. Phase III trials are also being conducted for pediatric functional dyspepsia patients in Japan. Moreover, we moved forward with Phase II trials of ZG-802, which uses the same ingredients, for the indication of underactive bladder. The indication is said to have a significant impact on quality of life (QOL), which has been attracting

attention in recent years, but effective drug treatment has not been confirmed worldwide. We will contribute to society by providing unmet treatment options through the development of this drug.

We have filed an application for approval in Japan for ZG- 801, a therapeutic agent for hyperkalemia in-licensed from Vifor (International) AG.

As for consumer healthcare products, we have sequentially launched new products, such as dermatosis treatments Prevaline αQuick Ointment and Prevaline αQuick Cream.

Research and Development Pipeline

Status of Pipeline of New Drugs

I. Domestic					(As of May 9, 2024)
Stage	Development Code/	Development	Indications	Classification	Source
Generic Name

NDA filed	ZG-801/		Zeria	Hyperkalemia	Potassium binder	In-licensed
Patiromer Sorbitex Calcium

Phase III	Z-338/Acotiamide		Zeria	Pediatric functional	Upper gastrointestinal	Original
	dyspepsia	motility modulator

Phase II	ZG-802/Acotiamide		Zeria	Underactive bladder	Lower urinary tract	Original
	function modulator

Phase II*	Z-338/Acotiamide		Kyushu University	Esophagogastric junction	Upper gastrointestinal	Original
(Investigator-Initiated Trial)		outflow obstruction	motility modulator


II. Overseas			*: Supported by a grant from Japan Agency for Medical Research and Development (AMED)


Stage	Development Code/	Development	Indications	Classification	Source
Generic Name

Phase III	Z-338/Acotiamide		Zeria	Functional dyspepsia	Upper gastrointestinal	Original
(Europe)		motility modulator

NDA approved					Upper gastrointestinal	Original
(Honduras, Dominican Republic,	Z-338/Acotiamide		Faes Farma	Functional dyspepsia
	motility modulator	(Out-licensed)
Ecuador, Chile, El Salvador, Peru)

NDA approved	Z-338/Acotiamide		Meiji Seika Pharma	Functional dyspepsia	Upper gastrointestinal	Original
(Thailand)		motility modulator	(Out-licensed)

NDA filed	Z-338/Acotiamide		F.T. Pharma	Functional dyspepsia	Upper gastrointestinal	Original
(Vietnam)		motility modulator

NDA filed	Z-338/Acotiamide		United Italian Trading	Functional dyspepsia	Upper gastrointestinal	Original
(Singapore)		Corporation Pte. Ltd.	motility modulator	(Out-licensed)

NDA filed					Upper gastrointestinal	Original
(Colombia, Costa Rica, Guatemala,	Z-338/Acotiamide		Faes Farma	Functional dyspepsia
	motility modulator	(Out-licensed)
Panama, Nicaragua)

Products developed and launched
Launch Date	Development Code/	Development	Indications	Classification	Source
Generic Name

October 2023	Z-338/Acotiamide		Faes Farma	Functional dyspepsia	Upper gastrointestinal	Original
(Mexico)		motility modulator	(Out-licensed)

Reference
Phase I Clinical Trials		Phase II Clinical Trials	Phase III Clinical Trials

After confirmation of the efficacy and safety by animal studies, "drug candidates" are tested on a small group of healthy subjects. These trials aim for determination of not only safety, but also how long it takes for the body through an absorption of the drug and the degree to which the body excretes the drug.

After safety has been confirmed by Phase I clinical trials, the efficacy and safety of the "drug candidate," as well as the appropriate method of use such as dosage and administration method, are tested on a small number of patients against placebo*.

By administering to a large number of patients, the efficacy, safety and method of use of the "drug candidate" are studied as a final stage. During this phase, the "drug candidate" is tested against other drugs on the market or placebo*. In many cases, stringent testing methods called double-blind trials are performed.

* Placebo: A fake drug that does not contain the active ingredient, but which is indistinguishable from the "drug candidate" by outer appearance or taste, etc.

Status of Production and Distribution / Outlook for Fiscal Year 2024

Status of Production and Distribution

In production and distribution, amid the rising prices of raw materials and energy and soaring distribution costs, we took steps to reduce costs by consolidating and bringing production in-house, based on the premise of securing quality and stable supply.

In departments related to Production, despite the shift in classification of COVID-19 to a Class 5 infectious disease we continued to take thorough measures against the risk of infection at our plants, and worked to maintain a stable supply system. Furthermore, Zeria carried out a review of the production system at its four domestic plants, including the Saitama and Tsukuba plants owned by Zeria and the plants owned by two subsidiaries (Kenso-Seiyaku Co., Ltd.'s Tsukuba Plant and IONA INTERNATIONAL CORPORATION's Fukushima Plant), and proceeded with the consolidation of production lines and in-house production. We will accelerate these initiatives and continue to work on further cost reduction.

In departments related to Distribution, we will continue to strive for further improvement of operational efficiency in order to reduce distribution costs.

Furthermore, in a continuation of the previous fiscal year, the government has been strengthening its inspection system for manufacturing facilities due to violations of GMP ordinances by some drug manufacturers and distributors, etc. At our plants, we clarified in organizational terms which officers are responsible for strengthening the GMP system, and bolstered the management structure. We will ensure that there continues to be no issues going forward by instilling a culture of quality (corporate culture that prioritizes quality) at each plant, and reinforcing our framework for oversight by Quality Control and the relevant departments at Headquarters.

Outlook for Fiscal Year 2024

For the fiscal year ending March 31, 2025, we forecast net

sales of 83.0 billion yen (up 9.6% from the previous fiscal year), operating profit of 10.0 billion yen (up 3.9% from the previous fiscal year), ordinary profit of 10.0 billion yen (up 17.5% from the previous fiscal year), and profit attributable to owners of parent of 7.8 billion yen (up 0.9% from the previous fiscal year).

Net sales

In the Ethical Pharmaceuticals Business, we forecast that sales will increase, with sales growth expected in the overseas market for Asacol and DIFICLIR, our main products. In the Consumer Healthcare Business, we expect sales to increase, contributed by sales growth in the Hepalyse range and Chondroitin range as well as product groups following the main products, such as the WithOne range and the Masdent range of medicated toothpaste.

Profit

Despite expected impacts from rising energy and raw materials prices and increases in research and development expenses, milestone payments and other expenses, we forecast increases in operating profit, ordinary profit and profit attributable to owners of parent due to the increase in net sales.

	Fiscal year 2023	Fiscal year 2024
	(70th results)	(71st forecast)
Net sales	¥75,725 million	¥83,000 million
(up 10.7% from	(up 9.6% from
	the previous fiscal year)	the previous fiscal year)
Operating profit	¥9,621 million	¥10,000 million
(up 6.7% from	(up 3.9% from
	the previous fiscal year)	the previous fiscal year)
Ordinary profit	¥8,513 million	¥10,000 million
(up 12.3% from	(up 17.5% from
	the previous fiscal year)	the previous fiscal year)
Profit attributable	¥7,731 million	¥7,800 million
(up 24.8% from	(up 0.9% from
to owners of parent
	the previous fiscal year)	the previous fiscal year)

Special Offers to Our Shareholders

Zeria offers a hospitality program to its shareholders in recognition of their constant support.

Shareholders who own 1,000 or more of Zeria's shares can choose from one of the seven options A to G.

Shareholders who own 100 or more but less than 1,000 of Zeria's shares receive option H.

Zeria hopes its shareholders will try the gift products for better understanding of the Zeria Group's wide-ranging product structure.

Option	A	Option	E
Soft drinks, Designated quasi-drug,	Three-product Quality
Food for specified health uses
Moisturizer Set
Set of an assortment
IONA Three-product
of aluminum can drinks
Basic Skincare Set
and Hepalyse® W



Option	B	Option	F
Dietary supplement	High-quality moisturizing skincare
Assortment of
based on chondroitin research
Chondro Support®	IONA R Two-product
1 pack of 288 tablets/
Special Care Set
3 pouches of 90 tablets


Option	C	Option	G
Cosmetics, quasi-drug and
dietary supplement	Health supplement
Set of ChondroMax®	SEAALPA® 100
and Aposty®	1 pack of 180 tablets



Option	D	Option	H
All-in-one cosmetics originating	Drink containing liver extract and
from the spa
turmeric extract
Assortment of IONA
10 bottles of Hepalyse® W
Spa&Mineral products

Options E and F are available at the Zeria online store (https://www.zeriaonline.com/).

Topics

Significant growth in overseas business drives consolidated overseas net sales ratio over 50%

In fiscal year 2023, the consolidated overseas net sales ratio exceeded 50%. Beginning with the 2009 acquisition of Switzerland's Tillotts Pharma, Zeria has been engaged in a full-fledged overseas expansion. Tillotts Pharma subsequently established sales offices in Europe, and has built a direct-distribution system. In addition to strengthening the sales network for Asacol, we enhanced the product lineup by acquiring the inflammatory bowel disease therapeutic agent Entocort in 2015. Furthermore, in 2020 we acquired DIFICLIR, a therapeutic agent for Clostridioides difficile infections, leading to a surge in overseas net sales.

Under the 11th Mid-Term Management Plan, we aim to achieve further growth in the overseas business by focusing on expanding operations in Asia as well as on the European Ethical Pharmaceuticals Business, which has been performing strongly.

40,000		50%
Consolidated overseas	Consolidated overseas
net sales (¥ million)	net sales ratio
30,000		40%

		30%
20,000
		20%
10,000		10%

0		0%
2009	2015	2020

Tillotts Pharma made

a wholly owned subsidiary

Operating profit (

)/Ordinary profit (

Profit attributable to owners of parent (

(Unit: ¥million)

(Unit: ¥million)

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