Alfresa : Financial Results Summary for the Fiscal Year Ended March 31, 2024

Financial Results Summary for the Fiscal Year Ended March 31, 2024

Explanation of Financial Results

During the consolidated fiscal year under review (April 1, 2023-March 31, 2024), the Japanese economy continued its gradual recovery following the downgrading of COVID-19 to a Class 5 infectious disease in May 2023. However, the Japanese economy could be subject to downward pressure if overseas economies suffer a downturn due to such factors as the impact of global monetary tightening and the uncertain outlook of the Chinese economy.

Under its 22-24Mid-term Management Plan: Leap into the Future "An Evolving Healthcare Consortium" (hereinafter, the "22-24Mid-term Management Plan") announced in May 2022, the Alfresa Group is working to achieve its stated Group management policies:

1. "Enhancement of business models and creation of new value,"
2. "Contribution to local health and treatments through united Group efforts,"
3. "Contribution toward a sustainable society through initiatives to protect the environment,"
4. "Promotion of a human resource strategy focused on diversity," and
5. "Cultivation of a corporate culture with compliance as its highest priority."

To further enhance corporate value, in May 2023 we announced the Alfresa Group's Medium- to Long-Term Vision, comprising the Group's medium- to long-term business, financial, and capital strategies up to fiscal 2032. Furthermore, for the purpose of improving capital efficiency and enhancing shareholder returns, we decided to buy back our shares for up to ¥35.0 billion. The Alfresa Group has acquired 15,201,000 shares as of October 2, 2023.

As a part of its initiatives to create new value, in May 2023 the Alfresa Group made investments through third-party allocation of shares in RIN Institute Inc. (head office: Chuo-ku, Tokyo), which carries out research and development, mainly of antibody medicine. In addition to supporting RIN Institute's development of antibody drugs, we will reinforce our development pipeline and production technology in the Manufacturing Business to achieve total supply chain services.

Moreover, in July 2023 Cell Resources Corporation (head office: Chiyoda-ku, Tokyo), which became a wholly owned subsidiary of the Company as the result of a reorganization, entered into a bio-industry support agreement with Miltenyi Biotec B.V. & Co. KG (head office: Germany) for the purpose of supporting the design, construction, and operation of facilities and processes for cell culture automation in the gene cell therapy market. With this agreement, the Alfresa Group will prepare a business platform for providing advanced cell cultivation automation services on a contract basis for the gene cell therapy market and build a structure for providing contract manufacturing services for regenerative medicines and other products.

In November 2023, GEKKA WORKS Co., Ltd. (head office: Chiyoda-ku, Tokyo), a subsidiary of the Company, began the full-scale operation of "Docshiru," a membership-based online service for doctors that had previously been undergoing a verification experiment. GEKKA WORKS, working alongside marketing specialists* in the Company's Ethical Pharmaceuticals Wholesaling Business, will contribute to improving the healthcare provision system and workstyle reforms for doctors by supporting regional medical cooperation.

With regard to financing, in December 2023 the Company issued social bonds amounting to ¥20 billion in an effort to create social value. The funds generated by these bonds will be used to construct and operate buildings for the production of pharmaceuticals in Ota City, Gunma Prefecture, and the construction and operation of a new distribution center in Tsukuba City, Ibaraki Prefecture.

In the consolidated fiscal year under review, net sales for the Alfresa Group increased 6.0% year on year, to ¥2,858,500 million; operating income was up 27.6%, to ¥38,460 million; ordinary profit expanded 21.8%, to ¥39,997 million; and profit attributable to owners of the parent rose 14.6%, to

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¥29,558 million.

• Sales personnel who have special knowledge about products and services in the pharmaceuticals wholesaling business

Business Segment Information

1) Ethical Pharmaceuticals Wholesaling Business

In the consolidated fiscal year under review, economic and social activity began to normalize following the downgrading of COVID-19 to a Class 5 infectious disease under the Infectious Diseases Control Law in May 2023. To fulfill our mission as part of the social infrastructure that handles life-related products amid these circumstances, the Group has been making efforts not only to provide a stable supply of pharmaceuticals and other products, but also to provide delivery services for new COVID-19 vaccines and therapeutic drugs, as well as for generic drugs, for which there continue to be shortages and adjustments in supply and demand.

In the Ethical Pharmaceuticals Wholesaling Business segment, we are keen to strengthen initiatives in specialty domains and medical products, as well as to transform our business through digital transformation (DX). To this end, we are advancing priority measures for this segment, as stated in the 22-24Mid-term Management Plan; focusing on enhancing existing businesses; pursuing profitability through business reform; and achieving Groupwide optimization, efficiency, and standardization.

The Alfresa Group is working hard to resolve issues in the medical field by pursuing partnerships with various venture companies that are proactively challenging themselves to develop new medical services.

Consolidated subsidiary Alfresa Corporation (head office: Chiyoda-ku, Tokyo; hereinafter "Alfresa") entered into a capital and business partnership agreement with MICIN, Inc. (head office: Chiyoda-ku, Tokyo) to facilitate the adoption of Curon Smartpass, a cashless payment service for outpatient hospital care, and the Curon online diagnosis service platform. By utilizing the business resources of both companies, our aim is to develop and promote the use of medical and healthcare services that lead to better health outcomes for patients and improved access to healthcare overall.

Furthermore, in May 2023 Alfresa signed a basic outsourcing agreement with Kidswell Bio Corporation (head office: Chuo-ku, Tokyo) and Mitsubishi Logistics Corporation (head office: Chuoku, Tokyo) regarding the creation of a high-quality and stable storage and transportation system for stem cells from human exfoliated deciduous teeth (SHEDs), which Kidswell Bio Corporation is currently developing as a type of regenerative medicine. To reliably supply pharmaceuticals in the regenerative medicine field, we are collaborating to commercialize products such as regenerative medicine for which the main ingredients used are SHEDs.

In August 2023, Alfresa completed the construction of the Tsukuba Distribution Center in Tsukuba City, Ibaraki Prefecture. The establishment of the center, which began operations on May 7, 2024, forms part of the Group's efforts to create an optimal logistics network compliant with Pharmaceutical Inspection Co-operation Scheme and Good Distribution Practice (PIC/S GDP) guidelines with the aim of achieving optimization, efficiency, standardization throughout the Group. With its advanced logistics functions and disaster resistance, it is the Group's largest distribution center and will contribute to regional healthcare by further enhancing the system for stabilizing the supply of pharmaceuticals and other products in the Kanto area.

In December 2023, consolidated subsidiary TS Alfresa Corporation (head office: Nishi Ward, Hiroshima City), completed the construction of the Yamaguchi Ube Center in Ube City, Yamaguchi Prefecture, which began operations on May 7, 2024. We will continue to contribute to regional

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healthcare by utilizing this center and the Onomichi Distribution Center, currently in operation in Onomichi City, Hiroshima Prefecture, as a core logistics base in the Chugoku region.

In the consolidated fiscal year under review, there was an increase in segment revenue due to market growth, including for COVID-19 treatments and influenza-related products, changes to distribution systems by certain pharmaceutical companies, and efforts to improve the gross profit margin, despite the negative impact of interim-year NHI drug price revisions in April 2023. For these reasons, net sales increased 6.0% year on year, to ¥2,539,932 million, and operating income was up 22.7%, to ¥33,091 million.

The net sales figure includes intersegment sales of ¥18,026 million, up 7.1% year on year.

2) Self-Medication Products Wholesaling Business

In the Self-Medication Products Wholesaling Business segment, subsidiary Alfresa Healthcare Corporation (head office: Chuo-ku, Tokyo) is promoting efforts to achieve high profitability in existing businesses while entering new growth domains. At the same time, the company endeavors to enact the priority measures for the segment stated in the 22-24Mid-term Management Plan, which focuses on initiatives aimed at achieving high profitability, strengthening Groupwide collaboration, and enhancing profitability through business reform. In particular, the company took steps to address rising purchasing costs caused by higher commodity prices and worked to create new channels, including the development of dispensing pharmacy sales channels.

In February 2024, Alfresa Healthcare Corporation held the 2024 Life Support Fair at Hamamatsucho-Kan, Tokyo Metropolitan Industrial Trade Center (Minato-ku, Tokyo). Under the theme of "New Gate: Creating New Drugstores for a New Era," the fair provided visitors with suggestions for creating sales spaces that anticipate changes while respecting what must remain the same, with an eye on the changing social environment.

In the consolidated fiscal year under review, sales increased as the market recovered alongside stronger inbound demand from an increase in overseas visitors to Japan and a recovery in the flow of people following the downgrading of COVID-19 to a Class 5 infectious disease. For these reasons, net sales increased 6.6% year on year, to ¥262,843 million and operating income grew 27.1% year on year, to ¥2,683 million.

The net sales figure includes intersegment sales of ¥498 million, down 5.5% year on year.

3) Manufacturing Business

In the Manufacturing Business segment, we aim to build a foundation for the future by promoting reliable, safe, and sincere manufacturing; efforts to achieve total supply chain services; and new initiatives that utilize digital technology-priority measures for the segment stipulated in the 22-24Mid-term Management Plan.

In April 2023, consolidated subsidiaries Alfresa Pharma Corporation (head office: Chuo-ku, Osaka) and Sannova Co., Ltd. (head office: Ota City, Gunma Prefecture) implemented a merger. The newly merged company will create new value in an effort to satisfy customers to the greatest extent possible and help realize the Group's declared vision of becoming a Healthcare Consortium that provides products and services in every health-related field.

Moreover, in March 2023 the company entered into an agreement with K Pharma, Inc. (head office: Minato-ku, Tokyo) for the domestic development, production, and marketing rights of ropinirole hydrochloride, a treatment for amyotrophic lateral sclerosis (ALS), and is working to develop this treatment.

In January 2024, Alfresa Pharma Corporation finalized a blueprint for the construction of new buildings for pharmaceutical production at its Gunma Plant. These buildings will increase the company's production capacity for small-molecule pharmaceuticals and facilitate newly consigned

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manufacturing of formulations with high pharmacological activity, as well as consigned inspection, packaging, and testing for sterile preparations. Moreover, they will strengthen and expand the Group's total supply chain services, ranging from development to manufacturing.

In the consolidated fiscal year under review, the Manufacturing Business segment enjoyed growing sales for both consignment manufacturing and active ingredient production services and stronger demand for ALSONIC® COVID-19 Ag SARS-CoV-2 antigen rapid test kits, despite increased expenses stemming from a lump-sum contract payment for the development of the aforementioned treatment for ALS. As a result, net sales increased 7.5% year on year, to ¥52,740 million, and operating income increased 349.9% year on year, to ¥1,894 million.

The net sales figure includes intersegment sales of ¥15,146 million, up 9.3% year on year.

4) Medical-Related Business

In the Medical-related Business segment, subsidiary APOCREAT Corporation (head office: Toshima-ku, Tokyo), which operates a dispensing pharmacy business, aims to make family pharmacies available for people at every stage of their lives, from preventive to terminal care. Doing so involves pursuing business growth through home care service initiatives, promoting DX-driven business reforms, and adopting pre-symptomatic illness and prevention initiatives, which are priority measures for the segment stipulated in the 22-24Mid-term Management Plan.

In September 2023, in its pursuit of business growth through home care service initiatives, the company acquired all shares of Kaiei Y.K. (head office: Fujimino-shi, Saitama Prefecture), which operates dispensing pharmacies in Saitama Prefecture, including the Kaiei Pharmacy Group, and made it a wholly owned subsidiary. APOCREAT Corporation will continue its efforts to create a home-centric care system within communities.

In the consolidated fiscal year under review, sales increased despite the negative impact of NHI drug price revisions, thanks in part to increased revenue from COVID-19 treatments and efforts to curb SG&A expenses. As a result, net sales for the segment increased 1.2% year on year, to ¥36,654 million, and operating income increased 115.6%, to ¥713 million.

About the Alfresa Group

The Alfresa Group is a leader in the Japanese healthcare industry and is dedicated to making its corporate philosophy, "we create and deliver a fresh life for all," come true through a wide range of business lines, including ethical pharmaceuticals wholesaling, OTC pharmaceuticals wholesaling, pharmaceutical manufacturing, and operating dispensing pharmacies. Alfresa Holdings Corporation (TSE:2784) reported its consolidated revenue of ¥2.8 trillion for the fiscal year ended March 31, 2024. For more information, please see: https://www.alfresa.com/eng/

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