Nippon Chemiphar : Corporate report 2023 (Annual report FY2022)

CORPORATE REPORT

2023

Business Philosophy

The goal of the Nippon Chemiphar Group is to make a difference in society by providing pharmaceutical drugs and health-related services to help people become and remain healthy.

Nippon Chemiphar has operated as a pharmaceutical company since its founding in 1950.

Throughout the years, we have consistently developed, manufactured, and sold distinctive, original pharmaceutical formulations. Since the year 2000, we have made generics a pillar of our business and conducted related development, manufacturing, and sales operations in-house.

We implement initiatives associated with drug discovery themes that target the development of innovative drugs, and diagnostic products that contribute to speedy diagnoses. We are also actively taking on the challenge of multifaceted development, using the alkalization therapy expertise we have cultivated over many years.

NIPPON CHEMIPHAR CORPORATE REPORT 2023

Contents

Our value creation story	2	Business Overview	10
Value Creation Strategy	4	Pharmaceutical Products	11
Message to Our Stakeholders	6	ESG Initiatives for a Sustainable Society	20
Financial Highlights	9	Corporate Data	33

• Scope of Report

This report contains information regarding the Nippon Chemiphar Group's business strategy, financial situation, and corporate social responsibility-related activities.

• Reporting period: FY2022 (April 1, 2022-March 31, 2023)
• Reporting companies: Nippon Chemiphar Co., Ltd. and its
  Group companies

Note Regarding Forward-looking Statements

Statements made in this corporate report with respect to current plans, estimates, strategies and beliefs, and other statements of Nippon Chemiphar are forecasts for the Company's future performance. These forecasts are based on information currently available to management. Consequently, they are subject to known and unknown risks and uncertainties and may differ significantly from actual results. Items that may influence forward-looking statements and forecasts include changes in the economy, changes in the business and competitive environment for Nippon Chemiphar's business, revisions to the Pharmaceutical Affairs Law and related legislation, and other items not limited to the above.

Cover painting

Provided by Paralym Art,* an association that assists artists with disabilities to achieve economic independence by supporting their business.

Title: Niji to Hansen (Rainbow and Sailboats)

About the artist: Magari Ohishi lives in Kobe City, Hyogo Prefecture. He is known for his landscape and still life paintings. The rainbow in this work uses five colors, but was painted in such a way as to suggest that seven colors have been used. The different shapes of the sails represent the individuality of each ship, while the different directions in which each ship is sailing represent the welcoming of diversity.

• Welfare service for people with disabilities or intractable diseases who, due to reasons associated with age or physical strength, have difficulty working at companies or other conventional places of business. Through this support, individuals can receive training involving light work or other forms of employment.

Nippon Chemiphar's Three Plus 1 Principal Goals

Since 2000, Nippon Chemiphar has promoted a basic management strategy based on three goals: establishing a strong presence in the generics business; becoming a leader in the field of alkalization therapy; and pursuing in- house drug discovery and development.

To attain these three goals, we are working to increase our earning capacity through the generic drugs business; deploying multilaterally the additional business foundation we are building by leveraging our alkalization therapy expertise, cultivated through Uralyt; and striving to secure further growth, over the medium to long term, through in-house drug discovery and in-licensing of new drugs.

We believe that these efforts will enable us to maximize the value of our corporate Group and achieve sustainable growth as we combine businesses that are advancing on different time horizons, as well as expand overseas the results that these businesses generate in Japan.

Goal 1: Generic drugs

Strengthen profit structures while pursuing added value and efficiency using a quality-based approach

Diagnostics

FY2022 topics related to our three principal goals

Generic drugs and diagnostics

• • In addition to further strengthening our quality assurance system, we have introduced two- and three-shift operations at both domestic and overseas factories to address the industry-wide need to ensure stable supplies

Diagnostics

• We increased the production capacity of our
  DropScreenTM reagent, and initiated promotional support on the part of our pharmaceutical sales department, resulting in domestic installations of DropScreen measuring equipment topping 500 units

Goal 2: Alkalizer

Apply multilaterally expertise related to alkalization therapy

Goal 3: New drug development

Globally develop unique new drugs internally created as well as in-licenced

Plus 1: Overseas Business

Generate sustainable growth by expanding results of goal-related efforts overseas

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Alkalization therapy

• Phase 2 clinical trials of our pipeline drug DFP-17729 have ended, and the data is currently being analyzed
• We expect to bring the drug to market in FY2026

Drug discovery and development

• We signed a licensing agreement for the development of NC-2500 in China
• Specific out-licensing negotiations are ongoing with overseas companies for NC-2600
• NC-2800is currently in phase 1 clinical trials
• Favorable phase 2 results for DFP-14323 were presented at an academic conference

Overseas business

• In Vietnam, we have obtained approval for Rebamipide tablets
• We are applied there for another product, with administration and dosage that differ from those in Japan
• Having conducted market research on sales in the Middle East and Africa, we are narrowing down possible target countries and partners

Nippon Chemiphar Corporate Report 2023 1

History of value creation

For the past 73 years, Nippon Chemiphar has remained true to the time-honored traditions we have inherited. Keeping pace with the times, we have courageously remedied issues requiring attention, and spared no effort in taking on new challenges. In a word, our history is one of "immutability."

We will continue to strive to develop, manufacture, and sell generic drugs that can be used safely by patients and medical institutions, and continue to take on the challenge of developing new products and new drugs to increase the Group's value.

Main product developments and business strategies

1951	1957	1976	1988	1993	2000	2001	2007	2020	2020
Manufacture and	Begin marketing	Expand into the	The need for urinary	Launch Soleton tablets (an analgesic/anti-	Full-scale entry	Launch allergy-specific IgE measurement	Three Principal	Launch DropScreen, an allergy screening	Sign a licensing agreement with Delta-
market our products,	imported drugs.	clinical diagnostics	alkalinization	inflammatory agent) developed in-house. The	into the generic	device DiaPack 2000 and dedicated	Goals established	test kit. It allows 41 items to be measured with	Fly Pharma for DFP-17729, a cancer
Nalpyrin and Nalbron		business, in	is recognized	product has few side effects.	drug business.	measurement reagent IgE NC.	as a longer-term	a single drop of blood. Of compact design,	microenvironment improving agent. Supports
(injectable solutions,		anticipation of	in response		Change policy from		strategy that divides	the kit occupies a space about the size of an	development at Delta-Fly Pharma with our
pain relievers, and	1958	the increasing	to increased		being a new drug		our growth prospects	A3 sheet of paper, allowing it to be used for	expertise in alkalinization.
antipyretics for use	Launch sales of	importance of pre-	complications in		manufacturer to a		into three stages.	in-hospital allergy testing.
by doctors).	medication clinical	patients with gout		manufacturer that		This remains our
Donpyline tablets
	tests in the future.	and hyperuricemia		handles both new		basic strategy to this		2021
	(therapeutic agent
	for neuralgia and		due to changes in		drugs and		day. In 2015, we add		Sign a joint development agreement and
		living conditions.		generic drugs.		overseas business
	rheumatism),					option agreement for NC-2800 with Sumitomo
	1983	Launch alkalizing				as Plus 1.
	manufactured in-					Pharma. NC-2800 is a compound discovered
	house.	Advance into the	agent Uralyt-U.			2003			at Nippon Chemiphar's drug discovery
		cosmetics and health		1995		Launch Pravastan, the			research laboratories. It has the potential
		food fields.		Market Calvan tablets (for hypertension).		first in-house developed			to become a revolutionary antidepressant/
					generic drug.			antianxiety drug with superior efficacy and
									safety.
									Conclude a licensing agreement with
								Measuring device A-1	Delta-Fly Pharma for antitumor drug DFP-
									14323. Development targeting lung cancer
								Specific IgE measuring	is underway, and we are strengthening the
						2005		pipeline in the oncology field.
							kit ST-1
						License out NC-2400 (lipid metabolism
						improving agent) to Cerenis.

Business development centered on pharmaceuticals for doctors, Starting in 1950 and business expansion against

the backdrop of Japan's universal health insurance system.

Since 1980, have been restoring trust and launching new drugs

Following an incident of data falsification, new	Since 2000, expanding	Sale of generic drugs increases, resulting from government
drugs are launched as we strive to regain trust.	generic drugs	policy promoting their use.

Since 2015, pursuing new drug and new product development and overseas expansion funded by earnings from generics business.

Business timeline

(Sales, bn yen) 40

1950

Establish Hitachi Chemical Co., Ltd. (as Chemiphar was formerly known) with the main business being the manufacture and sale of pharmaceuticals

301970

Company changes name to Nippon Chemiphar Co., Ltd.

1973

Establish laboratory in

Misato City, Saitama Prefecture

201976

• Transferred to the Tokyo Stock Exchange's First Section
• Establish Japan Sopharchim
  Co., Ltd. to ensure a stable supply of fine chemicals.

10

1977

Establish Ibaraki Factory in Makabe-gun, Ibaraki Prefecture (Nihon Pharmaceutical Industry's current Tsukuba Factory)

1979

Establish office in London to collect information on overseas products for market research.

1982

Clinical trial data submitted with application for approval of three new drugs is found to have been partially falsified. The then-Ministry of Health and Welfare orders an 80-day freeze on Chemiphar's manufacture and import of all pharmaceuticals.

1986

Safety Research Institute for Chemical Compounds Co., Ltd. becomes a subsidiary

2002

The Ministry of Health, Labor and Welfare's medical fee revisions for the first time include measures to promote the use of generic drugs.

2007

A quantitative target for generic drugs (30% or more) is set for the first time in the basic policy of the government's economic and fiscal reforms.

2010	2015
Nihon Pharmaceutical Industry	Establish Nippon Chemiphar Vietnam
Co., Ltd. becomes a subsidiary	Co., Ltd. (NC-VN) in Vietnam.
2014	2017
Establish West Japan Logistics Center
Third plant at NPI's Tsukuba	in Kobe City, Hyogo Prefecture, thus
factory comes on line.	having one base each in both East and
	West Japan.

2018

NC-VN factory starts exporting to Japan.

Net sales1

0

FY 1950

1970

1975

1980

1985

1990

1995

2000

2005

2 Nippon Chemiphar Corporate Report 2023

Sale of generic drugs2

2010

Notes 1. Sales are presented on a consolidated basis since FY1999.

2. We have disclosed sales of generic drugs since FY2004.

20152020 2022

Nippon Chemiphar Corporate Report 2023 3

Value Creation Strategy

Nippon Chemiphar Group's Value Creation Strategy

Business Model

Market demands

Generic drugs that

lead to lightened burdens on patients and public nance

Creation of breakthrough drugs

Manufacture and stable supply of high-quality pharmaceutical drugs

Greater safety of, and convenience in, pharmaceutical drugs

Input*

Human capital

Employees: 872 people (consolidated)

Financial capital

Consolidated net assets: ¥48 billion

Intellectual capital

R&D: ¥2 billion

Manufactured capital

Factories: Japan, abroad

Social and relationship capital

Work with business partners

Natural capital

Pharmaceutical Products Segment

Others Segment

Pharmaceutical products

Generic drugs (pp.11,12)

• Develop value-added formulations that reect medical needs
• Improve quality assurance and our stable supply system

Proprietary products and new drugs (p.10)

• Expand product lineup by in-licensing items from other companies

Alkalizer (p.13)

• Utilize cultivated technologies and expertise to expand application to conditions other than hyperuricemia

In-house drug discovery and development (p.14)

• Develop and out-license items in our internal development pipeline
• Improve development accuracy through use of new technologies and collaboration with external partners
• Expand into new elds by in-licensing promising pipeline products

Diagnostics (p.17)

• Expand the use of DropScreen, create additional reagents

Overseas expansion of pharma ceutical products business overseas (p.18)

• Reduce manufacturing costs by using our Vietnam factory
• Market abroad products made at the Vietnam factory and preempt overseas developments
• Develop pharmaceutical products and clinical diagnostics abroad

Contracted testing (p.10)

• Use a comprehensive one-stop system to provide total support for non-clinical and clinical trials

Strengths

Integrated system to develop, manufacture, and market generic drugs

Factories in Japan and abroad attain advanced manufacturing technology, become cost competitive

Broader information delivery, data gathering resulting from marketing new drugs

Expertise in alkalizers and citrate preparations

Venture-based drug discovery research targeting early out-licensing to domestic and overseas companies

Adoption of new technologies, collaboration with specialists in various disciplines and elds

Offered value

Increased patient QOL

Extended healthy life spans

Reduced patient burdens, limited healthcare expenses

Employees nd

fulllment in personal growth through work

Stable, sustainable shareholder returns

Safeguarding of global environment

Community

Energy use (crude oil equivalent) 6,524kl

• Quality assurance and stable supply (p.12) • Corporate governance (p. 26)
• Compliance and risk management (p. 29) • Initiatives to reduce environmental impact (p. 20)
• Contribution to local communities (p. 23)
  Our corporate philosophy, principles of conduct, support for employee abilities, and training system (p. 24)

involvement

* Based on the IIRC framework for	Sustainable growth in corporate value through value creation cycle
FY2022 results.

4 Nippon Chemiphar Corporate Report 2023

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