Fuso Pharmaceutical Industries,Ltd. Q4 FY2025 earnings call

Overall Financial Performance: • 6 consecutive years of revenue growth since FY2018, with two consecutive years of over 4 billion yen in strong revenue growth in the prior and current fiscal year; profit, which had been flat for several years, achieved a sharp increase in the current fiscal year. • The full-year revised earnings guidance announced in November 2024 was fully achieved.

Core Business Strategy: • The company will continue to focus on leveraging its core strength in the renal/dialysis field, driving stable revenue growth from renal/dialysis and infusion solution segments, and prioritizing development and commercialization of innovative and generic drugs in this space. • It will also steadily advance growth in ART (assisted reproductive technology) products, and contract manufacturing, out-licensing and export businesses to drive long-term expansion.

Operational Progress: • The second formulation building's powder dialysis agent Line 2 at the Ibaraki plant started operations in January 2024, strengthening stable supply capacity for core dialysis products. • The company maintains a dispersed manufacturing network across Okayama, Ibaraki, and contracted Tokushima plants, plus 12 logistics hubs, to build out robust BCP (business continuity planning) and stable supply systems, which is the company's core mission as an essential drug manufacturer.

Research and Development: • The company signed an exclusive license agreement for DMX-200, a focal segmental glomerulosclerosis (FSGS) treatment candidate from Australia's Dimerix Limited, with an upfront payment of 0.3 billion yen recorded in R&D expenses this period. • A global multi-center Phase 3 trial (ACTION3) for DMX-200 is ongoing overseas, with a Japanese Phase 3 trial set to begin shortly. The first Japanese patient enrollment is scheduled for May 2025, with regulatory submission planned for FY2029 and launch expected in FY2030 (assuming standard review timelines). • The company is advancing joint development of a new embryo culture medium for IVF in the ART field, to contribute to addressing Japan's declining birthrate. • Multiple new in-licensed product candidates from domestic and overseas sources are under review.

Shareholder Return: • The basic policy is to maintain stable, continuous dividends while strengthening internal reserves. The FY2024 year-end dividend is planned at 42 yen per share, a 2 yen increase from the prior year, matching the November 2024 revised forecast. • A dividend increase to 90 yen annual dividend is planned for FY2025 (YE March 2026), balancing growth investment and shareholder return. The company aims to adopt a progressive dividend policy by its 90th anniversary in 2027, and will announce an updated medium-term shareholder return policy alongside the new medium-term management plan.

Overall total company revenue for the full year 2024 was 60.563 billion yen, a 9.3% increase year-over-year, with all profit levels doubling year-over-year. For product segments: 1. Renal/Dialysis Segment: Revenue grew driven by strong performance of maxacalcitol syringes (with sales volume increasing sharply after supply capacity expansion) and levocarnitine syringes, alongside steady growth for core dialysis products. This segment is the company's historical core growth driver and holds high domestic market share. 2. Infusion Solution Segment: Revenue increased, supported by new sales growth for electrolyte infusion products led by the Vein series, and growing demand for large-volume products including 1L sterile water for injection and 2L normal saline. 3. Generic Drug Segment: Revenue grew due to increased sales of Dopacol impacted by selected care pricing, and steady adoption of argatroban HI injection launched in August 2023 in the acute care space. 4. Other Product Segment: Revenue decreased due to impacts from drug price revisions. Overall, 91% of the company's ethical drug sales come from basic and security-guaranteed essential pharmaceuticals.

For FY2025 (YE March 2026, fiscal 2026): • Revenue guidance is 61.5 billion yen, representing a 1.5% year-over-year increase, driven by core product sales growth and the minimum drug price hike. • Cost of goods sold is expected to increase 0.369 billion yen year-over-year due to higher sales volume, human capital investment including base pay increases, depreciation, and rising raw material costs; cost ratio is expected to improve slightly. • Selling, general and administrative expenses are projected to increase 1.298 billion yen year-over-year, driven by human capital investment (base pay increases), higher depreciation from core system updates, and the start of DMX-200 Phase 3 trials. • Operating profit guidance is 3.4 billion yen, a 17.7% year-over-year decrease; ordinary profit guidance is 3.3 billion yen (12.7% decrease); net income guidance is 2.3 billion yen (17.3% decrease). The projected profit decrease is primarily attributable to planned growth investment for the future, specifically an approximately 0.9 billion yen year-over-year increase in R&D expenses centered on DMX-200 development. • The medium-term management plan, which was delayed due to ongoing negotiations on key strategic projects, is scheduled for publication in early August 2025.

• Raw material costs and logistics-related costs have continued to surge, resulting in higher cost of goods sold than initially projected at the start of the fiscal year. • Ongoing cost pressures from inflation for raw materials, logistics, and employee compensation are expected to continue into the next fiscal year. • New drug development (including DMX-200) carries inherent regulatory, clinical trial, and timeline risks that could impact projected commercialization timelines and investment returns. • The company's core dialysis product segment faces very high domestic market share, meaning there is limited room for further major market share growth, and drug price revisions can create downward pressure on revenue for existing products.

The full transcript only lists the topics of three key questions, with no detailed content of questions or answers included: 1) Impact of US trade tariff policy on company performance; 2) Details of the medium-term management plan; 3) Correlation between revenue and profit in periods before FY2024. No additional information on these exchanges is available in the provided transcript.