4538.T

• Overall Industry and Market Context:

  • The Japanese economy saw moderate continued recovery on the back of improving employment and income environments and growing inbound demand, but the economic outlook remains uncertain due to soaring raw material costs, rising overall prices, U.S. trade policy shifts and financial capital market volatility.
  • The pharmaceutical industry continues to face pressure from healthcare cost control policies including drug price system reform and generic drug promotion, leading to increasingly tight profit conditions alongside rising R&D costs and development risks.

• Core Business Strategy Focus:

  • Fuso will continue to leverage its core strength in the renal/dialysis field, build on stable revenue from renal/dialysis and infusion areas, focus on development and sales of new drugs and generics in this space, and drive steady progress in ART related products and contract manufacturing/export/out-licensing businesses.
  • Stable supply of essential pharmaceuticals is the company's top priority: the company operates 4 domestic manufacturing plants, with large-scale production sites分散 across eastern and western Japan (Okayama and Ibaraki prefectures) to mitigate supply disruption risks, plus 12 logistics locations nationwide to ensure consistent inventory and delivery.
  • Over 90% of the company's pharmaceutical revenue comes from basic pharmaceuticals (44% of revenue, 89 products) and supply-critical pharmaceuticals (74% of revenue, 79 products), which are medically essential products with maintained drug prices under Japanese policy.

• Research and Development Progress:

  • DMX-200 (for FSGS, focal segmental glomerulosclerosis): Licensed from Australia-based Dimerix Limited, DMX-200 is in development for FSGS, an orphan indication with approximately 1,400 patients in Japan and no currently approved therapies. As of June 2025, 200 patients have been enrolled in the international Phase 3 ACTION3 trial across 21 countries/regions including Japan (20 planned Japanese enrollees). Enrollment of the full 286 patients is expected to complete in late 2025, with regulatory submission planned for 2029 FY and launch targeted for 2030 FY (assuming average review timelines). DMX-200 received orphan drug designation from Japan's Ministry of Health, Labour and Welfare in September 2025. All patients completing ACTION3 will be eligible for an additional 104-week open-label extension trial to evaluate long-term safety and efficacy.
  • ART New Product Development: The company is developing a new embryo culture medium for in vitro fertilization via joint research, targeting commercial launch around 2027 to contribute to Japan's declining birthrate countermeasures.
  • The company is currently evaluating multiple new in-licensed product candidates from global and domestic sources, with additional public disclosures planned as licensing deals progress.

• Shareholder Return Policy:

  • The company maintains a policy of continued and stable dividends while preserving sufficient internal reserves, targeting progressive dividends through 2030 FY. A full-year dividend of 90 yen per share is planned for 2025 FY, with an interim dividend of 45 yen per share already implemented. The company targets a minimum 2.0% dividend on equity (DOE), and will consider flexible share repurchases based on cash flow trends.

• Full-year 2025 FY full-year financial guidance is maintained unchanged from the initial forecast, despite larger-than-expected first-half profit declines.
• Management expects sales to continue on a steady trend through the second half of the year, and will drive strict cost control and production efficiency improvements to reduce costs. Selling, general and administrative expenses and non-operating expenses are expected to decline in the second half compared to the first half, which will offset first-half cost pressures and allow the company to hit full-year targets.
• The company maintains its progressive dividend target through 2030, with the 2025 FY full-year dividend target of 90 yen per share unchanged.

Total first half 2025 FY revenue was 31.229 billion yen, a 5.0% increase year-over-year, marking 7 consecutive years of revenue growth.

1. Renal/Dialysis Segment: Revenue grew driven by large volume increases from the dialysis complication treatment Makicalcitol Syringe (due to expanded supply capacity) and steady performance of the adsorptive blood purifier Rixcel. Leading product Kindaly Dialysis Agent saw a 2.2% revenue decline from lower dialysis fluid usage volume despite increased market share. The segment accounts for just over 50% of total annual revenue (2024 fiscal year data).
2. Infusion Solution Segment: Revenue grew driven by new sales expansion of the Veen series electrolyte infusions, plus growing demand for large-volume products including 1L sterile water for injection and 2L physiological saline. Physiological saline as a top 5 product saw revenue growth from rising 2L product demand.
3. Generic Drugs Segment: Revenue grew, with Lanthanum Carbonate and DopaCOL growing due to effects of selected therapy, and Argatroban HI Injection (launched August 2023) achieving steady market penetration in the acute care segment. Lanthanum Carbonate offset drug price revision impacts with growing sales volume.
4. Other Product Segment: Selnylton saw revenue growth from successful expansion via disease awareness outreach. ART (Assisted Reproductive Technology) related products and contract manufacturing also grew, contributing to overall revenue increases in this segment.

• Macro Industry Cost Risks: Sustained high prices for raw materials, contracted manufacturing, sourced products and logistics costs have increased cost of goods sold far beyond initial first-half projections, leading to margin deterioration. Persistent cost inflation remains a core risk to full-year profitability.
  • R&D Investment Risk: The high unmet need for DMX-200 creates significant commercial potential if approved, but late-stage clinical development carries inherent risks of trial failure, unexpected safety signals or delayed enrollment that could impact commercial launch timelines and future profitability.
  • Policy Risk: Continued Japanese healthcare cost control policies including drug price reform and generic drug promotion put ongoing pressure on industry profit margins and drug pricing.
  • Macro Economic Uncertainty: Ongoing macro uncertainty from raw material price volatility, overall price inflation, global trade policy shifts and financial market fluctuations create uncertainty for business performance.
  • Supply Risk: Disruption to manufacturing or logistics networks could impact the company's ability to deliver essential, supply-critical pharmaceuticals, which is a core reputational and operational risk.

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