TAIKO PHARMACEUTICAL CO.,LTD. Q4 FY2024 earnings call

• Overall 2024 Performance and 2025 Strategic Direction • Completed 2024 profitability improvement targets: achieved return to net profit for the first time in 4 years since 2020, resolved the "material uncertainty related to going concern" that was previously listed as a risk, and improved the balance sheet with an equity ratio up to 61.7%. • 2025 core priorities: first year of mid-term supply enhancement initiatives for the pharmaceutical business, exit from the downward trend for the infection control business, and continued cost cutting to improve profitability.

• Pharmaceutical Business Operational Highlights • Domestic anti-diarrheal market grew 9.5% year-over-year in 2024, and the company's overall domestic sales grew 13.6% outpacing the market, with its domestic market share rising to nearly 49.7% close to 50%. • Seirogan Quick C grew significantly after 2023 packaging refresh, driven by 2024 SNS promotions targeting younger consumers highlighting its portability and fast-acting benefits, with further sales expansion planned. • Rappa Seichoyaku BF achieved strong sales growth in 2024 after adding a trial-sized 8-pack SKU sold at convenience stores, and the company will continue expanding the Rappa brand beyond anti-diarrheal products. • Launched the mid-term Seirogan supply increase project in January 2025, including three core pillars: production capacity expansion, strengthening of the Suita factory, and production equipment relocation/upgrade, with completion planned for 2029. Parallel initiatives include talent recruitment and training to strengthen the overall supply system. • Seirogan supply constraints will continue partially in 2025, with limited SKU shipments for overseas markets, but the project is expected to fully resolve all supply issues in the mid-term. Seirogan Tōi A has fully resolved supply constraints, and will resume full SKU shipments in 2025 with enhanced sales promotion.

• Infection Control Business Operational Highlights • Core mission is to realize a future society free of infectious disease through popularization of its patented low-concentration chlorine dioxide products, and the company is working to establish a JSA standard for airborne virus/bacteria testing in 2025. • The market has bottomed out: market size grew in the peak winter demand season of December, and the company's market share has increased, showing a recovery trend. • 2024 winter marketing focused on differentiating Cleverin from general alcohol disinfectants, with online CM videos, KOL collaborations, and retail app tie-ins to expand consumer touchpoints. Results showed a clear correlation between influenza prevalence and Cleverin sales, indicating growing consumer recognition. • After JSA standard establishment, the company will update packaging and advertising messaging based on the standardized performance verification, and aims to expand Cleverin adoption to medical institutions under regulatory guidance.

1. Pharmaceutical Segment: Revenue of 5.778 billion yen, up 11.4% year-over-year, accounting for 91.8% of total consolidated revenue. Segment profit reached 1.947 billion yen, with a segment profit margin of 33.7%. Domestic and overseas sales both grew, with gross margin improved by price increases and favorable yen depreciation impacts. Within the segment, Seirogan had a year-over-year revenue decrease due to insufficient supply, while Seirogan Tōi A and Seirogan Quick C both achieved double-digit year-over-year revenue growth. Overseas revenue grew 20.2% year-over-year to approximately 2.2 billion yen, with 87% of overseas revenue coming from Seirogan, leading to more severe supply constraints than domestic markets. 2. Infection Control Segment: Revenue of 508 million yen, down 421 million yen year-over-year, accounting for 8.1% of total consolidated revenue. Despite the revenue decline, strengthened cost control reduced the segment loss by 724 million yen year-over-year to 467 million yen, with improved profitability.

• Total consolidated revenue for the 2025 December fiscal year is expected to be nearly flat year-over-year at 6.3 billion yen, with pharmaceutical segment revenue expected to decrease 33 million yen year-over-year to 5.745 billion yen, and infection control segment revenue expected to increase 41 million yen year-over-year to 550 million yen.
• Operating profit is expected to be 215 million yen, a 414 million yen year-over-year decrease, with expected net income attributable to parent shareholders of 300 million yen. The profit decline is primarily driven by higher raw material costs, increased project-related expenses for the supply system enhancement initiative, and temporary production reductions during facility upgrades.
• Dividend policy: 2024 fiscal year will maintain zero dividend as earnings recovery is still ongoing. The 2025 fiscal year dividend decision is currently undecided, and will be made based on actual earnings progress and financial position.
• Management confirms that while profit will decline year-over-year, it will maintain positive profitability while executing mid-term growth investments to prepare for future business expansion.

• Seirogan has persistent supply constraints in both domestic and overseas markets, which may limit near-term sales growth and negatively impact market share if the supply enhancement project is delayed.
• The chlorine dioxide infection control product market remains difficult to forecast, and consumer demand may continue to stay low, keeping the segment in a loss-making position for the foreseeable future.
• Raw material and resource price increases will raise production costs, putting pressure on profitability in 2025.
• The supply enhancement project requires significant upfront capital and operating expenditure, which will near-term reduce profitability even as it supports long-term growth.

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