Message from the CFO

1. Overview of business performance and Corporate value creation (TSR)

(1) Overview of consolidated business performance

In FY2025, the Otsuka group delivered strong business performance with consolidated revenue increasing 6.0% year on year to ¥2,468.9 billion. Although the Pharmaceutical Business was affected by generic competition with JINARC/JYNARQUE, revenue growth was driven primarily by higher sales of REXULTI and ABILIFY MAINTENA, as well as increased royalty income. Revenue also increased across all other business segments, including the Nutraceutical and Consumer Products Businesses.
Business profit increased by 3.6% year on year to ¥446.1 billion. This result was achieved even after absorbing new product launch expenses in the Pharmaceutical Business, notably for VOYXACT, making investments for growth, particularly in the “for women’s health” category of the Nutraceutical Business, and funding higher R&D expenses for the future growth drivers repinatrabit, ulotaront, and zipalertinib expected to power business performance in the 5th MTMP and beyond. Operating profit increased by 48.2% year on year to ¥479.4 billion, driven by gains from the sale of MicroPort Scientific Corporation shares as well as the absence of the impairment losses recognized in the previous fiscal year. Net profit increased by 5.8% year on year to ¥363.2 billion.
As a result, we achieved our highest record in revenue, business profit, operating profit, and profit attributable to owners of the Company since our listing on the Tokyo Stock Exchange in December 2010. Profitability indicators also reached record highs.

(2) TSR

Looking at our TSR since our listing on the Tokyo Stock Exchange, our corporate value has steadily increased with TSR reaching approximately 600% over the past 15 years as of the end of March 2026. Over the past two years, our TSR has also exceeded the average TSR of the TOPIX Pharmaceutical ETF (TOPIX-17).
When we went public in December 2010, concerns were raised in the market about the LOE of ABILIFY in the U.S. in 2015. To respond to such concerns, during the 1st and 2nd MTMPs, we leveraged the cash generated by ABILIFY to diversify our revenue structure by developing our 3 Global Products (ABILIFY MAINTENA, REXULTI, and Samsca/JINARC/JYNARQUE), alongside growth drivers such as the next-generation product LONSURF. In parallel we implemented the high-margin strategy in the Nutraceutical Business.
Furthermore, the 3rd MTMP was positioned as a period to prepare for the LOE of ABILIFY MAINTENA and JINARC/JYNARQUE, during which we drew on the cash generated by the 3 Global Products to nurture next-generation growth drivers.
As a result, the final year of the 3rd MTMP saw the approval in the U.S. of an additional indication for REXULTI for agitation associated with dementia due to Alzheimer’s disease (AAD), followed in 2025 by accelerated U.S. approval for VOYXACT. These products are expected to support revenue growth under the 4th MTMP and beyond.
By consistently allocating cash generated by our businesses toward investments for future growth, we have expanded our cycle of investment and growth and have worked to enhance corporate value. We believe these efforts in business expansion, improvements in earnings, and shareholder returns are reflected in the positive evaluation that we have received from the markets. (See Figure 1)

Figure 1 Total shareholder return (TSR)

• Notes:1. TSR is calculated based on cumulative dividend and share price movements
  2. Graph values indicate change based on public price at time of listing

2. Initiatives to enhance corporate value

(1) Framework for enhancing corporate value

As part of the framework of financial policies and strategies that support the creation of new value at the Otsuka group, we believe that establishing a stable financial foundation is essential to continue delivering on “what’s never been done and can only be done by Otsuka,” which is our corporate philosophy and ultimately contributes to society through innovation.
A key element in sustaining our growth cycle is securing stable and continuous cash generation at a level that exceeds the cost of capital through return on invested capital (ROIC) management. Cash generated through profit growth is allocated to growth investments focused on medium- to long-term opportunities as well as to shareholder returns. Through sustainable value creation that addresses social challenges, we aim to enhance the multiple. By expanding this cycle of value creation, we seek to achieve continuous growth in corporate value. (See Figure 2)
In terms of our approach to investment for growth, we place strong emphasis on contributing to society through innovation. We will continue to pursue investment opportunities that contribute to both corporate value enhancement and social contribution. Investment decisions are made in line with the capital allocation framework in areas aligned with our long-term strategy and capable of generating synergies with existing management assets. In the Pharmaceutical Business, we invest in drug discovery technologies and alliances that continuously generate pipelines, as well as making sustained R&D investments to strengthen products and pipelines in key areas such as psychiatry and neurology, oncology, autoimmunity, and rare diseases. In the Nutraceutical Business, we invest in expanding sales channels into new regions, building brand value by promoting new product benefits, and strengthening production and sales infrastructure.
Where external cash procurement is required to meet an opportunity for growth investment, we are always prepared to implement the full range of options, including commercial paper, corporate bonds and bank loans, so as to act in a timely manner.

Figure 2 Corporate value enhancement framework

(2) Review of Otsuka’s corporate value enhancement cycle

Looking back at our past MTMPs, operating cash flow before R&D investments has steadily increased, from ¥1.6 trillion during the five-year period of the 2nd to ¥2.3 trillion during the 3rd and a planned ¥3.0 trillion under the 4th MTMP. As cash generation has strengthened, growth investment has also expanded, from ¥1.8 trillion in the 2nd to ¥1.85 trillion in the 3rd and a planned ¥2.2 trillion in the 4th MTMP, reflecting an expanding cycle of corporate value enhancement. Under the 4th MTMP, we continue to take a long-term perspective and pursue the acquisition of assets and investments in R&D expected to generate future cash return, thereby sustaining this virtuous cycle. (See Figure 3)
In the Pharmaceutical Business, approximately ¥570 billion in growth investments in 4 Global Products has generated cumulative revenue of approximately ¥5.2 trillion from the 3rd MTMP onward. Investment in the Next 8 and Plus 2 product groups during the 3rd MTMP, meanwhile, is expected to drive revenue under the 4th and 5th MTMPs. (See Figure 4-1)
In the Nutraceutical Business, by investing in initiatives that address the three social issues specified in the 4th MTMP (“For climate & environmental risk,” “For women’s health,” and “For healthier life”) and making investments for growth to support the expansion of existing products into untapped overseas markets, we have significantly grown our business. As a result, the overseas revenue ratio has increased from approximately 40% at the time of listing to around 70%. (See Figure 4-2)

Figure 3 Corporate value enhancement cycle

Figure 4-1 Growth investment cycle by business segment: Pharma (2010–2025)

Figure 4-2 Growth investment cycle by business segment: NC (2010–2025)

(3) Financial policy and progress under the 4th MTMP

① Cash allocation

Under the 4th MTMP, we plan to secure funds of approximately ¥3.2 trillion, which exceeds the amount in the 3rd MTMP period. Our planned R&D investments of approximately ¥1.5 trillion will be allocated mainly to the Pharmaceutical Business for basic research to create future fundamental drug discovery technologies and for late-stage clinical development. Of the approximately ¥500 billion in capital expenditures, about half is for investment for growth, such as increasing production capacity to meet the demand for POCARI SWEAT in high-growth overseas markets, while the remaining half will be invested in the maintenance and renewal of existing facilities in an environmentally friendly manner. In addition, approximately ¥380 billion is planned for shareholder returns, including stable and continuous dividends and share buybacks.
In terms of progress over the first two years through FY2025, operating cash flow before R&D investments, which serves as the source of investment for growth, reached ¥1,592.3 billion, equivalent to 50% of the cash to be generated during the 4th MTMP period. This exceeds the two-year benchmark of 40% by approximately ¥190 billion.
Investments for growth have progressed to 41% of target, largely in line with the plan. R&D expenses progressed to 42% of target, driven by clinical development of products such as VOYXACT, centanafadine, and ulotaront. Capital expenditures reached 37% of target as investments progressed in areas such as expansion of the IV solutions business to the U.S. market and development of untapped markets in the Nutraceutical Business. In-licensing and acquisitions also reached ¥290.5 billion, exceeding the level achieved over the five years of the 3rd MTMP.
As for shareholder returns, supported by strong business performance and higher-than-expected cash generation, we implemented additional returns, resulting in a progress rate of 68%, significantly above the 4th MTMP. Going forward, we will continue to balance growth investments and shareholder returns in allocating generated cash, thereby supporting the sustainable enhancement of corporate value. (See Figure 5)

Figure 5 4th MTMP: Progress in cash generation and growth investment

② ROIC management

ROIC management, which supports Otsuka’s innovation, is considered a key initiative not only for improving short-term capital efficiency. It is also a framework for continuous monitoring of whether we are generating stable cash returns that exceed the cost of capital while continuing investments in research and development, external asset acquisition, and human resources development to support our social value. (See Figure 6-1)
FY2025 saw solid progress in ROIC, a management indicator of the efficiency of cash return generation, which reached 11.9%, significantly exceeding both the five-year average of 5.8% under the 3rd MTMP and the weighted average cost of capital (WACC) benchmark set under the 4th MTMP. Going forward, it will be essential to ensure that the outcomes of our investments for growth are steadily translated into earnings and cash generation. (See Figure 6-2)
With respect to cash returns, in the Pharmaceutical Business, the KPI of revenue from the Global 10 Plus 2 products increased by approximately ¥200 billion compared with FY2023 to reach ¥572.1 billion, highlighting steady expansion.
Improved cost efficiency in existing products contributed to an increase of approximately 0.4%, maximizing return by improving the business profit margin before R&D investments to reach 42.2%.
In the Nutraceutical Business, the KPI of overseas revenue ratio rose by approximately 5% compared with FY2023 to 70.6%, reflecting strong performance in overseas markets.
Although we have faced headwinds from steeply rising raw material costs in recent years, these were offset through ongoing efforts to reduce costs and price increases on certain products resulting in a 0.4% improvement in the cost ratio to 47.8%, contributing to profitability.
The EBITDA margin remained unchanged from FY2023 at 15.8%, reflecting increased costs for investments for growth. Going forward, we aim to improve margins through continued strengthening of high-margin product brands.
Regarding invested capital, we are acquiring external assets at a level above that of the 3rd MTMP to increase the portfolio of assets that can be expected to generate future cash return. Meanwhile, we maintained business asset turnover in both the Pharmaceutical and Nutraceutical Businesses by reviewing existing projects and other measures.
The cash conversion cycle has lengthened compared with the 3rd MTMP, primarily due to increased inventories to ensure stable supply and mitigate the impact of geopolitical risks and U.S. tariff policies. We will continue to seek the optimal balance between supply stability and working capital efficiency.
In addition, as part of initiatives beyond core operations, we have reduced cross-shareholdings by 31 issues since FY2023. From a financial efficiency perspective, while maintaining diversified financing options to cover potential financing needs, we have also worked to reduce interest-bearing debt, thereby lowering both financing costs and invested capital.

Figure 6-1 Otsuka Group ROIC management under 4th MTMP (Source: 4th MTMP launch materials)

* Net Operating Profit After Tax

Figure 6-2 Progress of KPIs under FY2025 ROIC management

③ Shareholder returns

Our shareholder returns policy is to steadily implement dividends and share buybacks as planned during the MTMP period, and to consider additional returns based on the level of cash generated from business growth and the outlook for the next MTMP.
In FY2024, we reaped the benefit of measures under the 3rd MTMP by investing approximately ¥50 billion in share buybacks. In March 2025, based on improved future earnings visibility following the approval of REXULTI in the U.S. for the additional indication of agitation associated with dementia due to Alzheimer’s disease (AAD), and on strong cash generation in FY2024 and steady progress in investments for growth, we executed approximately ¥70 billion of buybacks and increased the annual dividend by ¥20, from ¥120 to ¥140 per share.
On the strength of the positive business results for FY2025 and the improved future revenue visibility associated with the accelerated approval in the U.S. of VOYXACT, an APRIL inhibitor for the treatment of adults with IgA nephropathy (IgAN), we announced ¥50 billion of share buybacks to be implemented during FY2026. Going forward, we will continue to flexibly consider shareholder returns from multiple perspectives, including current upside in cash generation, progress in growth investments, future revenue visibility, and the key return indicator of total shareholder return ratio. (See Figure 7)

Figure 7 Shareholder return and net profit in 3rd and 4th MTMP periods