Translation from Japanese:

The quest for wisdom yields quantum leaps
Information Meeting Feb. 2004
Haruo Naito, CEO, Eisai Co., Ltd.

1

Today’s Theme:–Value Creation–Pursuit of Efficiency–Strengthen Infrastructure for Growth–Desirable Company Image
2

Value Creation
Creating Shareholder Value

3

Sustained Growth-Favorable Revenue & Earnings Growth and Aggressive Investment in R&D-

High Growth Rate Achieved for 5 years(Income, R&D: Millions of Yen)

(Net Sales: Billions of Yen)

120700100

R&D

FY99-03

CAGR

Operating Income

Sales

12.3%

Net Income

Operating Income 16.5%

Net Sales

Net Income

25.8%

R&D Expenses

9.4%

80600
500
40060300402002010000
FY99

FY00

CAGR: Compound Annual Growth Rate

FY01

FY02

FY03 (es t)

Note: Financial figures herein are presented in conformity with Japan GAAP unless otherwise stated.

4

Sustained Growth-Results of 5-Year Strategic Plans and Millennium Plan-

Confident in Achieving Millennium Plan in FY2006(Income, R&D: Billions of Yen)

120
100
806040(Net Sales: Billions of Yen)

R&D

FY97-01

Operating Income

Sales

Net Income

FY92-96

SalesSales

FY87-91

CAGR

Sales

8.3%

Operating Income 8.1%
Net Income

19.6%

R&D Expenses

10.0%

CAGR
4.7%

Operating Income 10.7%
Net Income

5.3%

R&D Expenses

4.9%

700

CAGR
8.9%

600

Operating Income 7.6%
Net Income

13.4%

R&D Expenses

7.5%

500
400300

FY02-06
Sales20

CAGR
6.8%

Operating Income 6.6%

0FY91
1st: Era of Domestic Operation

FY96
2nd : Era of Globalization

Net Income

10.4%

R&D Expenses

12.7%

FY01

200
1000

FY06 (est.)Third: Era of Soaring GrowthMillennium Plan

CAGR: Compound Annual Growth Rate

5

Dividend Policy-Steady Dividend Increase--Target DOE 3% in FY2006-(DPS: Yen)

(DOE: %)

50

3.0
2.440

2.0

3.0

2.5

2.5

2.0

36.0
32.0

2.0
DPSDOE

29.030

3.5

1.5
1.0

21.5

23.0

0.50.0

20
FY99

FY00

FY01

FY02

FY03 (es t.)

FY06 (plan)

DOE = Dividends On Equity ( = ROE*Dividend Payout)
DPS = Dividends Per Share
6

Active Return to Shareholders-Total Return Ratio as a key indicator-(Ratios: %)Return About Half of Net Income to Shareholders ThroughSteady Increases in Dividends and Flexible Share Buy-Backs

706160

RepurchaseRatio

57504544

Dividend PayoutRatio

40
293020100
FY99

FY00

FY01

FY02

FY03 (est)

FY03 (est.)
DPS: 36 yen (4 yen upfrom FY2002)
Repurchase: Feb 3, 2004
4MM shares boughtback (2850 yen/share)*Total Return Ratio=Dividend Payout Ratio (Dividend/Net Income) + Repurchase Ratio (Repurchase/Net Income)7

Creating Shareholder Value-Economic Profit (pro forma)Capital Cost-Conscious Management and Improvement in Capital Efficiency(Billions of Yen)

60
5040

NOPAT
Cost of Capital
Economic Profit

26.3

3027.4

30.4

18.9

206.9

100
FY99

FY00

FY01FY02

FY03 (est.)-pro forma presentation for reference purposes only-assumptions of calculation and reconciliation to Japan GAAP;
Economic Profit=NOPAT - Cost of Capital
NOPAT (Net Operating Profit After Tax) = Operating Income* (1-0.4)
Effective tax rate = 40% (general)
Cost of Capital = Capital Utilized*0.05
WACC (Weighted Average Cost of Capital = 5% (general)
Capital utilized = beginning balance of Shareholders’ Equity(Simplified Approach)8Value Creation by Investing inOverseas Business
Trend of Geographical Profitability(Billions of Yen)

1817161514131211107.0
6.05.0

North AmericaEuropeAsia

4.0

Profitability of U.S. Subsidiary, Eisai Inc.
16.9
14.9
13.6

FY01

FY02

FY03 (3Q)*Before Royalty Deducted Operating Income

3.0
2.0
1.0
0.0
-1.0-2.0-3.0

(%)

FY97

FY98

FY99

FY00

FY01

FY02

*After Royalty Deducted Operating Income

U.S. subsidiary showed an operating profit three years
after the company was established and erased its
accumulated deficit in the fifth year.
Despite difficulties such as health care cost containment
in the EU market, EU business in total is restoringprofitability and approaching the elimination of its
accumulated operating deficit.
The French subsidiary turned a single year profit threeyears after its creation and erased the accumulated
deficit in the fifth year.
Eisai Subsidiaries are realizing payback of investment
quickly and effectively and utilize higher standards thanthose set by other Japanese companies.

9

Pursuit of Efficiency
Establish Franchise
Seamless Value Chain

10Establish FranchiseFranchise Concept-Products with Sales of More than $1 Billion Forms the Basis ofa “Franchise”-Ongoing Projects in Each Stage of Clinical Development-Continuing Investment in Discovery Research
Benefits of Establishing Franchise-Extensive Information about Market, Competition, ScienceTrend, etc. in the Franchise area
-Informed Decision Making-Improved Success Rate
Neurology, Gastroenterology: Franchise Area
Oncology, and Orthopedics in Japan: Franchise Candidates
11

Establish Franchise(Billions of Yen)

(Billions of Yen)

200

185.0

MyonalMethycobal
Aricept

Neurology
8.8
9.5

9.7
8.8

Aciphex/Pariet

32.0

4.4
4.5

26.0

26.8

100
4.5

144.0
115.3

29.7
50

71.1

3.9
29.8

00

FY00

4.5

30.129.795.8

FY99

Gastroenterology

150

28.6

50168.5

Selbex

31.1

25.0

57.6

GlucagonG Novo

9.0150100200

FY01

FY02

FY03 (est.)

138.0
98.8

117.4

54.7

18.4
FY99

FY00

FY01

FY02

FY03 (est.)

12Compound Portfolio in
Franchise Areas

CompoundAricept
Aricept (Vascular Dementia)
Aricept (Rapid Disintegration Tablet)
Aricept (Liquid)
Aricept (Severe Alzheimer's)
Aricept (Dementia Associated with Parkinson's Disease)
Aricept (Migraine Prophylaxis)
rufinamide (Epilepsy)
Neurology
rasagiline (Parkinson's Disease)rasagiline (Alzheimer's Disease)
E2007 (Parkinson's Disease, Epilepsy, MS)
E2014 (Cervical Dystonia）
E2051 (Acute Cerebral Infarction)
E2070 (Sodium channel blocker for Neuropathic pain)
Parkinson's Disease Treatment
Depression Treatment
Aciphex/Pariet
Pariet (On-demand)Pariet (H. pylori Eradication)
Aciphex (Pediatric GERD)
Gastroenterlogy
Pariet (Symptomatic GERD)
E3620 (Gastroprokinetic Agent)
E3309 (H. Pylori Eradication)
IBS Treatment
E7070 (G1 Phase Arresting Agent )E0167 (Recurrence of Hepatocellular Carcinoma)
E7389 (Tubulin polymerization Inhibitor )Oncology
E7820 (Integrin-alpha 2 Inhibitor)
E7080 (VEGF Receptor Tyrosine-Kinase Inhibitor)
E7107 (Agent of Microbial Metabolite Origin)

Pre-clinical

Phase I

Phase II

Phase III

Application

Launch13

Seamless Value Chain
Seamless Value Chain Creates Value:
1. Satisfying Unmet Medical Needs
2. Stable Supply of Quality Products
3. Information Provision for Safe Usage ofMedicines
When One of The Links in the Value Chain is Lacking,the Efficiency of Value Creation Declines

14

Seamless Value Chain
Satisfying Unmet Medical Needs
Stably Supplying Quality Pharmaceuticals
Information Provision for Safe Usage of Medicines

DiscoverySalesandDevelopment Manufacturing
MarketingedicalMte
Unm ulfillment
FNeedsPharmacovigilanceIntegrated Value Chain Allows Efficient Management
Control and Decision-Making

Stable SupplyofQuality ProductsPatients

S af e U
sageofDrugs

15

Strengthen
Infrastructurefor Growth
R&D Activities
Strengthen Operations
16

Results and Plans of NDAs/sNDAs
FiscalYear
1996

NME (New Molecular Entity)

LCM (Life Cycle Management)
Japan

U.S.

E.U.

Aricept (Alzheimer’s Disease)
Pariet (Proton Pump Inhibitor)

1997
1998

Pariet (GERD Maintenance)

1999

Aricept (Granule)
Kaytwo (Antidote for Rhodenticide)

2000

Aciphex (Symptomatic GERD)

Pariet (Symptomatic GERD)
Pariet (H. pylori Eradication)

2001

Pariet (GERD Maintenance)

Aciphex (H. pylori Eradication)

2002

Aricept (Rapid Disintegration Tablet)
Apnission (Apnoea of Prematurity)

Aricept (VaD)

Aricept (VaD)

Aricept (RD Tablet)
Aricept (Liquid)

Aricept (RD Tablet)
Pariet (On-Demand)Pariet (Zollinger-Ellison)

Aricept (Severe AD)
Aricept (Migraine Prophylaxis)

Aricept (Severe AD)
Aricept (Dementia
Associated with Parkinson’sDisease)

2003

Careram (Rheumatoid Arthritis)
rasagiline (Parkinson’s Disease)2004

rufinamide (Epilepsy)

Pariet (H. pylori Eradication)
Tambocor (Sporadic Atrial Fibrillation/Flutter)

2005

E3309 (H. pylori Eradication)
E2014 (Cervical Dystonia)
D2E7 (Rheumatoid Arthritis)
E7210 (Ultrasound Contrast Agent)

Aricept (Severe AD)
Pariet (Symptomatic GERD)

2006

E2007 (Parkinson’s Disease)
E7070 (Oncology, G1 Phase Arresting)
E7389 (Oncology, Tubulin
Polymerization Inhibitor)

Aciphex (Pediatric GERD)

2007

E5564 (CABG)KES524 (Obesity Management)

E2007 (Epilepsy)

E2007 (Epilepsy)

17Results and Plans of NDAs/sNDAs
FiscalYear
1996

NME (New Molecular Entity)

LCM (Life Cycle Management)
Japan

U.S.

E.U.

Aricept (Alzheimer’s Disease)
Pariet (Proton Pump Inhibitor)

1997
1998

Pariet (GERD Maintenance)

1999

Aricept (Granule)
Kaytwo (Antidote for Rhodenticide)

2000
2001
2002

Aciphex (Symptomatic GERD)

Pariet (Symptomatic GERD)
Pariet (H. pylori Eradication)

Due to the Temporary Lack of New Molecular Entities
Pariet (GERD Maintenance)

Aciphex (h. pylori Eradication)

Aricept (RD Tablet)
Apnission (Apnoea of Prematurity)

Aricept (VaD)

Aricept (VaD)

after the Launch of Aricept and Aciphex/Pariet, We

2003

Careram (Rheumatoid Arthritis)
rasagiline (Parkinson’s Disease)

Aricept (RD Tablet)
Aricept (Liquid)

2004

rufinamide (Epilepsy)

2005

E3309 (h. pylori Eradication)
E2014 (Cervical Dystonia)
D2E7 (Rheumatoid Arthritis)
E7210 (Ultrasound Contrast Agent)

2006

E2007 (Parkinson’s Disease)
E7070 (Oncology, G1 Phase Arresting)
E7389 (Oncology, Tubulin
Polymerization Inhibitor)

Aciphex (Pediatric GERD)

2007

E5564 (CABG)KES524 (Obesity Management)

E2007 (Epilepsy)

Aricept (RD Tablet)
Pariet (On-Demand)Pariet (Zollinger-Ellison)

Have Aggressively Focused on Product Life Cycle
Pariet (H. pylori Eradication)
Tambocor (Sporadic Atrial Fibrillation/Flutter)

Management Activities

Aricept (Severe AD)
Pariet (Symptomatic GERD)

Aricept (Severe AD)
Aricept (Migraine Prophylaxis)

Aricept (Severe AD)
Aricept (Dementia
Associated with Parkinson’s
Disease)E2007 (Epilepsy)

18Number of necessary compound
required for one NME per year(Hypothesis)

Submission

1Phase III

4

Phase II

7

Phase I

6012345

6

Source: Numbers calculated based on CMR International Data78910(Number of compounds)
19

Current Pipeline
FY2003
rasagiline Careram

Submission

2
No. of company compounds

No. of necessary compounds

1Phase III

rufinamide

Phase II

D2E7

E5564

KES524 E2007

E7070

E7210

E2014

7Phase I

E5555

E2070

E7820

E3309

E6040

E2051

E7389

7

123456708910(Number of compounds)
20

Current Pipeline
FY2003
Submission

Phase III

Phase IIrasagiline Careram2
No. of Eisai's compound

No. ofThereAre 15 Projects (1, 7,7)necessaryand compound
2 Filed1rufinamide

Compounds (Careram and rasagiline).

Enrichmentof the Pipeline
inLate Phase is
D2E7
E5564
KES524 E2007
E7070 E7210
E2014 7
the Most Urgent Task.

Phase IE5555

017E2070

E7820

E3309

E6040

E2051

E7389

2345678910(Number of compounds)
21

Four Global Compounds
Proof of Concept for the Four Compounds
to be Completed Within FY2004
E2007 (AMPA Receptor Antagonist)– Parkinson's Disease: Phase IIb– Epilepsy, Multiple Sclerosis: Phase IIa Completed

E7070 (Anti-Cancer)– Colorectal Cancer, Breast Cancer and Non Small Cell Lung
Cancer: Phase I Ongoing for Combination Therapy– Breast Cancer: Phase IIb as Monotherapy Started

E7389 (Anti-Cancer)– Phase I (3 trials) Ongoing– Phase II Start in FY2004

E5564 (Endotoxin Antagonist)– Sepsis: Phase II (High Dose) Ongoing– CABG (Coronary Artery Bypass Graft Surgery): Phase II (2Trials) Ongoing22

Pipeline in FY2006
FY2006
Submission

E2007

E7070

E7389

3

No. of company compounds
No. of necessary compounds

2Phase III

E5564

Phase II

pladienolide E5555 E2070

KES524

E7820

E7080

E6040

E2051

7Phase I012345678910(Number of compounds)
This estimation is based on the current R&D plans therefore does not include Phase I compounds.

23

Pipeline in FY2006
FY2006
Submission

E2007

E7070

E7389

3No. of Eisai's compounds

R&D Investment Plans of 100 yen Billion inNo. of necessary compounds
KES524 2
Order to Support a Pipeline Necessary for One
E5564
NME per Year

Phase IIIpladienolide E5555 E2070

Phase II

E7820

E7080

E6040

E2051

7

Phase I

01

2

3

45

6

78

910(Number of compounds)
This estimation is based on the current R&D plans therefore does not include Phase I compounds.

24

Strengthen Operations

Strengthening the Value Chain
Components -the Basis for Global
Expansion - is the Key to Achieving
Further Growth.

25

Strengthening Operationin the U.S.
Completion of Seamless Value Chain–Assumption of Distribution of Aciphex in FY2003
Increase in Manufacturing Capacity–Investment of $15 Million in Manufacturing Facility at Research
Triangle Park, North Carolina in FY2003
Enhanced Abilities in Discovery Research–Investment of $75 Million in Boston Laboratories Through FY2006–Staff Increase up to 250
Enhanced Abilities in Clinical Research–Staff Increase to 200 in Eisai Medical Research in FY2004
Securing Appropriate SOV of Aricept and Aciphex–Increase Sales Force to 500 in FY 2004 through Addition of 100
Sales Representatives

26

Strengthening Operationsin Japan
Increase Sales Force to 1200 in FY2005
Continuous Growth of Aricept and Pariet– Aricept: 50% Penetration Ratio (FY2006)– Pariet: Confident in the Most Powerful Marketing Force inGastroenterology
Accelerate Switch from H2RAs to PPIs

Reinforcement of Manufacturing Capacity– Kashima (bulk drug substance): Invest 9 Billion Yen in FY2004
Enhance Process, Bulk Drug Substance Production, and Efficiencyof Operation– Misato (formulation): 4 Billion Yen in FY2004
Increase Production Capacity for Aciphex/Pariet and Efficiency

R&D Investment of 100 Billion yen in FY 2006 Dedicated toAchieving a Pipeline that is Necessary for 1 NME Per Year27

Strengthening Operationin Europe Position as a Pharmaceutical Cluster– The Second Largest Market in Size and High Growth Rate
– Increase of Potential Market by EU Enlargement (Middle and EasternEurope)– Efficient Drug Approval With Centralized Procedure– Cancer, Neurodegenerative Diseases, AIDS, Diabetes and Biologics are Subjectto Centralized Procedure Commitment in EU G5 Countries– Expansion Through Aricept and Pariet– Increase Coverage to About 80% in G5 by Advancing into a New Territory– Business Development in Neurology and Gastroenterology

 Expansion in the Enlarged EU to Meet Unmet Medical Needs– Expectation for Receiving Approval for rufinamide in 25 Countries inExpanded EU

 Eisai London Research Laboratories– Research of Drugs in Regenerative Medicine28

Strengthening Operationin Asia
 Reinforcement of Operations in China– Sales Force: 250, Covered Cities: 100
Estimated Sales of $20 Billion in FY2006– Currently 9 Products MarketedMethycobal, Aricept, Pariet, Selbex, Myonal, Merislon, Neuquinon
Pranopulin, Kestine– Plan to Expand Manufacturing Capability at Suzho Plant
 India Market– Market Size: 13th Worldwide in 2002 (2003 IMS Health)– Advancements in IT & Medicinal Chemistry– Compound Patent Protected from FY2005– Potential New Business Cluster

29

EU:
- To be enlarged to 25 nations.
- Diverse backgrounds- Cost containment measures
East Asia:- Lack of theInfrastructure

New market:-Low cost operation-Patent issues need to besolved

Japan:- Quality market withwell advanced NHI
healthcare system- Impact on pricerevision in national
health insuranceUS:- Decelerated growth& pressure for costcontainment- Active argument
regarding drug
price
- Fewer FDA
approvals of newdrugs at the surgeof R&D cost
- More genericchallenges

30

EU:
- To be enlarged to 25 nations.
- Diverse backgrounds- Cost containment measures

More Fragmented
More Regulated

East Asia:- Lack of theInfrastructure

More Cost-Contained

New market:-Low cost operation-Patent issues need to besolved

Japan:- Quality market withwell advanced NHI
healthcare system- Impact of pricerevision in national
health insuranceUS:- Decelerated growth& pressure for costcontainment- Active argument
regarding drug
price
- Fewer FDA
approvals for newdrugs and moregeneric challenges“Diseconomies of Scale” is assumed
from the prevailing global market trends

31Our Goal

32

Our Ideal Corporate Model

An Organization that Enables an Efficient,
Agile and Seamless Value Chain

33

Our Goal

Contribute Best to Patients ThroughMeeting Unmet Medical Needs inNeurology, Gastroenterology, andOncology, Producing Quality Products
Steadily, and Creating Value Throughthe Safe Usage of Drugs in Japan, theU.S., the E.U. and Other Asian Markets.
34

Safe Harbor Statement
 Materials and information provided during this presentation may contain“forward-looking statements” as defined in the Private Securities Litigation
Reform Act of 1995. These statements are based on current expectations,forecasts and assumptions that are subject to risks and uncertainties which
could cause actual outcomes and results to differ materially from thesestatements.
 Risks and uncertainties include general industry and market conditions, andgeneral domestic and international economic conditions such as interest rateand currency exchange fluctuations. Risks and uncertainties particularly applywith respect to product-related forward-looking statements. Product risks anduncertainties include, but are not limited to, technological advances and patents
attained by competitors, challenges inherent in new product development,
including completion of clinical trials; claims and concerns about product safety
and efficacy; obtaining regulatory approvals; domestic and foreign healthcare
reforms; trends toward managed care and healthcare cost containment, andgovernmental laws and regulations affecting domestic and foreign operations.
 Also, for products that are approved, there are manufacturing and marketingrisks and uncertainties, which include, but are not limited to, inability to build
production capacity to meet demand, unavailability of raw materials, and failure
to gain market acceptance.
 The Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future eventsor otherwise.

35