For immediate release
November 25, 2004

Sumitomo Pharmaceuticals reaches a basic agreement tomerge with Dainippon Pharmaceutical

Sumitomo Chemical Co., Ltd. announced today that its subsidiary, Sumitomo
Pharmaceuticals Co., Ltd.(SumiPharm), and Dainippon Pharmaceutical Co.,
Ltd.(Dainippon), along with Sumitomo Chemical have reached a basic
agreement on the proposed merger of Dainippon and SumiPharm, effective
October 1, 2005. The Board of Directors of the three companies maderesolutions to this effect at their respective meetings held today and have signed
a Basic Agreement concerning the merger.
Attached news release jointly issued by SumiPharm and Dainippon outlines themerger plan together with its background and objectives as well as providing
information about the two companies.
As the new company to be formed by the merger will become a consolidated
subsidiary of Sumitomo Chemical, we will announce our revised financial
performance projection when the business prospects of the new company
become available.
Mr. Hiromasa Yonekura, President of Sumitomo Chemical, has commented thatthe pharmaceutical business is one of our core operations and we will strongly
support the new company to maximize its value as a leading-edge R&D driven
pharmaceutical company.

1For immediate release
November 25, 2004

Dainippon Pharmaceutical and Sumitomo Pharmaceuticals Enter intoa Basic Agreement to Merge on October 1, 2005
Dainippon Pharmaceutical Co., Ltd.
Sumitomo Pharmaceuticals Co., Ltd.
Dainippon Pharmaceutical Co., Ltd. (President: Kenjiro Miyatake, “DainipponPharmaceutical”) and Sumitomo Pharmaceuticals Co., Ltd. (President: Yasuo Okamoto,“Sumitomo Pharmaceuticals”) today announced that the two companies, along with
Sumitomo Pharmaceuticals’ parent, Sumitomo Chemical Co., Ltd. (President: HiromasaYonekura, “Sumitomo Chemical”), reached a basic agreement for the merger ofDainippon Pharmaceutical and Sumitomo Pharmaceuticals, effective October 1, 2005,
with resolutions passed by each of the respective company’s Board of Directors in board
meetings held during the day.
The new company to be established by the merger (“New Company”) will rank among
Japan’s top 10 pharmaceutical companies in terms of domestic ethical pharmaceuticalsales. With a combined sales force of approximately 1,500 medical representatives(MRs), a number comparable to that of the leading Japanese pharmaceutical companies,
the New Company will be able to further strengthen its solid earnings base from its
domestic pharmaceutical operations. Leveraging a stable cash flow, the NewCompany will enhance R&D efforts, both qualitatively and quantitatively, andaccelerate the speed of drug development, thereby allowing the potential for global
expansion in the medium to long term. As there are numerous commonalities in thedirection and fields of research and development of the two companies, the merger is
expected to generate substantial synergies in their R&D activities.
Based on the ideal of contributing to the betterment of health and fuller lives for all
people worldwide, while striving to be a leading research-driven pharmaceuticalcompany with an increasing presence in the domestic Japanese market and pursuingfurther development of global operations, the New Company will implement thefollowing strategies based on the concept of “Selection and Focus”.

1(1) The New Company will seek to maximize synergies in sales by focusing on the 4
major products of Amlodin, Gasmotin, Prorenal, and Meropen.
(2) The New Company will accelerate the speed of drug development through“Selection and Focus” by prioritizing the development of products.
(3) The New Company will vigorously pursue
in the short to medium term.

cost synergies in all areas of operations(4) The New Company will work to swiftly fuse the corporate cultures of the twocompanies, in conjunction with fair and equitable personnel management, thereby
nurturing a corporate culture imbued with an enterprising spirit unique to the NewCompany.
Dainippon Pharmaceutical, Sumitomo Pharmaceuticals and Sumitomo Chemical haveagreed that the New Company will become a consolidated subsidiary of Sumitomo
Chemical, that Sumitomo Chemical will acquire 50.1% of the voting stocks of the NewCompany, and that the three companies will collaborate to achieve these objectives.
It was further agreed that basically Sumitomo Chemical will maintain its holding ofvoting stocks in the New Company at a level no greater than 50.1% for 10 years after
the merger is effected and that it will cooperate with the New Company in theircontinued listing on the stock exchange and render support toward the long-term growthof the New Company as a publicly traded corporation.
The key highlights of the merger are as follows.
1. Background and objectives of the merger
The business environment in which the Japanese pharmaceutical industry operates has
become increasingly challenging due to various factors, such as the government’scontinuing initiatives to restrain medication expenditure through periodical drug pricecutting and other measures, the soaring R&D spending of drug discovery, theintensifying competition with U.S. and European mega pharmaceutical companies, andthe ongoing restructuring of the pharmaceutical industry. Given these circumstances,
for a medium-to-large size company to achieve stable growth while contributing tosociety, it is essential that it aggressively invest in R&D towards the discovery of2

innovative drugs, meanwhile, securing a robust domestic business base to sustain thegrowing size and duration of investments needed for successful development.
Moreover, global business operations, a prerequisite for a pharmaceutical company togrow, requires thorough planning of business strategies and substantial investments.
Based on such common understanding, Dainippon Pharmaceutical and Sumitomo
Pharmaceuticals had been investigating the possibility of a merger of the two companies
to further fortify their business foundations in their most important operational base,
Japan, and to also establish the potential for further global business development, which
has culminated in today’s basic agreement.
With this merger, the New Company aims to further enhance profitability andcompetitiveness by combining the management resources of Dainippon Pharmaceuticaland Sumitomo Pharmaceuticals and through the implementation of basic strategies
based on the concept of “Selection and Focus”.
2. Outline of the merger(1) Schedule
Board meetings for approval of Basic Agreement

November 25, 2004

Signing of Basic Agreement

November 25, 2004

Board meetings for approval of Merger Agreement

April 2005 (schedule)

Signing of Merger Agreement

April 2005 (schedule)

Shareholders meetings for approval of Merger Agreement

Late June 2005 (schedule)

Effective date of Merger

October 1, 2005 (schedule)

The above schedule is subject to change based upon discussions between Dainippon
Pharmaceutical and Sumitomo Pharmaceutical, should any significant issues arise as thetransaction proceeds.
(2) Merger structure
The merger will be effected with Dainippon Pharmaceutical being the surviving entity.
(3) Merger Ratio
CompanyDainippon Pharmaceutical

Sumitomo Pharmaceuticals

Merger Ratio

11,2903

a. Allotment of shares
One Sumitomo Pharmaceuticals share will be exchanged for 1,290 Dainippon
Pharmaceutical shares.
(On an equity value basis, the ratio between Dainippon Pharmaceutical andSumitomo Pharmaceuticals is 41.5:58.5)
b. Basis for the Merger Ratio calculation
Dainippon Pharmaceutical engaged the services of J.P. Morgan Securities Asia Pte.
Limited and Sumitomo Pharmaceuticals engaged the services of Nikko Citigroupas independent financial advisors with respect to the determination of the Merger
Ratio. The merging companies, through negotiation and discussion, determined
the agreed upon Merger Ratio with the advice of their respective independent
financial advisors.
Both Dainippon Pharmaceutical and Sumitomo
Pharmaceuticals have received opinions from their respective advisors that theabove Merger Ratio is fair from financial point of view as of today.
It should be noted that should any material change in the conditions used as abasis for the Merger Ratio calculation occur, the Merger Ratio is subject to change
through discussions between the two merging companies.
c. Number of newly issued shares (anticipated)
Common stock 232,716,000 shares(4) Cash payment upon mergerNo cash payment is to be made to the shareholders of Dainippon Pharmaceutical andSumitomo Pharmaceuticals under the merger, except for the instance in which cash
payment is made upon merger in place of Sumitomo Pharmaceuticals’ interim dividend
for fiscal year 2005.
(5) Anticipated benefits from the merger
a. Enhancement of domestic operations- The New Company will rank among the top 10 companies in Japan in terms ofdomestic ethical pharmaceutical sales, and its total sales force of approximately
1,500 MRs will be comparable to that of the leading Japanese pharmaceutical firms.
With combined doctor visits by MRs numbering 5 million per year, the New
Company will be able to further strengthen its solid earnings base by focusing on the4

4 major products of Amlodin, Gasmotin, Prorenal, and Meropen.
- With the increased number of MRs, the New Company will be able to undertake
promotion activities with enhanced effectiveness and quality by incorporating
various measures, including the introduction of a specialist MR system where MRs
operate in specialized fields such as the central nervous system.
b. Enhancement of R&D capability- The New Company’s annual R&D expenditure will be approximately 45 billion yen,which, when combined with the efforts to prioritize projects, will enable the New
Company to accelerate the speed of drug development in selected fields.
- With numerous commonalities in the direction and fields of R&D of Dainippon
Pharmaceutical and Sumitomo Pharmaceuticals, such as diabetes, the central
nervous system (CNS) and immunology and allergy, the New Company will be able
to establish a further enhanced R&D base in these fields.
- In the fields of diabetes and CNS in particular, Dainippon Pharmaceutical andSumitomo Pharmaceuticals respectively have a rich portfolio of products in thepipeline, including anticipated blockbusters. The New Company aims to promotebusiness growth in the medium to long term, centering on these therapeutic fields.
- By its increased presence in the domestic market, the New Company will be better
positioned to in-license blockbuster products from other companies or organizations.
c. Realization of cost synergies
The New Company will seek to optimize operations in various aspects, such as
operating expenses, operating locations, organizational structure, and human resources
allocation, as well as re-assess the pipeline of products under development and capital
investment plans, so as to realize cost synergies. (The New Company expects to yieldcost reduction synergies exceeding 10 billion yen in fiscal year 2007, as compared withthe simple sum of cost reductions potentially realizable by the two companies
independently.)d. Nurturing of an Enterprising Corporate Culture
The New Company will undertake fair and equitable personnel management, whichever5

company one comes from or whatever customary practices were followed in the past,and aims to nurture an enterprising spirit and shared awareness of risk and crisis byfusing the corporate culture of both companies as early as possible.
(6) Financial targets in fiscal year 2007
The New Company has the following medium-term targets for fiscal year 2007:
Total Net Sales(incl. Ethical Drug Sales
Operating Income
R&D Expenditure

280 Billion yen
230 Billion yen)
45 Billion yen
45 Billion yen(7) Merger Committee
Dainippon Pharmaceutical and Sumitomo Pharmaceuticals will jointly establish aMerger Committee, led by the Presidents of both companies, to proceed with the merger
smoothly and promptly.

3. Outline of Dainippon Pharmaceutical and Sumitomo Pharmaceuticals(1) Company name

Dainippon Pharmaceutical Co., Ltd.

Sumitomo Pharmaceuticals Co., Ltd.

(2) Business

Manufacture, sale/purchase andManufacture and sale ofexport/import of pharmaceuticals,

pharmaceuticals, diagnostics andveterinary products, food additives,

medical equipment.

industrial chemicals and otherchemicals
May 1897

February 1984

(4) Location of head

6-8, Doshomachi 2-chome, Chuo-ku,

2-8, Doshomachi, 2-chome Chuo-ku,

officeOsaka, Japan

Osaka, Japan(5) Representative

Kenjiro Miyatake, President

Yasuo Okamoto, President(6) Capital

13,444 million yen (as of September

9,020 million yen (as of September 30,30, 2004)

2004)

168,184,154 shares (as of September

180, 400 shares (as of September 30,(3) Date ofincorporation(7) Total shares

6outstanding

30, 2004)

2004)(8) Shareholders’

129,620 million yen (as of September

123,345 million yen (as of September

equity30, 2004, consolidated)

30, 2004, non-consolidated)(9) Total assets

185,352 million yen (as of September

170,489 million yen (as of September

30, 2004, consolidated)

30, 2004, non-consolidated)(10) Fiscal year end

March 31

March 31(11) Employees

2,493 (as of September 30, 2004,2,799 (as of September 30, 2004,consolidated)

non-consolidated)(12) Major

Mediceo Holdings Co., Ltd.

Suzuken Co., Ltd.

customers andAlfresa Corporation

Mediceo Holdings Co., Ltd.

suppliers

Toho Pharmaceutical Co., Ltd.

Alfresa Corporation(13) Major-Japan Trustee Services Bank,shareholders (%)

9.95 -Sumitomo Chemical Co., Ltd.

22.17

-Inabata & Co., Ltd.

Ltd. (Trust Account)

77.83

9.60

-The Master Trust Bank ofJapan, Ltd. (Trust Account)-Nippon Life Insurance Co.

6.90-Japan Trustee Services Bank,

4.16

Ltd. (Sumitomo Mitsui
Banking Corporation Pension
Fund Trust Account)
3.43- Sumitomo Life Insurance Co.

(14) Major banks(As of September 30, 2004)(As of September 30, 2004)

Sumitomo Mitsui Banking Corporation

Sumitomo Mitsui Banking Corporation

UFJ Bank Limited

The Norinchukin Bank
Sumitomo Trust & Banking Co., Ltd.

(15) RelationshipNo capital, personnel or trading

No capital, personnel or trading

between the two

relationship with the other party

relationship with the other party

companies(16) Financial results for the previous three fiscal years and forecast for the current fiscal year (Unit: MillionsYen)
Company

Dainippon Pharmaceutical (Consolidated)

Sumitomo Pharmaceuticals(Non-consolidated)

Fiscal year

March

March

March

March

March

March

March

March

2002

2003

2004

2005

2002

2003

2004

2005

7

(actual)(actual)(actual)(forecast*)(actual)(actual)(actual)(forecast*)

Net sales

164,117

172,161

170,842

171,000

143,446

138,282

136,915138,000

Operating

17,181

12,876

9,283

8,800

33,574

24,177

21,23922,00017,91012,86910,155

10,30032,161

21,106

20,38720,000Net income

9,595

6,364

7,967

7,700

17,434

11,16812,04812,000Earnings per

57.06

38.02

48.05

46.45

96,641

61,676

66,55566,519

10.00

10.00

10.00

10.00

38,00024,00026,00026,000689.79702.09784.24570,365

600,806

652,189

incomeRecurringincomeshare (Yen)Dividend pershare (Yen)
Shareholders’equity pershare (Yen)*All forecasted fiscal-year results are those previously announced in conjunction with the interim
results of fiscal 2004.

4. Description of the New Company(1) Company name:To be determined(2) Business
Manufacture, sale/purchase, and export/import of pharmaceuticals, diagnostics, medical
equipment, veterinary products, food additives, industrial chemicals and otherchemicals.
(3) Location of head office
6-8, Doshomachi 2-chome, Chuo-ku, Osaka, Japan(4) Representatives (Planned)
Chairman:Yasuo Okamoto (current President of Sumitomo Pharmaceuticals)
President:
Kenjiro Miyatake (current President of Dainippon Pharmaceutical)(5) Management
The Board of Directors, as of the date of the merger, will be composed of 10 Directors
and 4 Corporate Auditors, with 5 Directors to be nominated by Dainippon

8Pharmaceutical and Sumitomo Pharmaceuticals/Sumitomo Chemical respectively and 2Corporate Auditors to be nominated by Dainippon Pharmaceutical and Sumitomo
Pharmaceuticals/Sumitomo Chemical, respectively.
(6) Capital:

To be determined(7) Total assets: To be determined(8) Fiscal year end:

March 31

(9) Business prospects after the merger
Financial performance after the transaction, organizational structure, among other items,
will be announced as such information becomes available through the discussions of theMerger Committee.

Cautionary Statement
This material includes forward-looking statements based on assumptions and beliefs in light of theinformation currently available to the management of Dainippon Pharmaceutical and Sumitomo
Pharmaceuticals and subject to significant risks and uncertainties.
Actual financial results may differ materially depending on a number of factors including adverse
economic conditions, currency exchange rate fluctuations, adverse legislative and regulatory
developments, delays in new product launches, pricing and product initiatives of competitors, theinability of both companies to market existing and new products effectively, interruptions inproduction, infringement of the intellectual property rights of both companies and any adverse
outcome of material litigation.

Contact:
Dainippon Pharmaceutical Co., Ltd.
Public Relations Division
Phone: +81-6-6203-1407
Sumitomo Pharmaceuticals Co., Ltd.
Public Relations Dept.
Phone: +81-3-5159-2505

9