KYORIN Holdings, Inc.
5, Kanda Surugadai 2-chome, Chiyoda-ku, Tokyo
101-8311, Japan
Corporate Communication
TEL+81-3-3293-3414
E-mail http://www.kyorin-gr.co.jp/en/contact/
URL
http://www.kyorin-gr.co.jp/

ANNUAL REPORT 2011
Year ended March 31, 2011 KYORIN Holdings, Inc.

This report was printed using vegetable oil ink.
Printed in Japan

Profile

Corporate Information(As of March 2011)

Since the founding of its core subsidiary, KYORIN Pharmaceutical, the Kyorin Group has taken its
mission of contributing to better health seriously. Today, Kyorin is working to discover, produce, andsell pharmaceuticals through its pharmaceutical business and to develop a consumer healthcare business based on cosmetics. By promoting the faster development of superior new drugs and diversifying
its businesses to respond to expanding healthcare needs, the Kyorin Group aims to realize its role as
an organization supporting healthy living and to further enhance its corporate value.

KYORIN Holdings, Inc.
(Trading name changed from July 1, 2010)
				

Head Office
5, Kanda Surugadai 2-chome, Chiyoda-ku, Tokyo 101-8311
Phone: +81-3-3293-3451
URL: http://www.kyorin-gr.co.jp/en/

Establishment		

1958

Common Stock		¥700 million

Outstanding Shares		

74,947,628

Shareholders		

3,518

About the Corporate MarkThe corporate mark consists of three curved lines that form a hear t-shaped apricot. The lines
represent the smiles of patients, their families, and workers in medical services, as well as Kyorin’s
three core businesses, namely prevention, treatment, and prognosis.
Orange: Honesty and warmth
Violet: Technology that brings confidence
Light green: Free and lively creativity

Holding Company Structure
KYORIN Holdings, Inc. ser ves as the umbrella organization for the entire Kyorin Group, and by
taking on the management strategy function and ensuring efficient allocation and use of management resources, works to ensure that the Group achieves its comprehensive potential and to
improve consolidated business results. KYORIN Holdings, Inc. was formerly called KYORIN Co., Ltd
until changing its name on July 1, 2010.

Group Structural Diagram

KYORIN Pharmaceutical Co., Ltd.

Dr. Program Co., Ltd.

Drug discovery,
pharmaceutical business

Consumer healthcare (skincare)business

Major Shareholders			
			
			
			

Percentage
of totalsharesoutstanding

		
		
		
		
		
		
		
		
		
		

Minoru Ogihara
Hiroko Ogihara
Apricot Co., Ltd.
KM Godo Kaisha
Yoshiko Ogihara
Mykam Co., Ltd.
Japan Trustee Services Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
Yutaka Ogihara
Mariko Ogihara

8.18％
6.86％
6.67％
4.82％
3.90％
3.66％
3.11％
3.04％
2.48％
2.35％

Listing		

Tokyo Stock Exchange, First Section

Transfer Agent						Mizuho Trust & Banking Co., Ltd.,
2-1, Yaesu 1-chome, Chuo-ku, Tokyo 103-0028
Phone: +81-3-3278-8111

KYORIN Holdings, Inc.

KYORIN Rimedio Co., Ltd.
Generic drug business

KYORIN Medical Supply Co., Ltd.
Sales promotion, planning andproduction of advertising, etc.,
environmental hygiene business

Disclaimer Regarding Forward-looking Statements
Statements made in this annual repor t with respect to KYORIN Holdings, Inc.’s forecasts, plans, strategies and other statements other than thoseof historical facts are forward-looking statements about the future performance of the Company and its consolidated subsidiaries and are basedon management’s rational assumptions and beliefs in light of information currently available. As a consequence, readers should understand that, fora variety of reasons, actual results could differ materially from projections presented in this repor t. Key factors that could impact our results include,
but are not limited to, economic conditions, social trends, competition from rival companies, laws and regulations, uncer tainties in drug development
and exchange rate fluctuations.

KYORIN Holdings, Inc.

31

Contents

6
10

To Our Stakeholders
A message from President Masahiro Yamashita about the
Kyorin Group’s vision and its current growth strategies.

Summary of the First Year of
Medium-Term Business Plan
HOPE 100 Stage 1
A report on the progress of the medium-term businessplan, HOPE 100 Stage 1, announced in fiscal 2010.

15

2

Consolidated Financial Highlights

4

Our Policy

5

Our Milestones

6

To Our Stakeholders

8

Our Strategy

10

Summary of the First Year of Medium-Term Business
Plan HOPE 100 Stage 1

15

Research and Development

16

Products under Development

18

Overview of Main Markets

19

At a Glance

20

Segment Overview

22

List of Main Subsidiaries

24

Corporate Social Responsibility

26

Corporate Governance29

Directors, Auditors, and Corporate Officers

30

Organization Chart/Major Subsidiaries and Affiliates

31

Corporate Information

Research and Development
A repor t on the R&D initiatives of KYORIN
Pharmaceutical, the core subsidiary of the Kyorin Group.

KYORIN Holdings, Inc.

1

Consolidated Financial Highlights
KYORIN Holdings, Inc. (formerly KYORIN Co., Ltd.) and Consolidated Subsidiaries(Fiscal years ended March 31)
Millions of yen

FY2006

FY2007

FY2008FY2009FY2010Net sales

77,093

81,07090,88999,764

104,069

Operating income

8,413

6,251

8,952

13,261

16,443

10.9

7.7

9.8

13.3

15.8

4,842

2,189

2,037

8,848

10,927

6.3

2.7

2.2

8.9

10.5

Net cash provided by operating activities

5,005

4,444

4,575

12,027

6,805

Net cash used in investing activities(3,140)(6,144)(4,229)412(1,806)

1,865(1,700)346

12,439

4,999

8,609

10,826

10,531

11,807

12,495

11.2

13.4

11.6

11.8

12.0

Capital expenditure

2,954

1,952

1,612

1,291

1,668

Depreciation expense

4,544

4,536

3,799

2,810

2,458

ROE (%)

5.0

2.2

2.1

8.8

10.1

ROA (%)

4.0

1.8

1.6

6.8

7.7

Total assets

124,039

122,398

124,552

137,190

147,234

Total net assets

98,17897,18496,501

104,911

111,706

79.2

79.4

77.5

76.5

75.9

Results of Operations

Operating income/Net sales ratio (%)
Net income
Net income/Net sales ratio (%)

Free cash flow
R&D expenses
R&D expenses/Net sales ratio (%)

Financial Position at Year-end

Total shareholders’ equity ratio (%)

Yen

Per Share Data
Net assets per share

1,311.17

1,298.89

1,290.67

1,403.60

1,494.83

Net income per share

64.97

29.26

27.24

118.37146.21Dividend per share

30.00

22.50

13.00

50.00

45.00

46.2

76.9

47.7

42.2

30.8

Dividend payout ratio (%)

2

Annual Report 2011

Net sales

Net sales growth was driven by higher Kipres and Uritos sales in domestic ethical drugs, withgeneric drug sales also topping forecasts. As a result, net sales were ¥104,069 million, up 4.3% year
on year, surpassing the ¥100,000 million mark for the first time since the Company’s founding.

Operating income rose 24.0% year on year to ¥16,443 million, due to efforts to control the cost of

Operating income

sales ratio and SG&A expenses ratio, coupled with top-line growth.

Net income was up 23.5% year on year at ¥10,927 million, reaching the highest level on record for

Net income

the second straight year.

With significant growth on the profit side as in the previous fiscal year, ROE rose to 10.1%

ROE(1.3 points above the previous fiscal year).

Net sales

Operating income

Net income(Millions of yen)

(Millions of yen)

(Millions of yen)

120,000
99,764

104,069

20,00012,00010,927

16,44390,88990,00077,093

8,848

81,07015,00060,00010,0009,000

13,261

8,952

8,413

6,000

4,842

6,251
30,0000

5,0002006 2007 2008 2009 2010 (FY)

02,189 2,037

3,0002006 2007 2008 2009 2010 (FY)02006 2007 2008 2009 2010 (FY)ROE

Total shareholders’ equity ratio

Net income per share/Dividend payout ratio

(%)

(%)

(Yen)

(%)

10.1
10.0

8.8

8.0

80.0
79.2

180

79.4

90.0
76.9

146.2179.0
118.37
120

6.0

78.0

5.0

4.0

2.0

0

77.0
2.2

2.1

2006 2007 2008 2009 2010 (FY)

76.0

75.0

77.5

60.0
46.2

47.7

42.2

64.97
76.5

30.8

60
75.9

2006 2007 2008 2009 2010 (FY)

30.0

29.26 27.24

02006 2007 2008 2009 2010 (FY) 0
Net income per share (Left scale)
Dividend payout ratio (Right scale)

KYORIN Holdings, Inc.

3

Our Policy

Our
Philosophy
Kyorin continues to fulfill its mission of cherishing life, and benefiting society by contributing
to better health.

Our Vision

HOPE 100
Aim for Health Of People and our Enterprises
HOPE 100 is a long-term vision looking forward to 2023, the 100th anniversary of thefounding of subsidiary KYORIN Pharmaceutical Co., Ltd. It encompasses our powerful goalof supporting healthy lifestyles through our business in the treatment and prevention of
disease and the maintenance and promotion of good health. Our long-term vision HOPE
100 embodies the Group’s corporate philosophy and sets out the Group’s future development objectives. This philosophy is the statement of our business objective and the basic
rationale for the Group’s business. The future of the Group is expressed in the statement,“The Kyorin Group will promote diversified business expansion and development of theconsumer healthcare business, and by 2023 be recognized both within and outside theGroup as a company that supports sound and healthy lifestyles.” Guided by this vision, theGroup will spread its business risks and aim to achieve sound, stable, sustainable growth.

The Story of Kyorin
The name Kyorin originated from two Chinese characters that represent a truly virtuous wayof practicing medicine.
Long ago, a Chinese physician named Tai Feng treated the sick free of charge, and asked
those who recovered from serious illness to plant five apricot tree saplings and those cured ofminor illness to plant one. As time went by, a thick forest of apricot trees was formed in thearea. (A story that comes from a Chinese legend named Shinsen-den.)

Kyorin is a compound of kyo, the Chinese word for “apricot” and rin the Chinese word
for “woods.”
Praising the virtue of Tai Feng, the characters were transported from China to Japan as those
representing medicine and medical treatment in general.

4

Annual Report 2011

Our Milestones

1923

Toyo Shinyaku Sha, the predecessor of
KYORIN Pharmaceutical Co., Ltd., was founded.

1931

Kyorin Chemical Laboratory was established.

1940

The company was renamed KYORIN
Pharmaceutical Co., Ltd., and Kyorin YakuhinCo., Ltd. was organized as an independent
marketing division.

1946

The Okaya Plant was started; and the Tokyo, Osaka, and Nagoya Branches
were opened.

1957

The medical journal bulletin Doctor Salon was started.

1961

Behyd, a diuretic and anti-hypertensive agent, was launched.

1962

Kyorin Chemical Laboratory (later Technical Center of Development) wasestablished.

1965

KYORIN AP-2, an analgesic, was launched.
Deamelin-S, an oral hypoglycemic agent, waslaunched.
The Head Office was completed.

1967

The Nogi Plant was started. (now closed)

1971

Cholexamin, a lipid metabolism and peripheral circulation improving agent,
was launched.

1974

Hespander, a plasma substitute and extracorporeal c­ irculation flow
improver, was launched.

1976

Hydroxyethylstarch (HES) was licensed out toPfrimmer (Germany, present Baxter Deutschland).

1977

Central Research Laboratories (present Discovery Research Laboratories)
was established.

1980

Norfloxacin (NFLX), an antibacterial agent, was licensed to Merck & Co.,
Inc. (USA).

1981

Mucodyne, a mucoregulant, was launched.

1982

NFLX was licensed to Astra (Sweden) and Boots (UK, present BASF/
Knoll).

1983

NFLX was licensed to American Home Products (USA).

1984

Baccidal (NFLX), a broad-spectrum oral antibacterial agent, was launched.

1986

Fleroxacin (FLRX), an antibacterial agent, was licensed toF. Hoffmann-La Roche (Switzerland).
Aplace, an agent for gastritis and gastric ulcers, was launched.

1989

Ketas, for bronchial asthma and cerebrovascular disorders,
was launched.
Baccidal Eyedrops, a broad-spectrum ophthalmic antibacterial agent, waslaunched.

1991

Baccidal Tablets for Children was launched.

1992

KYORIN Pharmaceutical Co., Ltd. and Kyorin Yakuhin Co., Ltd.
were merged, and the new KYORIN Pharmaceutical Co., Ltd. wasfounded.

1993

Megalocin (FLRX), a long acting new quinolone agent, was launched.

1995

The Noshiro Plant was started.

1995

Research Center (now Development Research Laboratories) was
founded by integrating Research Center of Organic Syntheses, TechnicalCenter of Development, Technical Center of Product Formulation andTechnical Center of Safety Assessment.

1996

A joint venture, Nisshin KYORIN Pharmaceutical Co., Ltd., was establishedwith Kyorin’s capital participation.
Gatifloxacin was licensed to Bristol-Myers Squibb (USA).

1998

Milton, an effervescent disinfectant
business, was acquired from P&G.

1999

The company’s stock was issued on theTokyo Stock Exchange, Second Section.

2000

The company’s stock was issued on the Tokyo Stock Exchange, First
Section.
Gatifloxacin-eyedrops was licensed to Allergan (USA).

2001

Kipres, the leukotriene receptor
antagonist and bronchial asthma
treatment medicine, was launched.
A subsidiary company, Kyorin USA, Inc.
(USA), was established.

2002

A subsidiary company, Kyorin Europe GmbH (Germany),
was established.
Gatiflo (GFLX), a broad-spectrum, oral antibacterial agent,
was launched.

2004

ActivX Biosciences, Inc. became a wholly owned subsidiary.

2005

The stocks of Toyo Pharmar Co., Ltd. (present KYORIN Rimedio Co., Ltd.)
were acquired, making it into a subsidiary company.
Dr. Program Co., Ltd. became a wholly owned subsidiary.

2006

The Kyorin group shifts to a holding company structure through a shareexchange with KYORIN Co., Ltd. (currently KYORIN Holdings, Inc.)(KYORIN Pharmaceutical Co., Ltd. is delisted, and KYORIN Co., Ltd. is listedon the First Section of the Tokyo Stock Exchange market.)
The new Noshiro Plant began operating.

2007

A business transfer agreement was made with the Fresenius Kabi AG
Group in Germany concerning Hespander and Salinhes, plasma substitutes
and hemodilution agents.
Uritos Tablets 0.1mg, an overactive bladder drug, was launched.
Kipres Oral Granules 4mg, a bronchial asthma treatment drug, waslaunched.

2008

Kipres Tablets 5mg, a bronchial asthma and allergic rhinitis treatment drug,
was launched.
KYORIN Pharmaceutical merged with Nissin Kyorin Pharmaceutical.
Ulcerative colitis and crohn’s disease therapeutic agent Pentasa Tablets 500
was launched.

2009Marketing rights in China were granted to Senju Pharmaceutical for­Gatifloxacin Ophthalmic Solution.
A license agreement for Neramexane, a tinnitus drug, was made with
Merz Pharmaceuticals for the Japan region.

2010

KYORIN Co., Ltd. changed its name to KYORIN Holdings, Inc.
Mucodyne DS50%, a mucoregulant, was launched.

2011

A license agreement for Aclidinium Bromide, a COPD drug, was madewith Almirall for the Japan region.
Uritos Orally Disintegrating (OD) Tablets 0.1mg, an overactive bladderdrug, was launched.

KYORIN Holdings, Inc.

5

To Our Stakeholders

Representative Director, President and Chief Executive Officer

Masahiro Yamashita

We offer our deepest sympathies to all of those affected by the recent Great East Japan Earthquake, alongwith our prayers for the earliest possible recovery of the afflicted regions.
Fortunately, none of the Kyorin Group’s companies suffered any personal injury or fatalities, with only
minimal physical damage, and the effect of the earthquake on business performance has been minor.

Valuing Our Founding Spirit, while Working to Realize the Goals of
Our Corporate Philosophy
Since its founding in 1923, KYORIN Pharmaceutical, the Kyorin Group’s core subsidiary, has taken its missionof contributing to better health seriously, working to research, develop, produce, and sell unique drugs. One
aspect of that founding spirit can be seen in our name, Kyorin, which carries a historical meaning of “medicine”
or “medical care,” and in the corporate message we have used since 1969: “Your Health is Kyorin’s Mission.”
Today, the Kyorin Group carries on this founding spirit under the corporate philosophy of cherishing lifeand benefiting society by contributing to better health. In addition to contributing to the treatment of disease
by providing superior drugs and by building a portfolio of businesses that can respond to diversifying healthneeds, from health maintenance and advancement to disease prevention, we are working to enhance ouridentity as a Group and our corporate value.

Implementing Our Long-Term Vision and Our Medium-Term Business Plan
Since last year, the Kyorin Group has begun work on HOPE 100, a new long-term vision for the period
through 2023, which will mark the 100th anniversary of KYORIN Pharmaceutical, our core subsidiary, as well
as a new medium-term business plan, HOPE 100 Stage 1 (for fiscal 2010–2015), designed to reach the objectives of that vision.
Under the long-term vision, the future of the Group is expressed in the statement, “The Kyorin Group will

6

Annual Report 2011

promote diversified business expansion and development of the consumer healthcare business, and by 2023
be recognized both within and outside the Group as a company that supports sound and healthy l­ifestyles.”The business strategy is to focus on becoming a company that can respond to diversifying healthcare needs,
centered on the pharmaceutical business, while working to diversify management risk and achieving sound,sustainable growth. Meanwhile, the Group’s organizational strategy places great value in the idea that“a business is only as good as its people,” and we seek to become a place in which employees can bringpassion to their work: in short, a leading company for pursuing fulfilling careers.
Under HOPE 100 Stage 1, the medium-term business plan positioned as the first step in achieving thislong-term vision, the Kyorin Group will push ahead with a multi-core (MC) strategy comprising our pharmaceutical and consumer healthcare businesses. In the pharmaceutical business, we will work to build and promote the multi-faceted business model we call our Pharma Complex Model, an approach encompassing new
drugs, original drugs, and generic drugs. In new drugs, we will continue to expand our R&D (research anddevelopment) pipeline, while supporting the creation of drugs that can be licensed out worldwide. We arealso aiming to bring a unique approach to the expansion of our generic drug business. In consumer healthcare,
our goal is to supplement risks in the pharmaceutical business and put in place a structure for promoting theGroup’s growth by developing Milton and our existing skincare business, and by creating new businesses. In
addition, we recognize that the most crucial factors behind executing our business strategy and deliveringresults are valuing our employees and revitalizing both our people and our organization as a whole. Recognizing this, we will work to rebuild our human resources management, including structures for hiring, training,
performance evaluation, promotion, personnel allocation, compensation, and benefits.
Our numerical targets are to achieve consolidated sales of ¥140.0 billion and operating income of ¥20.0
billion in fiscal 2015, the last year of HOPE 100 Stage 1. The Kyorin Group will work to strengthen its management base through balanced implementation of investments for growth, investments for business continuity,and shareholder returns. Our dividend policy targets a consolidated payout ratio to shareholders of 30%.

Working toward Sustainable Performance GrowthThis summarizes our policies for business activity in the medium to long term, but at the same time, the Kyorin
Group must of course expand business performance in the short term. In fiscal 2010, Group consolidated sales
reached ¥104.1 billion, with operating income of ¥16.4 billion and net income of ¥10.9 billion—all record sales
and earnings results—a performance we are sure our stakeholders will be pleased with. While fiscal 2011
promises an even more challenging business environment, we intend to work hard to achieve new record net
sales for the eighth year in a row on a consolidated basis, and posting record-high operating income for thethird consecutive year. We also recognize that, in this second year of HOPE 100 Stage 1, we will be expected
to improve not only results, but operations as well, as we work to achieve our business vision.
Going forward, the Kyorin Group will be even more proactive in transmitting information to our stakeholders, and we hope you will recognize the progress we are making in business performance with HOPE 100 andelsewhere. I look forward to the continued understanding and support of all of our stakeholders.

July 2011
Masahiro Yamashita
Representative Director, President and Chief Executive Officer

KYORIN Holdings, Inc.

7

Our Strategy

Medium-Term Business Plan HOPE 100 Stage 1
As the first step in achieving the Kyorin Group’s long-term vision, HOPE 100, for realizing its corporate philosophy, we aim to bolster the forward momentum of its businesses by reorganizing them and building aframework for promoting each business at the HOPE 100 Stage 1.
In promoting HOPE 100 Stage 1, the Group will maintain its core pharmaceutical business, while diversifying
its core businesses through the consumer healthcare business. The expression “diversify” indicates our strong
desire to develop each business in the Group as a new core driver of the Group’s growth. Specifically, we haveare promoting a multi-core strategy and a new pharmaceutical business model, the Pharma Complex Model.
In addition, evolving into a company which supports healthy lifestyles and contributes to individual healthrequires that the Kyorin Group itself achieves sound growth. This includes not only financial good health, butalso efforts to build a solid management platform to ensure that it remains healthy in terms of corporate
governance, compliance, and corporate social responsibility.

Structure of HOPE 100 Stage 1
HOPE 100 Stage 1, the Kyorin Group’s
new medium-term business plan forachieving its long term vision, comprises
three elements: Strategy, Organization,
and Performance. By working to steadily
implement each of these components,
we aim to enhance corporate valueeven fur ther.

S

Business Strategy

StrategyP

Consumerhealthcare
business

Performance Targets

PerformanceO
Organization Strategy

Organization

Pharmaceuticalbusiness
Long-term growth (envisaged)
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Stage 2

Stage 1

2019

2020

2021

2022

2023 (FY)Stage 3

S

Overview of Business Strategy
To become a company that supports healthy lifestyles, as stated in the long-term vision, the Company willbuild a diverse business portfolio centered on the core pharmaceutical business and contribute to the healthof individuals through the total healthcare business.

Overview of the Multi-core (MC) Strategy
To strengthen its ethical pharmaceutical business through multi-faceted expansion and diversify business risk,
the Company will aim for diverse expansion and growth in its consumer healthcare business.

Multi-core (MC) Strategy
Diversify the Consumer Healthcare Business with Centering on the Ethical Drug BusinessPharmaceutical BusinessPharma Complex Model (PC model)
Multi-faceted business development(New drugs, original drugs, generic drugs)

8

Annual Report 2011

Consumer Healthcare Business
Cultivate existing businesses and create
new businesses

Overview of the Pharma Complex (PC) Model
In order to respond to changes in business environments, including trends in regulatory policies, the Kyorin
Group will work toward a multi-faceted expansion of its pharmaceutical business, aiming for sustainable growth.
To do this, under the PC Model the Company classifies ethical drugs into “New Drugs Group” (drugs alreadylaunched or being under development, which are protected by patents and exclusivity), “Original Drugs Group,”and “Generic Drugs Group,” enabling us to adopt a flexible strategy in responding to changing environments.

Diagram of Ethical Drugs Business Activity under the PC Model
Pharma Complex (PC) Model
Respiratory

Franchise Customer(FC) Strategy

Otolaryngological

New Drugs
Group

UrologicalOriginal Drugs
Group

Generic Drugs
Group

Other
Integration of wholesale sales channels

Common Platform

Consider optimization of total production system

Deploy a flexible strategy that can address changes in the environment(including functional reorganization of KYORIN Pharmaceutical and KYORIN Rimedio)

Overview of Organizational Strategy
O
In the formulation of its long-term vision and medium-term business plan, the Kyorin Group has emphasized
its founding conviction that “a business is as good as its people” and is promoting people-oriented management. It is by valuing our employees and energizing our people and our organizations, that we will drive theexecution of our business strategy, and we recognize these as the most critical issues in achieving results.
To accomplish this, under HOPE 100 Stage 1, we will strive to become a leading company for job fulfillment,
one in which employees can feel a sense of pride and trust in the company and its organizations, and in which
all Group employees are united in their work. The first steps towards realizing this goal will include efforts torebuild our human resources management in every Group company (hiring, training, evaluation, promotion,
assignment, compensation, and benefits) and to revitalizing communications.

P

Performance Targets
Under HOPE 100 Stage 1, in addition to quantitative performance targets, the Kyorin Group also
aims to contribute to stakeholders. We will

FY2015 (Target)

(Billions of yen)

Consolidated net sales

140.0

Pharmaceutical business

120.0

Consumer healthcare business*

20.0

Consolidated operating income

20.0

strengthen our management base by balancing
investments for growth, investments for business
continuity, and shareholder returns. In investments
for growth, we plan to license in new products toBalance between Investment andShareholder Returns

reinforce the R&D pipeline in our core pharmaceutical business and make strategic investments in new
consumer healthcare operations. In deciding divi-

Shareholder
returns

Investment
for growthdends we target a consolidated payout ratio of 30%.
* Skincare, over-the-counter drugs and others

Investment forbusiness continuity

KYORIN Holdings, Inc.

9

Summary of the First Year of Medium-Term Business Plan HOPE 100 Stage 1
In fiscal 2010, the first year of the new medium-term business plan HOPE 100 Stage 1, the Kyorin Grouppushed forward aggressively with management initiatives to build and promote a new pharmaceutical businessmodel, and develop its consumer healthcare business and create new businesses. The goal of these initiatives isto achieve sound, sustainable growth.
As a result, consolidated sales increased for the seventh consecutive fiscal year, while income rose for thesecond year in a row. Growth in primary products Kipres and Uritos led the rise in sales, while generic drugs
also performed better than planned. As a result, the Group posted net sales of ¥104.1 billion, an increase of
4.3% year on year, with net income up 23.5% year on year to ¥10.9 billion, both figures reaching record highs
for the second period in a row.

HOPE 100 Stage 1 Performance Targets

Billions of yen

FY2010 (Results)

FY2009 (Results)

FY2015 (Target)

99.8

104.1

140.0

Pharmaceutical Business

91.0

96.9

120.0

Consumer healthcare business*

8.7

7.2

20.0

13.3

16.4

20.0

FY2010 (Results)

ChangeChange (%)

Net sales

Operating income* Skincare, over-the-counter drugs and others

Sales of Main Products

Billions of yen

FY2009 (Results)

Kipres

29.2

34.5

5.3

18.3

Mucodyne

20.9

21.3

0.4

1.6

Pentasa

19.4

19.4

0

0.1

Uritos

3.7

5.5

1.8

48.4

New Drugs Group
Primary products classified as “New Drugs Group” under the PC Model include the bronchial asthma andallergic rhinitis treatment Kipres, and the overactive bladder (OAB) treatment Uritos.
Under HOPE 100 Stage 1, we are working to expand the market for Kipres and Uritos as far as possible,
while in our R&D pipeline, we are focusing on bringing KRP-108* quickly to market and on out-licensing
KRP-104. Enhancing the R&D pipeline from a long-term perspective is also a major issue, and we continue to10

Annual Report 2011

work on enrichment of our R&D pipeline in the franchise customer domain and on
early commercialization.
Our plan is to lift sales of “New Drugs Group” from ¥40 billion in fiscal 2010 to ¥50 billion in 2015.
* The Company aims to file of NDA for KRP-108 in fiscal 2012 and launch in fiscal 2014. Characteristics of KRP-108 include
its combination of ICS (fluticasone) and LABA (formoterol), and its optimal inhalation device.

Sales(Billions of yen)

50.0
500
40.0
400
30.0
300

50.0
500

20.0
200

32.9
329

40.0
400

10.0
100
0

2009

(Results)

2010(Results)

Sales(Billions of yen)

40.0
30.0
20.0
10.0

29.2

34.5

40.0

0
2009
(Results)

2010(Results)

2015 (FY)(Target)

Sales(Billions of yen)

10.0
8.0
6.0
10.0

4.0
2.0

3.7

5.5

0
2009
(Results)

2010(Results)

2015 (FY)(Target)2015 (FY)(Target)Kipres
While some impact was seen from reduction to the official priceof Kipres on Japan’s National Health Insurance drug price list
(down 7.2%) in fiscal 2010, steady growth came with an increasein prescriptions for allergic rhinitis. We also saw additional growth
in prescriptions for both adult and child bronchial asthma
patients, in particular greater use of 4mg fine granules and 5mg
chewable tablets. This led to expansion of our share of the market
for LT antagonists.
In fiscal 2011, we will position Kipres as a base treatment forallergic rhinitis and encourage its wider prescription by educating
doctors in the fact that allergic rhinitis is a chronic inflammatory
disease, and by building further evidence.
Prescriptions of leukotriene antagonists for allergic rhinitis remain
low, and by continuing these efforts, we hope to expand theirprescription not only among otolaryngologists, but general internists
as well, with target sales in fiscal 2015 of ¥40.0 billion.

UritosIn fiscal 2010, the impact of official price reduction (down 0.9%) was
limited, as Uritos became subject to the new policy regarding
premiums for promoting new drug creation and the elimination ofoff-label drug use. We were able to expand our share of theoveractive bladder (OAB) market by working aggressively toposition Uritos as a first-choice prescription through uncovering
latent markets and product differentiation.
We will continue these efforts in fiscal 2011, as we work toincrease market penetration of our new orally disintegrating (OD)
tablet formulation, which went on sale in April of this year. Whileconsultation rates for patients with OAB remain low, we believethat new treatments scheduled to come to market will give it
greater momentum, increasing patient awareness of the disease anddemand for treatment. The OAB market is predicted to grow to¥100.0 billion in fiscal 2015, and we aim to grow sales of Uritos
with it to ¥10.0 billion by the same year.

KYORIN Holdings, Inc.

11

Original Drugs GroupIn “Original Drugs Group,” we are using lifecycle management (LCM) to enhance product value and extend
product lifecycles. In particular, we are focusing on improving value and extending the lifecycles of key products such as the mucoregulant Mucodyne and Pentasa, a treatment for ulcerative colitis and Crohn’s disease.
Our plan is to lift sales of original drugs from ¥45.3 billion in fiscal 2010 to ¥50 billion in fiscal 2015.

Sales(Billions of yen)

50.0
40.0
30.0
20.0

49.5

50.0

45.3

10.0
0

2009

2010

(Results)(Results)

Sales(Billions of yen)

25.0
20.0
15.0
10.0

20.9

21.3

2009
(Results)

2010(Results)

24.0

5.0
0
2015 (FY)(Target)

Sales(Billions of yen)

20.0
15.0
10.0

19.4

19.4

19.0

2009
(Results)

2010(Results)

2015 (FY)(Target)

5.0
0

12

Annual Report 20112015 (FY)(Target)Mucodyne
Sales of Mucodyne saw some impact from official price reduction in
fiscal 2010 (down 7.6%), but after posting sales of approximately¥4.0 billion from the new DS50% formulation that launched in May
of 2010, and through efforts to expand prescription for use inpatients with chronic respiratory disorders and sinusitis, we weresuccessful in improving business performance.
In fiscal 2011, we will work to increase prescription of the new
DS50% formulation to a wide age range, while also aiming tomaximize market penetration by utilizing evidence-based data toincrease prescriptions in patients with chronic respiratory disorders
and sinusitis. We aim to grow sales of Mucodyne to a target of¥24.0 billion by fiscal 2015.

Pentasa
In fiscal 2010, Pentasa saw the twin effects of both official drug pricereduction (down 6.2%) and the introduction of competing products,
but sales remained level with the previous period. We worked toestablish Pentasa as a standard prescription for treating ulcerative
colitis, and saw increased prescription of the 4g dose for use in theactive stage of the disease, as well as combination use of Pentasa
Enema to induce and maintain remission.
In fiscal 2011, we will continue to establish Pentasa as a standard
prescription for ulcerative colitis, while also emphasizing patient
convenience by providing a variety of dosages and formulations(250mg tablets, 500mg tablets, enema) in response to broad patientneeds. We will further meet those needs by developing new formulations and dosages, targeting sales in fiscal 2015 of ¥19.0 billion.

Generic Drugs GroupThe Kyorin Group is aiming to expand its business in distinctive generic drugs by working to strengthen collaboration within the Group and aggressively promoting external alliances. In fiscal 2010, sales in the healthinsurance pharmacy market were steady due to the premium system for dispensing generic drugs. We also
worked to implement measures to increase sales and expand profits in response to systemic reforms andother changes in the business environment, including integrating distribution channels and lowering the cost of
sales ratio by reducing raw material costs.
By further expanding sales of key products, enhancing the number of new items and strengthening our
product lineup in key areas, we plan to raise sales from ¥8.9 billion in fiscal 2010, to ¥20.0 billion by fiscal 2015.
Sales at KYORIN Rimedio amounted to ¥10.3 billion, marking the first time sales have reached ¥10.0 billion
in a 12-month period (due to a change in the accounting period, 14 months of sales were posted in theprevious fiscal year).

Sales(Billions of yen)

20.0
500
400
15.0
300
10.0

20.0
500

200
5.0
100

329
8.6

400
8.9

0

2009

(Results)

From October 1, 2010, the KYORIN Rimedio Co., Ltd. wholesale channels(logistics) were integrated into KYORIN Pharmaceutical Co., Ltd.

KYORIN
Pharma- Distribution
ceuticalCo., Ltd.

2015 (FY)(Target)Promotion of distinctive generics business

Domestic and overseas alliances

Distribution and promotion of products

KYORIN
RimedioCo., Ltd.

2010(Results)

Wholesalers

Sales companies

Hospitals
anddispensing
pharmacies

Business developmentemphasizing infections(product lineup)

Quality assurance
Stable supply
Lower costs

Promotion● Expanded sales for generic drugs through the wholesale channel● Used a flexible approach to respond to changes in the environment

Stronger in-group alliances(Includes functional realignment with Ethical Drugs Business)

Integration of Distribution Channels

Promotion of Distinctive Generic Drugs Business

On October 1, 2010, KYORIN Rimedio Co., Ltd. integrated its whole-

The first objective is to promote quality assurance, stable supply, andsale sales routes with those of KYORIN Pharmaceutical Co., Ltd. As alower costs by strengthening collaboration within the Group and alli-

result, we are beginning to see increased sales of generic drugs throughances both at home and abroad. We see reducing our cost of sales ratio

wholesale channels. The important next step is to begin building an

as a particularly important issue. Our second objective is to begin work-

effective, efficient infrastructure to enable us to deploy more flexible

ing initiatives to gain competitive advantage through our product lineup

strategies within the Group in response to future changes in thein specific areas. Specifically, we will focus on infectious diseases as one

market environment.

key area, and we are currently working to enhance our product lineup in
certain types of antibacterial agents that are needed in Japan.

KYORIN Holdings, Inc.

13

Sales in Consumer Healthcare Business(Skincare and Nonprescription Drugs, etc.)
Under HOPE 100 Stage 1, the consumer healthcare business is classified into the skincare business and nonprescription drugs. We are working to diversify our business, both to compensate for risks in our pharmaceutical business and to achieve sustained growth for the Kyorin Group as a whole. In the skincare business, ourefforts focus on bringing the business into profitability while promoting growth, including expansion into Asianmarkets. In nonprescription drugs, we are working to leverage the Milton brand, while also aiming to create
new businesses. Beginning in fiscal 2011, the Kyorin Group has also decided to begin aggressive work in the
new business of environmental hygiene, finding ways to meet medical needs and contribute to better healththrough environmental infection control.
By continuing to study and consider new future-oriented acquisitions in the field of environmental hygiene,
while also considering the potential for business growth in areas related to ethical drugs, we are targeting salesof ¥20.0 billion in fiscal 2015.

Sales(Billions of yen)

20.0

15.0

10.0

20.0

5.0

8.7

7.2

0

2009

(Results)

2010(Results)

2015 (FY)(Target)Participation in Environmental Hygiene Business
The Kyorin Group considers the environmental hygiene business to include “businesses related to maintaining
and enhancing human health by improving harmful environments, based on an approach to health and disease
that examines the environments where people live.”
We will initially develop this business by focusing on controlling bacterial and viral infections in
the environment.
In fiscal 2011, we will begin sales of space purification systems and related products, utilizing stabilized chloride dioxide manufactured by DuPont in the U.S. Sales will be handled primarily by KYORIN Medical Supply
Co., Ltd. (formerly Kyobundo Co., Ltd.).

14

Annual Report 2011

Research and Development
As the core of the Kyorin Group’s pharmaceutical business, KYORIN Pharmaceutical focuses on R&D toensure that the best products are delivered to patients as quickly as possible. Our future vision for the Company under the long–term vision HOPE 100 is to be a drug manufacturer that is trusted by patients andmedical professionals, and is recognized for its presence in society. Under the HOPE 100 Stage 1 mediumterm business plan, our goal is to establish a strong presence in specific fields, while discovering new, original
drugs on a global basis. Specifically, the Company is working on building an attractive drug pipeline in respiratory medicine, otolaryngology, and urology, while creating several new drugs and out-licensing such new drugs
globally.
Using its global drug discovery network, including KYORIN Pharmaceutical’s Kyorin Discovery ResearchLaboratories in Japan, ActivX Biosciences, Inc. in the United States, and Kyorin-Scotland Research Laboratories
in Europe, the Kyorin Group explores drug discovery seeds and leads. With the Group’s strengths in synthesis
and ability to swiftly evaluate drug efficacy, pharmacology, ADME (Absorption, Distribution, Metabolism, Excretion), and safety, and with close collaboration between departments that promotes more reliable results, weare able to efficiently promote the discovery of compounds with development potential and thus facilitate
high-quality clinical trials.
In the medium- to long-term, the Kyorin Group’s research strategy will focus on key fields including respiratory medicine, urology, and infectious diseases, and we also work on other fields to meet unmet medical
needs. In selecting our R&D themes, we are working with a cross-functional team to evaluate opportunities
using a Company-wide, multi-perspective approach to determine target diseases and the corresponding
concept of products we wish to develop. In addition, we are strengthening our search for the seeds of new
drugs by promoting open innovation with outside entities and working to further expand our drug discovery
network. We are also working to further streamline clinical development (clinical trials in Asia, as well as joint
international trials) with the goal of bringing lifecycle management projects in specific fields and other development projects to market as quickly as possible, as we continue to build an extensive drug portfolio.

Focus on Timelines in Research and Development
Under HOPE 100 Stage 1, we have classified our initiatives based on the stage at which their results are to berealized, paying close attention to the plan’s timeline as we promote research and development activities.
Under the medium-term business plan, we will aim to introduce the bronchial asthma treatment KRP-108
within fiscal 2014 and out-license KRP-104, our anti-diabetes agent. At the same time, we will work actively on
the lifecycle management of our pharmaceuticals.

HOPE 100 Stage 1
FY2010-2015
Tasks atEach Stage• Life Cycle Management promotion• KRP-108 (aim for FY2014 launch)• KRP-104 (aim to out-license)

HOPE 100 Stage 2
FY2016-2019
Early application and approvalof newly developed products
Pipeline enhancement and strengthening

HOPE 100 Stage 3
FY2020-2023
Creation of original new global
products

Aim to in-license productsLife Cycle
Management

Newly Developed
Products(Incl. products
in-licensed)

Creation of
Original New
Drugs

For Pentasa, a UC/CD drug:• New dosage regimen (QD treatment)• New dosage form (Suppository)
KRP-108 (asthma)
KRP-104 (diabetes)
In-licensing of new products for respiratory
medicine, otolaryngology, and urology

KRP-209 (tinnitus)
KRP-203 (immunomodulator: IBD)
KRP-110 (constipation and intractable pruritus)
KRP-AB1102 (COPD)
KRP-AM1977X (respiratory infection)
KRP-AM1977Y (anti-MRSA)• Clarify direction of R&D (concentrating on FC domain and respond to unmet medical needs)• Strengthen capacity to create new drugs (restructuring the drug discovery network)

KYORIN Holdings, Inc.

15

Products under Development(As of July 29, 2011)

Ph II~Application
Compound/Code

Therapy area/Action

OriginFeatures

Comments

Stage
Pre-clinical

Pentasa (tablet)

Ulcerative
colitisFerringPharmaceuticals

New dosage regimen for ­ulcerative colitis
in the remission phase (once a day)Pentasa(suppository)

Ulcerative
colitisFerringPharmaceuticals

Consideration of a new dosage form forthe active phase of ulcerative colitis(once a day)Development of a new
dosage form

KRP-108 (inhalant)

Anti-asthmatic

SkyePharma

An ICS/LABA combination product which
offers better compliance and convenienceto patients•	License agreementwith SkyePharma(4/2008)•	Domestic Ph II
completed (4/2010)

Ph I

Ph II

Ph III

NDA

12/2009

Domestic
Overseas

KRP-104

Anti-diabetes
agent

In-house

A DPP IV inhibitor to reduce blood•	Overseas Ph IIb
glucose through suppression of thecompleted (3/2011)degradation of insulin-releasing hormone. •	Domestic Ph IIb
Diabetic therapy with fewer side effects
completed (3/2010)is expected than existing treatments.

Domestic

11/2010

Domestic

8/2010Overseas*1

Domestic

2/2008Overseas9/20071* United States: SkyePharma, Europe: Mundipharma
Other Comments
Uritos OD Tablet 0.1mg (orally disintegrating tablet of immidafenasin (INN), a drug for overactive bladder): Launched in 4/2011

POC Project (Pre-clinical ~ Ph II)
Compound/Code

Therapy area/Action

OriginFeatures

Comments

Stage
Pre-clinical

KRP-203

KRP-110

KRP-209

KRP-AB1102(inhalant)

KRP-AM1977X(Oral agent)

KRP-AM1977Y(Injection)

Transplantation,
autoimmune
diseases, andIBD

Opioid-induced
constipationand intractablepruritus

Tinnitus

Chronic
Obstructive
Pulmonary
Disease(COPD)

New quinolone
synthetic
antibacterial
agent

New quinolone
synthetic
antibacterial
agent

In-house

In-house

Merz

AlmirallIn-house

In-house*2 Ph II (POC) 12/2010 Novartis*3 Merz*4 Europe: Almirall, United States: Forest Laboratories

16

Annual Report 2011

An immunosuppressant with a novel
mechanism called an S1P-agonist. It may
have a better safety profile than previous
ones as well as an excellent effect underconcomitant use with other types of
immunomodulator.

•	License agreementwith Novartis(2/2006)•	New license agreement IBD (11/2010)

A highly selective μ-opioid receptor
antagonist. It is expected to block
constipation induced by opioid analgesics without interrupting the analgesic
effect of opioids. It is orally effective invarious itching models, indicating
potential of a novel anti-itch drug for
intractable pruritus.

Overseas

Ph III

NDA*2

Overseas•	License agreementwith Merz (11/2009)•	Merz: Ph I clinical trialof Japanese patients in
US completed(3/2010)

This bronchodilating agent has anacetylcholine receptor antagonist actionthat offers long-lasting improvement forbreathing difficulty and shortness ofbreath associated with COPD.
1. Fewer systemic side effects
2. Twice-daily dosage offers a full-day
improvement in symptoms andrespiratory function
3. S hort time required for the maximum
effectLicense agreement with
Almirall (2/2011)

1. S uperior ability to combat drugresistant gram-positive bacteria(incl. MRSA)
2. O
 utstanding ADME
(oral absorption, tissue migration)
3. H
 igh degree of safety expected sincesafety hurdles cleared prior to clinical
trials

Ph II

12/2010

Domestic

Domestic

KRP-209 (Neramexane) is expected to
improve the patients’ annoyance anddifficulties in their life caused by tinnitus,
mainly through its two pharmacologicalproperties: 1) NMDA antagonistic
activity and 2) Nicotinic acetylcholine
antagonistic activity

1. S uperior ability to combat drugresistant gram-positive bacteria(incl. MRSA)
2. O
 utstanding ADME
(oral absorption, tissue migration)
3. H
 igh degree of safety expected sincesafety hurdles cleared prior to clinical
trials

Ph I

8/2010In preparation

Domestic

Overseas

Domestic*3

Preparing forclinical trials

In preparation*4

Overseas

Domestic

Preparing forclinical trials

Overseas

Domestic

Overseas

Preparing forclinical trials

Licensing Development
Compound/CodeLicensee/
Therapy area/Action
Collaborative research

OriginComments

Stage
Pre-clinical

Alphagan/AlphaganP

Senju
Pharmaceutical

Glaucomatreatment

Allergan(US)•	Licensed from Allergan (Cross license of gatifloxacin
ophthalmic solution)•	License-out to Senju (5/2004)

Ketas

MediciNova(US)

Cerebrovasculardisorders

In-house•	KYORIN grants MediciNova an exclusive license in
all countries worldwide except for Japan, China,
South Korea, and Taiwan to develop, manufacture,and sell the compound and products for the multiple
sclerosis indication (10/2004)• Result of Ph II was reported in April 2008

KCA-757

KRP-203

MediciNova(US)

Novartis(Switzerland)

Bronchial asthma
and interestitial
systitis

Transplantation,
autoimmune
diseases, and IBD

In-house

In-house•	KYORIN grants MediciNova an exclusive license in
all countries worldwide except for Japan, China,
South Korea, and Taiwan to develop and sell thecompound and products•	Interstitial cystitis: Result of Ph II/III was reported in
January 2007 and development ceased•	Bronchial asthma: Clinical trial overseas was discontinued•	KYORIN grants the right to develop and commercialize KRP-203 worldwide for use as an immunosuppressant in organ transplants, and right todevelop and commercialize KRP-203 worldwide
except in Japan, Korea, China and Taiwan for thetreatment of autoimmune diseases and otherdiseases (February 2006)•	New license agreement IBD (November 2010)

Ph I

Ph II

Ph III

NDA
3/2011

Domestic
Overseas
Domestic

8/2005

Overseas

Domestic

11/2006*5

Overseas5/2005*6

Domestic

POC 12/2010

Overseas*5 Bronchial asthma*6 Interstitial cystitis

Reinforcing Our Pipeline in Specific Fields through Alliances
The Kyorin Group has set a goal of establishing a strong presence in the specific fields of respiratory medicine,
urology, and otolaryngology, and is working to reinforce its R&D pipeline. As the global supply of promising
new drugs runs dry, the presence of competitors makes it extremely difficult to license in new products.
Under those difficult conditions, in the three years since fiscal 2008, we have been able to license three new
products in the franchise customer field, including KRP-108, an inhaler for asthma, KRP-209, a treatment for
tinnitus, and KRP-AB1102, a treatment for chronic obstructive pulmonary disease. These results are due to thefact that all of the companies licensing these products found the prospect of working with the Kyorin Group
attractive, and were confident that we would prove to be a reliable partner. We believe this is evidence thatthe franchise customer strategy we are pursuing is gaining a firm hold in the pharmaceutical industry, both inJapan and overseas.
Going forward, our employees will work together to increase our comprehensive potential and build aneven more attractive pipeline of products.

Promoting Domestic and Overseas Alliances
Through proactive collaboration with outside firms, the Kyorin Group is working to enrich our R&D pipeline
and to maximize the value of our original products.
Eisai
Senju Pharmaceutical

Yungjin (Korea)

Taisho Pharmaceutical

Dainippon Sumitomo
PharmaKaken Pharmaceutical
Meiji Seika
Handok (Korea)

Chugai Pharmaceutical

LG Life Sciences(Korea)MSD
Merck & Co. (U.S.)

KYORIN
PharmaceuticalSekisui Medical

Sato Pharmaceutical
Ono Pharmaceutical

Chong Kun Dang (Korea)

Shinlin Sinseng (Taiwan)

Merz (Germany)
SkyePharma (U.K.)

Ferring (Switzerland)

Novartis (Switzerland)

Nichi-Iko
Pharmaceutical

SPIMACO*(Saudi Arabia)

Allergan(U.S.)

MediciNova (U.S.)

Nisshin Pharma
Galderma
Almirall (Spain)* SPIMACO: Saudi Pharmaceutical Industries & Medical Appliances Corporation

KYORIN Holdings, Inc.

17

Overview of Main Markets
Trends in the Domestic Pharmaceutical Market
In the domestic market, national healthcare costs continue to rise as the population ages, increasing theburden on national finances. As a result, more measures are being promoted to contain healthcare costs.
Specifically, the Japanese government is promoting the use of generic drugs, with a goal of having genericdrugs represent a 30% share in volume by fiscal 2012. The government has also made additional reductions to
the prices of longstanding items on the NHI drug price list, with an additional 2.2% reduction in fiscal 2010.
Another new initiative under consideration is to increase patient cost for OTC analogous drugs.
Other factors have also brought major changes to the business environment. Foreign firms have grownlarger through M&As, and R&D productivity has dropped as costs have soared, while new premiums forpromoting new drug creation and the elimination of off-label drug use*1 were implemented on a trial basis infiscal 2010. The Guidelines for Transparency*2 formulated by the Japan Pharmaceutical Manufacturers Association have also altered the competitive environment for medical representatives.
*1 Under the system, new drugs for which no generic is available, and which meet certain requirements, can in practice maintain their prices until a genericproduct comes to market.
*2 These guidelines call for disclosure of research costs, clinical trial costs, funds donated, speaker gratuities, lecture fees, and other information.

Market Trends in Treatments for Bronchial Asthma
The market for treatments for bronchial asthma in fiscal 2010 was worth approximately ¥180.0 billion, and is
expected to grow to approximately ¥200.0 billion by fiscal 2015. While patient numbers will remain flat andthe shift to generic drugs will accelerate, prescriptions of leukotriene receptor agonists and of higher-priced
ICS/LABA* combination treatments are expected to lead the market.
*ICS: Inhaled corticosteroids, LABA: Long-acting β2-agonists

Market Trends in Treatments for Allergic Rhinitis
The market for treatments for allergic rhinitis in fiscal 2010 was worth approximately ¥120.0 billion.
Going forward, the number of allergic rhinitis patients is expected to climb by 5% per year, and by fiscal
2015, the market is forecast to be worth ¥150.0 billion.

Market Trends in Treatments for Overactive Bladder (OAB)
The market for treatments for OAB in fiscal 2010 was worth approximately ¥60.0 billion.* In fiscal 2011, theworld’s first beta 3 stimulant is scheduled to enter the market, along with new anticholinergic agents andpatch-type treatments that are a new formulation in Japan. Drug companies are expected to begin ramping
up their patient education efforts in line with these developments.
As a result, the market is predicted to grow to ¥100.0 billion in fiscal 2015.
* Source: Compiled from ©2011 IMS Japan K.K., JPM (March 2011 MAT). Unauthorized copying prohibited.

Market Trends in Expectorants
The market for expectorants in fiscal 2010 was worth approximately ¥48.0 billion. With no competing products scheduled to come to market, generic products are expected to continue to spread. Given these factors,
the market for expectorants is expected to remain flat, at about ¥48.0 billion* in fiscal 2015.
* Source: Compiled from ©2011 IMS Japan K.K., JPM (March 2011 MAT). Unauthorized copying prohibited.

18

Annual Report 2011At a Glance
The Kyorin Group’s business is comprised of the pharmaceutical and consumer healthcare (skincare) s­ egments.
In the pharmaceutical business, the Group’s operations mainly involve development, manufacture, and sales of
ethical drugs (domestic and overseas ethical drugs, and generic drugs) and over-the-counter drugs and others.
In its consumer healthcare (skincare) business, the Group develops and sells skincare products.

Pharmaceutical Business
Outline of Operations
The core companies that make up the pharmaceutical business are
KYORIN Pharmaceutical, which undertakes R&D, manufacture andsales of new drugs, and KYORIN Rimedio, which carries out R&D,
manufacture, and sales of generic drugs. The pharmaceutical business isclassified into new drugs, original drugs, and generic drugs, and employs
the Pharma Complex Model to allow flexible strategy in response tochanges in the business environment. In new drugs, we will work to
maximize the adoption of our core products and strengthen our drug
development pipeline from a long-term perspective. In original drugs,
we will continue to promote lifecycle management and to establish astrong presence in certain areas. In generic drugs, our aim is to build adistinctive business by fostering links within the Group and allianceswith partners in and outside of Japan to strengthen our sales capabilities, lowering cost of sales ratios, and expanding our product lineup in
certain areas.

Ethical Drug Sales
in Japan■

Ethical Drug Sales
Overseas■

Generic Drugs■

Over-the-Counter
Drugs and Others■(Millions of yen)

FY2009FY2010Net sales

96,422

101,271

Operating income

13,21816,318Consumer Healthcare(Skincare)

Consumer Healthcare (Skincare) Business
Outline of Operations
The core company in this business, Dr. Program Co., Ltd., develops andsells skincare products. Through Dr. Program, the Kyorin Group offersa range of skincare products targeting women over 40 based on
nanocapsule technology. The Group is also working to enhance its
lineup of high value-added products and to expand its base of repeat
customers, rather than simply increase customer numbers, while also
focusing on strengthening its operating base through collaboration
between Group companies.

Ethical Drug Sales
in Japan
Ethical Drug Sales
Overseas
Generic Drugs(Millions of yen)

FY2009FY2010Net sales

3,342

2,797

Operating income

(192)

104

Over-the-Counter
Drugs and Others
Consumer Healthcare(Skincare)■

KYORIN Holdings, Inc.

19

Segment Overview
Following a revision to Japan’s accounting standard for disclosures about segments of an enterprise andrelated information, from fiscal 2010, the Kyorin Group has presented its financial results information in twosegments: the pharmaceutical business, and the consumer healthcare (skincare) business. At the same time, inpresenting information about the medium-term management plan HOPE 100 Stage 1, in line with our management strategy we classify information on business activities into five categories. Specifically, information
about the pharmaceutical business (domain) is classified into domestic ethical drugs, overseas ethical drugs,
and generic drugs, while information about the consumer healthcare business (domain) is further classified
into skincare and nonprescription drugs, etc. In other words, the consumer healthcare business under the
medium-term management plan uses a very broad definition, with target sales including the total of skincare
and nonprescription drugs.

Ethical Drug Sales in Japan
We promoted our franchise customer strategy, stepping up sales activities to specialist medical professionals and institutions involved mainly in

Net sales

respiratory medicine, otolaryngology, and urology. We also worked to

100,000(Millions of yen)further bolster our wholesale strategy to build effective sales capabili-

80,000ties and raise productivity. In addition, we promoted appropriate use of

60,000products based on scientific evidence and succeeded in maximizing

40,000their penetration.

20,000As a result of these activities, sales increased 6.9% year on year to0

FY2009¥85,284 million.

FY2010Among key products in this business Kipres, for treating bronchialasthma and allergic rhinitis, and Uritos, for treating overactive bladder,sold briskly, and Mucodyne, a mucoregulant, also increased sales overthe previous fiscal year.

Ethical Drug Sales Overseas
Sales of core product gatifloxacin ophthalmic solution (out-licensed toAllergan (US)) were more or less flat year on year.
Sales rose 4.1% year on year to ¥2,736 million.

Net sales(Millions of yen)
3,000
2,000
1,000
0

FY200920

Annual Report 2011

FY2010Generic Drugs
Measures to promote the use of generic drugs (revisions to the premium system for dispensing generic drugs) took effect from April 2010,

Net salescausing the market to expand. Against this backdrop, the Kyorin Group

10,000(Millions of yen)achieved strong sales of generic drugs in the insurance dispensing

8,000

pharmacy market.

6,000

As a result, sales rose by 2.7% year on year to ¥8,871 million (dueto changing its fiscal year-end in the previous fiscal year, KYORIN­Rimedio’s previous fiscal year consisted of 14 months). Moreover, to

4,000
2,000
0

FY2009allow a flexible strategic response to changes in the operating environ-

FY2010ment of the ethical drugs business, from October 1, 2010, the KYORIN
Rimedio wholesale channels (logistics) were consolidated and integrated into KYORIN Pharmaceutical.

Over-the-Counter Drugs and Others
The core product in this segment is the Milton brand of baby bottle
disinfectant, which holds the top market share for liquid baby bottle
disinfectants in Japan. The product line saw sales increase compared to

Net sales(Millions of yen)
6,000

the previous fiscal year. In OTC drugs, we have a distinctive advantage
among OTC drug divisions of ethical drug manufacturers in being able
to supply specialist information in the field of respiratory disorders in

4,000
2,000

particular. We leveraged this in working to strengthen our COOL
ONE brand, mainly of COOL ONE Kyotan Soft expectorant capsules.

0

FY2009Despite these efforts, sales fell 18.7% compared to the previous

FY2010fiscal year to ¥4,378 million, mainly due to the influence of KyobundoCo., Ltd. (from April 1, 2011 “KYORIN Medical Supply Co., Ltd.”) changing its fiscal year-end date from the end of February to the end of
March. This resulted in a 13-month year for the previous fiscal period.

Consumer Healthcare (Skincare)
The skincare market saw increasing competition from new participants,
some from other industries, and other major corporations. This, inNet sales(Millions of yen)addition to a protracted slump in private consumption and lower

4,000

demand, sent sales at Dr. Program with its nanocapsule technology-

3,000

based cosmetics business lower for the year.
As a result, segment sales declined 16.3% year on year to ¥2,797
million, while operating income came to ¥104 million (compared to an
operating loss of ¥192 million in the previous fiscal year).

2,000
1,000
0

FY2009FY2010KYORIN Holdings, Inc.

21

List of Main Subsidiaries

KYORIN Pharmaceutical Co., Ltd.
http://www.kyorin-pharm.co.jp/en/
KYORIN Pharmaceutical envisions itself as a drug manufacturer that istrusted by patients and medical professionals, and is recognized for its
presence in society. To achieve that, we are working to enhance ourpresence in specific fields, including respiratory medicine, otolaryngology,
and urology, while discovering new, original drugs on a global basis. In
sales, we are deploying a franchise customer strategy, focusing again on the key areas of respiratory medicine, otolaryngology,
and urology. By focusing resources in these key areas, we are working to strengthen the competitiveness of our domestic
sales base, utilizing around 750 medical representatives to provide customer-centric sales and ongoing, detailed service.
We are also working aggressively to promote alliances with leading firms both domestically and abroad, and to reinforce our R&D pipeline in our franchise customer fields.
In proprietary drug discovery we focus on respiratory disease, otolaryngology, urology, and other key areas, utilizing ourglobal network across Japan, the United States, and Europe and close collaboration between our divisions to verify drug
synthesis, pharmacology, ADME (Absorption, Distribution, Metabolism, Excretion), and safety. These links underpin ourefforts to discover original, new, world-class drugs.
Our production infrastructure features world-class manufacturing facilities and GMP*-based management, which will
enable us to establish a system for providing a stable supply of high-quality products at low cost, and to build further trust.
As the environment surrounding the pharmaceutical industry grows increasingly turbulent both in Japan and abroad,
KYORIN Pharmaceutical continues its efforts to establish a solid position in the industry, as we work to become a drug
manufacturer that is trusted by both patients and medical professionals, and that is recognized by society for its contribution to good health.
* Good Manufacturing Practice: Standards for pharmaceutical manufacturing and quality assurance management

Areas of Business● Drug discovery research● R&D● Manufacturing● Sales

KYORIN Rimedio Co., Ltd.
http://www.kyorin-rmd.co.jp/(Japanese only)
As the generic drug business subsidiary of the Kyorin Group, KYORIN
Rimedio aims to become a highly reliable generic drug manufacturer. It will
strive to improve product quality and win the trust of healthcare professionals, and to provide products that patients can use with confidence.
To respond to the growing needs for generic drugs at medical institutions and insurance dispensing pharmacies, andfrom other healthcare providers, KYORIN Rimedio will work to establish a brand with a reputation for reliability andsafety. To do this, we will utilize our strengths, including production infrastructure that enables production of a wide rangeof formulations, and alliances within the Kyorin Group. We will also continue to aggressively promote alliances withdomestic and overseas firms, enhancing our product lineup in specific fields, while working to reduce the cost of sales
ratio and improve competitiveness.
To contribute to better patient health, and play a vital social role in containing healthcare costs and helping to maintainJapan’s social security infrastructure, KYORIN Rimedio will continue to ensure a stablesupply of quality products and information, and to deliver distinctive, reliable generic drug
products to the market as a generic drug company.
Areas of Business● R&D● Manufacturing● Sales22

Annual Report 2011

Dr. Program Co., Ltd.
http://www.drprogram.co.jp/(Japanese only)
Dr. Program has gained the support and trust of its customers, and grown
its business since it was established, based on providing highly safe andeffective cosmetics. In this business, we manufacture products based on
nanocapsule technology—a drug formulation concept that we havecultivated through research into new beauty enhancing compounds anddevelopment of technologies for penetration of compounds.
The domestic skincare and cosmetics market is approaching maturity, with a continued slump in consumer spending
and an increasingly difficult competitive environment. Under these conditions, Dr. Program will continue to develop
products in line with our proprietary concept of providing high-quality, mild products at a price that makes continued use
affordable, and focus sales on women in their 40s or older, who can appreciate the quality of our technology. We will also
expand our business through our mail order operation, which gives us a unique way to build a direct connection with ourcustomers. Dr. Program also continues to explore overseas expansion, and is preparing to swiftly take advantage of new
business opportunities.
Going forward, the company will continue to listen closely to its customers, working to create completely new value inthe market and contributing to the beauty and good health of women.
Areas of Business● Development and sales of skincare products

KYORIN Medical Supply Co., Ltd.
http://www.kyorin-ms.co.jp/(Japanese only)
As part of its efforts to fully enter the environmental hygiene businessin fiscal 2011, Kyobundo Co., Ltd changed its name to KYORIN
Medical Supply Co., Ltd.
The former Kyobundo Co., Ltd. was primarily responsible forproviding shared services to companies in the Kyorin Group. Utilizing its knowledge and experience in marketing andadvertising in the pharmaceutical business, Kyobundo was involved in a wide range of communications-related businessactivities, from overall advertising planning and production, to package design, event and seminar planning and operations,and corporate PR.
Going forward, in addition to these existing services, KYORIN Medical Supply will embark on new initiatives in theenvironmental hygiene business. The company will approach health and disease issues faced by individuals and society
by focusing on the environments in which we live, seeking ways to contribute to society as a company that supports
healthy living.
Areas of Business● Sales promotion, planning and production of advertising, etc.
● Environmental hygiene business

KYORIN Holdings, Inc.

23

Corporate Social Responsibility
The starting point of the Kyorin Group’s corporate social responsibility (CSR) endeavors is its corporate philosophy, that is “to cherish life and benefit society by contributing to better health.” For sustainable growth, Kyorin willprioritize building and maintaining trust-based relationships with medical professionals, customers, shareholders,investors, employees, business partners, and local communities. The Group will continue to work to realize thatgoal by providing trusted products and services, and by fulfilling its corporate social responsibility in the areas ofenvironmental and industrial safety and hygiene through activities that contribute to health and society.

Corporate Social Responsibility

3. Each November is designated as compliance enhancement

In recognition of the importance of its corporate social respon-month, during which time the Company works to tighten up

sibility, the Kyorin Group is enhancing its corporate ethicalon compliance at every level.

standards and putting in place a system of compliance in linewith the approach set out below.

Ongoing Environmental Initiatives
The main subsidiary of the Kyorin Group, KYORIN Pharmaceutical,

Compliance Measures

is implementing the following activities on an ongoing basis.

Basic policy

1. Preventing global warming

An enterprise should pursue profits through fair competition as• Reduce the amount of fuel used by installing cogeneration

an economic entity, and at the same time should be a force forthe greater good of society.
Based on its corporate philosophy “to cherish life and benefit
society by contributing to better health,” the Kyorin Group willconduct its activities in every country based on a high standard

systems and using smaller boilers• Reduce power consumption by controlling air conditioning
settings to 28°C in summer and 21°C in winter• Use eco-cars and hybrid vehicles to improve fuel efficiency
and reduce exhaust emissionsof corporate ethics, respecting human rights and observing alllaws, as well as standards of conduct and the spirit thereof.
MeasuresTo ensure the Group’s activities are based on a high standardof corporate ethics, the Company has built a complianceframework. It has drawn up the Kyorin Holdings Corporate
Charter, updated its Compliance Guidelines to their current
form in August 2010, and holds a Compliance Committee

CO2 Emissions from Factories andResearch Laboratories(t)
20,00015,00010,0005,000

meeting once a month.
0

1. The Kyorin Holdings Corporate Charter was developed to
specify matters of corporate ethics and compliance in

2006

2007

2008

2009

2010 (FY)*FY2006–FY2008 data is from the Environmental Report*FY2009–FY2010 data is from the Periodic Reportaccordance with our corporate philosophy, and serves as thestarting point for our corporate activities.
2. The Compliance Guidelines complement the Kyorin­Holdings Corporate Charter by clarifying the standards tobe followed for sound and proper business activities.
3. In March 2006, the Compliance Committee was establishedto provide overall supervision of corporate ethics andcompliance systems. Each company has a compliance promotion manager who is responsible for the understanding
and instilling of corporate ethics and compliance.
Education and training
In-house training courses are conducted to promote under-

2. Reducing waste volume• Reduce waste emissions and promote recycling towards
achieving zero final landfill, and introduce a negative carbon
printing system
3. Managing chemical substances• Manage substances covered by the Pollutant Release andTransfer Register (PRTR) Law, and evaluate methods for
reducing amounts used and the use of alternatives
4. Preventing atmospheric pollution• Measure and control the amounts of soot and smoke,
nitrogen oxides (NOx) and sulfur oxides (SOx) emitted bystanding of and instill corporate ethics and compliance.

boilers and generators

1. Compliance managers organize education and training

5. Preventing water pollution

courses on corporate ethics and compliance, which areconducted at each level of the organization on a Companywide basis, and run instructional activities for Company
officers and employees.
2. Details relating to corporate ethics and compliance areincorporated into job function-specific training conducted by• Process wastewater, including by primary processing plants,
and management of pH, biochemical oxygen demand(BOD), and suspended solids (SS) levels
6. Preventing deforestation• Recycle paper, use recycled paper, and promote a paperlessoffice environment

each division to promote understanding and instill a sense of

7. Preventing destruction of the ozone layer

ethics and awareness of compliance among employees.

• Swiftly replace equipment that uses specified
chlorofluorocarbons

24

Annual Report 2011

8. Preventing ground subsidence

residents are invited. These are popular events that provide an• Check for ground subsidence and improve utilization ofopportunity to further promote understanding of thepiped water­Company’s activities.

9. Preventing contamination of soil and surface water

Local cleanup activities• Locate tanks above ground, install oil barriers, and implement

For nine years, the Okaya Plant has been a “foster parent”

emergency response training

responsible for beautifying a section of the shore of Lake Suwa

10. Noise reduction

as part of the Lake Suwa Adoption Program. Employees also

• Take steps to measure and manage noise levels

help to keep the lakeside park clean.

11. Preventing foul odors• Install draft chambers and use scrubbers to remove odors

Employees of the Noshiro Plant participate in voluntary
activities to maintain the Kaze-no-Matsubara, a pine forest andrecreational area that acts as a barrier protecting the locality

Measures Relating to Industrial Safety and Hygiene
In 2004, subsidiary KYORIN Pharmaceutical obtained occupa-from winds.
In our head office, employ-tional health and safety management system certification

ees participate on a voluntary(OHSAS 18001) for all production and research divisions, andbasis in cleanup campaigns

in 2005, consolidated its ISO 14001 and OHSAS 18001

carried out twice a year by themeasures. The Rimedio Center of KYORIN Rimedio obtained

local Chiyoda City authorities.

ISO 14001 certification in 2008 and OHSAS 18001 certifica-

Distribution of Doctor Salon booklets

tion in 2009.

Radio Nikkei broadcasts Doctor Salon, a program aimed at

1. Rate and severity of work accidents

physicians. These broadcasts have been compiled into booklets,

As a result of measures implemented to prevent work acci-

which KYORIN Pharmaceutical’s medical representatives distrib-

dents, the frequency and severity of such accidents are muchute during their monthly calls on doctors. A wide range oflower than the industry average. There have been no fatal

diseases is covered, providing timely coverage of current topics,

accidents since the start of operations.

making the booklets very popular with primary care physicians.

2.Vehicle accidents

Supporting sporting events

Despite setting a target of a year-on-year reduction of around

The Kyorin Group supports sporting events that help to

40% in the number of vehicular accidents per branch, in fiscal

promote health. Among these is the Shimotsuke Soccer Work-2010 there were 202 accidents, 16 more than the previous

shops for children, with former J-League players and otheryear. To turn around this increasing trend in vehicle accidents,

soccer athletes serving as instructors.

for fiscal 2011, the Kyorin Group is implementing various
accident-prevention measures, incorporating both physical andsystematic approaches.

Employee Voluntary Community/
Health Activities (Kyorin Smile Program)
The Kyorin Group launched its corporate branding program in

Risk Management Measures

March 2006. To help achieve a happy society, the aim of the

The passing of the Corporation Law in May 2006 made it

corporate branding program is to change the awareness andnecessary to set up an internal control system. Kyorin estab-actions of each and every employee by promoting the Kyorin

lished a Risk Management Committee in order to prevent risks

Smile Program, a set of employee initiatives for making afrom materializing and deal with any risks that do materialize.

contribution to society and people’s health. The activities in thisAlso, a risk management promotion officer has been appointed

program include donating blood, local beautification schemes,

at each company to raise awareness relating to risk

and fund-raising.

management.

In fiscal 2010, the Kyorin Group donated a total of ¥160,231
contributed by employees to Unicef. This money is being used

Local Community Activities

for funding a sanitation improvement project in Burkina Faso in

Cherry blossom viewing party

West Africa. The Group also collected 3.0 kilograms of used

The Kyorin Pharmaceutical Discovery Research Laboratories

stamps, which were donated to the Japanese Organization for

and Development Research Laboratories hold an annual party

International Cooperation in Family Planning (JOICFP). The

for viewing the blossoms on cherry trees that are more thanstamps will be used to help fund White Ribbon Campaign

40 years old. As usual, this year’s party had many participants.

activities aimed at protecting the lives of mothers and babies

The occasion was also used as an opportunity to explain

throughout the world.

Kyorin’s environmental and occupational safety activities.
Summer evening parties
Each year, the KYORIN­Pharmaceutical Development
Research Laboratories andvarious plants hold summer
evening parties to which local

KYORIN Holdings, Inc.

25

Corporate Governance
Basic Management Policies
As a group, our corporate philosophy is “to cherish life and benefit society by contributing to better health.” To
realize this philosophy we will pursue diverse expansion and development of our consumer healthcare businessunder our long-term vision HOPE 100 (Aim for Health Of People and our Enterprise), aiming to be a group that
supports sound and healthy lifestyles.

Basic Policy on Corporate GovernanceThe key management goal for KYORIN Holdings, Inc. is to continue

their auditing function. In addition to participating in important

raising shareholder value. To achieve this goal requires fostering ameetings, including those of the Board of Directors and the Man-

management environment that enables us to build trust withagement Committee, corporate auditors implement comprehensive

stakeholders and the general public. Therefore, having given better

audits by checking documents and other materials relating to key

corporate governance a high priority, we seek to ensure prompt

decisions and inspecting departments, facilities, and Group companies.

decision-making, strong monitoring of the appropriateness of

In recognition of our corporate social responsibility, for every

management, and ethical and transparent corporate activities. To

Kyorin Group company we appoint compliance and risk manage-

ensure transparency and fair disclosure, we release appropriate

ment promotion officers. In addition, we have established ainformation without delay for the benefit of shareholders andGroup-wide compliance and risk management system that isinvestors. Within our website, we have created an investor informa-

administered by the Compliance Committee and Risktion section on which we list business performance data, informa-­Management Committee. We have established guidelines for eachtion presented at meetings, our securities report, news releases andaffiliated company based on the Kyorin Compliance Guidelines

other corporate information, enabling anybody to access informa-and set up a system for employees to report and seek advice

tion about Kyorin at any time. In the future, we intend to actively

about possible irregularities. In addition to the above measures,increase our disclosure of information, and expand and improve ourwe have created management guidelines for affiliated companies

communications with all stakeholders.

and built a system of support that respects their autonomy. Under

We are an audit- and committee-based company under Japanese

this system, we receive regular business reports from theselaw. The Board of Auditors endeavors to fully demonstrate its

companies and hold meetings with their management before

auditing and supervising functions and ensure the transparency of

deciding important issues. The Internal Audit Office conducts

the decisions being made by the Board of Directors. Corporate

audits of affiliated companies based on internal audit guidelines.

auditors conduct audits in line with an auditing policy and plan set

Based on the results of these audits, departments that overseeby the Board of Auditors at the beginning of each fiscal year.

the operations of the affiliated companies issue instructions or

Corporate auditors carry out a diverse range of a­ ctivities in fulfilling

warnings and provide appropriate guidance.

Management Organization and Internal Control System
1. Management Organization

Kyorin has established an executive officer system. The Board of

To clarify the roles of our six directors, who are responsible for

Directors usually meets once a month, deciding important opera-

making business decisions and supervising business execution, andtional matters after debating the issues as well as supervising eachsix executive officers, who are responsible for business execution,

director’s duties. To oversee business execution, we established a

Corporate Governance and Management Structure (As of June 24, 2011)
Ordinary General Shareholders’ Meeting
Appointment/
dismissal

Reports

Accounting
Auditing Firm
(Independent
Auditor)Appointment/dismissal

AuditsBoard ofAuditors(5 members)

Board ofDirectors(6 members)

Exchangeofopinions

AuditsAppointment/dismissal

Cooperation

Internal
Audit Office(7 members)

Representative
Director

AuditsSupervision

Management
Committee

AuditsAffiliated Companies
Guidance

26

Annual Report 2011

Executive Officers/
Departments

OutsideLegal
CounselManagement Committee, comprising the president and directors,

structure that enables managers to prepare reliable internal

which discusses key operational matters concerning the Group.

control reports for financial reporting. Under this structure, theWe also utilize a corporate auditor system with two statutory

Internal Audit Office also evaluates and reports on internal

corporate auditors and three outside corporate auditors. By

controls related to financial reporting based on the newly

capitalizing on such auditing and supervisory functions,established Standards and Practice Standards for Management

we are building a system that facilitates highly transparent

Assessment and Audit Concerning Internal Control over Finan-­decision-making.

cial Reporting.
6 Basic rationale on the elimination of anti-social forces and the

2. Basic Philosophy and Status of Internal Control Systemestablishment of related measures. Giving consideration to our

Kyorin is building an internal control system in accordance with thecorporate philosophy, we formulated the Kyorin Holdings

following basic policy: In keeping with our corporate philosophy ofCorporate Charter to ensure a high standard of corporate“cherish life and benefit society by contributing to better health,” weethics and thoroughgoing compliance. This charter clearly states

undertake our activities in Japan and overseas guided by a highthat we will “stand firmly against any anti-social forces or groups

standard of corporate ethics as we respect human rights andthat pose a threat to the order and safety of society.”comply with the letter and spirit of all laws and codes of conduct.

The Company will eliminate any relationships with and1 We established the Compliance Committee, which is chaired bystrongly confront anti-social forces or groups. As an internala director in charge and includes the Director of the Internal

structure for overall monitoring of our corporate ethics and our

Audit Office who serves as a member of the committee.

compliance structure, we established the Group Compliance

Thoroughgoing guidance is provided to executives and regular

Committee, with the director in charge of the committee also

employees via training programs, while the Corporate Ethics

handling overall coordination. As the department in charge of

Hotline has been set up for consultations and reporting matterscompliance, the General Affairs & Human Resources Depart-concerning internal violations. Moreover, we have set Company

ment is working to strengthen and promote a wider permeation

rules to ensure the accuracy of financial reporting, and devel-of corporate ethics and compliance through education and

oped systems for ensuring the validity and reliability of internal

other measures in collaboration with relevant departments.

controls over financial reporting of the Group.
2 We are building and operating a structure for reducing andWe have also established standard measures to prepare forany possible undue demands from anti-social forces. To this end,

preventing risks. As part of this structure, we established the Risk

we have built a structure that includes designating a “person

Management Committee, chaired by a director in charge, withresponsible for prevention of undue claims” at our Head Office

the General Affairs & Human Resources Department respon-

and all branch offices to respond to encounters with any

sible for overseeing the committee. For risks concerning compli-

anti-social forces or groups. We also maintain close communica-

ance, the environment and accidents, we also formulated thetions with police departments with relevant jurisdictions, special

Risk Management Guidelines and the Corporate Ethics andcrime prevention units, and legal advisers to ascertain the latest

Compliance Guidelines as part of a quick-response structure.

trends and gather other information on anti-social forces orAdditionally, to handle crisis management when dealing with anygroups as well as for guidance, consultation, and assistance. Also,

contingencies, we have set up the Contingency Measures

we have prepared Responding to Telephone Calls and Visits to

Headquarters under the leadership of the president.

the Company during the Initial Phase of Claim-Related Problems

3 In accordance with the Documentation Management Guidelines

as a manual, to ensure that employees make appropriate initialand other internal regulations, we carry out the appropriate

responses. In this manner, we have established a structure forpreparation, preservation, and management of information

properly responding to any demands from anti-social groups.

regarding directors’ decisions, their execution of other duties andreports concerning directors.
4 To ensure that auditors effectively perform audits, the accounting

3. Audit Organization
1 Internal Auditors

auditing firm explains the details of the accounting audit to theInternal audits are conducted by the Internal Audit Office, which is

auditors and exchanges various information while cooperating

staffed by seven employees, reports directly to the president and iswith the Internal Audit Office in ensuring appropriate communi-

independent from other sections. Based on yearly auditing plans,

cation and effective auditing.

the Internal Audit Office regularly assesses and evaluates the

5 Along with establishing compliance committees and risk manage-effectiveness and efficiency of the legal compliance and internal

ment committees at each Kyorin Group company, the Compli-

control systems in every section of the parent and Group compa-

ance Committee and Risk Management Committee oversee andnies. After an audit, the office communicates any problems or areas

promote compliance and risk management for the entire Group.

that need improvement directly to the president and makes the

In addition, we have built a structure for consultation andappropriate recommendations.

reporting that covers the whole Group.
We will create management guidelines for affiliated companies

Another function of the office is to evaluate the Group’s internal
controls over financial reporting. The office evaluates the maintenanceand build a system of support that respects their autonomy.

and operation of these internal controls according to a predeter-

Under this system, we will receive regular business reports frommined scope for evaluation, and makes a report to the President.

these companies and hold meetings with their management

2 Corporate Auditors

before deciding important issues.

Corporate auditors conduct audits in line with an auditing policy

The Internal Audit Office performs audits of affiliated compa-

and plan set by the Board of Auditors at the beginning of each fiscal

nies based on internal audit guidelines. Depending on the results

year. In addition to participating in important meetings, includingof these audits, departments that oversee the operations of thethose of the Board of Directors and the Management Committee,

affiliated companies issue instructions or recommendations andcorporate auditors implement comprehensive audits by checking

provide appropriate guidance. Moreover, we are also building a

documents and other materials relating to key decisions and

KYORIN Holdings, Inc.

27

inspecting departments, facilities, and Group companies.
Under our adopted system, if someone discovers that an executive officer or employee is acting in contravention of either laws andengagement partner
A further 7 certified public accountants and 12 assistant accountants assisted with the audit.

regulations, or the Company’s Articles of Incorporation, they imme-

The Board of Auditors provides a forum for close, regulardiately notify the corporate auditors. We are working to establish an

exchange of information with the Internal Audit Office and theenvironment conducive to more efficient audits by corporate

accounting auditing firm, thereby enhancing the auditing system.

auditors by coordinating closely with executives and regular employ-as necessary, and these human resources are carefully checked by

4. Overview of Personnel, Capital and Trading­Relationships between the Company and the Outside
Directors and Outside Auditors

directors and auditors to ensure that they are independent.

None to report.

ees and by fostering deeper understanding of audits. Furthermore,
we assign auditing staff to assist the duties of the corporate auditors

Moreover, the senior corporate auditor, Seiyu Miyashita has
experience as a director and head of accounting of KYORIN

5. Compensation of Directors and Corporate Auditors

Pharmaceutical Co., Ltd, and has a considerable level of knowledge

In fiscal 2010, ended March 31, 2011, compensation paid to direc-

about finance and accounting.

tors and corporate auditors was ¥241 million: ¥212 million to 10

3 Outside directors and outside corporate auditors

directors (excluding outside directors), and ¥29 million to 3 corpo-

Kyorin has three outside auditors who are neutrally positioned andrate auditors (excluding outside auditors).

not compromised by relationships with management or parties
having a special interest. These outside auditors all have a considerable level of knowledge of corporate legal matters, and matters of

There were no payments to directors corresponding toemployee salaries.
Remuneration for outside officers totaled ¥15 million for 3 directors.

finance and accounting. We utilize their specialist understanding andwide-ranging knowledge and experience to strengthen and enhance

6. Number of Directors

our auditing functions. In terms of independence of outside auditors,

The number of directors is limited to 15 as set out in the

we do not consider auditors from major shareholding companies and­Company’s Articles of Incorporation.

key trading partners to be truly independent. To ensure that execuoutside auditors who have a high level of neutrality that is not

7. Conditions for Resolution on Appointments of­Directors and Corporate Auditors

compromised by a relationship with management or parties having a

The Company’s Articles of Incorporation stipulate that a resolution

special interest, and for whom there is no risk of forming a contradic-

to appoint a director or corporate auditor must be by majority votetion of interest with general shareholders, are the most independent.

of attending shareholders holding at least one-third of the voting

Our outside corporate auditor, Masaji Obata is well versed in therights of shareholders who are eligible to exercise voting rights.

tion of duties by directors is legal, transparent, and fair, we believe that

Corporation Law as a lawyer, and has considerable knowledge
concerning finance and accounting.
Moreover, Kyorin Holdings has not appointed an outside director.

8. Ordinary General Shareholders’ Meeting Matters thatMay Be Resolved by the Board of Directors

Compared to an outside director, who would be appointed for only

1 Acquisition of treasury stock

one year, the corporate auditors, who do not execute business

Pursuant to the provisions of Article 165, paragraph 2 of theduties at Kyorin Holdings, have a more stable position of four years,

Corporation Law of Japan, the Company’s Articles of Incorporationand have independent compensation and authority. With respect tostipulate that the Company may acquire treasury stock by resolu-

appointments, the corporate auditors have the auditors’ right oftion of the Board of Directors. The aim is to allow management toagreement, the right to make proposals and to carry out compre-

exercise capital policies as deemed appropriate in response tohensive surveys. For these reasons, we believe that corporatechanges in the operating environment, by allowing the Company toauditors are more independent from management than outsideacquire treasury stock through market transactions, etc.

directors. Moreover, our outside corporate auditors make an active

2 Decision-making body for cash dividends from retained earnings

contribution to Board of Directors and Board of Auditors meetings,

Pursuant to Article 459, paragraph 1 of the Corporation Law ofoffering comments and advice from a specialist perspective

Japan, and except where otherwise specified in a separate appli-

informed by wide ranging knowledge and experience. This helps tocable legal or regulatory provision, the Company’s Articles of

ensure that execution of duties by the directors is appropriately

Incorporation stipulate that cash dividends are to be decided bylegal, transparent, and fair, and we believe it is the best way toresolution of the Board of Directors, and not the ordinary generalstrengthen oversight functions through links between directors andshareholders’ meeting. The aim is to allow management to exercise

corporate auditors.

capital policy as deemed appropriate.

4 Independent Auditors

ments and Exchange Law, we receive annual audits by Ernst &9. Requirements for Special Resolution by the Ordinary
General Shareholders’ Meeting

Young ShinNihon LLC. We benefit from its valuable advice as an

Pursuant to Article 309, paragraph 2 of the Corporation Law ofaccounting auditing firm, as well as from its services as an auditor ofJapan, the Company’s Articles of Incorporation stipulate that special

our financial accounts.

resolutions by the ordinary general shareholders’ meeting must be

In accordance with the Corporation Law and the Financial Instru-

The following certified public accountants performed the audit of
KYORIN Holdings, Inc.

passed by at least a two-thirds majority vote of attending shareholders holding at least one-third of the voting rights of shareholders eligible to exercise voting rights. The aim is to lower the(Names of certified public accountants)

required quorum for a special resolution of the ordinary general

Mari Sono, designated limited liability partner and engagement

shareholders’ meeting to facilitate operation of the meeting.

partner; Hidemitsu Kato, designated limited liability partner and28

Annual Report 2011

Directors, Auditors, and Corporate Officers(As of June 24, 2011)

Representative Director,
President and Chief Executive Officer

Masahiro Yamashita

Executive Director

Senior Executive Director

Senior Executive Director

Keiji Hirai

Minoru Hogawa

Mitsutomo Miyashita

KYORIN Pharmaceutical Co., Ltd.
Representative Director, President andChief Executive Officer

Management Planning
Finance & AccountingIntellectual Property

Executive Director

Executive Director

Tomiharu Matsumoto

Yutaka Ogihara

General Affairs & Human Resources
Legal

President’s Office
Corporate Communication
Information System Management

Senior Corporate Auditors

Corporate Auditors

Senior Executive Officers

Corporate Officers

Seiyu Miyashita

Masaji Obata

Takayoshi Ishizaki

Haruki Watanabe

Shigeru Abe

Junji Honda

Yoh ItoTakashi Nishino

Yasuyuki Hirota

Satoru Kanai

Shigeru Ogihara

KYORIN Holdings, Inc.

29

Organization Chart(As of June 24, 2011)

General Shareholders’ Meeting
Board of Corporate Auditors
Board of Directors

President’s Office

Representative Director,
President and Chief Executive Officer

Management Planning
Corporate Communication

Management Meeting

Finance & Accounting
General Affairs & Human Resources
Legal
Information System Management
Intellectual Property
Auditing

Major Subsidiaries and Affiliates(As of July 2011)

Consolidated
Subsidiaries

KYORIN Pharmaceutical Co., Ltd.
Capital:¥4,317 million
Percentage of ownership: 100%
Head office:5, Kanda Surugadai 2-chome, Chiyoda-ku, Tokyo 101-8311
Operations:
Manufacture and sales of prescription medicines and quasi-drugs, diagnostics, and industrial chemicals
KYORIN Medical Supply Co., Ltd.
Capital:¥488 million
Percentage of ownership: 100%
Head office:Kyorin Nishi-Shinjuku Building, 25-13, Nishi-Shinjuku 6-chome, Shinjuku-ku, Tokyo 160-0023
Operations:
Sales promotion, planning and production of advertising, etc.
KYORIN Rimedio Co., Ltd.
Capital:¥1,200 million
Percentage of ownership 100%
Head office:287-1, Shimocho Moroe-cho, Kanazawa City, Ishikawa Prefecture 920-0017
Operations:
Manufacture and sales of prescription medicines and quasi-drugs, diagnostics, and industrial chemicals

KYORIN PharmaceuticalCo., Ltd. Subsidiaries

Equity-method Affiliates

30

Annual Report 2011

Dr. Program Co., Ltd.
Capital:Percentage of ownership:
Head office:Operations:¥251 million
100%
3rd Floor, 4-40, Minami-Aoyama 5-chome, Minato-ku, Tokyo 107-0062
Development and sales of skincare products

Kyorin USA, Inc.
Capital:Percentage of ownership:
Head office:Operations:

US$500,000
100%
500 Frank W. Burr Boulevard, Teaneck, New Jersey 07666, United States
Research and analysis of other companies’ technologies and collection of information concerning clinical trials

Kyorin Europe GmbH
Capital:Percentage of ownership:
Head office:Operations:

50,000 EURO
100%
Kaiserstrasse 8, 60311 Frankfurt am Main, Germany
Research and analysis of other companies’ technologies and collection of information concerning clinical trials

ActivX Biosciences, Inc.
Capital:Percentage of ownership:
Head office:Operations:

US$1
100%
11025 N. Torrey Pines Rd., La Jolla, California 92037, United States
Discovery and evaluation of candidate compounds

Nippon Rika Co., Ltd.
Capital:Percentage of ownership:
Head office:Operations:¥411 million
29.2%
2-2, Nihonbashi Honcho 4-chome, Chuo-ku, Tokyo 103-0023
Production and sales of pharmaceuticals, reagents, intermediates, and other products

Profile

Corporate Information(As of March 2011)

Since the founding of its core subsidiary, KYORIN Pharmaceutical, the Kyorin Group has taken its
mission of contributing to better health seriously. Today, Kyorin is working to discover, produce, andsell pharmaceuticals through its pharmaceutical business and to develop a consumer healthcare business based on cosmetics. By promoting the faster development of superior new drugs and diversifying
its businesses to respond to expanding healthcare needs, the Kyorin Group aims to realize its role as
an organization supporting healthy living and to further enhance its corporate value.

KYORIN Holdings, Inc.
(Trading name changed from July 1, 2010)
				

Head Office
5, Kanda Surugadai 2-chome, Chiyoda-ku, Tokyo 101-8311
Phone: +81-3-3293-3451
URL: http://www.kyorin-gr.co.jp/en/

Establishment		

1958

Common Stock		¥700 million

Outstanding Shares		

74,947,628

Shareholders		

3,518

About the Corporate MarkThe corporate mark consists of three curved lines that form a hear t-shaped apricot. The lines
represent the smiles of patients, their families, and workers in medical services, as well as Kyorin’s
three core businesses, namely prevention, treatment, and prognosis.
Orange: Honesty and warmth
Violet: Technology that brings confidence
Light green: Free and lively creativity

Holding Company Structure
KYORIN Holdings, Inc. ser ves as the umbrella organization for the entire Kyorin Group, and by
taking on the management strategy function and ensuring efficient allocation and use of management resources, works to ensure that the Group achieves its comprehensive potential and to
improve consolidated business results. KYORIN Holdings, Inc. was formerly called KYORIN Co., Ltd
until changing its name on July 1, 2010.

Group Structural Diagram

KYORIN Pharmaceutical Co., Ltd.

Dr. Program Co., Ltd.

Drug discovery,
pharmaceutical business

Consumer healthcare (skincare)business

Major Shareholders			
			
			
			

Percentage
of totalsharesoutstanding

		
		
		
		
		
		
		
		
		
		

Minoru Ogihara
Hiroko Ogihara
Apricot Co., Ltd.
KM Godo Kaisha
Yoshiko Ogihara
Mykam Co., Ltd.
Japan Trustee Services Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
Yutaka Ogihara
Mariko Ogihara

8.18％
6.86％
6.67％
4.82％
3.90％
3.66％
3.11％
3.04％
2.48％
2.35％

Listing		

Tokyo Stock Exchange, First Section

Transfer Agent						Mizuho Trust & Banking Co., Ltd.,
2-1, Yaesu 1-chome, Chuo-ku, Tokyo 103-0028
Phone: +81-3-3278-8111

KYORIN Holdings, Inc.

KYORIN Rimedio Co., Ltd.
Generic drug business

KYORIN Medical Supply Co., Ltd.
Sales promotion, planning andproduction of advertising, etc.,
environmental hygiene business

Disclaimer Regarding Forward-looking Statements
Statements made in this annual repor t with respect to KYORIN Holdings, Inc.’s forecasts, plans, strategies and other statements other than thoseof historical facts are forward-looking statements about the future performance of the Company and its consolidated subsidiaries and are basedon management’s rational assumptions and beliefs in light of information currently available. As a consequence, readers should understand that, fora variety of reasons, actual results could differ materially from projections presented in this repor t. Key factors that could impact our results include,
but are not limited to, economic conditions, social trends, competition from rival companies, laws and regulations, uncer tainties in drug development
and exchange rate fluctuations.

KYORIN Holdings, Inc.

31

KYORIN Holdings, Inc.
5, Kanda Surugadai 2-chome, Chiyoda-ku, Tokyo
101-8311, Japan
Corporate Communication
TEL+81-3-3293-3414
E-mail http://www.kyorin-gr.co.jp/en/contact/
URL
http://www.kyorin-gr.co.jp/

ANNUAL REPORT 2011
Year ended March 31, 2011 KYORIN Holdings, Inc.

This report was printed using vegetable oil ink.
Printed in Japan