ANNUAL REPORT 2015
Year ended March 31, 2015

KYORIN Holdings, Inc.

History of the Kyorin GroupKYORIN Pharmaceutical, the core company within the Kyorin Group, was established in 1923. Since then, Kyorin takes seriously
the realization of its corporate philosophy of always making a contribution to human health. Kyorin has developed its healthcare
business based around skincare and other medical products, and currently the Group’s pharmaceutical operations span R&D,
manufacturing and sales.
The Kyorin Group is focused on developing a continuous stream of original drugs, while also diversifying its businesses to
respond to diversifying healthcare needs.

Corporate Philosophy of the Kyorin GroupKyorin continues to fulfill its mission of cherishing life and benefiting society bycontributing to better health.
Origin of the Name “Kyorin”
The name Kyorin originated from two Chinese characters that represent a truly virtuous way of practicing
medicine. It is derived from Chinese folklore, and embodies the Kyorin Group’s aspirations to continuously
contribute to the betterment of people’s health in any day and age.

[Kyorin Legend]Long ago, a Chinese physician named Dong Feng treated the sick free of charge, and asked those who
recovered from serious illness to plant five apricot tree saplings and those cured of minor illness to plant one.
As time went by, a thick forest of apricot trees was formed in the area.
(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 Dong Feng, the characters were transported from China to Japan as those representing
medicine and medical treatment in general.

2005

Toyo Pharmar Co., Ltd.
(Old name)
Establishment
year

Establishment
date (June 16)

2005

2007

Kyobundo Co., Ltd. (Old name)
1994

Kyorin Yakuhin Co., Ltd.
Toyo Shinyaku
Sha
1923

Kyorin Chemical
Laboratory
1931

KYORIN Pharmaceutical Co., Ltd.
(KYORIN Pharmaceutical Co., Ltd. and Kyorin Yakuhin Co., Ltd. were merged.)

KYORIN Pharmaceutical Co., Ltd.
1940

KYORIN Co., Ltd.
(Old name)

1992

2006

1920

1930

1940

1990

1995

2000

2005

Contents
Inside Cover.... History of the Kyorin Group
2................... The Process of Value Creation
4................... Performance Highlights
6................... To Our Shareholders and Investors
8................... President’s Interview
10................... Promotion of Group Management
12................... Establishing a Greater Presence in Specific Fields
14................... Research and Development
16................... Production
18................... Sales
20................... Corporate Governance
23................... Directors, Corporate Auditors, and Corporate Officers
24................... Corporate Social Responsibility

25................... Human Resources Management
26................... Financial Information.26................. Financial Analysis.30................. Consolidated Balance Sheet.32................. Consolidated Statement of Income/Consolidated Statement of Comprehensive Income.33................. Consolidated Statement of Changes in Net Assets.34................. Consolidated Statement of Cash Flows.35................. Notes to the Consolidated Financial Statements.52................. Independent Auditor’s Report.53................. Non-consolidated Financial Summary
Non-consolidated Balance Sheet/
Non-consolidated Statement of Income

54................... Corporate History
56................... Corporate Overview/Stock Information

The Kyorin Group is focused on achieving HOPE100, a long-term business vision spanning the period
to the centenary of the founding of KYORIN Pharmaceutical in 2023. The Company is working to achieve
the goals of its current medium-term business plan that covers Stage 1 of the HOPE100 vision.

Corporate vision
for

2023

Long-term Vision HOPE100 (FY2010–FY2023)
The Kyorin Group will promote diversified business expansion and the development of the consumer
healthcare business, and by 2023, will be recognized within and outside the Group as a company that
supports sound and healthy lifestyles.

Long-term Vision HOPE100 (Aim for Health Of People and our Enterprises)
Medium-term business plan(for fiscal 2010 – 2015)
Stage 1

Medium-term business plan(for fiscal 2016 – 2019)
Stage 2Medium-term business plan(for fiscal 2020 – 2023)
Stage 3

KYORIN Pharmaceutical
Facilities Co., Ltd.
2012

Dr. Program Co., Ltd.

KYORIN Rimedio Co., Ltd. (New name)
KYORIN Medical Supply Co., Ltd.
(New name)
2011

KYORIN Holdings, Inc. (New name)
2010

2010
Start
(2010)

Current
2015
year

2020

(2015)

Future (2023)

2023

100th Anniversaryof its Founding

Editorial Policy
Annual Report 2015 integrates financial reports with information on the Group’s environmental, social and governance (ESG) activities. In linewith the framework established by the International Integrated Reporting Council, the report combines results and other financial data with
nonfinancial information relating to value creation by the Kyorin Group, including business processes and strategies. Through this approach,
we aim to help stakeholders gain a deeper understanding of the Group’s activities.

Target Audience

Period Covered by Report

Shareholders, investors and other stakeholders

Fiscal 2014 (April 1, 2014 to March 31, 2015); some information also
relates to fiscal 2015 activities.

KYORIN Holdings, Inc.

1

The Process of Value Creation
The Kyorin Group gives priority to its basic business activities, including investing in people, contributing to society and caring
for the environment. The Group works to improve its corporate value by striving to create a more robust financial base while
conducting business activities that include the development, production and sale of pharmaceuticals and other products.
In line with the HOPE100 vision, the Group is developing business through a business model that aims to build a diversified
business portfolio centered on its pharmaceutical business, from the viewpoint of responding to diversifying healthcare needs
and achieving corporate growth.

Value Creation Process

Human capitalBusiness Activities

Utilization of individual
employee capabilities(knowledge and technical skills)

Intellectual andmanufacturing capitalSpecialized pipeline focusing
on specific fields

Improvement of
product creation
capabilities

Introduction of
new innovative
products

Strong business
base

Development of a Group
production system

Financial capital
Strong cash flow, highshareholders’ equity ratio

Utilization and acquisitionof external resources
Open innovation
Academic collaboration
Product introduction, etc.

Social capital
Contribution tohuman healthEco-capital
Energy rationalization

Generation of
profits

Providing
products andservicesthat contribute tohealthReductions in CO2 andwaste emissions

Achieve Long-term Vision HOPE100

Statement
The Kyorin Group will promote diversified business expansion and the development of the consumer
healthcare business, and by 2023, will be recognized within and outside the Group as a company that
supports sound and healthy lifestyles.

2

Annual Report 2015

Business Model
Work to diversify the pharmaceutical businessand the consumer healthcare business
The Group targets sustained growth by combining the drug discovery business,
which operates on a long time scale, with the consumer healthcare business,
which has a relatively short business cycle and supplements the pharmaceutical business.

PharmaceuticalBusiness
Original
Drugs
Group

New
Drugs
Group

Generic
Drugs
Group

Consumer
Healthcare Business

Promote the Pharma Complex Model(PC Model)
Kyorin classifies its pharmaceutical business into new drugs,
original drugs, and generic drugs, enabling us to respondaccurately to changes in the business environment byconducting multi-faceted development.
As a result, we are working to strengthen
our entire pharmaceutical business.

Over-the-counter drugs
and others
Environmental hygiene
business
SkincareShort time scaleLong time scale

Five HOPEs (Corporate Objectives)• The Leading Company
for Career Fulfillment• An International Company that Supports
Healthy Lifestyles Around the World• A Company that Sustains Growth• An Innovative Company that Customers Trust• A Company that Seeks to Co-Exist
with Society

KYORIN Holdings, Inc.

3

Performance Highlights
Consolidated Financial Highlights
KYORIN Holdings, Inc. and Consolidated Subsidiaries(Fiscal years ended March 31)

Millions of yen
FY2010FY2011FY2012FY2013

FY2014

Net sales

104,069

103,232

107,031

111,400

113,121

Operating income

16,443

14,464

17,94817,607

14,737

15.8

14.0

16.8

15.8

13.0

10,927

9,231

12,422

12,025

12,064

Results of Operations

Operating income/Net sales ratio (%)
Net income

10.5

8.9

11.6

10.8

10.7

Net cash provided by operating activities

Net income/Net sales ratio (%)

6,805

8,913

11,544

19,293

6,391

Net cash used in investing activities(1,806)(4,926)(7,187)(2,477)(1,364)

Free cash flow

4,999

3,987

4,357

16,816

5,027

12,495

13,964

11,05911,35913,514

12.0

13.5

10.3

10.2

11.9

Capital expenditure

1,668

1,952

6,576

6,500

2,655

Depreciation and amortization

2,458

2,363

2,738

3,153

3,053

ROE (%)

10.1

8.0

10.0

9.0

8.4

ROA (%)

7.7

6.3

8.3

7.4

6.8

Total assets

147,234

145,673

154,968

169,378

183,383

Total net assets

111,706

118,201

129,099

137,821

148,600

75.9

81.1

83.3

81.4

81.0

R&D expenses
R&D expenses/Net sales ratio (%)

Financial Position at Year-end

Total shareholders’ equity ratio (%)

YenAmounts per Share
Net assets

1,494.83

1,581.94

1,727.86

1,844.61

2,009.45

Net income

146.21123.54166.25160.95161.63

Cash dividends

45.00

45.00

50.00

52.00

52.00

30.8

36.4

30.1

32.3

32.2

2,294

2,297

2,444

2,452

2,445

Cash dividends payout ratio (%)
Number of employees

Net sales/Operating income(Millions of yen)
120,000

Net income/ROE(Millions of yen)
30,000104,069 103,232

107,031

111,400 113,121(Millions of yen)
15,00017,948
14,46410,00017,607
14,737(Yen)(%)
180
90.0
166.25

10.1

123.54
9,231

10.0

120

5.0

60

0.0

0

60.0

10.0
9.0

15,000

8.4

8.0
36.4

5,000
30,0000

7,500

Net sales (Left scale)Operating income (Right scale)402010 2011 2012 2013 2014 (FY)

Annual Report 2015

160.95 161.63

146.21

12,025 12,064

10,92722,50060,000(%)
15.0
12,42290,00016,443

Net income per share/
Cash dividends payout ratio02010 2011 2012 2013 2014 (FY)Net income (Left scale)ROE (Right scale)

30.8

32.3
30.1

32.2

30.0

2010 2011 2012 2013 2014 (FY)Net income per share (Left scale)
Cash dividends payout ratio (Right scale)

0.0

Fiscal 2014 Highlights
Operating results
111.4

Group consolidated net sales

Achieved
a new record

113.1

billion
yen

107.0
103.2

FY2011FY2012FY2013

FY2014

New product Increased sales of combination drug for asthma treatment Flutiform(A 30-day formulation (120-inhalation) launched Dec. 2014)

FY2014FY2013¥0.6
billion¥3.6

New product COPD treatment Eklira Genuair

Generic drug business

Launched

Sales ¥15.5 billion(May 2015)

billion+ 29.1%(yoy)

New R&D facility
In-licensing and acquiring rights

WATARASE Research Center opened(Jul. 2015)

Allergic rhinitis treatment desloratadine
Co-promotion agreement with MSD (Nov. 2014)
Gene-therapy product Ad-SGE-REIC
Development initiated (Jul. 2014)

Progress in the R&D pipeline

Overactive bladder treatment KRP-114V: Phase III clinical trials initiated (Jan. 2015)
Quinolone synthetic antibacterial agent KRP-AM1977X: Phase III clinical trials initiated (Apr. 2015)
Quinolone synthetic antibacterial agent KRP-AM1977Y: Phase II clinical trials initiated (Jun. 2014)

KYORIN Holdings, Inc.

5

To Our Shareholders and Investors

Representative Director,
President and Chief Executive Officer

Minoru Hogawa
Representative Director,
Chairman

Masahiro Yamashita

6

Annual Report 2015

All Kyorin Group employees are united in their determination
to realize our long-term vision HOPE100
The Kyorin Group intends to develop as a corporate group recognized for its presence in society,based on our corporate philosophy, which states “to cherish life and benefit society by contributing
to better health.”
As the embodiment of this corporate philosophy, we formulated our long-term vision HOPE100
and our HOPE100 Stage 1 medium-term business plan (for fiscal 2010 – 2015) in 2010. The Kyorin
Group will promote diversified business expansion, including in regards to drugs that can truly
contribute to better health. Meanwhile, the Group places great value in the thinking that “a business is only as good as its people.” We seek to become a place in which employees can bringpassion to their work; in short, to become a leading company for pursuing fulfilling careers.
In fiscal 2014, the fifth year of our HOPE100 Stage 1 medium-term business plan, and amid a
tough business climate due partly to drug pricing revisions, we were able to set a new record forrevenue mainly due to growth in the ethical drug business in Japan and sales expansion in thegeneric drug business.
By extension, fiscal 2015 is the final year of our current medium-term business plan, andI believe a key issue is to formulate a new medium-term business plan, HOPE100 Stage 2(Fiscal 2016 – 2019), designed as the next step in achieving a higher level of numerical targets
and in realizing our long-term vision.
In June 2015, we commenced a new management structure, with Masahiro Yamashita being
appointed representative director, chairman and Minoru Hogawa being appointed representative
director, president and chief executive officer. Under this new management structure, the Kyorin
Group will harness its collective power and strive to further improve its corporate value.
We look forward to the continued understanding and support of all our stakeholders.

“Your Health is Kyorin’s Mission.”

August 2015
Representative Director,
Chairman
Masahiro Yamashita

Representative Director,
President and Chief Executive Officer
Minoru Hogawa

KYORIN Holdings, Inc.

7

President’s Interview

We will manage the company
with a keen awareness of the need for bothtransformation and speed.

Representative Director,
President and Chief Executive Officer

Minoru Hogawa

Q1

As the new representative director and president,
what are your ambitions and intentions forthe company?

Answer 1
I was appointed representative director and president at the Ordinary
General Shareholders’ Meeting held on June 23, 2015 and at themeeting of the Board of Directors that followed. The Kyorin Group is
currently working toward the embodiment of our long-term vision
HOPE100, which has a target year of 2023. Our mission, as stated in
the vision, is to be broadly recognized as a company that supports
sound and healthy lifestyles while at the same time achieving sustained growth. The business environment in which the Group operates however is changing so quickly that it cannot be accommodatedby merely extending our old approaches into the future. We will therefore manage the company with a keen awareness of the need forboth transformation and speed.

Q2

Please describe the business environment in
the last fiscal year and the company’s financial
results in general.

Answer 2
Consolidated Performance in Fiscal 2014
The structure of the market in Japan’s pharmaceuticals industry has
undergone substantial change due to the National Health Insurance(NHI) drug price revisions that went into effect on April 2014 and thereforms made to the remuneration system for medical services, andgrowth in the ethical pharmaceuticals market has been sluggish. Ourconsumer healthcare business has also faced difficult conditions dueto the prolonged impact of decreased demand following last-minutedemand ahead of the consumption tax increase, as well as to only
moderate growth in consumer spending.
In terms of performance, in the pharmaceutical business, newdrugs enjoyed increased sales owing to the launch of a new 30-day

8

Annual Report 2015

formulation (120 inhalations) of Flutiform, a combination drug forasthma treatment which had its dosing period restriction lifted in
December 2014, and to growth from mainstay products, but sales of
Mucodyne, a mucoregulant, and other original drugs decreased year
on year due to the impact of drug price revisions and other factors.
Generic drug sales however increased significantly at insurance dispensing pharmacies and other outlets due to our having actively carried out sales activities on a tailwind provided by policies and othermeasures to promote use of generic drugs. As a result, overall sales
from the pharmaceutical business increased by 2.0% compared tothe previous fiscal year.
In the consumer healthcare business, the over-the-counter drugs
and others category enjoyed increased sales from RUBYSTA, a multipurpose disinfectant cleaner, but sales at Dr. Program Co., Ltd., whichhandles skincare products, declined year on year, so overall sales inthe business declined by 6.1% compared to the previous year.
As a result of these developments, consolidated net sales
increased 1.5% year on year to ¥113,121 million, which was a newrecord high. At the same time, on the earnings front, the cost of sales
ratio increased by 2.6 percentage points year on year, while R&D
expenses also went up due to the conclusion of new in-licensing
agreements to strengthen the pipeline. As a result, operating income
declined by 16.3% to ¥14,737 million, meaning we still have issues toresolve.
Research and Development
Regarding the progress of R&D activities, Eklira Genuair, a treatment
for chronic obstructive pulmonary disease (COPD), was released inMay. In addition, we commenced Phase III clinical trials for KRP-114V,
an overactive bladder treatment, and Phase II clinical trials for KRPAM1977Y, a quinolone synthetic antibacterial agent. We also madesteady progress on other drugs in our development pipeline.
We also took on a new project: the development of an Ad-SGEREIC formulation, a next-generation gene-therapy drug with thepotential to treat diseases with substantial unmet medical needs.

Q3

Tell us about your initiatives in fiscal 2015, thefinal year of the HOPE100 Stage 1 medium-termbusiness plan.

Answer 3
Business Strategy
Since initiating our HOPE100 Stage 1 medium-term business plan in
fiscal 2010, the Kyorin Group has regarded development of a business portfolio that mitigates risk in the pharmaceutical business andpromotes growth to be an important part of the Group’s own sustained growth. We formulated the Multi-Core (MC) strategy andworked to strengthen our core pharmaceutical business, while also
further developing the multifaceted consumer healthcare business,
cultivating existing businesses and expanding into new ventures.
This fiscal year, to achieve sustained, healthy and profitable growthin the pharmaceutical business in the midst of major changes taking
place in the medical environment, drug pricing and product lineups,
we intend to reconstruct our sales strategies for the medium and longterm and promote the Group production model. For generic drugs,
we will work to achieve challenging targets on the tailwind provided bysystem reforms. In addition, we will further advance the proactive joint
development model with other companies and formulate a plan forstrengthening R&D capabilities.
As regards the consumer healthcare business, in the environmental hygiene business, we will accelerate growth in the RUBYSTA business so that it quickly becomes a new core business for the Group,
and also work to expand other product lineups to make environmental
hygiene a business with excellent prospects in terms of both scale
and profitability.
Drug Discovery is the Lifeblood of a Pharmaceutical Company
For our core drug discovery business, we intend to reform drug discovery systems and augment our pipeline.
With the WATARASE Research Center, a new R&D facility, which
went into operation in July 2015, we will reform our drug discovery
system into a matrix organization that promotes new drug discovery
from both product and technical standpoints, and work to continuously
create innovative and original new drugs in specific fields (respiratory
medicine, otolaryngology, and urology). In addition, together with theClinical Development Center, we will actively engage in in-house drug
discovery, development of in-licensed products and life cycle management for existing products (acquiring additional formulations, indications and dosages), and thereby build an appealing product pipelinein specific fields.
Performance
For this fiscal year (fiscal 2015), the final year of our medium-termbusiness plan, we had targeted net sales of ¥140.0 billion and operating income of ¥20.0 billion. However, the business environment intensified drastically as the Japanese government continued to implement
various policies designed to curtail spending on drugs. As a result, ourconsolidated business forecast for the final fiscal year of our mediumterm business plan is net sales of ¥120.2 billion and operating incomeof ¥16.0 billion.
In terms of sales in this fiscal year, for new drugs, we will robustly
accelerate market penetration of Flutiform, a combination drug forasthma treatment, which is in its third year on the market, and promote the market introduction of the new product Eklira Genuair, atreatment for COPD. Through these and other means, we will work toincrease sales of new drugs and further expand sales of genericdrugs. As for earnings, while an increase in selling, general andadministrative expenses is anticipated, gross profit will also rise, so
operating income is expected to increase year on year.
Given these considerations, we are projecting year-on-yearincreases in both revenues and profits (operating income and ordinary
income) in this fiscal year, and all Group employees will earnestly
make every effort to achieve these forecasts.

Q4

What is your stance regarding shareholder
returns?

Answer 4
We will work to raise corporate value and fulfill our responsibilities tostakeholders by conducting investments for growth, investments forbusiness continuity and shareholder returns in a well-balanced manner and strengthening our management base. Investments for growth
will involve promoting efforts to license new products to reinforce our
R&D pipeline in the pharmaceutical business, the core of the Kyorin
Group. And, in the consumer healthcare business, we will actively
consider growth investment to expand new businesses.
As for shareholder returns, we are aiming for a consolidated payout ratio of approximately 30% when deciding dividends. The dividend per share for fiscal 2014 was ¥52, representing a consolidated
payout ratio of 32.2%. In fiscal 2015, we are forecasting a dividend
per share of ¥52 (interim dividend of ¥20), for a consolidated payout
ratio of 33.8%.

Q5

Do you have a message for your stakeholders?

Answer 5
As we move to realize our long-term vision HOPE100, our ideal for the
Kyorin Group, we will actively and robustly work to achieve thenumerical targets we’ve set for the fiscal year and tackle the management issues we’ve identified.
Given that this year is the last year of the current medium-termbusiness plan, we will spend the year laying the groundwork for the
next plan, HOPE100 Stage 2 (Fiscal 2016 – 2019), which is the next
step toward the HOPE100 vision.
The Group intends to even more actively disclose information and tocommunicate with stakeholders as appropriate as regards the progress we are making to realize our long-term vision HOPE100.
I look forward to the continued support of all of our stakeholders.

KYORIN Holdings, Inc.

9

Promotion of Group Management
For the Kyorin Group, business strategies to maximize the strengths of the Group are an essential part of achieving sustained
growth. In both the pharmaceutical and consumer healthcare businesses, we are promoting a Multi-Core (MC) strategy,
which is a Group strategy of strengthening cooperation both within and outside the Group, so that we can cultivate existing
businesses and create new businesses.

Seeking to Diversify Businesses through Group-wide Collaboration
The Kyorin Group comprises five consolidated subsidiaries and is engaged in the development, production and sale of new and genericdrugs, centered on the core company KYORIN Pharmaceutical Co., Ltd., which is developing the pharmaceutical business. We are also
pushing ahead with diversifying the consumer healthcare business through Group-wide collaboration.

Kyorin Group

Pharmaceutical Business

Consumer Healthcare Business(New drugs, generic drugs)(Skincare, over-the-counter drugs and others)

KYORIN
Medical Supply Co., Ltd.

KYORIN Rimedio Co., Ltd.
Generic drugs, over-the-counter drugs and others

Sales promotion, planning and production ofadvertising and environmental hygiene business

KYORIN PharmaceuticalCo., Ltd.
Drug discovery business, prescription drugs,
over-the-counter drugs and others

KYORIN Pharmaceutical
Facilities Co., Ltd.

R&D

Dr. Program Co., Ltd.
Development and sales of skincare products

Manufacture and sales of prescription drugs
Sales

Production

Initiatives for Group-wide Collaboration
Pharmaceutical Business

Consumer Healthcare Business

New Drugs Group and Original Drugs GroupWe are promoting a project to transfer the production functions of the KYORIN
Pharmaceutical Okaya Plant to KYORIN Pharmaceutical Facilities in order to
optimize the Group’s overall production system, which is a vitally important
issue for the Group. By strengthening cooperation between KYORIN
Pharmaceutical Facilities and the Okaya and Noshiro plants, we will ensure
a smooth transition.

Penetration of Multi-purpose Disinfectant Cleaner RUBYSTA andDisinfectant Milton
RUBYSTA is being marketed to medical institutions, nursing homes, and public
facilities in a joint effort between KYORIN Medical Supply, which in-licensed the
product, and KYORIN Pharmaceutical, which has an extensive track recordand expertise in the medical field.
We continue to strengthen sales of our existing flagship product, Milton,
while also seeking to enhance our lineup of products in the environmental
hygiene business, using partnerships within the Kyorin Group to further
popularize these products.

Generic Drugs GroupKYORIN Pharmaceutical and KYORIN Rimedio have been collaborating on
R&D, thereby enabling the development of high-quality generic drugs.
We are dispatching employees from the production divisions of KYORIN
Pharmaceutical and KYORIN Pharmaceutical Facilities to KYORIN Rimedio,
which manufactures generic drugs. We are also revitalizing coordination among
employees within the Group in order to ensure a reliable supply of genericdrugs, including by sharing technology and providing production assistance.

10

Annual Report 2015

Development of Skincare Products
A skincare research unit established in KYORIN Pharmaceutical’s WATARASE
Research Center is collaborating with Dr. Program on the development ofskincare products.

Group Strategy
Multi-Core (MC) Strategy
We believe it is important to possess a strong, well-balanced business portfolio by means of combining differing businesses in a cyclicalmanner in order to realize sustained corporate growth. As a businessstrategy, Kyorin is promoting a Multi-Core (MC) strategy comprising
our pharmaceutical business and consumer healthcare business.
In the pharmaceutical business, we are implementing a conceptthat we call the Pharma Complex Model (PC model), an approachencompassing multi-faceted development in the “New Drugs
Group,” the “Original Drugs Group,” and the “Generic Drugs
Group.” In the consumer healthcare business, we are compensating for risks in our pharmaceutical business and promoting growth
as a Group by cultivating our existing businesses and striving toaugment new businesses.

Multi-Core (MC) Strategy—Diversify the Consumer Healthcare Business by Centering on the Ethical Drug Business—

Pharmaceutical Business

Consumer Healthcare BusinessPharma Complex (PC) Model*

Cultivate existing businesses andcreate new businesses

Multi-faceted business development(new drugs, original drugs, generic drugs)* Kyorin classifies its pharmaceutical business into new drugs, original drugs, and generic drugs, enabling us to respondaccurately to changes in the business environment by conducting multi-faceted business development. As a result, we areworking to strengthen our entire pharmaceutical business.

Alliances Strategy
KYORIN Pharmaceutical, the core subsidiary in the Kyorin Group, isworking to reinforce its product pipeline to establish a greater presence in specific fields. Amid a lack of innovative new drugs worldwide, the large number of competing companies makes it a major
challenge to acquire products through in-licensing activities.
Under these conditions, we have successfully in-licensed various
drugs in specific fields (FC), namely, the therapeutic areas of respiratory medicine, urology, and otolaryngology. These include Flutiform,
a combination drug for asthma treatment launched in November
2013; Eklira Genuair, a COPD treatment launched in May 2015;
KRP-209, a treatment for tinnitus; KRP-AB1102F, a COPD treatment; and KRP-114V, a therapeutic agent for overactive bladder.
MSD

Eisai

In addition, we have concluded a co-promotion agreement with
MSD for desloratadine, a treatment for seasonal allergic rhinitis.
These results are due to the fact that among all of the companies
that out-licensed these products, the joint-development companies
found the prospect of working with the Kyorin Group attractive, andwere confident that we would prove to be a reliable partner. We
believe this is evidence that the franchise customer (FC) strategy weare pursuing is gaining a firm hold in the pharmaceutical industry,both in Japan and the rest of the world. Going forward, our employees will work together to build an even more attractive product pipeline, which will be trusted by physicians and patients, and the Kyorin
Group will be recognized as having a significant presence in society.

Ono Pharmaceutical

Kaken Pharmaceutical

Sato Pharmaceutical

Taisho PharmaceuticalNovartis (Switzerland)

Handok (Korea)

MediciNova (U.S.A.)

LG Life Sciences (Korea)

SPIMACO* (Saudi Arabia)

Chong Kun Dang (Korea)

KYORIN
Pharmaceutical

R-Pharm (Russia)

Yungjin (Korea)

Nichi-Iko Pharmaceutical

Shinlin Sinseng (Taiwan)

Chugai PharmaceuticalSenju Pharmaceutical

Nisshin Pharma

Merck & Co. (U.S.A)

ROHTO Pharmaceutical
Merz (Germany)

Yakult Honsha

Ferring (Switzerland)* SPIMACO: Saudi Pharmaceutical Industries & Medical Appliances Corporation

SkyePharma (U.K.)

AstraZeneca (U.K.)

Out-licensed

In-licensed

Allergan (U.S.A.)

In- and out-licensed

KYORIN Holdings, Inc.

11

Establishing a Greater Presence in Specific Fields
KYORIN Pharmaceutical focuses on R&D activities and marketing activities in specific fields (FC), namely, the therapeutic areas of respiratory
medicine, otolaryngology and urology, and promotes the Franchise Customer (FC) strategy that realizes sustained growth in an effective andefficient way. We prioritize marketing activities that involve making regular visits mainly to specialist physicians, and we are building strong
relationships of mutual trust with medical professionals. At the same time, our R&D activities aimed at enhancing our product lineup are also
focused on these specific fields (FC). Overall, we aim to establish a greater presence to make our pharmaceutical operations more competitive.

Respiratory field
Eklira Genuair

Flutiform
FY2014
Sales

3.6

Launched
COPD treatment

billion yen

Eklira 400 μg Genuair for 30 Inhalations

Combination drug for asthma treatment
Flutiform
50 Aerosol 56 Inhalations/120 Inhalations
Flutiform
125 Aerosol 56 Inhalations/120 Inhalations

This combination asthma treatment delivers fluticasone*1 for the prevention of airway inflammation
along with formoterol*2 that acts as a bronchodilator. The use of a pressurized metered-dose
inhaler enables patients to inhale the drug easily, irrespective of the level of lung function.
*1 Fluticasone propionate *2 Formoterol fumarate dihydrate

The product was launched in May 2015 for the treatment of
COPD. Administered twice daily using the advanced Genuair
inhaler, Eklira improves respiratory function throughout theentire day.

Products under Development
Compound/Code

Therapy area/Action

OriginFeatures

Stage
Ph I

Pharmaceutical Business

KRP-AB1102F

Ad-SGE-REIC

Chronic obstructive pulmonary
disease (COPD)

Almirall(Spain)A drug that combines the long acting muscarinic
agonist (LAMA: aclidinium) and the long-acting
beta 2 stimulant (LABA: formoterol)

Malignant pleural
mesothelioma

Okayama
University

A gene therapy drug that uses the new cancerinhibiting gene REIC that was discovered at
Okayama University. It is expected to induce theactive development of cancer cell selective
apoptosis and anticancer immunity.

Ph II

Ph III

NDA

8/20137/2015* Ad-SGE-REIC Selected for NexTEP (a system of cooperation between industry and academia for developing practical applications of products) in June 2014.

Urology field
Therapeutic agent for overactive bladder
URITOS Tablets 0.1 mg, URITOS OD Tablets 0.1 mg

URITOS
FY2014Sales

7.3

The product improves urinary urgency, frequency and urgency incontinence
due to overactive bladder. Not associated with dry mouth and available as anorally disintegrating tablet, Uritos is suitable for elderly patients and those withdifficulties swallowing.

billion yen

Products under Development
Compound/Code

Therapy area/Action

OriginFeatures

Stage
Ph I

KRP-114V

Overactive
bladder

Other field

IBD

Consumer Healthcare
Business(lower digestiveorgans)12

Environmental
hygiene business:
Key products

Annual Report 2015

Merck & Co.
(U.S.A.)PENTASAKRP-114V is expected to improve urinary frequency
through stimulation of the beta 3 receptor in the
bladder which improves bladder muscle relaxation.

FY2014
Sales

Ulcerative Colitis/
Crohn’s Disease Remedy
PENTASA Tablets 250 mg,
PENTASA Tablets 500 mg

Ulcerative Colitis Remedy
PENTASA Intestinal Infusion 1 g,
PENTASA Suppositories 1 g

Milton

Ph II

17.2

billion yen

As a standard drug for the treatment for ulcerative colitis, IBD is widelyused to maintain remission by preventing any further recurrence by
inducing the remission of minor to moderately serious conditions. The
drug is a spot formulation and is administered anally, to work directly on
the lesioned area, such as the rectum or sigmoid colon. The drug may
also be used simultaneously as an oral agent and spot formulation,
depending on the locations of the symptoms or lesions.

FY2014Sales

2.0

billion yen

Since its launch in 1963, the disinfectant Milton has assisted mothers hoping for the healthy growth oftheir babies. As the leading brand of baby bottle disinfectant, it also enjoys the support of obstetricians,
gynecologists, and nurses.

Ph III
1/2015NDAOtolaryngology field

KIPRES
FY2014
Sales

MUCODYNEFY2014
Sales

14.0

41.2

billion yen

Leukotriene receptor antagonist
Anti-bronchial asthma and allergic rhinitis drug

billion yen

KIPRES Tablets 5 mg,
KIPRES Tablets 10 mg

Mucoregulating drug
MUCODYNE Tablets 250 mg,
MUCODYNE Tablets 500 mg,
MUCODYNE Syrup 5%,
MUCODYNE DS 50%

Leukotriene receptor antagonist
Anti-bronchial asthma drug

The product is used in the treatment of upper respiratory problems (such aspharyngitis or laryngitis), bronchitis, bronchial asthma and various ear, noseand throat conditions that affect both adults and children.

A long-term management drug for the treatment of bronchial asthma and for allergic
rhinitis in adults. It not only exhibits a superior effectiveness, the drug is offered indifferent forms to meet patients’ needs, including convenient once-a-day dosages
and formulation, chewable tablets that can be taken by children aged 6 or older, andfine granules suitable for infants.

KIPRES Fine Granules 4 mg,
KIPRES Chewable Tablets 5 mg

Products under Development
Compound/Code

Therapy area/Action

OriginFeatures

Stage
Ph I

KRP-AM1977X(oral agent)

Quinolone synthetic
antibacterial agent

In-house

KRP-AM1977Y(injection)

Quinolone synthetic
antibacterial agent

In-house

1. Superior ability to combat drug-resistantgram-positive bacteria (incl. MRSA)
2. Outstanding ADME (oral absorption, tissue
migration)
3. High degree of safety expected since safety
hurdles cleared prior to clinical trials

Ph II

Ph III

NDA

4/20156/2014

Products under Development
Compound/Code

Therapy area/Action

OriginFeatures

Stage
Ph I

KRP-209

Tinnitus

Merz (Germany)

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

Ph II

Ph III

NDA

8/2011[Reference]

Desloratadine

Allergic rhinitis*Underdevelopment by
MSD K.K.

A second-generation histamine H1 antagonist. It is
expected to alleviate itches accompanying nettlerash or hives and skin disease or dermatosis(eczema, dermatitis and cutaneous pruritus).

Underdevelopment* Desloratadine: In November 2014, we concluded a co-promotion agreement applying to Japan with affiliated company MSD.

Products under Development
Compound/Code

Therapy area/Action

OriginFeatures

Stage
Ph I

KRP-203

Transplantation,
autoimmune
diseases, and IBD

In-house

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 under concomitant use with other types of
immunomodulators.

Ph II

Ph III

NDA

3/2013[Reference Information] Overseas
KRP-203
Novartis PhII (POC) (12/2010)

RUBYSTAFY2014Sales

0.5

billion yen

RUBYSTA, a multi-purpose disinfectant cleaner that went on sale in 2012, is used inhygiene control in medical institutions and other settings, both for infection prevention
and to prevent the spread of pathogens.

* Products under development as of July 30, 2015

KYORIN Holdings, Inc.

13

Research andDevelopment
Backed by our ability to create innovative new ideas, KYORIN PharmaceuticalCo., Ltd. aims to become a manufacturer of original new drugs that can contributeto the health of the world’s people. In July 2015, we opened the WATARASE
Research Center, a new R&D facility. At this facility, which brings together our collective capabilities, we are able to conduct R&D functions in one place, carrying out
a series of activities ranging from basic research to confirmations of effectivenessand safety. As a result, we are able for the first time to maximize efficiency andcoordination in terms of people, organization and systems with the goal of creatinga system that demonstrates the strength of the business to the greatest extent. We
have transformed our research framework into a matrix organization that facilitates
the simultaneous pursuit of both products and technologies in a parallel manner.
This means that we can both improve the pipeline of specific fields and also
shorten the development time from drug creation to market entry.

Masakatsu Komuro
KYORIN Pharmaceutical Co., Ltd.
Senior Executive Director and Head of Discovery Research Headquarters
KYORIN Holdings, Inc.
Executive Director

Promoting Drug Discovery, Development and Life
Cycle Management to Establish Our Presence inSpecific Fields
The Discovery Research Division continuously licenses globallycompetitive, original drugs under our long-term vision HOPE100,
and has set a goal of establishing a strong presence in the Company’s specific fields (respiratory medicine, otolaryngology, and urology).
To do this, it is important to build a highly productive organizationby emphasizing timelines, and to fully explore the R&D processes
from drug discovery to life cycle management: theme selection,
evaluation, development period, and the introduction of new drug
discovery technology. Under our medium-term business plan
HOPE100 Stage 1 (Fiscal 2010 – 2015), we are tackling the priority
topics of doing research into life cycle management to maximize
product value, steadily bringing development projects to market,
and creating innovative new drugs under the key concept of creating drugs that will change existing therapeutic systems. Under
HOPE100 Stage 2 (Fiscal 2016 – 2019), we will prioritize bringing tomarket development projects that include original new drugs. From
HOPE100 Stage 3 (Fiscal 2020 – 2023) onwards, we will focus on
creating innovative new drugs that can contribute to the health of
the world’s people.
In the drug discovery process, we aim to create innovative original new drugs under the key concept of creating drugs that willchange existing therapeutic systems, and are therefore focusing
our limited resources on our specific fields. We are working to clarify disease-specific issues to fuse the technologies of pharmacology, drug synthesis, toxicity, ADME (Absorption, Distribution,
Metabolism, Excretion), and CMC, and to speedily create attractive
and high-quality drug candidates. Moreover, in our next-generation
drug discovery research, we are working on the development of agene-therapy drug that has the potential to treat diseases with
substantial unmet medical needs, and have started a practicalapplication program for an Ad-SGE-REIC formulation that targets

14

Annual Report 2015

the treatment of malignant pleural mesothelioma.
In the development process, we are guided by a consistentfocus on the needs of the patients who will use the drugs, and thisis based on understanding the importance of creating productsthat meticulously meet medical needs. In addition, we follow a“developer-producer” approach in which we formulate development
policies with a strong awareness of our vision for a product after
launch. In line with this, we give ample consideration to marketability, profitability and feasibility, and are continuing to create drugs by
pursuing effectiveness, safety and convenience. Currently, we areworking on the development of KRP-114V, an overactive bladder
drug; KRP-AM1977X and Y, a new quinolone synthetic antibacterial
agent; KRP-209, a treatment for tinnitus; and other drugs, with thegoal of bringing them quickly to market.
In the life cycle management process, we work to build evidence by implementing scientifically high-value research into life
cycle management (clinical research, drug additions, etc.), thereby
maximizing product value.

To Create Drugs That Meet Market Needs
With medical needs continuing to expand and becoming moresophisticated, KYORIN Pharmaceutical meets the challenges ofdeveloping new drugs. One of our strengths is our relatively small
scale, exploiting the benefits of collaboration between individuals
with a broad range of research expertise and departments that canquickly make judgments and respond. In May 2015, we completed
the WATARASE Research Center, a new R&D facility, and it opened
in July the same year. In our R&D Department, we have reshuffled
the organization based on our business strategy. The organization
now ties together four units (respiratory medicine, otolaryngology,
urology and new foundation research) for each disease domain,with each unit bearing responsibility from research to product commercialization. As a result, we can shorten the transition time fromthe discovery of a new drug candidate compound to thedevelopment and commercialization of the drug, and we canstrengthen the pipelines in specific fields. Furthermore, we are promoting not just research within the Company but also collaboration
with academia (research with universities, research institutes andthrough other ventures). We will select highly original research
themes and pursue R&D activities. We are doing our utmost to
focus our efforts on practical applications so that we can provide
patients with new therapies as soon as possible.

The WATARASE Research CenterWe founded the WATARASE Research Center as a new R&D facility that unites in one research institute the research activities
that had hitherto been dispersed in two locations. The WATARASE Research Center is a facility with state-of-the-art equipment and instruments that organically connects individual research capabilities, and that encourages ease of communication
between researchers. The Product Portfolio Planning Department ties together four units (respiratory medicine, otolaryngology,
urology and new foundation research) that formulate a strategy for each disease domain, and there are eight drug research
institutes (Pharmacology 1, Pharmacology 2, Synthesis 1, Synthesis 2, Safety, Pharmacokinetics, CMC, and Drug Discovery
Technologies). This matrix organization structure promotes new drug creation both effectively and efficiently, enabling us toclarify the treatment domains and diseases that Kyorin should engage in, and to undertake new drug creation in line withmarket needs.
To respond to the diverse and increasingly sophisticated medical needs of today, we must integrate Kyorin’s technologies
and knowledge and exhibit our collective power even more than hitherto. Furthermore, we also need to develop attractive andhigh-quality products by combining the wisdom and technologies of external bodies such as academia, startup companies
and other partners. We must not only think of drugs as merely something with medicinal properties. Rather, we should thinkthat drugs enable us to make a good impact on patients and their families, healthcare professionals and medical treatments.
In short, Kyorin aims to become a new-drug creator that is recognized for its presence in society.

Shigeru Ogihara
KYORIN Pharmaceutical Co., Ltd.,
Executive Director and Head of
WATARASE Research Center
KYORIN Holdings, Inc.
Executive Director[WATARASE Research Center (aerial view)]

Newpharmaceutical
discovery
researchlaboratories

Overview
Location
Building
Structure
Commence operations

1848, Nogi-machi, Shimotsuga-gun, Tochigi
Building area: 7,536 m2; total floor area: 20,703 m2; number of floors: 4
Steel-reinforced concrete structure (in part); steel construction (seismically isolated structure)
July 7, 2015

KYORIN Holdings, Inc.

15

Production
Providing a stable supply of high-quality pharmaceutical products at a low cost is
our ongoing mission. At KYORIN Pharmaceutical, we have a quality policy of maintaining stable supplies and working to reduce costs while ensuring high quality, andare currently involved in reinforcing production activities and supply chain management from a scientific standpoint. For this to be achieved, it is important that initiatives be people-driven. With all employees aware of their respective roles, we arepromoting the development of systems that allow us to maximize the strengths we
possess. KYORIN Pharmaceutical aspires to be a drug manufacturer that is trusted
not only in Japan but all over the world as well by building a strong, cohesive production organization for the overall Group and fulfilling our mission.

Kazuhiro Marubayashi
KYORIN Pharmaceutical Co., Ltd.
Executive Director and Head of Production & Manufacturing Headquarters

For the Efficient Supply of High-Quality
Pharmaceuticals
Under our long-term vision of being a drug manufacturer trusted
and appreciated by patients, the Kyorin Group steadily carries out
production activities that are trusted in Japan and overseas and are
guided by the basic approach of quality assurance, supply stability,
and cost reduction—the mission of our production divisions. In fiscal 2014, the government enacted a policy of accelerating relativeuse of generic drugs for longstanding pharmaceutical products andmade further drug price revisions, so corporate management faced
a more challenging situation and further pursuit of efficient production to ensure sustained growth and earnings for the Group has
become a pressing issue. Given this, the Production & Manufacturing Headquarters focused specifically on building a new production
system for the stable supply of high-quality products at low costs,
and promoted the following four priority initiatives to realize thelong-term vision HOPE100 and achieve the goals of HOPE100
Stage 1, our medium-term business plan.
1) Overall optimization of the Group’s production system: We are
deepening coordination between KYORIN Pharmaceutical’s
Noshiro and Okaya plants, KYORIN Rimedio and KYORIN Pharmaceutical Facilities to ensure a stable Group supply system responsive to business plans and raise the efficiency of production
activities.
2) Development of new global production and delivery: We areworking to strengthen the production system for compliance with
global standards into the future. This includes further implementing
Good Manufacturing Practice (GMP) quality assurance standards at
all production facilities and maintaining a quality assurance system
directly linked to the Quality Assurance & Reliability Headquarters toensure compliance with the Pharmaceutical Inspection Convention
and Pharmaceutical Inspection Co-operation Scheme, which aims

16

Annual Report 2015

to harmonize quality system and GMP standards at the global level.
Through this, we intend to provide stable supplies of high-quality
products, improve manufacturing technologies, reduce costs andrealize global development.
3) Low-cost operations: Production divisions established a new
Supply Chain Management department in fiscal 2014 and haveworked, through greater transparency, to achieve supply stability,
cost reductions and quality improvements. With a goal of shortening
lead times, we are working now to reduce inventories of products
and raw materials.
4) Human resources development: In order to stably supply highquality products to patients and medical professionals, we’ve set a
clear policy that calls on each and every employee to work with asense of mission and maximize their respective roles while maintaining cohesiveness, and all employees are engaged as a single
team in an action program to achieve this. We respect the idea thatan organization ultimately comes down to its people and intend topromote the type of organization that allows high levels of creativity
to be exhibited, while also keeping the workplace lively and cheerful
to maintain and raise employee motivation and morale.
Through these initiatives we are working to create one of the top
production systems in Japan in terms of quality, delivery and cost
(QDC).

Strategic Promotion of Supply Chain Management
With the goal of establishing robust earnings power that is resistant
to changing conditions, we are comprehensively assessing the
supply chain throughout the entire Kyorin Group and building a system for more efficient production and greater supply stability.
It is essential that we promote supply chain management toraise speed and accuracy through product-by-product management on a worldwide basis, from raw material procurement toproduction management, manufacturing and shipping. To mitigate
supply-side risk and ensure we continue to receive stable supplies,
we are building strong relationships rooted in trust with domestic
and overseas suppliers while also securing second and third supply
sources and alternate transport routes. We consider daily how to
pursue efficient forms of production that also reduce manufacturingcosts. Going forward, the entire Kyorin Group will be involved inbuilding a new production system for overall optimization and lowcost operations.

Accelerating Group Collaboration in Production
The Noshiro Plant, the main factory of KYORIN Pharmaceutical, is anenvironmentally and worker-friendly production facility with highly efficient automated equipment including a flow-bin production system
for automatic conveyance of raw materials and intermediate products. The Kyorin Group is working to build a Group production[Group Production Sites]

system for the maximum utilization of the production resources andcharacteristics of the Noshiro Plant, KYORIN Pharmaceutical Facilities and KYORIN Rimedio’s Inami Plant.
We will promote overall optimization at Group level in order tosecurely and stably supply generic pharmaceutical products,
whose reputation has been improving on the tailwind of the government’s policy on use of generic drugs. Specifically, employees fromthe production divisions of KYORIN Pharmaceutical and KYORIN
Pharmaceutical Facilities have been dispatched to KYORIN Rimedio,
which manufactures generic drugs, to disseminate technologies via
personnel exchange and provide manufacturing support.
We currently have a project underway to relocate the production
functions of KYORIN Pharmaceutical’s Okaya Plant to KYORIN
Pharmaceutical Facilities. To ensure that the transfer is smooth andgoes according to plan, we will deepen the coordination between
KYORIN Pharmaceutical Facilities and KYORIN Pharmaceutical’s
Okaya and Noshiro plants.

KYORIN Pharmaceutical Co., Ltd.,
Noshiro Plant
KYORIN Pharmaceutical Co., Ltd.,
Okaya Plant
KYORIN Rimedio Co., Ltd.,
Inami Plant

KYORIN Pharmaceutical
Facilities Co., Ltd.

KYORIN Holdings, Inc.

17

Sales
The sales division is striving to further raise its presence in the key fields of respiratory medicine, otolaryngology and urology. Our medical representatives (MRs) work
to build strong, trust-based relationships with the physicians they visit regularly,
particularly the specialists in these fields, so that from an organizational standpoint,
we are able to precisely grasp the needs of medical professionals and quickly
accommodate them. We make various proposals after sufficiently understanding
physicians’ approaches to drug treatment, and work to contribute to the development of medicine in general and the treatment of patients and people’s health in a
broader sense.

Kunio Kajino
KYORIN Pharmaceutical Co., Ltd.
Executive Director and Head of Sales & Marketing Headquarters
KYORIN Holdings, Inc.
Executive Director

Aiming to Establish a Greater Presence inSpecific Fields
The approximately 750 MRs at KYORIN Pharmaceutical strive tomaximize the penetration of mainstay products under a franchisecustomer (FC) strategy that prioritizes sales activities and information provision for physicians and medical institutions in specificfields, centering on specialists in respiratory medicine, otolaryngology and urology.
In fiscal 2014, we focused on strategic communications with
doctors based on detailed plans established for each product anddosage form, and this was effective in promoting our mainstay
products.
In fiscal 2015, to achieve the final targets of our medium-termbusiness plan HOPE100 Stage 1, it will be important to further
maximize the penetration of mainstay products while maintaining afirm grasp on market changes. A look at the current domestic ethical pharmaceuticals market reveals major changes are taking placein market trends by region and product group due to drug pricing
revisions and changes to the remuneration system for medical services. At the Sales & Marketing Headquarters, we have made organizational changes to accurately ascertain and address thesechanges, establishing the new Area Management Department to
respond to the specific characteristics of users and geographic
areas and the new Product Management Department to fully identify diverse medical needs with a focus on specified diseases. Sales
activities are being developed on a regional and product matrix as
we seek to identify disease-specific issues as well as which products (including dosage forms) are needed by medical professionals
in each region and at each medical institution in order to craft highly
tailored approaches.
To build trust and further improve relationships with physicians,
we are providing and collecting information through regular visits,
holding talks and seminars for specialists, and giving presentations
to provide detailed product information to benefit the medical field

18

Annual Report 2015

and precisely grasp the needs of doctors. In addition, we’ve started
using tablet terminals in sales activities as a tool for providing information, having launched the Kyorin Medical Bridge members’ website for medical professionals and instituted other policies designed
to continuously strengthen information provision and collection
activities. In this way, the entire company is working to further
improve relationships with specialist physicians.

Team-based Sales Structure to Maximize Individual
Abilities and Achieve Organizational Goals
KYORIN Pharmaceutical has instituted a team-based sales structure in which a number of MRs are made responsible for a certain
area. We are not only working to build a structure that allows MRs
to demonstrate their individual abilities (and strengths) to the maximum extent while enabling us to respond to the diverse needs ofphysicians, we are also fostering a climate in which MRs experience the pleasure of achieving a goal as a team.
At the same time, in order to further promote mainstay products
on a sustained basis, it is important to enhance the general abilitiesof each MR, including his or her knowledge, technical skills andpersonal abilities. We are enhancing employee education and training programs, including new employee training and training for personnel in their second or third year at the company, and thereby
working to foster personnel capable of appropriately providing
information in line with physician needs.

Active Promotion of the FC Strategy
At KYORIN Pharmaceutical, we have supplied Kipres and Mucodyne
and contributed significantly to drug treatment in the key fields ofrespiratory medicine and otolaryngology.
In fiscal 2014, in respiratory medicine, we worked to facilitate
further market penetration for Flutiform, a combination drug forasthma treatment that was launched in November 2013. Flutiform
has powerful anti-inflammatory effects, is fast-acting and comes inan optimal device for these characteristics; it is an asthma medication that is especially easy to inhale with complete confidence. As adrug that meets the needs of patients with symptoms not adequately controlled by existing treatments, we will promote its further
penetration by working to provide more information and facilitate
understanding, taking advantage of the fact that restrictions on the
drug’s dosing period were rescinded in December 2014. In May

2014, we launched Eklira Genuair, a treatment for chronic obstructive pulmonary disease (COPD), and worked to further enhancedrug therapies in this field.
In urology, another of our specific fields, we provide hospitals
and clinics with the overactive bladder (OAB) drug Uritos, actively
proposing it as a first-line drug treatment, raising awareness of thedisease to facilitate market growth, and otherwise striving to maximize the product’s penetration.
We will continue to highly value the trust we have fostered withmedical professionals in these specific fields and work toward thefurther evolution of our FC strategy. In line with the changing times
and changing market, we will optimize regular visits and do ourutmost to harness our accumulated expertise, connections, networks and other resources to more speedily develop new products
while making every effort to be able to deliver these new drugs that
contribute to the health of patients as soon as possible.

We continue working under our franchise customer (FC) strategy,
by which our some 750 medical representatives (MRs) regularly visit
some 70,000 doctors, primarily in the three specific treatment areas
we promote (respiratory medicine, otolaryngology, and urology).

Regularly visited
doctors

Respiratory

FC 3 areas

Otolaryngology

About 70,000

About 9,000

About 25,000

About 9,000

All Japanese doctors
About 300,000

Urology
About 7,000

Other areas(internal medicine, pediatrics,
lower digestive organs, etc.)

KYORIN Holdings, Inc.

19

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 business under our
long-term vision HOPE100 (aiming for the Health of People and our Enterprise), striving to advance as a group that
supports sound and healthy lifestyles.

Basic Policy on Corporate Governance
The most important management goal for KYORIN Holdings, Inc. is tocontinue raising shareholder value. To achieve this goal requires fosteringa management environment that enables us to build trust with the generalpublic. Therefore, having given better corporate governance a high priority, we seek to ensure prompt decision making, strong monitoring of theappropriateness of management, and ethical and transparent corporate
activities. To ensure transparency and fair disclosure, we release appropriate information without delay for the benefit of shareholders and investors.
Within the Kyorin website, we have created a shareholder and investor
information section on which we list business performance data, information presented at meetings, our securities report, news releases and othercorporate information, enabling anybody to access information about
Kyorin at any time. In the future, we intend to actively increase our disclosure of information, and expand and improve our communications with all
stakeholders.
KYORIN Holdings, Inc. has appointed three outside directors to further
strengthen the supervision of the business execution of directors, and tofurther enhance the transparency and fairness of management.
Kyorin is a Company with a Board of Corporate Auditors based on the
Companies Act of Japan. The Board of Corporate Auditors, including thethree outside corporate auditors, endeavors to fully demonstrate its auditing and supervising functions and to ensure the transparency of thedecisions being made by the Board of Directors. At the same time, corporate auditors carry out a diverse range of activities in fulfilling their auditing function. In addition to participating in important meetings, including
those of the Board of Directors and the Management Committee, corporate auditors implement comprehensive audits by checking documents
and other materials relating to key decisions and inspecting departments,
business facilities, and Group companies.
In addition, in recognition of our corporate social responsibility (CSR),
for every Kyorin Group company we appoint compliance and risk management promotion officers. We have established a Group-wide compliance and risk management system that is administered by theCompliance Committee and Risk Management Committee. We haveestablished guidelines for each affiliated company based on the Kyorin
Compliance Guidelines and set up a system for employees to report andseek advice about possible irregularities. As well as the above measures,
we have created management guidelines for affiliated companies and built
a system of support that respects their autonomy. Under this system, we
receive regular business reports from these companies and hold meetings
with their management before deciding important issues. The Internal
Audit Office conducts audits of affiliated companies based on internal
audit guidelines. Based on the results of these audits, departments thatoversee the operations of the affiliated companies issue instructions or
warnings and provide appropriate guidance.

Corporate Governance and Management Structure (As of June 23, 2015)
Ordinary General Shareholders’ Meeting
Appointment/dismissal

Reports

Accounting
Auditing Firm
(Independent
Auditor)Appointment/dismissal

AuditsBoard ofAuditors(5 Auditors)

Exchangeofopinions

AuditsAppointment/dismissal

Board ofDirectors(11 Directors(3 Outside
Directors))

Cooperation
Representative
Directors
Internal
Audit Office(7 Members)

Supervision

OutsideLegal
CounselManagement
Committee

AuditsAuditsAffiliated Companies
Guidance

20

Annual Report 2015

Corporate Officers/
Departments

1. Management Organization
To clarify the roles of our eleven directors, who are responsible for making
business decisions and supervising business execution, and four corporate officers, who are responsible for business execution, Kyorin has
established a corporate officer system. The Board of Directors usually
meets once a month, deciding important operational matters in a timely
manner after debating issues as well as supervising each director’s duties.
To oversee business execution, we established a Management Committee, comprising the president and directors, which discusses key operational matters concerning the Group. In addition, at its Ordinary General
Shareholders’ Meeting held in June, 2015, Kyorin appointed three outside
directors, and we will be leveraging their independence, rich experience,and high level of specialization to further enhance our management transparency and monitoring functions.
We also utilize a corporate auditor system with two statutory corporate auditors and three outside corporate auditors. By capitalizing on suchauditing and supervisory functions, we have built a system that facilitateshighly transparent decision-making.

2. Internal Control System and Risk Management System
Kyorin is building an internal control system in accordance with the basic
policy determined by the Company:• We established the Compliance Committee, which is chaired by a director in charge and includes the Director of the Internal Audit Office whoserves as a member of the committee. Thoroughgoing guidance is provided to executives and regular employees via training programs, while
the Corporate Ethics Hotline has been set up for consultations andreporting matters concerning internal violations. Moreover, we have set
Company rules to ensure the accuracy of financial reporting, and developed systems for ensuring the validity and reliability of internal controls
over financial reporting of the Group.
• We have built and are operating a structure for reducing and preventing
risks. As part of this structure, we established the Risk Management
Committee, chaired by a director in charge, with the General Affairs &Human Resources Department responsible for overseeing the committee. For risks concerning compliance, the environment and accidents,
we also formulated the Risk Management Guidelines and the Corporate
Ethics and Compliance Guidelines as part of a quick-response structure. Additionally, to handle crisis management when dealing with any
contingencies, we have set up the Contingency Measures Headquarters
under the leadership of the president.
For details, please refer to http://www.kyorin-gr.co.jp/en/company/governance.shtml

3. Audit Organization
1 Internal auditors
Internal audits are conducted by the Internal Audit Office, which is staffedby seven employees who report directly to the president, and is independent from other sections. Based on yearly auditing plans, the Internal
Audit Office regularly assesses and evaluates the effectiveness and efficiency of the legal compliance and internal control systems in the parent
and Group companies. After an audit, the office communicates any problems or areas that need improvement directly to the president and makes
the appropriate recommendations.
Another function of the office is to evaluate the Group’s internal controls over financial reporting. The office evaluates the development andoperation of these internal controls according to a predetermined scopefor evaluation, and makes a report to the president.
2 Corporate auditors
Corporate auditors conduct audits in line with an auditing policy and plan
set by the Board of Auditors at the beginning of each fiscal year. In addition to participating in important meetings, including those of the Board of
Directors and the Management Committee, corporate auditors implement

comprehensive audits by checking documents and other materials relating to important decisions and inspecting departments, facilities, andGroup companies.
Under our adopted system, if someone discovers that an executive
officer or employee is acting in contravention of either laws and regulations, or the Company’s Articles of Incorporation, they immediately notify
the corporate auditors. We are working to establish an environment conducive to more efficient audits by corporate auditors by coordinatingclosely with executives and regular employees and by fostering deeper
understanding of audits. Furthermore, we assign auditing staff to assist
the duties of the corporate auditors as necessary, and these humanresources are carefully checked by directors and auditors to ensure thatthey are independent.
Moreover, the statutory senior corporate auditor, Seiyu Miyashita, hasexperience as a director and head of accounting of KYORIN PharmaceuticalCo., Ltd, and has a considerable level of knowledge about finance andaccounting.
3 Outside directors and outside corporate auditors
Kyorin has three outside directors and three outside corporate auditors.
Outside director Senji Ozaki has experience as a director of B-R 31
ICE CREAM Co., Ltd. With his rich management experience and wideranging insight, Kyorin deemed Senji Ozaki well-qualified overall for
appointment to outside director. In addition, no risk of conflicts of interest
arising with our general shareholders was found that might affect the performance of his duties as outside director, and we recognize that hebrings a high degree of independence to the position. Note that nopurchasing, sales, or other trade relationship exists between Kyorin and
B-R 31 ICE CREAM Co., Ltd.
As an attorney well-versed in corporate law, outside director Noriyuki
Shikanai has also served on the board of Keio University and in otherimportant positions, and with his high degree of specialization and richexperience, was deemed well-qualified overall for appointment to outside
director. In addition, no risk of conflicts of interest arising with our generalshareholders was found that might affect the performance of his duties as
outside director, and we recognize that he brings a high degree of independence to the position.
Outside director Takashi Takahashi has experience as a director of
Teijin Limited. With his wide-ranging insight developed from his richmanagement experience, Kyorin deemed Takashi Takahashi well-qualified
overall for appointment to outside director. Note that no purchasing,sales, or other trade relationship exists between Kyorin and Teijin Limited.
Kyorin has three outside corporate auditors who are neutrally positioned and not compromised by relationships with management or specified parties having a special interest. These outside corporate auditors all
have a considerable level of knowledge of corporate legal matters, andmatters of finance and accounting. We utilize their specialist understanding and wide-ranging knowledge and experience to strengthen andenhance our auditing functions.
Outside corporate auditor Masaji Obata is well versed in the Corporation Law as a lawyer, and has considerable knowledge concerning
finance and accounting. Outside corporate auditor Takao Yamaguchi hasa considerable level of knowledge in matters of finance and accounting asa certified public accountant and a certified tax accountant.

While Kyorin has no clearly established standards or policies regarding
independence in the appointment of its outside directors and outside corporate auditors, appointments are decided based on a review of the individuals’ backgrounds and relationship with Kyorin, and, from a standpoint
independent from that of management, on the assumption that sufficient
independence can be ensured that said individuals are able to adequately
carry out their duties as outside directors and outside corporate auditors.

KYORIN Holdings, Inc.

21

4 Independent auditors
In accordance with the Corporation Law and the Financial Instruments
and Exchange Law, we receive annual audits by Ernst & Young ShinNihon
LLC. We benefit from its valuable advice as an accounting auditing firm,
as well as from its services as an auditor of our financial accounts.
The following certified public accountants performed the audit of
KYORIN Holdings, Inc.: (Names of certified public accountants)
Shigeyuki Amimoto, designated limited liability partner and engagement
partner; and Hidemitsu Kato, designated limited liability partner andengagement partner.
A further 16 certified public accountants and 11 assistant accountants assisted with the audit.
The Board of Auditors provides a forum for close, regular exchange
of information and opinions with the Internal Audit Office and theaccounting auditing firm, thereby enhancing the auditing system.

4. Overview of Personnel, Capital and Trading Relationships
between the Company and the Outside Directors andOutside Auditors
None to report.

5. Compensation of Directors and Corporate Auditors
1 Total compensation paid to each director or corporate auditor,

total paid by type of compensation, and number of applicabledirectors and corporate auditors
Total paid by typeof compensation(Millions of yen)
Basic compensation

Number of applicabledirectors andcorporate auditors(People)

195

195

7

Corporate auditors(Excluding outside corporate auditors)

30

30

3

Outside directors or corporate
auditors

39

39

7

Director or
corporate auditor

Total compensation
paid(Millions of yen)

Directors(Excluding outside directors)

2 Importance of employee salary in cases where a director is also

an employee
None to report.
3 Policy and method of determination of the policy, as regards theamount of compensation paid to a director or corporate auditor,
and the method of calculation
Kyorin has not decided its policy as regards the amount of compensation
paid to directors and corporate auditors or the method of calculation.

6. Number of Directors
The number of directors is limited to 15 as set out in the Company’s
Articles of Incorporation.

7. Conditions for Resolution on Appointments of Directors
and Corporate Auditors
The Company’s Articles of Incorporation stipulate that a resolution toappoint a director or corporate auditor must be made by the majority voteof attending shareholders holding at least one-third of the voting rights ofshareholders who are eligible to exercise voting rights.

8. Ordinary General Shareholders’ Meeting Matters that May
Be Resolved by the Board of Directors
1 Acquisition of treasury stock
Pursuant to the provisions of Article 165, paragraph 2 of the Corporation
Law of Japan, the Company’s Articles of Incorporation stipulate that theCompany may acquire treasury stock by resolution of the Board of Directors. The aim is to allow management to swiftly exercise capital policies
as deemed appropriate in response to changes in the operating environment, by allowing the Company to acquire treasury stock through market
transactions, etc.
2 Decision-making body for cash dividends from retained earnings
Pursuant to Article 459, paragraph 1 of the Corporation Law of Japan,
and except where otherwise specified in a separate applicable legal or
regulatory provision, the Company’s Articles of Incorporation stipulate thatcash dividends are to be decided by resolution of the Board of Directors,
and not the ordinary general shareholders’ meeting. The aim is to allow
management to exercise capital policy as deemed appropriate.

9. Requirements for Special Resolution by an Ordinary
General Shareholders’ Meeting
Pursuant to Article 309, paragraph 2 of the Corporation Law of Japan,
the Company’s Articles of Incorporation stipulate that special resolutions
by an ordinary general shareholders’ meeting must be passed by at least
a two-thirds majority vote of attending shareholders holding at least onethird of the voting rights of shareholders eligible to exercise voting rights.
The aim is to lower the required quorum for a special resolution of an ordinary general shareholders’ meeting to facilitate the smooth operation of
the meeting.

10. Status of Stockholding
Among KYORIN Holdings, Inc. and its consolidated subsidiaries, details
of KYORIN Pharmaceutical Co., Ltd., the largest company (largest company holding) in terms of investment securities (amount of investment
stocks) reported on the balance sheet, are as follows.
Among investment stocks, the number of different stocks and the totalreported consolidated balance sheet value of investment stocks held forother than purely investment purposes:
28 different stocks¥19,846 million
For details, please refer to http://www.kyorin-gr.co.jp/en/company/governance.shtml

Message from an Outside Corporate AuditorYour health is Kyorin’s mission. I am very honored to have become a member of the company whose venerable corporate
message I have come to know so well over the years.
Inappropriate accounting practices have become an issue, so what is expected of me is to draw on my experience as a certified public accountant (CPA) and licensed tax accountant to help KYORIN Holdings, Inc. as an impartial specialist and provide
my opinion from an objective standpoint.
It is said that the job of a CPA is to provide appropriate opinions. This does not mean to provide appropriate opinions whileturning a blind eye to inappropriate practices. If a practice is improper, it needs to be corrected—the mission of a CPA is to ensurethat appropriate accounting information is provided to the public. The same is expected I believe of audits by corporate auditors.
Outside Corporate Auditor

Takao Yamaguchi

22

Annual Report 2015

I will do my part as an outside corporate auditor to help ensure that appropriate and proper opinions are expressed while
coordinating with the accounting auditing firm. I thank you for your guidance and support.

Directors, Corporate Auditors, and Corporate Officers (As of June 23, 2015)

From the left: Takashi Takahashi, Yutaka Ogihara, Senji Ozaki, Mitsutomo Miyashita, Shigeru Ogihara, Masahiro Yamashita,
Masakatsu Komuro, Minoru Hogawa, Kunio Kajino, Tomiharu Matsumoto and Noriyuki Shikanai

Representative Director,
Chairman

Representative Director,
President and Chief Executive Officer

Executive Director

Senior Executive Director

Executive Director

Executive Director

Mitsutomo Miyashita

Tomiharu Matsumoto

Yutaka Ogihara

Masakatsu Komuro

Minoru Hogawa

KYORIN Pharmaceutical Co., Ltd.

General Affairs & Human Resources,

President’s OfficeIntellectual Property

Representative Director, President

Finance & Accounting,

Auditing

and Chief Executive Officer

Legal and Compliance

Executive Director

Executive Director

Outside Director

Outside Director

Outside Director

Shigeru Ogihara

Kunio Kajino

Senji Ozaki

Noriyuki Shikanai

Takashi Takahashi

Discovery Research Strategy

Sales & Marketing Strategy

Senior Corporate Auditors

Outside Corporate Auditors

Senior Corporate Officer

Corporate Officers

Seiyu Miyashita

Masaji Obata

Yoh ItoYoshiya Yoshida

Hiroaki Hama

Yuuji Konishi

Kenji Akutsu

Takao Yamaguchi

Michiro Oonota

Masahiro Yamashita

KYORIN Holdings, Inc.

23

Corporate Social Responsibility
The starting point of the Kyorin Group’s corporate social responsibility (CSR) endeavors is its corporate philosophy,
which states “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 that goal byproviding trusted products and services, and by fulfilling its corporate social responsibility in the areas of environmental
and industrial safety and hygiene through activities that contribute to health and society.

To Achieve Corporate Social Responsibility
Compliance Measures
Basic policy
An enterprise should pursue profits through fair competition as an
economic entity, and at the same time should be a force for the greater
good of society.
Based on its corporate philosophy, the Kyorin Group will conduct its
activities in every country based on a high standard of corporate ethics,
respecting human rights and observing all laws, as well as standards ofconduct and the spirit thereof.

Environment■ Fiscal 2014 Targets• Rational uses of energy (CO2 reduction)• Reduction of waste■ Environmental Indicators
CO2 Emissions from Factories and Research Laboratories(t)
25,00020,00020,187

17,815

18,417

17,91917,389

2011

2012

2013

2014

80

80

2012

2013

15,000MeasuresTo ensure the Group’s activities are based on a high standard of corporate
ethics, the Company has built a compliance framework. It has updated
the KYORIN Holdings Corporate Charter and its Compliance Guidelines
to their current form in August 2010, and holds a Compliance Committee
meeting once a month.
1. The KYORIN Holdings Corporate Charter was developed to specify
matters of corporate ethics and compliance in accordance with our
corporate philosophy, and serves as the starting point for our corporate
activities.
2. The Compliance Guidelines complement the KYORIN Holdings
Corporate Charter by clarifying the standards to be followed for soundand proper business activities.
3. In March 2006, the Compliance Committee was established to provide
overall supervision of corporate ethics and compliance systems. Each
Kyorin company has a compliance promotion manager who is responsible for the understanding and instilling of corporate ethics andcompliance.
For details about compliance training, please refer to www.kyorin-gr.co.jp/en/csr/

Risk Management Measures
Kyorin established a Risk Management Committee in order to prevent
risks from materializing and deal with any risks that do materialize. Also,a risk management promotion officer has been appointed at each company
to raise awareness relating to risk management.

Measures Relating to the Environment and Industrial Safety
KYORIN Pharmaceutical Co., Ltd.
and Hygiene
The Kyorin Group actively works to protect the environment and prevent
pollution, giving priority to preventing global warming, protecting
resources, and living in harmony with the natural environment. In doing
our corporate activities, we give top priority to ensuring the safety andhealth of all the members of the Kyorin Group. Furthermore, we promotesocial contribution activities while cooperating with local communities.

10,000
5,000
0

2010

(FY)

Reduction of waste(t/millions of yen)
150

100

100
60

70

50

0

2010

2011

2014

(FY)

■ Initiatives
1. Preventing global warming• Reduce the amount of fuel used by installing cogeneration 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 andreduce exhaust emissions

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 and Transfer
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 by boilers and generators
5. Preventing water pollution• Process wastewater, including by primary processing plants, andmanagement of pH, biochemical oxygen demand (BOD), andsuspended solids (SS) levels
6. Preventing deforestation• Recycle paper, use recycled paper, and promote a paperless officeenvironment
7. Noise reduction• Take steps to measure and manage noise levels

24

Annual Report 2015

8. Preventing foul odors• Remove odors by installing draft chambers and using scrubbers, etc.

Industrial Safety and Hygiene■ Fiscal 2014 Targets•A chieved zero days off due to work accidents

Social Contribution Activities■ Fiscal 2014 Targets• Promote social contribution activities and communicate withlocal residents■ Initiatives
1. Communicate with local communities• Hold and invite local residents to cherry
blossom viewing parties and summer
evening parties at various plants of
KYORIN Pharmaceutical Development
Research Laboratories (currently,
WATARASE Research Center)■ Initiatives
1. Rate and severity of work accidents	The frequency and severity of such accidents are much lower than
the industry average. There have been no fatal accidents since thestart of operations.
Rate of work accidents
KYORIN Pharmaceutical
1.20
1.00

0.99

0.80

• Local cleanup activities: The Okaya
Plant has been a “foster parent”
responsible for beautifying a section of
the shore of Lake Suwa as part of theLake Suwa Adoption Program.
Employees of the Noshiro Plant participate in voluntary activities to maintain the Kaze-no-Matsubara, a pine
forest and recreational area that acts as a barrier protecting the
locality from wind. At our head office, employees participate on a
voluntary basis in cleanup campaigns carried out twice a year by the
local Chiyoda City authorities.

2. Employee voluntary community/Health activities(Kyorin Smile Program)• Promoting the Kyorin Smile Program, a set of employee initiatives formaking a contribution to society and people’s health. The activities inthis program include donating blood and fund-raising.
Fiscal 2014 Initiatives Contributed by employees to UNICEF: ¥71,273
Used stamps collected: 3.2 kilograms* The stamps will be donated to the Japanese Organization for International
Cooperation in Family Planning and used to help fund White Ribbon Campaign
activities aimed at protecting the lives of mothers and babies throughout the world.

3. Continued support for recovery from the Great East Japan
Earthquake• Participation in the Sunflower Project in which sunflower seedlings aregrown and delivered to the areas afflicted by the Great East Japan
Earthquake. (KYORIN Pharmaceutical’s Discovery Research Laboratories,
Development Research Laboratories and Sendai Branch Office)

0.60

0.72

0.40

0.29

0.20
0

Chemical industry

Entire manufacturing industry

1.06

1.05

1.00

0.94

0.88

0.85

0.82

0.29

0.29

0.29

2012

2013

2014

0.76

0.00
2010

2011

(FY)

Rate of work accidents: Number of deaths and injuries due to industrial accidents per total working
hours times one million (indicates frequency of accidents)
Calculation method: No. of deaths and injuries due to industrial accidents /Total working hours x 1,000,000

Severity of work accidents
KYORIN Pharmaceutical
0.20

Chemical industry

0.17

0.15
0.10
0.05
0

Entire manufacturing industry

0.09
0.04

0.08

0.00
2010

0.04
0.00
2011

0.12

0.12

0.10

0.10

0.09

0.01

0.01

0.01

2012

2013

2014

(FY)

Severity of work accidents: Number of lost working days per total working hours times one thousand
Calculation method: No. of lost working days / Total working hours x 1,000

2. Vehicle accidents	Targets were set for the year-on-year reduction in the number of vehicular accidents per branch, and in fiscal 2014, there were 163 accidents,
13 less than the previous year.
Progress in improving occupational health and safety(KYORIN Pharmaceutical)
2004: Obtained occupational health and safety management
system certification (OHSAS 18001)
2005: Consolidated ISO 14001 and OHSAS 18001 measures

For further details, please visit the following website: www.kyorin-gr.co.jp/en/csr/

Human Resources Management
The Kyorin Group aspires to become a leading company forpursuing fulfilling careers, as is envisioned in our long-term vision
HOPE100. Kyorin believes that the basis for a company to continue to exist and grow lies in the enhancement of its humanassets, namely, to become a place in which employees can bringpassion to their work. The Kyorin Group seeks to become acompany in which employees can feel a sense of pride and trustin the company, and in which employees are united with theirpeers in their work—in short, a leading company for job fulfillment.
To realize this vision, the Kyorin Group has formulated a humanresources management policy that must be shared by the Group,
and is rebuilding a human resources management system.

Basic Stance Regarding Human Resources Management
The Kyorin Group believes the relationship between the company and its
employees is a long-term, reciprocal one of cooperation and co-existence.
The Group, a partner of both the company and its employees, plays the role of meeting the
expectations of both and realizing their mutual interests in a sustained manner over the long term.

Basic Policy
1) To build human resources management premised on long-term employment
2) To build a human resources management system founded on the employees’
contribution role3) To build a human resources management system that can comprehensively ensure
a balance between the degree of the employees’ contribution role and their treatment
4) To build a human resources management system that considers both self-help(self-guidance) and cooperation (mutual assistance)

KYORIN Holdings, Inc.

25

Financial Analysis
Business Overview

Net sales

The Kyorin Group comprises KYORIN Pharmaceutical Co., Ltd., which is mainly involved
with the R&D, manufacture and sales of pharmaceuticals; KYORIN Rimedio Co., Ltd.,
which mainly manufactures and sells generic drugs; Dr. Program Co., Ltd., which mainly
develops and sells skincare products; KYORIN Medical Supply Co., Ltd., which is mainly
involved in sales promotion, advertising planning and production, and the environmental
hygiene business; and KYORIN Pharmaceutical Facilities Co., Ltd., which is mainly
involved in contract manufacturing of third-party products. These five companies operate
under the Group holding company, KYORIN Holdings, Inc. (“the Company”). As theGroup’s controlling company, KYORIN Holdings is responsible for the business strategiesof the overall Group, and strives to efficiently allocate and utilize management resources.

(Millions of yen)
113,121120,000
111,400
104,069 103,232 107,031
90,00060,00030,000Industry Trends in Japan
0

2010

2011

2012

2013

2014

In fiscal 2014, the Japanese economy remained on a recovery path, supported mainly by
improving employment conditions in addition to the weaker yen and rising stock prices
continuing from fiscal 2013. However, we also saw a slump in consumer spending as aresult of a consumption tax rise.
Under these circumstances, in the domestic pharmaceutical industry, where the corebusiness of the Kyorin Group operates, the market structure greatly changed and theprogress of the market growth rate for ethical pharmaceuticals remained low, due to theimpact of various measures, including reforms to the drug pricing system implemented in
April 2014 and the revision of medical service fees. The consumer healthcare business
continued to face a challenging business environment with only gentle growth in consumer
spending since the consumption tax rise, despite an upturn in business conditions, inaddition to the impact of a protracted reaction resulting from last-minute demand aheadof a rise in the consumption tax rate.

(FY)■ Ethical drug sales in Japan (Ethical drug business)■ Ethical drug sales overseas (Ethical drug business)■ Generic drug business■ Consumer healthcare business

Operating income and operating income margin(Millions of yen)
20,00017,94816,44315,00015.8

14,464

16.8

(%)
20.0

17,60715.8

14.0

14,73715.0

13.0

10,000

10.0

5,000

5.0

0

2010

2011

2012

2013

2014

(FY)

0

■ Operating income (Left scale)Operating income margin (Right scale)■

Net income and ROE(Millions of yen)
15,000(%)
15.0
12,422

12,025

12,064

10,927
10,000

9,231
10.1

10.0
8.0

10.0
9.0

8.4

5,000

0

5.0

2010

2011

■ Net income (Left scale)ROE (Right scale)■

26

Annual Report 2015

2012

2013

2014

(FY)

0

Consolidated Operating Results
Net Sales
In fiscal 2014, overall net sales increased ¥1,721 million or 1.5% year on year to ¥113,121
million, reaching an all-time high. Sales growth was driven by a significant year-on-yearincrease in generic drug sales in the pharmaceutical business, despite lower sales in the
ethical drugs business as a result of the impact of the lowering of prices on the NHI drug
price list.
With regard to the ethical drugs business in Japan, sales decreased year on year
despite increased sales of new products, notably the Pentasa suppository, a drug forthe treatment of ulcerative colitis, launched in June 2013, and Flutiform, a combination
treatment for asthma, launched in November 2013. There was also continued growth inour principal products. The main decrease factors were reduced sales by KYORIN
Pharmaceutical Facilities Co., Ltd. in addition to lower sales of longstanding items on the
NHI drug price list, which were influenced by reforms to the drug pricing system. As aresult, segment sales decreased 0.6% year on year to ¥91,079 million.
KYORIN Pharmaceutical Co., Ltd. has been promoting the franchise customer (FC)strategy that facilitates marketing activities directed at doctors and medical institutions in
specific fields centered on respiratory medicine, otolaryngology, and urology. In fiscal 2014,
we mainly focused on maximizing early-stage market penetration of Flutiform, a new productin the FC field, and on maximizing the greater use of our mainstay products. Flutiform waslaunched on December 1, 2014 as a 30-day formulation (for 120 inhalations), in addition
to the possibility of its long-term dosage (as a new drug with no limitation on the period
for which it is taken), and sales have significantly expanded. Among our mainstay products, sales increased year on year for Kipres, a treatment for bronchial asthma and allergic
rhinitis. However, sales decreased for Uritos, a treatment for overactive bladder, Pentasa,
a treatment for ulcerative colitis and Crohn’s disease, and Mucodyne, a mucoregulant.
In ethical drug sales overseas, royalty income decreased year on year for gatifloxin
ophthalmic solution (outlicensed to Allergan, Inc. (U.S.A.)) due to the impact of generics
launched in the U.S. in October 2013, and segment sales decreased 44.2% year on yearto ¥1,032 million. Meanwhile, in ethical drug sales overseas, in October 2014 KYORIN
Pharmaceutical Co., Ltd. concluded a basic contract with R-Pharm (Russia) for the exclusive
development and marketing of Imidafenacin in Russia and neighboring countries.
Sales for generic drugs increased 29.1% year on year to ¥15,477 million. The Kyorin
Group proactively developed marketing activities driven by measures to encourage
generic drug use and other factors. As a result, segment sales at insurance dispensing
pharmacies and other locations significantly increased. Moreover, KYORIN Rimedio Co., Ltd.
strove to take the lead in joint development, and translated these efforts into expansion in
the third-party contract manufacturing business. As a result, net sales in the pharmaceuticals business increased by 2.0% to ¥107,888 million.
In the consumer healthcare business, sales in over-the-counter drugs and others
increased 0.3% year on year to ¥4,183 million, Despite a challenging performance overall,sales rose for mainstay product RUBYSTA, a multi-purpose disinfectant cleaner.
In the skincare business, the Kyorin Group posted lower sales and lower earnings. Sales
declined 21.6% to ¥1,349 million. This mainly reflected reduced sales at Dr. Program Co., Ltd.,
which is engaged in the production and sales of skincare products, due to a reaction
resulting from last-minute demand ahead of a rise in the consumption tax rate, a slump in
consumer spending since the consumption tax rise, and the intensification of competition
between companies. As a result, in the consumer healthcare business, sales decreased
6.1% year on year to ¥5,532 million.

Cost of Sales Ratio, SG&A Expenses, and Operating Income
The cost of sales ratio increased 2.6 percentage points year on year to 41.2%, mainly due
to the impact of drug price revisions and the change in product sales composition, including the increased sales weight of generic drugs. As a result, gross profit was down by¥1,829 million year on year despite an increase in sales of ¥1,721 million.
SG&A expenses increased 2.1% year on year to ¥51,785 million, due to a 19.0%
year-on-year increase in R&D expenses offsetting a decrease in selling expenses. As aresult, operating income decreased 16.3% year on year to ¥14,737 million. The operating
income margin fell 2.8 percentage points to 13.0%.

Net assets(Millions of yen)
160,000

120,000

111,706 118,201

129,099

137,821

148,600

80,000

Summary of Consolidated Statements of Income
Millions of yen

Net sales
Cost of sales
Gross profit
SG&A expenses(R&D expenses)
Operating income
Other income
Other expenses
Income before income taxes
Net income

FY2013

FY2014111,400
43,047
68,35250,744
11,35917,607732
59
18,312
12,025

113,12146,59866,522
51,785
13,514
14,737768
16
17,561
12,064

YoY change YoY change (%)

1,721
3,551
(1,829)1,041
2,155(2,870)
36
(43)
(751)
39

1.5
8.2
(2.7)
2.1
19.0
(16.3)
4.9(73.1)(4.1)
0.3

40,000

0

2010

(%)
85.0

12,025

12,064

39

0.3

1,333
13,3585,534
17,598

4,201
4,240

315.2
31.7

Income before minority interests
Total other comprehensive
incomeComprehensive income

YoY change YoY change (%)

Net Income and Net Income Per Share
Net income increased 0.3% year on year to ¥12,064 million. Net income per share
increased ¥0.68 from the previous fiscal year to ¥161.63.

2013

2014

(FY)

83.3
81.4

81.1

Millions of yen

FY20142012

Total shareholders’ equity ratio

Summary of Consolidated Statements of Comprehensive Income
FY2013

2011

81.0

80.0

75.0

70.0

75.9

2010

2011

2012

2013

2014

(FY)

Assets, Liabilities and Net Assets
At March 31, 2015, current assets had increased ¥7,426 million due to increases in notes
and accounts receivable, merchandise and finished goods, raw materials and supplies,
and other current assets.
Fixed assets rose ¥6,578 million due to increases in investment securities and asset for
retirement benefits, despite a decrease in property, plant and equipment. As a result, total
assets increased ¥14,005 million from a year earlier to ¥183,383 million.
Liabilities at the fiscal year-end were up ¥3,225 million to ¥34,782 million from a year earlier.
This was mainly due to increases in long-term debt, deferred tax liabilities, and other long-term
liabilities, despite decreases in other current liabilities and liability for retirement benefits.
Net assets at the fiscal year-end amounted to ¥148,600 million, up ¥10,779 million from ayear ago. This was mainly attributable to increases in retained earnings, in unrealized holding
gain on other securities, in retirement benefits liability adjustments, and in treasury stock.
As a result, the shareholders’ equity ratio at year-end was 81.0%, down 0.4 percentage
points from the previous fiscal year-end.
ROE (Return on Equity)
The Kyorin Group has established net sales and operating income as its performancetargets, with the aim of achieving sustainable growth. The Group recognizes that improving profitability and raising ROE are crucial to attaining those targets. In fiscal 2014,
ROE was 8.4%, down 0.6 percentage points from the previous fiscal year.

Summary of Consolidated Balance Sheets
Millions of yen

Current assets
Fixed assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities
Total shareholders’ equity
Total accumulated othercomprehensive income
Net assets
Total liabilities and net assets

FY2013

FY2014

YoY change YoY change (%)

121,638
47,740169,378
28,401
3,155
31,557135,273

129,064
54,318183,383
27,773
7,009
34,782
140,518

7,426
6,578
14,005
(628)
3,854
3,225
5,245

6.1
13.8
8.3
(2.2)
122.2
10.2
3.9

2,548
137,821
169,378

8,082
148,600
183,383

5,534
10,77914,005

217.2
7.8
8.3

KYORIN Holdings, Inc.

27

Cash Flows

Cash flows from operating activities,
cash flows from investing activities,
and free cash flow
(Millions of yen)
20,00010,00019,293
16,816

8,913

11,544

6,805
4,999

6,391
5,027

4,357

3,987

0
(1,806)(2,477)(1,364)(4,926)–10,000(7,187)

2010

2011

2012

■ Cash flows from operating activities■ Cash flows from investing activities
Free cash flow■

2013

2014 (FY)

Net cash provided by operating activities in fiscal 2014 totaled ¥6,391 million. The main
components were income before income taxes and minority interests of ¥17,561 million,
depreciation and amortization of ¥3,053 million, an impairment loss of ¥2,232 million, aloss on sales and retirement of property, plant and equipment, net of ¥4,305 million, an
increase in notes and accounts receivable of ¥2,877 million, an increase in inventories of¥4,230 million, an increase in consumption taxes payable of ¥1,117 million and income
taxes paid of ¥4,640 million.
Net cash used in investing activities was ¥1,364 million. Cash was mainly used for
payments for purchase of short-term investments of ¥8,398 million, proceeds from sales
and redemption of short-term investments of ¥11,100 million, payments for purchase ofproperty, plant and equipment of ¥5,383 million, proceeds from sales of property, plantand equipment of ¥4,756 million and payments for purchase of investment securities of¥6,905 million. On the other hand, cash was provided by proceeds from sales andredemption of investment securities of ¥4,413 million.
Net cash used in financing activities was ¥5,233 million, largely attributable to proceedsfrom long-term debt of ¥2,227 million, an increase in treasury stock of ¥2,186 million, andpayment of cash dividends of ¥4,626 million.
As a result, cash and cash equivalents at the end of the fiscal year were down ¥100
million year on year to ¥35,727 million.
Cash flows for the next fiscal year, the fiscal year ending March 31, 2016, are projected
as follows. Investing activities are projected to use approximately ¥8,700 million cash
mainly for acquiring property, plant and equipment, including constructing a new R&D
facility and enhancing plant facilities. Financing activities are projected to use approximately ¥3,900 million for the payment of dividends, comprising ¥32.00 per share for the
year-end dividend, and ¥20.00 per share for the interim dividend.

Summary of Consolidated Statements of Cash Flows
Millions of yen

FY2013

Cash provided by operating
activities
Cash used in investing activities

FY2014

YoY change YoY change (%)

19,293

6,391(12,902)(66.9)(2,477)(1,364)

1,113

44.9

Cash provided by (used in)financing activities(3,704)(5,233)(1,529)(41.3)Cash and cash equivalents
at end of year

35,82835,727

(100)

(0.3)

Outlook for Fiscal 2015
The outlook for the domestic pharmaceutical industry is expected to remain challenging
mainly due to the Japanese government continuously examining various policies designed
to curtail spending on drugs, including the lowering of prices on the NHI drug price list
implemented in April 2014.
Under these conditions, the Kyorin Group will make every effort to achieve the targets
prescribed by our medium-term business plan, HOPE100 Stage 1 (for fiscal 2010–2015).
Fiscal 2015 is the final year of this plan, and we will actively promote the plan’s businessstrategies, namely, advancing initiatives related to the new drugs business model Pharma
Complex Model (PC Model) and accelerating growth in new consumer healthcare operations. Our ultimate goal here is to achieve sustainable growth and earn trust and improved
assessments from all our stakeholders.
On the sales front, in the ethical drugs business, we are projecting higher sales of
products such as the new Flutiform drug launched in fiscal 2013. In the generic drugs
business, we forecast that sales will grow further. Combined with an anticipated increasein sales in consumer healthcare operations, including general-use drugs and others, weare expecting overall sales to increase.
On the earnings front, we are forecasting higher SG&A expenses (with R&D expenses
decreasing by about ¥100 million year on year to ¥13,400 million) but also an increased
gross profit due to an increase in net sales. As a result, we expect increases in both
operating income and ordinary income.

Forecasts for Fiscal 2015
Millions of yen

Net sales
Operating income
Net income

28

Annual Report 2015

FY2013

FY2014FY2015 YoY change (%)

111,400
17,607
12,025

113,121
14,737
12,064120,200
16,00011,500

6.3
8.6
(4.7)

Business Risks
We have described below the risk factors that could affect the business performance or
financial health of the Group. Although the Group has taken organizational and systematic
measures to minimize risk, the outline does not include every risk or variable that could
affect its business.

1. Legal Regulations
Legal regulations in Japan, such as the Pharmaceutical
Affairs Law, the NHI system, NHI drug prices and laws inother countries can affect the Group’s business. Everystage of our operations, including pharmaceutical development, production, import, and distribution, is regulated
by various approval and licensing systems. Unforeseen
substantial shifts in future healthcare administration policy
could affect our business performance and financial health.
2. Pharmaceutical R&D
Ethical drug development requires substantial R&D investment over lengthy periods. Furthermore, the success rate
is low for companies seeking to discover original compounds and bring pharmaceutical products to market.
Currently, several of KYORIN Pharmaceutical Co., Ltd.’s
ethical drugs are undergoing clinical trials. The clinicaldevelopment of such drugs could be terminated as aconsequence of various factors, such as unforeseeableside effects or failure to achieve intended results.
3. Increased Competition
The pharmaceutical industry is experiencing rapid technological change. Sales of the Group’s principal products could
be affected if a competitor developed and brought to market
drugs that were more useful or produced the same effects.
4. NHI Drug Price Revisions
Japan’s healthcare system, including NHI drug prices, isbeing revised. When forecasting business results, theKyorin Group does its best to predict and factor in theeffects of such changes. Nevertheless, our performance
could suffer as a result of greater than expected NHI drug
price revisions or changes to the NHI system.
5. Side Effects
Information concerning the safety of new pharmaceuticals
is based only on clinical trials using a limited number ofsubjects and therefore cannot eliminate the possibility ofall side effects. If a drug in general use is found to haveunknown and unreported side effects after its launch, its
usage may be restricted or, in some cases, its sale could
be discontinued.

7. Pharmaceutical Recalls
If the Group’s pharmaceuticals are shown to be defective
due to contamination or other causes, they will berecalled. Such a situation would adversely affect theGroup’s business results.
8. Intellectual Property Protection
There is a risk that the Group may become unable toprotect its intellectual property effectively in Japan oroverseas. In this event, third parties could exploit theGroup’s technology and reduce demand for its principal
products and related pharmaceuticals. If the Group’s otheractivities are deemed to infringe on another company’s
patents or threaten its intellectual property rights relating
to its products, the Group may become involved in legal
disputes and have to terminate some business operations.
9. Lawsuits
The Group could become the subject of a lawsuit foralleged patent infringements, violations of the Product
Liability Act or the Antimonopoly Act or as a result ofenvironmental issues or labor disputes.
10. Exchange Rate Fluctuations
As the Group imports and exports pharmaceutical products, its sales are vulnerable to exchange rate fluctuations.
11. Cancellations of Tie-Up Agreements
The Group promotes strategic alliances to make efficientuse of external capital. Through tie-up agreements withother pharmaceutical companies in and outside of Japan,
the subsidiary allocates sales rights for some of its products and collaborates in sales, R&D, and other activities.
A cancellation of these tie-up agreements for any reason
could affect the forecast performance of the Group.
12. IT Security and Information Management
In the course of business operations the Group utilizes
numerous IT systems. This means business operations
are vulnerable to disruptions caused by system faults oroutside causes such as computer viruses. Furthermore,
the leakage of information could cause a loss of trust in
the Group and materially affect the business performanceof the Group.

6. Slowdowns or Delays in Production
Technical or regulatory problems, natural disasters andaccidents, including fires, could cause slowdowns ordelays in production or the cessation of operations,
thereby affecting the Group’s performance. Operations at
the Noshiro Plant (Noshiro, Akita Prefecture, Japan) of
Kyorin Group company KYORIN Pharmaceutical Co., Ltd.
were not affected by the Great East Japan Earthquakethat struck on March 11, 2011. No plant personnel were
injured, and the plant itself sustained no physical damage
from the disaster.

KYORIN Holdings, Inc.

29

Consolidated Balance Sheet
KYORIN Holdings, Inc. and Consolidated Subsidiaries
As of March 31, 2015

Millions of yen

Thousands of
U.S. dollars(Note 3)

2015

2014

2015

¥ 30,652¥ 31,017$  254,860

Notes and accounts receivable (Note 11)

47,007

44,123

390,846

Short-term investments (Notes 5 and 11)

17,867

17,965

148,557

Merchandise and finished goods

13,868

12,172

115,307

Work in process

1,205

1,048

10,019Raw materials and supplies

10,855

8,477

90,255

Deferred tax assets (Note 14)

2,471

2,432

20,545

Other

5,194

4,456

43,186

(58)

(54)

(482)

129,064

121,638

1,073,119

Land

2,019

2,449

16,787

Buildings and structures

30,60430,577

254,461

Machinery and vehicles

19,00617,991

158,028

559

517

4,648

Construction in progress

3,526

3,505

29,317

Other

8,082

7,668

67,199(44,423)(41,869)(369,361)

19,374

20,841

161,088

31,00823,804

257,820

AssetsCurrent assets:
Cash and cash in banks (Notes 4, 11 and 13)

Inventories:

Less allowance for doubtful accounts
Total current assets

Property, plant and equipment:

Leased assets

Less accumulated depreciation and impairment loss
Property, plant and equipment, net

Investments and other assets:
Investment securities (Notes 5 and 11)Long-term loans
Asset for retirement benefits (Note 12)
TrademarkDeferred tax assets (Note 14)

4

25

20

8,597

2

4

17

84

454

698

Other

2,940

2,732

24,445Less allowance for doubtful accounts

(129)

(122)

(1,073)34,94426,898290,546¥183,383¥169,378$1,524,761

Total investments and other assets
Total assets

30

3
1,034

Annual Report 2015

Millions of yen

Thousands of
U.S. dollars(Note 3)

2015

2014

2015

¥ 11,259¥ 11,056$   93,614

1,372

1,678

11,408

83

88

690

Accrued income taxes (Note 14)

2,440

2,361

20,288

Accrued bonuses to employees

3,288

3,301

27,338Reserve for sales returns

26

30

216

Provision for point card certificates

34

39

283

Liabilities and net assets
Current liabilities:
Notes and accounts payable (Note 11)
Short-term bank loans (Note 6)
Lease obligations (Note 6)

Other

9,267

9,844

77,052

27,77328,401

230,922Long-term debt (Note 6)

2,227

242

18,517

Lease obligations (Note 6)

277

259

2,303

Accrued retirement benefits for directors and corporate auditors

10

14

83

2,815

—

23,406

Total current liabilities
Long-term liabilities:

Deferred tax liabilities (Note 14)
Liability for retirement benefits (Note 12)

368

2,073

3,060

1,309

566

10,884

7,009

3,155

58,277

700

700

5,820

Capital surplus

4,752

4,752

39,511Retained earnings

137,577

130,145

1,143,901(2,511)(325)(20,878)

140,518

135,273

1,168,355

7,798

3,434

64,837

168

12

1,397

Other
Total long-term liabilities
Contingent liabilities (Note 17)
Net assets:
Shareholders’ equity (Note 7):
Common stock, no par value:
Authorized—297,000,000 shares in 2015 and 2014
Issued—74,947,628 shares in 2015 and 2014

Treasury stock, at cost:
996,611 shares in 2015
231,922 shares in 2014
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain on other securities
Translation adjustments
Retirement benefits liability adjustments

115

(898)

956

8,082

2,548

67,199Total net assets

148,600

137,8211,235,553

Total liabilities and net assets¥183,383¥169,378$1,524,761

Total accumulated other comprehensive income

See notes to consolidated financial statements.

KYORIN Holdings, Inc.

31

Consolidated Statement of Income
KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2015

Millions of yen

Thousands of
U.S. dollars(Note 3)

2015

2014

2015

¥113,121¥111,400$940,559

46,59843,047

387,445

66,522

68,352

553,106

51,78550,744

430,573

14,737

17,607

122,533

279

275

2,320

Interest expense

(6)

(11)

(50)

Equity in earnings (losses) of affiliates

(7)

22

(58)

130

(42)

1,081

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 8)
Operating income
Other income (expenses):
Interest and dividend income

Foreign exchange gains (losses)
Loss on investments in partnership
Gain (loss) on sales and retirement of property, plant and equipment, net (Note 9)
Gain on sales of investment securities, net (Note 5)
Loss on devaluation of investment securities
Impairment loss (Note 10)
Other, net
Other income, net

—

(2)

—

4,306

(14)

35,803

—

64

—

(2)

(18)

(17)

(2,232)—(18,558)

358

432

2,977

2,823

705

23,472

17,561

18,312

146,013

Current

4,712

5,095

39,179Deferred

785

1,191

6,527

Income before income taxes and minority interests
Income taxes (Note 14):

Total income taxes
Income before minority interests
Net income

5,497

6,287

45,705

12,064

12,025

100,308¥ 12,064¥ 12,025$100,308

Millions of yen

Thousands of
U.S. dollars(Note 3)

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2015

Income before minority interests

2015

2014

2015

¥12,064¥12,025$100,308

4,322

1,138

35,936

155

192

1,289

1,014

—

8,431

41

1

341

Other comprehensive income (Note 15):
Unrealized holding gain on other securities
Translation adjustments
Retirement benefits liability adjustments
Share of other comprehensive income of affiliates accounted
for using equity method
Total other comprehensive income
Comprehensive income

5,534

1,333

46,013¥17,598¥13,358$146,321¥17,598¥13,358$146,321———

Total comprehensive income attributable to:Shareholders of KYORIN Holdings, Inc.
Minority interests
See notes to consolidated financial statements.

32

Annual Report 2015

Consolidated Statement of Changes in Net Assets
KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2015

Millions of yen

Balance as of April 1, 2013

Shareholders’ equity

Accumulated othercomprehensive income
Total
Retirement
Unrealized
accumulated
benefits
Translation
holding gainotherliability
on other adjustments
comprehensive
adjustments
securities
incomeNumber ofshares issued Common
stock(Commonstock)

CapitalsurplusRetainedearnings

Treasurystock,
at costTotal
shareholders’equityTotal
net assets

74,947,628¥700¥4,752¥121,856¥(323)¥126,985¥2,293¥(180)¥—¥2,113

Cash dividends

—

—

—

(3,736)—(3,736)

—

—

—

—

¥129,099(3,736)

Net income

—

—

—

12,025—

12,025————

12,025Purchase of treasury stock

—

—

—

—

(1)

(1)

—

—

—

—

(1)

Other changes

—

—

—

—

—

—

1,140

192

(898)

434

434

Net changes during
the year
Balance as of April 1, 2014

—

—

—

8,289

(1)

8,287

1,140

192

(898)

434

8,722

74,947,628

700

4,752

130,145(325)

135,273

3,434

12

(898)

2,548

137,821

Cash dividends

—

—

—

(4,632)—(4,632)

—

—

—

—

(4,632)

Net income

—

—

—

12,064—

12,064————

12,064(2,225)Purchase of treasury stock

—

—

—

—

(2,225)(2,225)

—

—

—

—

Disposals of treasury stock

—

—

—

—

39

39

—

—

—

—

39

Other changes

—

—

—

—

—

—

4,364

155

1,014

5,534

5,534

Net changes during
the year

—

—

—

7,431

(2,186)

5,244

4,364

155

1,014

5,534

10,779Balance as of March 31, 2015 74,947,628¥700¥4,752¥137,577¥(2,511)¥140,518¥7,798¥168¥  115¥8,082¥148,600

Thousands of U.S. dollars (Note 3)

Commonstock

Balance as of April 1, 2014

CapitalsurplusRetainedearnings

Shareholders’ equity

Accumulated othercomprehensive income

Total
shareholders’equityTotal
Retirement
Unrealized
accumulated
benefits
Translation
holding gainotherliability
on other adjustments
comprehensive
adjustments
securities
incomeTreasurystock,
at cost$5,820 $39,511 $1,082,107 $(2,702) $1,124,744

Total
net assets$28,552$100$(7,467)

Cash dividends——(38,513)—(38,513)———$21,186 $1,145,930—(38,513)

Net income——

100,308—

100,308

—

—

—

—

100,308(18,500)

Purchase of treasury stock

—

—

—

(18,500)(18,500)

—

—

—

—

Disposals of treasury stock

—

—

—

324

324

—

—

—

—

324

Other changes

—

—

—

—

—

36,285

1,289

8,431

46,01346,013——61,786(18,176)

43,60236,285

1,289

8,431

46,01389,623$5,820 $39,511 $1,143,901 $(20,878) $1,168,355$64,837$1,397$956

Net changes during
the year
Balance as of March 31, 2015

$67,199 $1,235,553

See notes to consolidated financial statements.

KYORIN Holdings, Inc.

33

Consolidated Statement of Cash Flows
KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2015

Millions of yen

Thousands of
U.S. dollars(Note 3)

2015

2014

2015

Operating activities
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase in allowance for doubtful accounts
Decrease in accrued bonuses to employees
Decrease in accrued retirement benefits for directors and corporate auditors
Increase in asset for retirement benefits(Decrease) increase in liability for retirement benefits
Equity in earnings of affiliates
Interest and dividend income
Interest expense
Loss (gain) on sales and retirement of property, plant and equipment, net
Gain on sales of investment securities, net
Loss on devaluation of investment securities
Decrease (increase) in notes and accounts receivable
Increase in inventories
Increase in notes and accounts payable
Increase in consumption taxes payable
Other, net
SubtotalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities¥17,561
3,053
2,232
—
10
(21)
(3)
(843)
(382)
7
(279)
6
(4,305)—2(2,877)(4,230)
202
1,117
(503)
10,748289(6)(4,640)
6,391¥18,312
3,153
—
64
0
(39)
(19)
(20)
134
(22)
(276)
11
14
(64)
18
2,445
(1,761)2,499
9637
25,099294(11)(6,089)19,293$146,013
25,385
18,558
—
83
(175)
(25)
(7,009)(3,176)58(2,320)50(35,794)—17(23,921)(35,171)
1,680
9,287
(4,182)89,366
2,403(50)(38,580)
53,139Investing activities
Payments for time deposits
Proceeds from withdrawal of time deposits
Purchase of short-term investments
Proceeds from sales and redemption of short-term investments
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Other, net
Net cash used in investing activities

(777)
622
(8,398)
11,100(5,383)
4,756(472)(6,905)4,413(320)(1,364)(865)
980(9,895)6,501(2,622)415(473)(4,509)7,829
161(2,477)(6,460)5,172(69,826)
92,292(44,758)
39,544(3,925)(57,412)36,692(2,661)(11,341)

Financing activities(Decrease) increase in short-term bank loans, net
Repayments of lease obligations
Proceeds from long-term debt
Repayments of long-term debt
Net increase in treasury stock
Cash dividends
Net cash used in financing activities
Effects of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 4)

(240)
(99)
2,227
(308)
(2,186)(4,626)(5,233)105(100)
35,828¥35,727

190
(112)
300
(343)
(1)
(3,736)(3,704)173
13,28522,543¥35,828(1,996)(823)
18,517(2,561)(18,176)(38,463)(43,510)873(831)
297,896$297,057

See notes to consolidated financial statements.

34

Annual Report 2015

Notes to the Consolidated Financial Statements
KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the years ended March 31, 2015

1.

Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of KYORIN Holdings, Inc. (the “Company”) and its
domestic subsidiaries have been prepared in accordance with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and are compiled from the consolidated
financial statements prepared by the Company as required by the Financial Instruments and Exchange
Act of Japan.
Certain reclassifications have been made in the 2014 consolidated financial statements to conform to the2015 presentation. These reclassifications have no effect on consolidated net income and net assets.

2.

Summary of Significant Accounting Policies(a) Basis of Consolidation and Accounting for Investments in Unconsolidated Subsidiaries and Affiliates
The accompanying consolidated financial statements include the accounts of the Company and significant
companies controlled directly or indirectly by the Company. Companies over which the Company exercises significant influence in terms of their operating and financial policies are included in the consolidatedbalance sheets on an equity basis. All significant inter-company balances and transactions are eliminatedin consolidation.
Investments in subsidiaries and affiliates, which are not consolidated or accounted for by the equity
method, are carried at cost or less. Where there has been a permanent decline in the value of suchinvestments, the Company has written down the investments.
Among the consolidated subsidiaries, Kyorin USA, Inc., Kyorin Europe GmbH, and ActivX Biosciences,Inc. close their books of account at December 31 for financial reporting purposes. Their financial statements
are used for preparing the consolidated financial statements, and necessary adjustments are made to theconsolidated financial statements for any significant transactions between their balance sheet date
(December 31) and the consolidated balance sheet date (March 31).
(b) Foreign Currency Translation
The revenue and expense accounts of the foreign consolidated subsidiaries are translated into yen at the
average rates of exchange in effect during the year. The balance sheet accounts, except for the components of shareholders’ equity, are translated into yen at the exchange rates in effect at the balance sheet
date. The components of shareholders’ equity are translated at their historical exchange rates. Translation
adjustments are presented as a component of net assets in the accompanying consolidated balance sheets.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposit with banks withdrawable on demand, andshort-term investments which are readily convertible into cash and are subject to an insignificant risk of any
changes in their value and which were purchased with original maturities of three months or less.
(d) Short-Term Investments and Investment Securities
Securities other than equity securities issued by subsidiaries and an affiliate are classified into other securities. Marketable securities classified as other securities are carried at fair value with changes in unrealized
gain or loss, net of the applicable income taxes, directly included in net assets. Non-marketable securities
classified as other securities are stated at cost. Cost of securities sold is determined by the moving
average method.
(e) Inventories
Merchandise and finished goods, work in process, raw materials, and some supplies (samples) are mainly
stated at cost determined by the gross average method. These inventories with lower profitability are written
down to their net realizable value. Supplies except for samples are stated at the last purchase price method.

KYORIN Holdings, Inc.

35

(f) Depreciation and Amortization (Except for Leased Assets)
Depreciation of property, plant and equipment is calculated by the declining-balance method at rates basedon the estimated useful lives of the respective assets. For buildings (excluding accompanying facilities)
acquired on or after April 1, 1998, the straight-line method is used. The useful lives of property, plant andequipment are summarized as follows:
Buildings and structures

3 to 50 years

Machinery and vehicle

4 to 17 years

Intangible assets are amortized by the straight-line method over their estimated useful lives. Computer
software for internal use is capitalized and amortized by the straight-line method over the useful life of
five years.
(g) Leases
Leased assets are initially accounted for at their acquisition costs and depreciated over the lease term by
the straight-line method with no residual value. All finance leases are accounted for in the same manner assales transactions.
(h) Research and Development Expenses
Research and development expenses are charged to income as incurred.
(i) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between financial reporting andthe tax bases of the assets and liabilities and are measured using the effective tax rates and laws which will
be in effect when the differences are expected to reverse.
(j) Accounting Method for Retirement Benefits
The retirement benefit obligation is calculated by allocating the estimated retirement benefit amount toperiod of service on the benefit formula basis.
Prior service cost is amortized as incurred by the straight-line method over the average remaining yearsof services of the employees in the year such cost occurs (10 years).
Actuarial gain or loss is amortized from the year following the year in which such gain or loss is recognized primarily by the straight-line method over the average remaining years of service of the employees inthe year such gain or loss occurs (10 years).
Unrecognized actuarial loss and unrecognized prior service costs are, after adjusting for tax effects,
recorded as retirement benefits liability adjustments under accumulated other comprehensive income in
net assets.
(k) Accrued Retirement Benefits for Directors and Corporate Auditors
Directors and corporate auditors of certain consolidated subsidiaries are customarily entitled to lump-sum
payments under their respective unfunded retirement benefits plans. Accrued retirement benefits for these
directors and corporate auditors have been estimated in an amount required under the assumption that all
directors and corporate auditors retired at the balance sheet date based on their policy.
(l) Appropriation of Retained Earnings
Appropriation of retained earnings with respect to a given financial period is made by resolution of the boardof directors’ meeting for dividend and resolution of the ordinary general shareholders’ meeting for otherappropriations (see Note 7).
(m) Accounting Change
Accounting Standard for Retirement Benefits
Effective from the beginning of the year ended March 31, 2015, the Company and its consolidated domestic
subsidiaries have applied Article 35 of the Accounting Standard for Retirement Benefits (ASBJ Statement
36

Annual Report 2015

No. 26, May 17, 2012 (hereinafter, the “Standard”)) and Article 67 of Guidance on Accounting Standard for
Retirement Benefits (ASBJ Guidance No. 25, March 26, 2015 (hereinafter, the “Guidance”)), and changed
the calculation methods of retirement benefit obligations and service costs.
The attribution method for the projected retirement benefit was changed from the straight-line method toa benefit formula basis and the determination of the discount rate was changed to a method where a single
weighted average discount rate is applied in calculating the present value of obligations based on the
expected period of benefit payments and amount of payment for each period.
The adoption of the Standard and the Guidance had no impact on liabilities and retained earnings at the
beginning of the year ended March 31, 2015 and operating income and income before income taxes for theyear ended March 31, 2015.
(n) Additional Information
At a meeting of the Board of Directors held on February 2, 2015, the Company (KYORIN Holdings, Inc.)
resolved to introduce a trust-based employee shareholding incentive plan (hereinafter, the “Plan”) to provide
additional incentive for improving the Company’s corporate value, primarily by enhancing employee welfare
and benefits, raising employee awareness of the stock price and improving work motivation. The Plan will
steadily supply the Company’s shares to the employee shareholding association, and distribute the returns
generated by management of trust assets to employees.
The Company is accounting for the Plan in line with the guidelines set out in “Practical Solution on
Transactions of Delivering the Company’s Own Stock to Employees, etc., through Trusts” (Practical Issues
Task Force (PITF) No. 30, March 26, 2015).
(1) Outline of transactions
The Plan is an incentive plan designed to return the economic benefits of an appreciation in the Company’s
stock price to all employees who join the Kyorin Pharmaceutical Group Shareholding Association (hereinafter,
the “Shareholding Association”).
Under the Plan, the Company shall enter into a stock benefit trust (Employee Shareholding Association
Distribution Type) agreement where the Company is the settlor and Mizuho Trust & Banking Co., Ltd.
(hereinafter, “Mizuho Trust & Banking”) is the trustee (hereinafter, the trust based on the agreement shall bereferred to as the “Trust”). Furthermore, Mizuho Trust & Banking shall enter into an agreement with Trust &Custody Services Bank, Ltd. to re-entrust the management of trust assets, such as the Company’s shares,
with Trust & Custody Services Bank (Trust Account E) (hereinafter, “Trust Account E”) as the trustee.
Trust Account E will acquire the Company’s shares from the markets in the amounts expected to beacquired by the Shareholding Association during the prescribed stock acquisition period, after borrowing
the acquisition funds from a bank. Until the trust account finishes, the shares will be periodically sold to the
Shareholding Association. If a significant amount of realized gains on sale of shares remain within the trust
assets of the Trust following the sale of the shares to the Shareholding Association by Trust Account E, thesegains will be distributed as residual assets to Shareholding Association members who satisfy the eligibility
requirements for beneficiaries. Moreover, the Company provides guarantees for the loans undertaken toacquire its shares. Therefore, if there is a residual loan balance equivalent to a realized loss on the sale ofthese shares due to a decline in the Company’s stock price, the Company shall repay this residual loanbalance based on the guarantee agreement.
(2) Company shares remaining in trust
Treasury shares held by the Trust as of March 31, 2015 are presented as treasury stock in net assets. The
carrying amount of the treasury shares was ¥2,185 million ($18,167 thousand) and the total number oftreasury shares was 764 thousand shares.
(3) Carrying amount of debt recorded through the application of the gross price method
The carrying amount of debt recorded through the application of the gross price method was ¥2,227 million($18,517 thousand) as of March 31, 2015.

KYORIN Holdings, Inc.

37

3.

U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter ofarithmetic computation only, at the rate of ¥120.27 = U.S.$1.00, the approximate rate of exchange on
March 31, 2015. The translation should not be construed as a representation that yen have been, could
have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

4.

Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2015 and 2014 for the consolidated statements of cash flows
consisted of the following:Thousands of
U.S. dollars

Millions of yen

Cash and cash in banks
Short-term investments
Time deposits with a maturity over three months
Cash and cash equivalents

5.

2015

2014

2015

¥30,652
6,562(1,487)¥35,727¥31,017
6,062(1,251)¥35,828$254,860
54,561(12,364)$297,057

Short-Term Investments and Investment Securities
Information regarding marketable securities classified as other securities as of March 31, 2015 and 2014 is
as follows:
Marketable other securities
Millions of yen

Thousands of U.S. dollars

2015

Securities whose carrying
value exceeds theiracquisition cost:
Equity securities
Debt securities:
Government bonds
Corporate bonds
Other bonds
Other
Subtotal
Securities whose carrying
value does not exceed
their acquisition cost:
Equity securities
Debt securities:
Government bonds
Corporate bonds
Other bonds
Other
Subtotal
Total

38

Annual Report 2015

2015

Acquisition
cost

Carrying
value

Unrealized
gain (loss)

Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥ 8,222¥19,583¥11,361$ 68,363$162,825$94,462

13,299———21,522

13,386———32,97086———
11,447

110,576———
178,947

111,300———
274,133

715———
95,178

30

27

(3)

249

224

(25)

13,405500
1,000—
14,935¥36,458

13,402500964—
14,894¥47,864

(3)
—
(35)
—
(41)
¥11,406

111,458
4,157
8,315
—
124,179$303,135

111,433
4,157
8,015
—
123,838$397,971

(25)
—
(291)
—
(341)
$94,837Millions of yen
2014

Securities whose carrying value exceeds
their acquisition cost:
Equity securities
Debt securities:
Government bonds
Corporate bonds
Other bonds
Other
Subtotal
Securities whose carrying value does not exceed
their acquisition cost:
Equity securities
Debt securities:
Government bonds
Corporate bonds
Other bonds
Other
Subtotal
Total

Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥ 7,206¥12,303¥5,096

15,597300
200—
23,304

15,695300
206—
28,505

97
0
6
—
5,201

46

41

(5)

11,100—1,000—
12,147¥35,451

11,099—898—
12,038¥40,544

(0)
—
(101)
—
(108)
¥5,093

Unlisted securities and other non-marketable securities are not included in the above schedules as theirfair market values are extremely difficult to be determined. The amounts of these securities were ¥416 million($3,459 thousand) and ¥656 million as of March 31, 2015 and 2014, respectively.
Sales amounts of securities classified as other securities and the related aggregate gain and loss for theyears ended March 31, 2015 and 2014 are summarized as follows:
Millions of yen

Proceeds from sales
Gains on sales
Losses on sales

6.

Thousands of
U.S. dollars

2015

2014

2015

¥200
—
—

¥3,00364—$1,663——

Short-Term Bank Loans, Long-Term Debt and Lease Obligations
Short-term bank loans and the current portion of long-term debt and lease obligations as of March 31,
2015 and 2014 consisted of the following:
Millions of yen

Short-term bank loans
Current portion of long-term debt
Current portion of lease obligations
Total

Thousands of
U.S. dollars

2015

2014

2015

¥1,130242
83¥1,455¥1,370308
88¥1,766$9,3962,012
690$12,098

The average interest rates applicable to short-term bank loans outstanding as of March 31, 2015 and2014 are 0.5%.

KYORIN Holdings, Inc.

39

Long-term debt (excluding long-term debt related to a trust-based employee shareholding incentive plan)
and lease obligations as of March 31, 2015 and 2014 consisted of the following:

Long-term debt, due through 2016 at average interest
rate of 0.5% in 2015 and 2014
Lease obligations due through 2023 in 2015 and 2014
Current portion of long-term debt and lease obligations
due within one year
Total

Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

¥242
360

¥550
347

$2,012
2,993

(325)
¥277

(396)
¥501

(2,702)$2,303

The annual maturities of long-term debt (excluding long-term debt related to a trust-based employee
shareholding incentive plan) and lease obligations are summarized as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2016
2017
2018
2019
2020 and thereafter
Total

¥325
63
41
35
138
¥602

$2,702
524
341
291
1,147
$5,005

Other than those above, the Company recorded long-term debt related to a trust-based employee
shareholding incentive plan (see Note 2(n)).
Long-term debt related to the trust-based employee shareholding incentive plan as of March 31, 2015
and 2014 was as follows:
Millions of yen

Long-term debt, due through 2020

Thousands of
U.S. dollars

2015

2014

2015

¥2,227¥—$18,517

The average rate and annual maturities of long-term debt related to the trust-based employee shareholding incentive plan are not described because the repayment rate and amounts are variable.

7.

Shareholders’ Equity
Japanese companies have been subject to the Companies Act of Japan (the “Companies Act”). The significant
provisions in the Companies Act that affect financial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to theyear-end dividend upon resolution at the shareholders’ meeting. The board of directors may declare dividends(except for dividends-in-kind) if the company has prescribed so in its articles of incorporation for companies
that meet certain criteria such as:(1) having the board of directors,(2) having independent auditors,(3) having a board of corporate auditors, and(4) the term of service of the directors is prescribed as one year rather than two years of normal term by
its articles of incorporation.
The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders
subject to a certain limitation and additional requirements.

40

Annual Report 2015

Semiannual interim dividends may also be paid once a year upon resolution by the board of directors if
the articles of incorporation of the company so stipulate. The Companies Act also provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as
the amount available for distribution to the shareholders, but the amount of net assets after dividends must
be maintained at no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus)
depending on the equity account charged upon the payment of such dividends until the total of the aggregate
amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies
Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The
Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capitalsurplus and retained earnings can be transferred among the accounts under certain conditions upon
resolution of the shareholders.
(c) Treasury Stock and Stock Option
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury
stock by resolution of the board of directors. The amount of treasury stock purchased cannot exceed theamount available for distribution to the shareholders, which is determined by a specific formula. Under theCompanies Act, stock acquisition rights, which were previously presented as a liability, are now presented
as a separate component of net assets. The Companies Act also provides that companies can purchase bothtreasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented asa separate component of net assets or deducted directly from stock acquisition rights.

8.

Research and Development Expenses
Research and development expenses included in general and administrative expenses for the years ended
March 31, 2015 and 2014 were ¥13,513 million ($112,356 thousand) and ¥11,359 million, respectively.

9.

Gain (Loss) on Sales and Retirement of Property, Plant and Equipment, Net
Significant components of the gain (loss) on sales and retirement of property, plant and equipment, net for
the years ended March 31, 2015 and 2014 are as follows:

Gain:
Buildings and structures
Machinery and vehicles
Land
Other
Loss:
Buildings and structures
Machinery and vehicles
Other
Total

Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

¥  61503,889
0¥4,505

¥9
0
162
1
¥172

$ 5,113032,336
0$37,457¥(64)
(2)
(131)
(199)
¥4,306¥(137)
(5)
(43)
(186)
¥ (14)$(532)(17)(1,089)(1,655)$35,803

KYORIN Holdings, Inc.

41

10.

Impairment Loss
The Company and its consolidated subsidiaries recognized a loss on impairment of long-lived assets for theyear ended March 31, 2015 as follows:
Location

Use

Type of assets

Nogi-machi Shimotsuga-gun,Tochigi Prefecture

Business use

Two other groups of assets

Business use

Land,
buildings and
other
Land,
buildings andotherMillions of yen

Thousands of
U.S. dollars¥1,656$13,769576¥2,232

4,789$18,558

Total

When applying accounting for impairment losses, the Company and its consolidated subsidiaries groupassets based on the reportable segments.
In the fiscal year ended March 31, 2015, consolidated subsidiary, KYORIN Pharmaceutical Co., Ltd.,
reduced the carrying amount of assets whose recoverable amounts had fallen below their carrying amounts
to the recoverable amounts of those assets, mainly after arriving at decisions related to the centralization of
its R&D bases. This reduction, dismantlement costs and other charges were recorded as an impairment
loss of ¥2,232 million ($18,558 thousand) under extraordinary loss.
The components of the impairment loss were buildings and structures of ¥646 million ($5,371 thousand), land of ¥171 million ($1,422 thousand) and dismantlement and other costs of ¥1,414 million($11,757 thousand).
The recoverable amount used in the measurement of impairment loss is the net selling value or the value
in use.
There was no impairment loss recognized in the fiscal year ended March 31, 2014.

11.

Financial Instruments(a) Investment Policy of Financial Instruments
The Company and its consolidated subsidiaries mainly operate funds by the highly secured financial instruments such as deposits and highly rated bonds, ensuring the security and liquidity. The Company and its
consolidated subsidiaries use bank loans as the prime source of financing, and no derivatives are used.
(b) Details of Financial Instruments, Associated Risks and Risk Management
Operating receivables such as notes and accounts receivable are exposed to credit risk. The Company
and its consolidated subsidiaries, in accordance with internal rules, keep track of the adverse financial conditions of the customers in the early stage to mitigate the bad debt by monitoring the major customers’
credit conditions periodically and managing the due date and balance per each customer. The Company
and its consolidated subsidiaries mitigate foreign currency risk by utilizing foreign currency deposits for
operating receivables denominated in foreign currencies and settling payables denominated in the same
currencies through the deposits.
Short-term investments and investment securities mainly consist of highly rated bond securities andequity securities of companies with business relationships and are exposed to market risk and credit risk.
The Company and its consolidated subsidiaries regularly review the fair value and issuers’ financial condition
to mitigate the risks.
Operating payables such as notes and accounts payable are mainly due within six months. Certain
operating payables are denominated in foreign currencies.
Short-term bank loans are mainly used to finance operating capital, and long-term debts are used tofinance fund for the introduction of a trust-based employee shareholding incentive plan.
Operating payables and loans and debts are exposed to liquidity risk. The Company and its consolidated
subsidiaries manage the risk by preparing and updating the cash management plan periodically.

42

Annual Report 2015

(c) Supplemental Information on Fair Value of Financial Instruments
As well as the values based on market prices, fair values of financial instruments include values, which arereasonably calculated in case market prices do not exist. As the calculation of those values includes variablefactors, those values may vary in case different assumptions are applied.
Carrying values, fair values, and their differences of financial instruments as of March 31, 2015 and 2014
are as follows:
Millions of yen

Thousands of U.S. dollars

2015

Cash and cash in banks
Notes and accounts
receivable
Short-term investments
and investment securities
Total assets
Notes and accounts
payableTotal liabilities

Carrying
value

Fair value¥ 30,652

2015

Difference

Carrying
value

Fair value

Difference¥ 30,652¥—$  254,860$ 254,860$—

47,00747,007—

390,846

390,846—

47,864¥125,524

47,864¥125,524—¥—

397,971$1,043,685

397,971$1,043,685—$—¥ 11,259¥ 11,259¥ 11,259¥ 11,259¥—¥—$   93,614$   93,614$  93,614$  93,614$—$—
Millions of yen
2014

Carrying
value

Fair value

Difference

Cash and cash in banks
Notes and accounts receivable
Short-term investments and investment securities
Total assets¥ 31,017
44,12340,544¥115,684¥ 31,017
44,12340,544¥115,684

¥—
—
—
¥—

Notes and accounts payable
Total liabilities¥ 11,056¥ 11,056¥ 11,056¥ 11,056¥—¥—

Unlisted securities and others of ¥1,011 million ($8,406 thousand) and ¥1,224 million whose fair values
are extremely difficult to determine as of March 31, 2015 and 2014, respectively, are not included in theabove tables.
Calculation method of fair value of financial instruments and information about securities are as follows:
Cash and cash in banks and Notes and accounts receivable
The carrying value is deemed as the fair value since it is scheduled to be settled in a short period of time.
Short-term investments and Investment securities
Fair value of equity securities is based on the price on stock exchanges and that of bonds is based on
the price on bond markets or the price presented by the counterparty financial institutions. Please see
Note 5, Short-Term Investments and Investment Securities, for securities by classification.
Notes and accounts payable
The carrying value is deemed as the fair value since it is scheduled to be settled in a short period of time.

KYORIN Holdings, Inc.

43

The redemption schedule for monetary receivables and securities with maturities subsequent to March 31,
2015 is as follows:
Millions of yen
2015

Cash and cash in banks
Notes and accounts receivable
Short-term investments andinvestment securities:
Other securities with maturities:
Government bonds
Bonds
Other
Total

Due in one
year or lessDue after one
year throughfive years

Due after five
years throughten years

Due after
ten years¥30,652
47,007

¥—
—

¥—
—

¥—
—

17,800——¥95,460

6,900——¥6,900

2,000
—
1,000
¥3,000

—
500
—
¥500

Thousands of U.S. dollars
2015

Cash and cash in banks
Notes and accounts receivable
Short-term investments andinvestment securities:
Other securities with maturities:
Government bonds
Bonds
Other
Total

12.

Due in one
year or lessDue after one
year throughfive years

Due after five
years throughten years

Due after
ten years$254,860
390,846

$—
—

$—
—

$—
—

148,000——$793,714

57,371——$57,371

16,629—8,315$24,944—
4,157—$4,157Retirement Benefit Plans
The Company and its consolidated subsidiaries have defined benefit pension plans, defined contribution
pension plans, and annuity in advance retirement severance plans, and certain domestic consolidated
subsidiaries adopt lump-sum retirement plans and the Government Welfare Pension Fund Plan.
Certain consolidated subsidiaries have adopted the simplified method in calculating the retirement
benefit obligations.
Defined benefit plans(1) The changes in the retirement benefit obligation for the years ended March 31, 2015 and 2014 are
as follows:
Millions of yen

Retirement benefit obligation at the beginning of the year
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Prior service costs
Retirement benefit obligation at the end of the year

44

Annual Report 2015

Thousands of
U.S. dollars

2015

2014

2015

¥29,589967
384
169(1,048)—¥30,062¥29,999
1,003
389
109
(1,237)(675)¥29,589$246,021
8,040
3,193
1,405
(8,714)—$249,954

(2) The changes in plan assets for the years ended March 31, 2015 and 2014 are as follows:
Millions of yen

Plan assets at the beginning of the year
Expected return on plan assets
Actuarial gain or loss
Contributions paid by the employer
Retirement benefits paid
Plan assets at the end of the year

Thousands of
U.S. dollars

2015

2014

2015

¥27,902
558
1,662
1,958
(1,048)¥31,033¥25,269
758
992
2,120
(1,237)¥27,902$231,995
4,640
13,81916,280(8,714)$258,028(3) The changes in liability (asset) for retirement benefits for consolidated subsidiaries applying the simplified
method for the years ended March 31, 2015 and 2014 are as follows:

Liability (asset) for retirement benefits at the beginningof the year
Retirement benefits costs
Retirement benefits paid
Contributions to the plans
Liability (asset) for retirement benefits at the endof the year

Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

¥367
46
(32)
(76)

¥378
74
(57)
(28)

$3,051
382
(266)
(632)

¥305

¥367

$2,536(4) The reconciliation between the liabilities recorded in the consolidated balance sheet and the balances ofdefined benefit obligations and plan assets as of March 31, 2015 and 2014 is as follows:
Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

Unfunded retirement benefit obligation
Net liability (asset) for retirement benefits¥30,373(31,387)(1,014)347¥(666)¥29,821(28,155)
1,666
387¥2,053$252,540(260,971)(8,431)
2,885$(5,538)

Liability for retirement benefits
Asset for retirement benefits
Net liability (asset) for retirement benefits¥368(1,034)¥(666)¥2,073(20)¥2,053$3,060(8,597)$(5,538)

Funded defined benefit obligation
Plan assets

The above table includes defined benefit plans applying the simplified method.
(5) The components of retirement benefits costs for the years ended March 31, 2015 and 2014 are as follows:
Millions of yen

Service costs
Interest costs
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service costs
Retirement benefits costs basedon the simplified method
Retirement benefits costs

Thousands of
U.S. dollars

2015

2014

2015

¥967
384
(558)
162
(88)

¥1,003
389
(758)
310
(95)

$8,040
3,193(4,640)
1,347
(732)

46
¥914

74
¥  924382$7,600

KYORIN Holdings, Inc.

45

(6) Prior service costs and actuarial gain or loss included in other comprehensive income (before tax effect)
for the years ended March 31, 2015 and 2014 are as follows:
Millions of yen

Prior service costs
Actuarial gain or loss
Total

Thousands of
U.S. dollars

2015

2014

2015

¥88
(1,656)¥(1,567)

¥—
—
¥—

$732
(13,769)$(13,029)(7) Unrecognized prior service costs and unrecognized actuarial loss included in accumulated othercomprehensive income (before tax effect) as of March 31, 2015 and 2014 are as follows:
Millions of yen

Unrecognized prior service costs
Unrecognized actuarial loss
Balance at the end of the year

Thousands of
U.S. dollars

2015

2014

2015

¥(540)
369¥(170)¥(629)2,026¥1,396$(4,490)
3,068$(1,413)(8) Plan assets
The breakdown of plan assets is as follows:
2015

2014

Domestic debt securities
Domestic equity securities

50.7%
6.0

42.5%
16.6

Foreign debt securities
Foreign equity securities
Other
Total

6.2
11.9
25.2
100.0%

6.6
12.8
21.5
100.0%In determining the long-term expected rate of return on plan assets, the Company and its consolidated
subsidiaries consider the current and projected asset allocations, as well as current and future long-term
rates of return for various categories of plan assets.
(9) Actuarial assumptions
Discount rate
Expected rate of return on plan assets

2015

2014

1.3%
2.0%

1.3%
3.0%

Defined contribution plans
The Company and its consolidated subsidiaries contributed ¥316 million ($ 2,627 thousand) and ¥298
million to the defined contribution plans for the years ended March 31, 2015 and 2014, respectively.

13.

Pledged Assets
Assets pledged as collateral for guaranty deposits as of March 31, 2015 and 2014 are as follows:46

Annual Report 2015

Millions of yen

Thousands of
U.S. dollars

Assets pledged as collateral:

2015

2014

2015

For guaranty deposits
Cash and cash in banks
Total

¥10
¥10

¥10
¥10

$83
$83

14.

Income Taxes
Significant components of deferred tax assets and liabilities as of March 31, 2015 and 2014 are as follows:

Deferred tax assets:
Liability for retirement benefits
Accrued bonuses to employees
Allowance for doubtful accounts
Accrued enterprise tax
Loss on retirement of inventories
Loss on devaluation of investment securities
Loss on retirement of property, plant and equipment
Amortization of deferred assets
Tax loss carryforward
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for reduction entry of property,
plant and equipment
Reserve for special account for advanced
depreciation of non-current assets
Unrealized holding gain on other securities
Prepaid pension cost
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

¥63
1,067
59
189
157
181
1,058
813
203
1,526
5,320
(373)
4,947

¥739
1,151
57
192
194
243
901
553
318
1,031
5,383
(532)
4,850

$524
8,872
491
1,571
1,305
1,505
8,797
6,760
1,688
12,68844,234(3,101)
41,132

(51)

(66)

(424)

(1,182)(3,688)(279)(4)(5,207)¥  (259)—(1,879)—(17)(1,962)¥2,887(9,828)(30,664)(2,320)(33)(43,294)$ (2,153)

Taxes on income consist of corporate, inhabitants’ and enterprise taxes. Reconciliations of the statutory
tax rate to the effective tax rate for the years ended March 31, 2015 and 2014 are as follows:
Statutory tax rate
Entertainment expenses and others that are not tax
deductible permanently
Inhabitants’ per capita taxes
Adjustment to deferred tax assets and liabilities from change inthe statutory tax rate
Tax credits for research and development expenses
Valuation allowanceInternal profit elimination
Other
Effective tax rate

2015

2014

35.6%

38.0%

1.2
0.5

2.1
0.4

1.6
(6.4)
0.5
(0.6)
(1.2)
31.3%

1.0
(5.4)
(0.6)
0.1
(1.3)
34.3%

The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 9 of 2015) and the “Act for Partial
Amendment of the Local Tax Act, etc.” (Act No. 2 of 2015) were promulgated on March 31, 2015.
Accordingly, the effective statutory tax rate used to measure deferred tax assets and liabilities waschanged from 35.6% to 33.1% for the temporary differences expected to be realized or settled in thecurrent fiscal year. The effective statutory tax rate was also changed to 32.3% for the temporary differences
expected to be realized or settled in the fiscal years beginning on or after April 1, 2016.
As a result, deferred tax liabilities (net of deferred tax assets) as of March 31, 2015 decreased by¥103 million ($856 thousand), while unrealized holding gain on other securities as of March 31, 2015 andincome taxes-deferred for the year ended March 31, 2015 increased by ¥374 million ($3,110 thousand) and¥271 million ($2,253 thousand), respectively.
KYORIN Holdings, Inc.

47

15.

Comprehensive Income
Reclassification adjustments and income tax effects on other comprehensive income for the years ended
March 31, 2015 and 2014 are as follows:

Unrealized holding gain on other securities:
Gain arising during the year
Reclassification adjustments
Before income tax effects
Income tax effects
Unrealized holding gain on other securities
Translation adjustments:
Adjustments arising during the year
Retirement benefits liability adjustments:
Gain arising during the year
Reclassification adjustments
Before income tax effects
Income tax effects
Retirement benefits liability adjustments
Share of other comprehensive income of affiliates
accounted for using equity method:Gain arising during the year
Total other comprehensive income

16.

Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

¥6,131—6,131(1,809)4,322¥1,833
(64)
1,769
(630)
1,138

$50,977—
50,977(15,041)
35,936

155

192

1,289

1,493
73
1,567
(552)
1,014

—
—
—
—
—

12,414607
13,029(4,590)8,431

41¥5,534

1¥1,333341$46,013

Segment Information(a) Overview of Reportable Segments
The Company’s reportable segments are those for which separate financial information is available andregular examination by the board of directors is performed in order to decide how resources are allocatedamong the Company and evaluate their performance.
The Company has two reportable segments, the Pharmaceutical Business and the Consumer Healthcare(Skincare) Business, which are classified based on similarities in the products and services.
The Pharmaceutical Business mainly produces, sells, and purchases ethical drugs, generic drugs andover-the-counter drugs. The Consumer Healthcare (Skincare) Business mainly sells and purchases
skincare products.
(b) Method of Calculating Net Sales, Profit (Loss), Assets and Other Items by Reportable Segment
Accounting policies of the reportable segments are consistent to those described in Note 2, Summary of
Significant Accounting Policies.
Segment profit is based on operating income.
Inter-segment transactions are based on prevailing market price.

48

Annual Report 2015

(c) Information about Net Sales, Profit (Loss), Assets and Other Items by Reportable Segment
Millions of yen
2015
Reportable segment

Net sales:
Sales to third parties
Inter-segment sales or transfers
Total
Segment profit (loss)
Segment assets
Other items:
Impairment loss
Depreciation and amortization
Investments in affiliates accounted
for using equity method
Increase in property, plant andequipment and intangible assets

PharmaceuticalBusiness

Consumer
Healthcare(Skincare)Business

Total

Adjustments

Consolidated¥111,771
47¥111,819¥ 14,576¥163,135¥1,34948¥1,398¥(20)¥  683¥113,121
96¥113,217¥ 14,556¥163,818¥—(96)¥(96)¥181¥19,564¥113,121—¥113,121¥ 14,737¥183,383¥  2,232
2,678

¥—
13

¥  2,232
2,692

¥—
361

¥  2,232
3,053

594

—

594

—

594

2,587

5

2,592

195

2,788

Thousands of U.S. dollars
2015
Reportable segment

Net sales:
Sales to third parties
Inter-segment sales or transfers
Total
Segment profit (loss)
Segment assets
Other items:
Impairment loss
Depreciation and amortization
Investments in affiliates accounted
for using equity method
Increase in property, plant andequipment and intangible assets

PharmaceuticalBusiness

Consumer
Healthcare(Skincare)Business

Total

Adjustments

Consolidated$  929,334
391$  929,733$  121,194$1,356,406$11,216399$11,624$(166)$ 5,679$  940,559
798$  941,357$  121,028$1,362,085

$—
(798)
$(798)$  1,505$162,667$  940,559—$  940,559$  122,533$1,524,761$   18,558
22,267$—108$   18,558
22,383$—
3,002$   18,558
25,385

4,939

—

4,939

—

4,939

21,51042

21,552

1,621

23,181Millions of yen
2014

Reportable segment

Net sales:
Sales to third parties
Inter-segment sales or transfers
Total
Segment profit
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Investments in affiliates accounted
for using equity method
Increase in property, plant andequipment and intangible assets

PharmaceuticalBusiness

Consumer
Healthcare(Skincare)Business

Total

Adjustments

Consolidated¥109,678
64¥109,742¥ 16,973¥151,201¥1,72151¥1,773¥  161¥  774¥111,400
115¥111,516¥ 17,134¥151,976¥—(115)¥(115)¥   473¥17,402¥111,400—¥111,400¥ 17,607¥169,378¥  2,84564¥   19—¥  2,86564¥   288—¥  3,153
64

568

—

568

—

568

5,906

1

5,908

534

6,442

KYORIN Holdings, Inc.

49

1. “Adjustments” for “Segment profit (loss)” of ¥181 million ($1,505 thousand) and ¥473 million for the years
ended March 31, 2015 and 2014, respectively, were mainly eliminations of inter-segment transactions.
2. “Adjustments” for “Segment assets” of ¥19,564 million ($162,667 thousand) and ¥17,402 million as ofMarch 31, 2015 and 2014, respectively, were the Company’s assets and offset of inter-segment receivables
and payables.
3. “Adjustments” for “Depreciation and amortization” of ¥361 million ($3,002 thousand) and ¥288 million forthe years ended March 31, 2015 and 2014, respectively, were depreciation of property, plant and equipment
and intangible assets of the Company.
4. “Adjustments” for “Increase in property, plant and equipment and intangible assets” of ¥195 million($1,621 thousand) and ¥534 million for the years ended March 31, 2015 and 2014, respectively, wereincrease in property, plant and equipment and intangible assets of the Company.
5. “Segment profit (loss)” is adjusted to operating income disclosed in the accompanying consolidated
statements of income.
(Related Information)(a) Information by Product and Service
Information by product and service is omitted since the classification by product and service was the sameas the reportable segment for the years ended March 31, 2015 and 2014.
(b) Information by Geographical Area
(1) Sales
Information about sales by geographical area is omitted for the years ended March 31, 2015 and 2014,
since domestic sales were more than 90% of net sales on the consolidated statements of income.
(2) Property, plant and equipment
Information about property, plant and equipment by geographical area is omitted for the years ended
March 31, 2015 and 2014, since property, plant and equipment in Japan constituted more than 90%
of property, plant and equipment on the consolidated balance sheets.
(c) Information by Major Customer for the Years Ended March 31, 2015 and 2014
Millions of yen
2015
Name of customer

Alfresa Corporation
SUZUKEN CO., LTD.
MEDIPAL HOLDINGS CORPORATION
Toho Pharmaceutical Co., Ltd.

Sales amount¥19,641
17,768
16,523
15,161

Related segments

Pharmaceutical BusinessPharmaceutical BusinessPharmaceutical BusinessPharmaceutical BusinessThousands of U.S. dollars
2015

Name of customer

Alfresa Corporation
SUZUKEN CO., LTD.
MEDIPAL HOLDINGS CORPORATION
Toho Pharmaceutical Co., Ltd.

50

Annual Report 2015

Sales amount$163,308
147,734
137,383
126,058

Related segments

Pharmaceutical BusinessPharmaceutical BusinessPharmaceutical BusinessPharmaceutical BusinessMillions of yen
2014
Name of customer

Sales amount

Alfresa Corporation
SUZUKEN CO., LTD.
MEDIPAL HOLDINGS CORPORATION
Toho Pharmaceutical Co., Ltd.

¥19,568
17,551
16,568
14,977

Related segments

Pharmaceutical BusinessPharmaceutical BusinessPharmaceutical BusinessPharmaceutical Business and Consumer
Healthcare (Skincare) Business(d) Information about Amortization and Unamortized Balance of Goodwill by Reportable Segment
There is no unamortized balance of goodwill as of March 31, 2015 and 2014.
Information about amortization of goodwill by reportable segment for the years ended March 31, 2015
and 2014 is omitted since the information is disclosed under “(c) Information about net sales, profit (loss),
assets and other items by reportable segment” in this section.

17.

Contingent Liabilities
Contingent liabilities as of March 31, 2015 and 2014 are as follows:
Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

¥1

¥2

$8

Yen

U.S. dollars

Guarantors of indebtedness of employees

18.

Amounts per Share
Amounts per share for the years ended March 31, 2015 and 2014 are as follows:

Basic net income
Cash dividends
Net assets

2015

2014

2015

¥  161.63
52.00
2,009.45¥  160.95
52.00
1,844.61$ 1.340.43
16.71

Basic net income per share was computed based on the net income available for distribution to shareholders of common stock and the weighted average number of shares of common stock outstanding during
the year. Diluted net income per share is omitted because no potentially dilutive shares were outstanding
during the years ended March 31, 2015 and 2014.
Cash dividends per share represent the cash dividends applicable to the year.
The amount per share of net assets is computed based on the net assets available for distribution to theshareholders of common stock and the number of shares of common stock outstanding at the year-end.
The treasury shares remaining in trust and recorded as treasury stock in shareholders’ equity areincluded in the treasury shares excluded from the calculation of the average number of shares during the
fiscal year, which is used to calculate the amount of net income per share. Furthermore, these treasury
shares are included in the number of treasury shares excluded from the total number of issued shares at theend of the fiscal year, which is used to calculate net assets per share.
The average number of treasury shares during the fiscal year that were excluded from the calculation of
the amount of net income per share was 76,875 in the fiscal year ended March 31, 2015.
The number of these treasury shares at the end of the fiscal year that were excluded from the calculationof net assets per share was 764,100 as of March 31, 2015.

19.

Subsequent Events
There are no relevant items.

KYORIN Holdings, Inc.

51

Independent Auditor’s Report

52

Annual Report 2015

Non-consolidated Financial Summary

Non-consolidated Balance Sheet
KYORIN Holdings, Inc.
As of March 31, 2015
Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

$156,156

Assets¥ 18,781¥ 17,102

Cash and deposits

10,785

10,14689,673

Short-term investments

4,999

3,599

41,565Current assets

155

147

1,289

Income taxes receivable

Prepaid expenses

1,233

1,039

10,252

Short-term loans

1,500

2,000

12,472

Deferred tax assets

94

154

782

Other

13

15

108

Less allowance for doubtful accounts
Noncurrent assets
Property, plant and equipment
Intangible assets
Investments and other assets
Total assets

—

0

—

84,357

84,370701,397

619

744

5,147

744

761

6,186

82,99382,865690,056

103,138

101,473857,554

606

698

5,039
19,822

Liabilities
Current liabilities
Non-current liabilities

2,384

7

Total liabilities

2,991

706

Net assets

100,147

24,869832,685(0)100,767(0)

100,147

100,767

832,685

103,138

101,473857,554

Millions of yen

Thousands of
U.S. dollars

2015

2014

2015

Operating revenue¥9,336¥8,640$77,625

Operating expenses

3,162

3,078

26,291

Operating income

6,173

5,561

51,326

Shareholders’ equity
Total net assets
Total liabilities and net assets

Non-consolidated Statement of Income
KYORIN Holdings, Inc.
For the year ended March 31, 2015

Non operating income
Ordinary income
Extraordinary income
Extraordinary loss

108

121

898

6,282

5,683

52,232

—

—

—

1

151

8

Income before income taxes

6,281

5,531

52,224

Income taxes—current

16

37

133

Income taxes—deferred
Net income

66

101

549

6,198

5,392

51,534

Note: The rate of ¥120.27 to U.S.$1.00, prevailing on March 31, 2015, has been used for translation into U.S. dollar amounts.

KYORIN Holdings, Inc.

53

Corporate History

1923

1977

1995

Central Research Laboratories were established.

The Noshiro Plant was started.

1980

1996

Norfloxacin (NFLX), an antibacterial agent, waslicensed to Merck & Co. (U.S.A.).

1931

A joint venture, Nisshin KYORIN PharmaceuticalCo., Ltd., was established with Kyorin’s capital
participation.

1981

Kyorin Chemical Laboratory was established.

Mucodyne, a mucoregulant, was launched.

Gatifloxacin (GFLX) was licensed to Bristol-Myers
Squibb (U.S.A.).

1940

1982

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

Norfloxacin (NFLX) was licensed to Astra(Sweden, present AstraZeneca) and Boots(U.K., present Abbott).

1947

1983

The Okaya Plant was started.

Norfloxacin (NFLX) was licensed to American
Home Products (U.S.A., present Pfizer).

1923
Toyo Shinyaku Sha, the predecessor of KYORIN
Pharmaceutical Co., Ltd., was founded.

1957
The medical journal bulletin Doctor Salon wasstarted.

1961
Behyd, a diuretic and antihypertensive agent, waslaunched.

1962
Kyorin Chemical Laboratory (later Technical Centerof Development) was established.

1965
KYORIN AP-2, an analgesic, was launched.
Deamelin-S, an oral hypoglycemic agent, was launched.

1984
Baccidal (NFLX), a broadspectrum oral antibacterial
agent, was launched.

1986
Fleroxacin (FLRX), an antibacterial agent, waslicensed to F. Hoffmann-La Roche (Switzerland).
Aplace, an agent for gastritis and gastric ulcers,
was launched.

1989
Ketas, for bronchial asthma and cerebrovasculardisorders, was launched.

The Research Center (now the Watarase Drug
Discovery Center) was founded by integrating the
Research Center of Organic Syntheses, the Technical Center of Development, the Technical Centerof Product Formulation and the Technical Center of
Safety Assessment.

1998
Milton, an effervescent disinfectant business, wasacquired from P&G.

1999
Listed on the Tokyo Stock Exchange,
Second Section.

2000
Listed on the Tokyo Stock Exchange,
First Section.
Gatifloxacin-eyedrops was licensed to Allergan(U.S.A.).

2001
Kipres, the leukotriene receptor antagonist andbronchial asthma treatment medicine, was launched.

The Head Office was completed.

Baccidal Eyedrops, a broadspectrum ophthalmic
antibacterial agent, was launched.

1967

1991

The Nogi Plant was started (now closed).

Baccidal Tablets for Children was launched.

2002

1971

1992

A subsidiary company, Kyorin Europe GmbH
(Germany), was established.

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

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

1974
Hespander, a plasma substitute and extracorporeal
circulation flow improver, was launched.

1993
Megalocin (FLRX), a long-acting new quinolone
agent, was launched.

A subsidiary company, Kyorin USA, Inc. (U.S.A.),
was established.

Gatiflo (GFLX), a broad-spectrum, oral antibacterial
agent, was launched.

2004
ActivX Biosciences, Inc. (U.S.A.) became a wholly
owned subsidiary.

1976

2005

Hydroxyethylstarch (HES) was licensed to Pfrimmer(Germany, present Baxter Deutschland).

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.

54

Annual Report 2015

2006

2009

2013

2006

Marketing rights in China were granted to Senju
Pharmaceutical for Gatifloxacin Ophthalmic
Solution.

Head office moved to Ochanomizu sola city in
Kanda Surugadai.

The Kyorin Group shifts to a holding company
structure through a share exchange with KYORIN
Co., Ltd.

A license agreement for Neramexane, a tinnitus
drug, was made with Merz Pharmaceuticals(Germany) for the Japan region.

The new Noshiro Plant began operating.

2010
KYORIN Co., Ltd. changed its name to KYORIN
Holdings, Inc.
Mucodyne DS 50%, a mucoregulant, waslaunched.

A business transfer agreement was made with theFresenius Kabi AG Group in Germany concerning
Hespander and Salinhes, plasma substitutes andhemodilution agents.

Flutiform, a combination drug for asthma treatment,
was launched.

2014
Signed a license agreement concerning Vibegron,a therapeutic agent for overactive bladder, withMerck & Co. (U.S.A.).

Uritos Orally Disintegrating (OD) Tablets 0.1 mg, anoveractive bladder drug, was launched.

2015

2012

2015

RUBYSTA, a multipurpose disinfectant cleaner,
was launched.

Eklira Genuair, a treatment for COPD, was launched.

2011

2007

Pentasa Suppositories 1 g, a treatment for ulcerative colitis, was launched.

Established the WATARASE Research Center.

Acquisition (conversion into subsidiary) of the
Shiga Plant of MSD K.K. and established
KYORIN Pharmaceutical Facilities Co., Ltd.

Uritos Tablets 0.1 mg, an overactive bladder drug,
was launched.
Kipres Fine Granules 4 mg, a bronchial asthma
treatment drug, was launched.

2008
Kipres Tablets 5 mg, a bronchial asthma andallergic rhinitis treatment drug, was launched.
KYORIN Pharmaceutical merged with Nissin
Kyorin Pharmaceutical.

Transfer of business related to a topical antifungal
prescription drug Pekiron cream 0.5% to Galderma
S.A. (Switzerland).

Corporate MarkThe corporate mark consists of three curved lines that form a heart-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: The technology that brings confidence
Light Green: Free and lively creativity

KYORIN Holdings, Inc.

55

Corporate Overview/Stock Information (As of March 31, 2015)

Head Office

6, Kanda Surugadai 4-chome, Chiyoda-ku, Tokyo 101-8311
Phone: +81-3-3525-4700
URL: http://www.kyorin-gr.co.jp/en/

Establishment

1958

Common Stock¥700 million

Major Shareholders

16.8%

26.2%

1.4%

Shareholders

4,546

Outstanding Shares 74,947,628

19.6%

Shareholders

4,546

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

Major Shareholders

Financial institutionsPercentage of total shares outstanding

TEIJIN LIMITED
Mykam Co., Ltd.
Japan Trustee Services Bank, Ltd.
(Trust Account)
Minoru Ogihara
Banrina Co., Ltd.
Archans Co., Ltd.
Yutaka Ogihara
Mariko Ogihara
Hiroko Ogihara
The Master Trust Bank of Japan, Ltd.
(Trust Account)

36.1%

19.12%
3.66%

16.8%

Financial instruments firms

1.4%

Other corporations

36.1%

Foreign corporations19.6%

Individuals and other

26.2%

3.51%
2.97%
2.60%
2.60%
2.48%
2.35%
2.33%
2.33%

Change in Share Price
Share price(Yen)

Share price

TOPIX

TOPIX

3,000

3,000

2,500

2,500

2,000

2,000

1,500

1,500

1,000

1,000

500

500

0

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4
2010
2011
2012
2013
2014
2015

Website introducing Kyorin’s IR activities

http://www.kyorin-gr.co.jp/en/ir/

Kyorin has created an informative website introducing its IR activities, with the aim of providing timely
information to all shareholders and investors. This website provides appropriate public information
about Kyorin, including account settlement information, news releases, investor briefings materials,
and annual reports.

56

Annual Report 20150

Organization Chart (As of June 23, 2015)
President’s Office
General Shareholders’ Meeting

Management Planning
Corporate Communication

Board of Corporate Auditors

Information System
Management

Board of Directors

General Affairs & Human Resources

Representative Director, President and Chief Executive Officer

Finance & Accounting

Management Meeting

LegalIntellectual Property
Compliance
Auditing

Subsidiaries and Affiliates
Consolidated
Subsidiaries

KYORIN Pharmaceutical Co., Ltd.
Capital:¥4,317 million
Percentage of ownership: 100%
Head office: 6, Kanda Surugadai 4-chome,
Chiyoda-ku, Tokyo 101-8311
Operations: Manufacture and sales of prescription
medicines and quasi-drugs,
diagnostics, and industrial chemicals

KYORIN
PharmaceuticalCo., Ltd.
Subsidiaries

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 andproduction of advertising, etc.

Kyorin Europe GmbH
Capital:€50,000
Percentage of ownership: 100%
Head office: Kaiserstrasse 8, 60311 Frankfurt am
Main, Germany
Operations: Research and analysis of othercompanies’ technologies andcollection of information concerning
clinical trials

KYORIN Rimedio Co., Ltd.
Capital:¥1,200 million
Percentage of ownership: 100%
Head office: 287-1, Shimocho Moroe-cho,Kanazawa-shi, Ishikawa 920-0017
Operations: Manufacture and sales of prescription
medicines and quasi-drugs,
diagnostics, and industrial chemicals
Dr. Program Co., Ltd.
Capital:¥251 million
Percentage of ownership: 100%
Head office: Kyorin Nishi-Shinjuku Building, 25-13,
Nishi-Shinjuku 6-chome, Shinjuku-ku,
Tokyo 160-0023
Operations: Development and sales of skincare
products
KYORIN Pharmaceutical Facilities Co., Ltd.
Capital:¥450 million
Percentage of ownership: 100%
Head office: 1-4 Sasagaoka, Minakuchi-cho,
Koka, Shiga 528-0061
Operations: Manufacture and sales of prescription
medicines

Kyorin USA, Inc.
Capital:
US$500,000
Percentage of ownership: 100%
Head office: 500 Frank W. Burr Boulevard,
Teaneck, New Jersey 07666, UnitedStatesOperations: Research and analysis of othercompanies’ technologies andcollection of information concerning
clinical trials

ActivX Biosciences, Inc.
Capital:
US$1
Percentage of ownership: 100%
Head office: 11025 N. Torrey Pines Rd., La Jolla,
California 92037, United States
Operations: Discovery and evaluation of candidate
compounds
Equity-method
Affiliates

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

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

KYORIN Holdings, Inc.

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KYORIN Holdings, Inc.
6, Kanda Surugadai 4-chome, Chiyoda-ku, Tokyo
101-8311, Japan
Corporate Communication, President’s OfficeTEL+81-3-3525-4707
URL
http://www.kyorin-gr.co.jp/en/