ANNUAL REPORT 2013
Year ended March 31, 2013 KYORIN Holdings, Inc.

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

Millions of yen

FY2008FY2009FY2010FY2011FY2012

Net sales

90,88999,764

104,069

103,232

107,031

Operating income

8,952

13,261

16,443

14,464

17,948

9.8

13.3

15.8

14.0

16.8

2,037

8,848

10,927

9,231

12,422

2.2

8.9

10.5

8.9

11.6

Net cash provided by operating activities

4,575

12,027

6,805

8,913

11,544

Net cash used in investing activities(4,229)412(1,806)(4,926)(7,187)346

12,439

4,999

3,987

4,357

10,531

11,807

12,495

13,964

11,059

11.6

11.8

12.0

13.5

10.3

Capital expenditure

1,612

1,291

1,668

1,952

6,576

Depreciation and amortization

3,799

2,810

2,458

2,363

2,738

ROE (%)

2.1

8.8

10.1

8.0

10.0

ROA (%)

1.6

6.8

7.7

6.3

8.3

Total assets

124,552

137,190

147,234

145,673

154,968

Total net assets

96,501

104,911

111,706

118,201

129,099

77.5

76.5

75.9

81.1

83.3

Results of Operations

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

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

Financial Position at Year-end

Total shareholders’ equity ratio (%)

YenAmounts per Share
1,290.67

1,403.60

1,494.83

1,581.94

1,727.86

Basic net income

27.24

118.37146.21123.54166.25

Cash dividends

13.00

50.00

45.00

45.00

50.00

47.7

42.2

30.8

36.4

30.1

Net assets

Cash dividends payout ratio (%)

Net sales

Consolidated net sales increased 3.7% year on year to ¥107.0 billion, reaching an all-time high. Sales growth
was driven by sales contributions from KYORIN Pharmaceutical Facilities Co., Ltd., which commenced
operations on October 1, 2012, as well as year-on-year increases in ethical drug and generic drug sales in thepharmaceutical business.

Operating income

Operating income amounted to ¥17.9 billion, up 24.1% year on year and reaching an all-time high. Among themain factors behind this growth was a year-on-year increase in gross profit of ¥600 million in line with higher
sales, although the cost-of-sales ratio rose 1.7 percentage points mainly due to the impact of an official drug
price reduction in Japan’s National Health Insurance drug price list and the conversion of KYORIN
Pharmaceutical Facilities Co., Ltd. into a consolidated subsidiary. Another factor was lower selling, general andadministrative (SG&A) expenses, primarily because R&D expenses decreased by 20.8% year on year.

Net income

Net income increased 34.6% year on year to ¥12.4 billion.

ROE

With growth on the profit side, ROE rose to 10.0% (2.0 percentage points above the previous fiscal year).

Consolidated
Financial Highlights

ProfileFeature: The Source ofValue Creation

To Our Stakeholders

The Foundation of
Value Creation

Operating income

Net sales

Management Foundation

Net income(Millions of yen)

(Millions of yen)

(Millions of yen)

120,000

20,00015,000104,069 103,232
99,764

107,031

17,94812,422

16,44390,88914,46415,00090,000Financial Information

10,927

12,00013,261

9,231

8,848
9,000
10,00060,000

8,952
6,000

5,000

30,00002008 2009 2010 2011 2012 (FY)

ROE

0

3,000

2008 2009 2010 2011 2012 (FY)0

Total shareholders’ equity ratio

(%)

(%)

12.0

84.0
10.1

2008 2009 2010 2011 2012 (FY)Net income per share/
Dividend payout ratio
(Yen)

83.3

(%)

166.25

180

82.0
81.1
8.0

60.0
47.7

6.0

42.2
78.0

2.1

76.0

2008 2009 2010 2011 2012 (FY)

74.0

36.4

77.5
30.8

60

76.5

0

123.54118.37
120

80.0

3.0

90.0

146.21

10.0

8.8

9.0

2,037

30.1

30.0

27.24

75.9

2008 2009 2010 2011 2012 (FY)2008 2009 2010 2011 2012 (FY) 00

Net income per share (Left scale)
Dividend payout ratio (Right scale)Contents
Inside Cover ...Consolidated Financial Highlights

28 ........Financial Analysis

02 ........Profile

32 ........Consolidated Balance Sheet

04 ........To Our Stakeholders

34 ........Consolidated Statement of Income/Consolidated Statement of Comprehensive Income

10 ........Feature: The Source of Value Creation
18 ........Presence in the Respiratory Field
19 ........Main Products
20 ........Alliances
21 ........Products under Development
22 ........Corporate Governance
25 ........Directors, Auditors, and Corporate Officers
26 ........Corporate Social Responsibility

35 ........Consolidated Statement of Changes in Net Assets
36 ........Consolidated Statement of Cash Flows
37 ........Notes to the Consolidated Financial Statements
54 ........Independent Auditor's Report
55 ........Non-consolidated Financial Summary
Non-consolidated Balance Sheet/
Non-consolidated Statement of Income

56 ........Organization Chart/Subsidiaries and Affiliates
57 ........Corporate Information

KYORIN Holdings, Inc.

1

Profile

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

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

Our Milestones

1923

1977

1980

1923

1957

1980

1993

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

The medical journal bulletin
Doctor Salon was started.

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

Megalocin (FLRX), a long-acting
new quinolone agent, waslaunched.

1981

1995

Mucodyne, a mucoregulant, waslaunched.

The Research Center (nowDevelopment Research Laboratories) was founded by integrating
the Research Center of Organic
Syntheses, Technical Center ofDevelopment, Technical Center of
Product Formulation and Technical Center of Safety Assessment.
The Noshiro Plant was started.

1961
Behyd, a diuretic and antihypertensive agent, was launched.

1962
1931
Kyorin Chemical Laboratory wasestablished.
Kyorin Legend
The name Kyorin originated fromtwo Chinese characters that
represent a truly virtuous way ofpracticing medicine.
Long ago, a Chinese physician
named Dong Feng treated the sickfree of charge, and asked those
who recovered from serious illness
to plant five apricot tree saplings
and those cured of minor illness toplant one. As time went by, a thickforest 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 ,” theChinese 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 andmedical treatment
in general.

1940
The company was renamed
KYORIN Pharmaceutical Co.,
Ltd., and Kyorin Yakuhin Co., Ltd.
was organized as an independent
marketing division.

1946
The Okaya Plant was started.

2

Annual Report 2013

Kyorin Chemical Laboratory (later
Technical Center of Development)
was established.

1965
KYORIN AP-2, an analgesic, waslaunched.
Deamelin-S, an oral hypoglycemic agent, was launched.
The Head Office was completed.

1982
Norfloxacin (NFLX) was licensed
to Astra (Sweden, present
AstraZeneca) and Boots (U.K.,
present Abbott).

1983
Norfloxacin (NFLX) was licensed
to American Home Products(USA, present Pfizer).

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

1967
The Nogi Plant was started (nowclosed).

1971
Cholexamin, a lipid metabolism
and peripheral circulation improving agent, was launched.

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

1976
Hydroxyethylstarch (HES) was
licensed to Pfrimmer (Germany,
present Baxter Deutschland).

1977
Central ResearchLaboratories(present Discovery ResearchLaboratories) was established.

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

1989
Ketas, for bronchial asthma andcerebrovascular disorders, waslaunched.
Baccidal Eyedrops, a broadspectrum ophthalmic antibacterial
agent, was launched.

1991
Baccidal Tablets for Children was
launched.

1992
KYORIN Pharmaceutical Co., Ltd.
and Kyorin Yakuhin Co.,Ltd. weremerged, and the new KYORIN
Pharmaceutical Co., Ltd. was founded.

1996
A joint venture, Nisshin KYORIN
Pharmaceutical Co., Ltd., wasestablished with Kyorin’s capital
participation.
Gatifloxacin (GFLX) was licensed
to Bristol-Myers Squibb (U.S.A.).

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

1999
The company’s stock was issued
on the Tokyo Stock Exchange,
Second Section.

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information[ Long-term vision HOPE100 ]Aim for Health Of People and our Enterprises
HOPE100 is a long-term vision looking forward to 2023, the 100th anniversary of the founding ofsubsidiary KYORIN Pharmaceutical Co., Ltd. It encompasses our powerful goal of supporting healthy
lifestyles through our business in the treatment and prevention of disease and the maintenance andpromotion of good health. Our long-term vision HOPE100 embodies the Group’s corporate philosophy and sets out the Group’s future development objectives. This philosophy is the statement of ourbusiness objective and the basic rationale for the Group’s business. The future of the Group isexpressed in the statement, “The Kyorin Group will promote diversified business expansion and development of the consumer healthcare business, and by 2023 will be recognized both within and outside
the Group as a company that supports sound and healthy lifestyles.” Guided by this vision, the Groupwill spread its business risks and aim to achieve sound, stable, and sustainable growth.

2000
2000
The company’s stock was issued
on the Tokyo Stock Exchange,
First Section.
Gatifloxacin-eyedrops was
licensed to Allergan (U.S.A.).

2013
Tokyo Stock Exchange market.)
The new Noshiro Plant began
operating.

2002
A subsidiary company, Kyorin
Europe GmbH (Germany), wasestablished.
Gatiflo (GFLX), a broad-spectrum,
oral antibacterial agent, waslaunched.

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

2005
The stocks of Toyo Pharmar Co.,
Ltd. (present KYORIN Rimedio
Co., Ltd.) were acquired, making
it into a subsidiary company.
Dr. Program Co., Ltd. became awholly owned subsidiary.

2006
The Kyorin Group shifts to aholding company structure
through a share exchange withKYORIN Co., Ltd. (currently
KYORIN Holdings, Inc.). (KYORIN
Pharmaceutical Co., Ltd. isdelisted, and KYORIN Co., Ltd. islisted on the First Section of the2010
KYORIN Co., Ltd. changed its
name to KYORIN Holdings, Inc.
Mucodyne DS50%, a mucoregulant, was launched.

2001
Kipres, the leukotriene receptor
antagonist and bronchial asthma
treatment medicine, waslaunched.
A subsidiary company, Kyorin
USA, Inc. (U.S.A.), was established.

made with Merz Pharmaceuticals(Germany) for the Japan region.

2007
A business transfer agreement
was made with the Fresenius
Kabi AG Group in Germany
concerning Hespander andSalinhes, plasma substitutes andhemodilution agents.
Uritos Tablets 0.1 mg, an overactive bladder drug, was launched.
Kipres fine Granules 4 mg, abronchial asthma treatment drug,
was launched.

2008
Kipres Tablets 5 mg, a bronchialasthma and allergic rhinitis
treatment drug, was launched.
Domestic licensing agreement for
Flutiform signed with Skye
Pharma PLC (U.K.).
KYORIN Pharmaceutical mergedwith Nissin Kyorin Pharmaceutical.
Ulcerative colitis and Crohn’sdisease therapeutic agent
Pentasa Tablets 500 mg waslaunched.

2009Marketing rights in China were
granted to Senju Pharmaceuticalfor Gatifloxacin Ophthalmic
Solution.
A license agreement for Neramexane, a tinnitus drug, was2011
A license agreement for Aclidinium Bromide, a COPD drug,
was made with Almirall (Spain) for
the Japan region.
Uritos Orally Disintegrating (OD)
Tablets 0.1 mg, an overactive
bladder drug, was launched.

2012
RUBYSTA, a multipurpose
disinfectant cleaner, was launched.
Acquisition (conversion into
subsidiary) of the Shiga Plant of
MSD K.K. (currently KYORIN
Pharmaceutical Facilities Co.,
Ltd.).

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

2013
Head office moved to Ochanomizu sola city in Kanda Surugadai.
Pentasa Suppositories 1 g, a
treatment for ulcerative colitis,
was launched.

Corporate MarkThe corporate mark,consists of three curvedlines that form a heartshaped apricot. The lines
represent the smiles ofpatients, their families,
and workers in medical
services, as well as
Kyorin’s three corebusinesses, namely
prevention, treatment, andprognosis.
Orange: Honesty and warmth
Violet: The technology thatbrings confidence
Light green: Free and lively
creativity

KYORIN Holdings, Inc.

3

To Our Stakeholders

Long-term growth
Structure of HOPE100 Stage 1
HOPE100 Stage 1, the Kyorin Group’s

S

Business Strategy

medium-term business plan for

Strategy

comprises three elements: Strategy,

P Performance

Organization, and Performance. By

Targets

achieving its long-term vision,working to steadily implement each ofthese components, we aim to enhanceO

Performance

Consumerhealthcare
business

Organization Strategy

Organization

corporate value even further.

¥20.0 billion¥6.3 billion¥106.7 billion

2009

2010

2011

2012

2013

Stage 1
4

Annual Report 20132014

Pharmaceuticalbusiness¥120.0 billion

2015

2016

2017

Stage 2

2018

2019

2020

2021

Stage 3

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Working to Achieve Our Long-term Vision
HOPE100 and Medium-term Business Plan
HOPE100 Stage 1
Based on its corporate philosophy “to cherish life and benefit society by contributing tobetter health,” the Kyorin Group is determined to contribute to disease treatment
through the provision of superior drugs. To this end, the Group is building a portfolio ofconsumer healthcare businesses that can respond to diversifying health needs, fromhealth maintenance and advancement to disease prevention, as we aim to grow as acompany with a recognized identity.
Under HOPE100, the long-term vision formulated in 2010 to embody the corporate
philosophy of the Kyorin Group, we are promoting the diversification of our consumer
healthcare business, centered on the pharmaceutical business. At the same time, weplace great value on the idea that “a business is only as good as its people.” In line with
HOPE100, we are working to become a leading company for pursuing fulfilling careers,a place in which employees can bring passion to their work.
In the midst of significant changes in business conditions, the Kyorin Group achieved
record sales and earnings in fiscal 2012, ended March 31, 2013.
In fiscal 2013, ending March 31, 2014, KYORIN Pharmaceutical, a core company in
the Kyorin Group, will mark its 90th anniversary. The year will also mark the turning
point for HOPE100 Stage 1 (2010–2015), the medium-term business plan positioned as
the first step in achieving our long-term vision HOPE100 (2010–2023). As we work
toward reaching our exit objectives for fiscal 2015, the final year of the medium-term
plan, the entire Kyorin Group will work together to set new records for sales and earnings, and to make steady progress with our program of business execution.

July 2013

Masahiro Yamashita
Representative Director, President and Chief Executive Officer

2022

2023 (FY)KYORIN Holdings, Inc.

5

Q1

Answer: 01

Please describe the business environment in the last fiscal year, and yourfinancial results in general.

Despite a tough business climate due to drug price revisions and other factors, the Group set new records forsales and earnings.
Business conditions in fiscal 2012 grew even more challenging as various
measures were enacted to reduce drug costs, including a lowering of prices on
the National Health Insurance drug price list by about 6% for the whole industry
on average, and in the 6% range for KYORIN Pharmaceutical.
Under these conditions, fiscal 2012 saw sales in our pharmaceutical business grow for Kipres, a drug used to treat bronchial asthma and allergic rhinitis,
and for Uritos, an overactive bladder drug; KYORIN Pharmaceutical Facilities
Co., Ltd., a consolidated subsidiary launched in October 2012, also contributed to increased revenue. In the generic drug business, sales to dispensing
pharmacies, and sales for products manufactured under outsourcing contracts
both increased. Sales in the consumer healthcare business dropped, however,reflecting reduced consumer spending in a lackluster economy. As a result,consolidated sales reached a record ¥107,031 million, an increase of 3.7%
year on year.
Operating income rose 24.1% year on year, to ¥17,948 million, also a newrecord. In a rebound from the previous year, when spending rose with progressin the development pipeline, R&D expenses fell by a significant 20.8% year on
year, which also brought SG&A expenses below the previous year’s levels.
(Billions of yen)

Sales of Mainstay
Products

Kipres

FY2011(Actual)

FY2012(Actual)

36.8

39.6

YoY (%)FY2015(Projected)
40.0

40.8

1.2

3.2

19.1

18.7

(0.4)

(2.0)

24.0

17.6

18.6

1.0

5.6

19.0

8.4

0.9

13.4

10.0

Mucodyne

21.5

Pentasa

18.0

Uritos6.3

7.5(Chart 1)

FY2013
YoY Change(Projected)

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

Pharmaceutical BusinessPharma Complex (PC) Model
Multi-faceted business development(New drugs, original drugs, generic drugs)

FY2015(Target)6

Annual Report 2013

Consumer Healthcare Business
Cultivate existing businesses and create
new businesses

Net sales ¥140.0 billion Operating income ¥20.0 billion

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Q2
How would you rate your progress inprogram execution through the last
fiscal year, and what are some of yourissues going forward?

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Answer: 02
With steady progress in its execution of programs aimed
at sustainable growth, the Kyorin Group continues working to build a robust business portfolio.
Among our achievements over the past three years, we saw steady progress in
our new drug development pipeline. In our generic drug business, we also
made progress toward building a new business model for generic drugs, built
on collaboration within the Group and also in-house development. In production operations, we established a foothold for building new production capacitywith the launch of KYORIN Pharmaceutical Facilities Co., Ltd., another significant achievement. In the consumer healthcare business, we were able to takethe first step toward expanding our environmental hygiene business as webegan sales of RUBYSTA, a multi-purpose disinfectant cleaner.
At the same time, we realize that we must accelerate our efforts to build arobust business portfolio, based on our multi-core (MC) strategy (Chart 1)
aimed at diversifying our consumer healthcare business, centered on the pharmaceutical business. To accomplish this, the Group will unite as never before in
the aggressive development of our business.

Q3
Tell us about issues you face with
HOPE100 Stage 1, your medium-termbusiness plan, and your fiscal 2013
initiatives looking forward to fiscal
2015, the plan’s exit year.

Answer: 03
We are working to post new records both in consolidated sales and operating income, and to enhance ouroperating base.
In fiscal 2013, we aim to again post record consolidated sales and operating
income. At the same time, we will take on the challenge of bringing KYORIN
Pharmaceutical Co., Ltd. to ¥100,000 million in sales, on a non-consolidated
basis, for the first time.
In the pharmaceuticals business, our top priorities include maximizing the
adoption of our existing principle products, and steadily preparing for theapproval and launch of Flutiform (KRP-108), the bronchial asthma treatment for
which an application was filed in September 2012. In addition, we must quickly
work to penetrate the market for Pentasa, our suppository treatment for ulcerative colitis launched in June 2013, and to develop it into a key product. We willcontinue moving forward with our franchise customer (FC) strategy, which
focuses sales resources on the doctors that our medical representatives visit
regularly, primarily in the specific treatment areas we promote (respiratory medicine, otolaryngology, and urology).
In our research and development (R&D) activities, we see our most pressing
issue as the need to build an even more robust set of new drug research anddevelopment themes, in order to drive discovery of new drugs that can belicensed worldwide under our HOPE100 Stage 3 (fiscal 2020–2023) long-term
vision. Under our new R&D framework, we will continue improving the R&D
process, working to speed up new drug development, and push ahead withbuilding an appealing product pipeline in our specific fields. We will also soon
begin construction of a new R&D facility, scheduled to commence operations in

KYORIN Holdings, Inc.

7

fiscal 2015. By consolidating all of our domestic R&D functions in one location,
we will work to streamline personnel, organizations, and systems, andenhance collaboration.
In production, we will continue to promote the overall optimization of our
production infrastructure, working to further enhance manufacturing efficiency
through low-cost operations.
In generic drugs, with the push provided by the government’s measures toencourage generic drug use and other factors, we will continue to focus on promoting our alliance strategy, including joint development and licensed production.
We also aim to expand our consumer healthcare business, and will continue
to develop the market for the Milton brand of baby bottle disinfectants, work tobuild a path for regrowth and profitability in the skincare business, and quickly
gain market penetration for RUBYSTA, the multi-purpose disinfectant cleaner inthe environmental hygiene business.

Q4
Tell us about your approach tohuman resource management.

Answer: 04
An energized workforce and organization are what drives
corporate growth. This is why we are rebuilding our humanresource management systems, with the aim of becoming
a leading company for pursuing fulfilling careers.
In other words, the true driver of corporate growth lies in the enhancement of
human assets, represented by the collective knowledge, skills, and individual
qualities of each and every employee. I believe that to become the kind ofcompany we have set out in our long-term vision, it is important that everyone
at the Kyorin Group brings self-awareness and initiative to their work, continuously focus on improving their own capabilities, and use active communication
to work together as one.
At the Kyorin Group, we believe the relationship between the company andits employees is a long-term, reciprocal one of cooperation and co-existence.
Going forward, we will work to rebuild our human resource management systems, putting in place an environment rich in motivation and an employeefriendly workplace where people feel rewarded for their efforts.

Q5
What are your expectations as you
welcome your new outside directors?

Answer: 05
I would like to see them contribute their experience andinsight to enhancing our corporate value.
In June, 2013, we appointed two outside directors. As we work to improve
management transparency and further strengthen our corporate governance,
we will make proactive use of their broad insight, experience, and expert
advice, incorporating their opinions in our efforts to further streamline management and enhance corporate value.

8

Annual Report 2013

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Q6
What is your stance regarding
shareholder returns?

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Answer: 06
The Kyorin Group targets a consolidated payout ratio of
30%, by balancing investments for growth, investments
for business continuity, and shareholder returns.
The Kyorin Group will work to strengthen its management base through balanced implementation of investments for growth, investments for business
continuity, and shareholder returns.
Investments for growth include promotion of efforts to license new products
and to expand the R&D pipeline in the Group’s core pharmaceuticals business.
We are also considering strategic, proactive investments with an eye toward
the future of our consumer healthcare business. As for shareholder returns, wetarget a consolidated payout ratio of 30% when deciding dividends.
The dividend per share for fiscal 2013 was ¥50, an increase of ¥5 from theprevious year, representing a consolidated payout ratio of 30.1%. In fiscal
2013, we aim to increase the dividend per share by ¥2, to ¥52 (including a ¥10interim dividend), for a consolidated payout ratio of 30.6%.

Performance Targets

Balance between Investment
and Shareholder Returns

Shareholder
returns

Investment
for growth

Investment forbusiness
continuity

FY2015 (Target)

Consolidated net sales(Billions of yen)

140.0

Pharmaceutical business

120.0

Consumer healthcare business*

20.0

Consolidated operating income

20.0* Skincare, over-the-counter drugs and others

Q7
Do you have a message for yourstakeholders?

Answer: 07
KYORIN Pharmaceutical, a core company in the Kyorin Group, will mark its
90th anniversary this year. As it approaches its 100th anniversary over the nextten years, we will renew our resolve to become the kind of company set forth inour HOPE100 long-term vision, and continue to build on our achievements.
Going forward, the Kyorin Group will continue to provide proactive disclosure, informing our stakeholders of the progress we make in terms of businessperformance and in bringing HOPE100 to fruition. I look forward to the continued understanding and support of all our stakeholders.

KYORIN Holdings, Inc.

9

Feature: The Source of Value Creation

The Source of Value Creation
A unified Group that produces results as an organization
Collaboration with the Kyorin GroupKYORIN Rimedio Co., Ltd.

Dr. Program Co., Ltd.

http://www.kyorin-rmd.co.jp/

http://www.drprogram.co.jp/

As the the Kyorin Group subsidiary responsible for the generic drug business,
KYORIN Rimedio aims to become a highly
reliable generic drug manufacturer. To
contribute to the health of patients, andrecognizing its critical social role in reducing
healthcare costs and helping to maintainsocial security infrastructure, KYORIN
Rimedio will continue to ensure a stablesupply of high quality products and information, as it works to deliver distinctive
generic drug products to the market.

Dr. Program manufactures products basedon nanocapsule technology—a pharmaceutical formulation concept that we havecultivated through research into new beautyenhancing ingredients and development oftechnologies for penetration of ingredients.
Going forward, the company will continue tolisten closely to its customers, working tocreate completely new value in the market
and contributing to the beauty and good
health of women everywhere.

KYORINGroup

KYORIN Medical Supply Co., Ltd.

KYORIN Pharmaceutical Co., Ltd.

http://www.kyorin-ms.co.jp/

http://www.kyorin-pharm.co.jp/en/http://www.kyorin-fc.co.jp/

KYORIN Medical Supply is involved in awide range of communications-related
business activities centered on planningand production of pharmaceutical advertising. It is also actively engaged in the environmental hygiene business, which will be
nurtured into a core Kyorin Group businessin the future. In this manner, KYORIN
Medical Supply will contribute to society asa member of the Kyorin Group, while
seeking to become a characteristic company supporting healthy living.

KYORIN Pharmaceutical aspires to be adrug manufacturer that is trusted bypatients and medical professionals, and isrecognized for its significant presence insociety. To this end, the company is striving
to enhance its presence in specific fields,
including respiratory medicine, otolaryngology, and urology, while aiming to discovernovel, global new drugs.

KYORIN Pharmaceutical Facilities commenced business in October 2012 as apharmaceuticals manufacturing company.
The company conducts business related tothe manufacturing of prescription medicines using pharmaceutical manufacturingassets acquired from MSD K.K. Looking
ahead, the company will build a frameworkfor flexibly and rapidly executing a variety ofmeasures in response to changes in thebusiness environment. The company’s goals
are to provide a stable supply of high-quality
products, enhance manufacturing technologies and streamline costs.

KYORIN Pharmaceutical Facilities Co., Ltd.

The Kyorin Group aims to achieve sustainable growth, and by creating attractive, high-quality products andservices, hopes to become a company that its customers can count on and trust. To accomplish this, we
believe that all of our employees must come together, striving to enhance their abilities as individuals sothat we can strengthen our capabilities as an organization.
By enabling R&D, production, and sales to collaborate and thus grow together, we will generate evenbetter new products and services.

Production
Value Creation ThroughCollaboration with Value Chains

Research andDevelopment

10

Annual Report 2013

Sales
(Medical Representatives (MRs))

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Strengthening collaboration with value chains to improve the organization’s capabilities of creating value

Kazuhiro Marubayashi

Masakatsu Komuro

Masahide Sugibayashi

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

KYORIN Pharmaceutical Co., Ltd.
Senior Executive Director and Head of
Research & Development Headquarters

KYORIN Pharmaceutical Co., Ltd.
Senior Corporate Officer and Head of
Sales & Marketing Headquarters

KYORIN Holdings, Inc.
Executive Director

Fiscal 2013 marks the turning point for the HOPE100 Stage 1 medium-term business plan. As we pushahead to diversify the consumer healthcare business at the same time as conducting our core pharmaceutical business, the Kyorin Group is placing particular emphasis on viewing each employee as a humanasset, enhancing individual ability as we work earnestly to energize our people and our organization.
We believe that employee effort represents an unshakeable path toward achieving the goals of
HOPE100 Stage 1, and will also lead to bringing our corporate philosophy to fruition as we contribute to thehealth of the world’s people through R&D, manufacture, and sales of superior products.

ResearchandDevelopment

Sales

Production

P.12
Providing attractive and high quality products bydiscovering novel, global and original new drugs, byintroduced product development and by cureresearch, is the mission of R&D at the Kyorin Group.
To accomplish this, it is important that we enhance
our drug creation activities, speed up new drug
development, and focus on selected projects. In thiscontext, we are implementing initiatives to accelerate
and improve the quality of drug discovery researchby utilizing small scale advantages such as information-sharing enabled through open communication.

P.14
Quality assurance systems in the manufacturing
process are critical to producing a stable supplyof high-quality products at low cost. To this end,
all of the Kyorin Group’s plants are working toenhance good manufacturing practice (GMP)levels, while a quality assurance system under
direct supervision of the head office ensures astable supply of high-quality products.

P.16
To enhance our presence in specific fields, it isvital that we create an organization that has a
precise grasp of the needs of doctors andhealthcare institutions in those areas, and canquickly respond to them. KYORIN Pharmaceutical is pushing ahead with a franchise customer(FC) strategy that places priority on activities in
specific fields, and thus is able to engage inefficient and effective marketing activities.

KYORIN Holdings, Inc.

11

Feature: The Source of Value Creation
Research and Development
The discovery of new drugs that can be provided to the world’s people can enhance the Kyorin Group’s
profile and presence as a new drug manufacturer, and lead to sustainable growth. Recognizing this, theGroup is pursuing more efficient and effective drug discovery activities focused on respiratory medicine,
urology, and otolaryngology.

ResearchandDevelopment

Leveraging Our Strength in Small-Scale Advantages
The Kyorin Group’s strength in research and development lies in the advantages of our smaller scale. In particular, excellent cross-departmental collaboration and the ability to nurture staff with diverse research capabilities able to handle a broad range of exploratory, development, and clinical research, are the source of ourcompetitiveness in new drug discovery, and enable us to bring a multi-faceted knowledge to our research
activities. In core technologies, our strengths also come from our drug discovery technologies, based on
foundational research in inflammation, immunology, and infectious diseases, which we exploit to efficiently
synthesize new compounds. Our research into optimized low molecular weight (LMW) drugs is also highly
regarded, and by leveraging the Group’s attributes in this area, we will continue to meet the challenge of discovering new and innovative LMW drugs.

Focus on Timelines in the Discovery, Development,
and Life Cycle Management (LCM) R&D Process
The Kyorin Group promotes research anddevelopment with an emphasis on timelines.
We have established a timeline for each role in
the process, beginning with HOPE100 Stage 1,
which emphasizes maximizing product value
through LCM. Stages 1 and 2 focus on bringing products to market through development,
while in Stage 3 and beyond, the emphasis ison the creation of new drugs that can contribute to the health of the world’s people. The
direction of our drug discovery efforts is focusedon creation of innovative new drugs in Stage 3,
with a focus on the development of LMW drugs
under the key concept of creating drugs thatwill change existing therapeutic systems.
In the development process, our goal is tobring a “developer-producer’s” awareness to12

Annual Report 2013

creating products. This refers to formulating
development policies with a strong awarenessof our vision for a product after launch, basedon which we work to accelerate and improve
the quality of development. In short, we envision
the patients who will actually use the product,and endeavor to meticulously meet their needs.
In LCM, we work to build evidence by implementing high-quality research, maximizing
product value by incorporating that evidence
into guidelines for medical care and therapeutic policies.
In this way, by clearly delineating each department’s functions and goals and enhancing collaboration, we aim to conduct research anddevelopment that will win the trust of medical
professionals and patients alike.

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Framework to Support Employees Making Efforts to Polish Their Skills
In drug discovery and research and development, it is important to retain advanced knowledge and technology at any age. Employees must
think for themselves, and make an effort to polishtheir skills. At the Research & Development Headquarters, we are engaged in systematic efforts toformulate human resource management policies
and provide ongoing education.
Foundational education is implemented on
separate levels, including training through the
Human Resources Department, R&D training,training by facility (systematic training provided
at individual facilities), and workplace training(task-specific on-the-job training, or OJT). R&D
training is conducted for the first three years
upon hire, providing new employees with basic

Employee Message

professional skills and a general overview ofdrug creation. By also holding more freewheeling “waigaya” sessions, we work toensure employees learn to diversify their thinking and gain the creativity needed to generate
new value.
Management employees undergo training instatus quo analysis and strategic organizational
reform, including next-generation humanresource (asset) development. To support individuals and their career paths and develop
independent careers, the Group also offers
opportunities to employees to conduct researchat or be assigned to work with domestic andforeign universities and research institutions.

Pursuing Research and Development That Always Keeps Medical
Professionals and Patients in Mind
Even after launching a product, the aim guiding our research and development activities is tohave patients consistently use the drugs we bring to market. When setting research and development themes, we give ample consideration to marketability, profitability and feasibility, pursuing drug designs that emphasize effectiveness, safety and convenience. We are working tounderstand the needs of medical professionals and patients, and to create new drugs acceptable worldwide in an open environment in which anyone can proactively establish new
research themes and take action.

KYORIN Holdings, Inc.

13

Feature: The Source of Value Creation

Production

Production
By introducing leading-edge production equipment, as well as flow bin production systems that automate thetransfer of raw materials and intermediates, the Kyorin Group works to improve production efficiency andreliability, promoting the creation of highly productive, worker-friendly plants. Under the slogan “Protecting thiswonderful planet through our actions,” our goal is for all plants to run on the concepts of possessing enhanced
good manufacturing practices (GMP) and a flexible production infrastructure, and to become worker-friendly,
highly efficient, and highly reliable facilities.

An Organization Designed to Deliver Quality Assurance,
Supply Stability, and Cost Reductions
Day after day, our efforts focus on the pursuit of quality assurance, supply stability, and cost reductions. In
addition to maintaining and continually improving our production infrastructure to provide a stable supply ofhigh-quality products at low cost, the Kyorin Group aims to create a product division that is trusted not only
where our plants are located, but also everywhere in the world that our products are made available. To
achieve this, we must maintain a positive, energetic workplace, and act as a Group to exploit our full creativity.

Strengthening Both Physical and Intangible Aspects in Order toEnhance Value
Our production divisions are working strategically on four key issues: overall optimization of
the Group’s production infrastructure, roll-out ofa new global production infrastructure, low-cost
operations, and human resource development.
In terms of overall optimization of the Group’s
production infrastructure, we are working toensure efficient production at each of theGroup’s plants, in line with the business plan.
Next, in our roll-out of new global production
infrastructure, we are striving to meet farsighted
global standards while working to strengthen
our production infrastructure. In October, 2012,
the Group saw the addition of KYORIN Pharmaceutical Facilities Co., Ltd., through which, evenmore than before, we hope to continue providing

14

Annual Report 2013a stable supply of high-quality products, while
improving manufacturing technology, streamlining costs, and expanding globally. In low-cost
operations, we are aiming to simultaneously
lower costs and improve quality through better
visualization of operations. Finally, in terms ofhuman resource development, we continue topromote the creation of workplaces in which all
employees are motivated to improve, and canmake full use of their creative energies. Throughits efforts in these four areas, the Kyorin Groupwill continue working to strengthen both thephysical and intangible aspects of its production
infrastructure in order to further enhanceGroup value.

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Developing Human Resources That Can Contribute to the Company
Quality assurance, supply stability, and cost
reductions: these three objectives are both themission of the production divisions, and ourconstant goal. To achieve that goal, it is essential that each employee unfailingly fulfills his or
her role. Further, to ensure those roles are fulfilled, it is important to acquire the necessary
human resources, and to develop them into
“assets” capable of contributing to the company. In the production divisions, our humanresource development efforts include preparing
career roadmaps that take into account theindividual’s wishes, as well as long-term humanresource development plans with establishedroadmaps for succession. In addition, personnel

Employee Message

transfers utilize these career and succession
roadmaps to arrive at the optimal allocation ofhuman resources.
At the production plants, training programs
and OJT and engineer roadmaps are prepared
to ensure employees acquire the knowledge,
technology, and skills needed in each workplace. Objectives are shared between supervisors and their employees, and making thesegoals visible in the workplace helps stimulate
motivation. We are also considering introductionof a tentatively-titled “Meister” system as part ofhuman resource development and the effort tofurther lift motivation.

A Top-Level Production Plant and Production Framework in JapanThe Kyorin Group is working to build an organization in which each employee is aware of theimportance of making dramatic improvements in productivity, and works seriously toward that goal.
The Noshiro Plant, the Kyorin Group’s central production facility, is equipped with automatedhigh-efficiency equipment, including flow bin production systems that automate the transfer of
raw materials and intermediates. Through QDC* and environmental responsiveness, the plant
aims to become a top-level production plant, bringing energy and exceptional creativity to the
pursuit of quality assurance, supply stability, and cost reduction.
* Quality, Delivery, Cost

KYORIN Holdings, Inc.

15

Feature: The Source of Value Creation
Sales
MRs are responsible for providing, collecting, and conveying information that encourages the proper use ofpharmaceuticals, and serve as drug treatment partners to medical professionals and others. KYORIN­Pharmaceutical is expanding the activities of its MRs based on its franchise customer (FC) strategy, whichprioritizes action in the fields of respiratory medicine, otolaryngology, and urology.

Sales

Aiming to Become MRs That Are Trusted by Doctors
We are aiming to build solid trust relationships with our customers by emphasizing action in specific fields,
while also working to improve individual employee skills and enhancing our organizational capabilities. With
the goal of becoming Kyorin MRs who are trusted by doctors, and by taking advantage of our unique teamstructure in which specific geographic areas are covered by multiple MRs, our MRs take on the challenge ofgenerating record revenue and operating income through their detailed efforts.

Achieving Steady Results in Response to Changes in the Environment
and to the Needs of Medical Professionals
Our focus in fiscal 2012 was on maximizing the
spread of our principal products (Kipres, Mucodyne, Uritos, and Pentasa), and thanks toaggressive sales efforts, we set a new record
for revenue.
To achieve steady results, it is important that
we continue to work on enhancing our presence in our specific fields of respiratory medicine, otolaryngology, and urology. Utilizing thetablet computers we have introduced for all of
our MRs, we are pushing ahead with efforts tostrengthen how we provide and collect information from physician specialists. In addition, by
encouraging people in our research divisions toparticipate in seminars and lectures set up for
specialist physicians by the sales division, we
are involving the entire company in efforts toimprove our relationships with these specialists.

16

Annual Report 2013

Further, we are building a sales and humanresource development structure that will firmly
establish us as the most highly-motivated company in the industry. Our unique team-based
sales structure enables our MRs to improve theirindividual capabilities, while providing an accurate
grasp of the needs of medical professionals, andachieving rapid responsiveness across the organization. We are encouraging the further evolution of this structure, as we work to create an
atmosphere in which MRs can share in the
excitement of meeting team goals.
Furthermore to these efforts, in our existingproducts we are drawing up detailed plans byproduct type and formulation, and in addition toaiming to completely meet those targets, we arepushing ahead with steady preparations for theapproval and launch of Flutiform (KRP-108), andConsolidated
Financial Highlights

ProfileTo Our Stakeholders

for the early spread of the Pentasa suppository
in the market. Finally, we will take on the challenge of seeing the Kyorin Group reach its goal

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

for fiscal 2013, to again post record revenue
and operating income.

Enhancing and Improving the Strengths of Our MRs and Managers
The Sales & Marketing Headquarters has
established two areas of focus for humanresource development in fiscal 2013. Enhancing the overall strengths of our MRs, andimproving management capabilities. In MR
training, our goal is to develop MRs that are
trusted by the doctors they work with. Introductory training for newly-hired MRs includes
not only studying product and related knowledge, but also acquiring the proper manners
and attitude for dealing with the medical profession, as well as nurturing their ability to think.

Employee Message

The second year offers training in presentation
skills, while the third year covers communication skills, all part of our efforts to develop MRs
who can anticipate and respond to the needsof healthcare professionals. In management
training, newly-appointed managers learn thecommunication and coaching skills that are
indispensable in developing their employees.
They also polish their qualities as managers
through the practice of accompanying MRs on
a full day of sales calls five times a month.

Nurturing MRs Whom Doctors Can Approachfor Appropriate Information
At the Kyorin Group, as a pharmaceutical company whose role is to provide treatment throughdrugs, our goal is to nurture MRs who can provide useful information to doctors, and who cansolve the problems those doctors face. To build relationships of trust with doctors, it is importantthat MRs be able to provide them with appropriate information according to their needs. The
sales approach at the Kyorin Group is unique for the way we prioritize our sales activities in
specific fields, based on our FC strategy, and we are notable for the level of relationships wemaintain with doctors in those key fields. In addition, through the introduction of a team structure, and the sharing of individual experiences and capabilities, team members work toward theirmutual improvement, engaging in their day-to-day activities with their eyes on a common goal.
Going forward, we will continue to contribute to medical care, and to the health of individuals,
through our ability to understand the kinds of drug treatments provided by doctors.

KYORIN Holdings, Inc.

17

Presence in the Respiratory Field

KYORIN Pharmaceutical positions the respiratory field as a core field in its franchise customer strategy. Currently, in hopes ofcontributing further to the treatment of disease among respiratory patients, KYORIN Pharmaceutical has in-licensed three products
as part of its development effort: Flutiform (KRP-108), along with KRP-AB1102 and KRP-AB1102F. We believe this promisingpipeline has been made possible because, out of the many pharmaceutical companies in the market, the companies out-licensing
these products recognized our efforts in the respiratory field, and could find the prospect of working with us appealing.
Going forward, we will continue to value the relationships we have established with medical professionals through our Kipres
and Mucodyne products, earnestly address the development of new drugs, and bring the entire company to bear on thechallenge of quickening, if only a little, the delivery of new products to the patients who need them.

Messages From Divisional Directors (KYORIN Pharmaceutical Co., Ltd.)
Quickly delivering new drugs that contribute to the treatment of asthma and
COPD

Team behind Flutiform (KRP-108) unitedby the desire to launch the product

Making a culture of listening to clinicalfeedback to further nurture our products

The respiratory field is one

Constantly ringing phones,

As a franchise, the respira-of the most importantthe sound of voices intory field involves the mostareas of product develop-

discussion… our work-

frequent contact withment for the Kyorin Group.

place is truly a beehive of

medical professionals.

We are currently working

activity. The entire launch

Mucodyne, for instance,on the development ofteam behind Flutiform

has wide application in a

new drugs in the asthma(KRP-108) is driven by theand COPD area, including

Exective Director
Clinical Development Center Flutiform (KRP-108), andDirector
Marketing Department

Kunio Kajino

Takaaki Kaji

KRP-AB1102 and KRP-

desire to deliver therange of diseases mostproduct to a clinical setting

Director
Marketing Department

as quickly as possible.

Taro Toru

often encountered in
day-to-day practice, and isrecognized for offering a

AB1102F. We believe our mission is to get new

Flutiform (KRP-108) is noted for its powerfulrange of easy-to-take formulations designed todrugs to the front lines of healthcare and into

anti-inflammatory effects and for taking effectsuit everyone from infants to the elderly. Today, itpatients’ hands as quickly as possible.

quickly, and can also be inhaled easily and accu-

has become the most prescribed drug in the

rately. We believe this will enable it to respond to

respiratory field in Japan.

To realize this, development needs to take placewith a vision for the product post-release, andcurrent asthma treatment needs, and provide aclinical trials and other steps need to come after an

new treatment option.

effective development strategy has been built.

Kipres, which has applications for asthma andallergic rhinitis, is now listed as a recommended

In preparing to launch this promising new drug,

drug in various medical guidelines, both in Japan

all of us keep very much in mind how important it

and overseas. By being recognized as offering

trials recognize our efforts to utilize front-lineis that doctors, medical staff, and the patientstreatment based on an abundance of high-quality

healthcare data and personal networks in thethemselves understand the unique attributes ofevidence, and tailored for the individual patient,

respiratory field, speeding development efforts

this medication. We will continue with challenge,

Kipres has become our No. 1 product, representing

through constant ingenuity, and many of themin the belief that these efforts generate trust,

40% of revenue. At KYORIN Pharmaceutical, we

look forward to these new drugs. In addition, bywhich in turn will lead to the Kyorin Group being

have a well-established culture of listening to clinicalproviding R&D, sales, and those on the front lines

recognized as a valuable presence in the respira-feedback, continuing to put our products through awith feedback in the form of information andtory field.

variety of tests even after initial launch, nurturing

Doctors who have participated in our clinicalchannels newly developed in the course of newthem one step at a time. Going forward, we will act

drug development, we aim to establish a highly

without slackening in our efforts to gather andvisible presence in the respiratory field.

provide data from the patient’s point of view, or in
our product lifecycle management. Those efforts,
we believe, are the cornerstone of trust.

Products Related to the Respiratory Field and Their Markets

FC area
Otolaryngology

Respiratory

Pipeline
KRP-AM1977Y
KRP-AM1977X

MarketMarket size

Infection¥100.0billionKRP-AB1102F

COPD

KRP-AB1102

Inhalant anti-asthmatic¥140.0billionFlutiform (KRP-108)

Urology
Regular calls on doctors(About 77,000 people)

Number of MRs
About 750 people
18

Annual Report 2013

KipresLT antagonist

Mucodyne

Mucoregulating drug

¥170.0billion¥410.0billionConsolidated
Financial Highlights

ProfileFeature: The Source ofValue Creation

To Our Stakeholders

The Foundation of
Value Creation

Management Foundation

Financial Information

Main Products
pharmaceutical business

KIPRESURITOS

Sales of Kipres(billions of yen)

50.0
36.8

40.0

39.6

10.0

40.8

7.5

6.3

5.0

20.0
10.0
0

8.4
7.5

30.0

Leukotriene receptor antagonist
Anti-Bronchial asthma and allergic
rhinitis drug
KIPRES Tablets 5 mg
KIPRES Tablets 10 mg

Sales of Uritos(billions of yen)

2011 2012 2013

(FY)

Therapeutic agent for overactive
bladder
URITOS Tablets 0.1 mg
URITOS OD Tablets 0.1 mg

2.5
0(projected)

2011 2012 2013

(FY)

(projected)

Leukotriene receptor antagonist
Anti-Bronchial asthma drug
KIPRES Fine Granules 4 mg
KIPRES Chewable Tablets 5 mg

MUCODYNEPENTASA

Sales of Mucodyne(billions of yen)

25.0
20.0

20.0

21.5
19.1

17.6

18.6

15.0
10.0

10.0
5.0
0

18.0

18.7

15.0

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

Sales of Pentasa(billions of yen)

2011 2012 2013

(FY)

(projected)

KETAS

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

5.0
02011 2012 2013

(FY)

(projected)

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

RapidTesta
Phosphodiesterase inhibitor agent forameliorating cerebro-vascular disorders
and bronchial asthma
KETAS Capsules 10 mg

Influenza virus kit
RapidTesta color FUL stick

HEALTHCARe business

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

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

Developing the environmental hygiene business through joint efforts between KYORIN Medical Supply Co., Ltd.
and KYORIN Pharmaceutical Co., Ltd.
With its stated objective of creating new businesses in the healthcare
field, the Kyorin Group, by diversifying its healthcare business, is aiming
to supplement the risks of its drug business and work toward sustainedGroup growth. Today, the Group is engaged in the environmental hygiene
business, contributing to medical needs and better health through control
of environmental infection. In July 2012, we introduced RUBYSTA, a new
multi-purpose disinfectant cleaner.

The product is being marketed to medical institutions, nursing homes,
and public facilities in a joint effort between KYORIN Medical Supply Co.,
Ltd., which in-licensed the product, and KYORIN Pharmaceutical Co.,
Ltd., which has an extensive track record and expertise in the medical
field. We will continue to strengthen sales of our existing flagship product,
Milton, while working to enhance our lineup of products in theenvironmental hygiene business, using partnerships within the Kyorin
Group to further popularize these products.

KYORIN Holdings, Inc.

19

Alliances

Reinforcing Our Pipeline in Specific Fields through Alliances

chronic obstructive pulmonary disease (COPD). These results are

KYORIN Pharmaceutical, a core company in the Kyorin Group,

due to the fact that all of the companies, which out-licensed

has set a goal of establishing a greater presence in specificthese products, found the prospect of working with the Kyorin

fields, and is working to reinforce its R&D pipeline. In addition toGroup attractive, and were confident that we would prove to be

the harsh environment owing to the number of competitors, thea reliable partner. We believe this is evidence that the FC strategy

lack of promising novel new drugs in the world makes it

we are pursuing is gaining a firm hold in the pharmaceuticalextremely difficult to acquire in-licensing opportunities. Under

industry, both in Japan and the rest of the world.

these conditions, in the five years since fiscal 2008, we have

Going forward, our employees will work together to build an

been able to in-license four new products in the franchise cus-even more attractive product pipeline, which will be trusted bytomer (FC) field (respiratory medicine, urology and otolaryngology),

physicians and patients, and the Kyorin Group will be recognized

Flutiform (KRP-108), an inhalant for asthma, KRP-209, a treatment

as having a significant presence in society.

for tinnitus, KRP-AB1102 and KPR-AB1102F, a treatment for

Promoting Alliances with Domestic and Overseas Pharmaceutical Companies
In addition to its own drug discovery efforts, through proactive collaboration with outside firms, KYORIN Pharmaceutical is
working to enrich and strengthen its R&D pipeline, its most critical issue as a pharmaceuticals manufacturer.

Eisai

Yungjin (Korea)

Taisho Pharmaceutical

Merz (Germany)

Novartis (Switzerland)
Kaken PharmaceuticalSenju Pharmaceutical

Handok (Korea)
Chugai Pharmaceutical
LG Life Sciences(Korea)MSD

KYORIN
Pharmaceutical

Merck & Co. (U.S.A.)

Sato Pharmaceutical
Ono PharmaceuticalSekisui Medical
Shinlin Sinseng (Taiwan)
Chong Kun Dang (Korea)

Nichi-Iko
Pharmaceutical

SkyePharma (U.K.)

SPIMACO*(Saudi Arabia)

Allergan(U.S.A.)

Nisshin Pharma
Ferring International Center,
S.A. (Switzerland)

MediciNova (U.S.A.)

Yakult Honsha
Almirall (Spain)* SPIMACO: Saudi Pharmaceutical Industries & Medical Appliances Corporation

Promotion of Distinctive Generic Drug Business
Domestic and overseas alliances

We pursue quality assurance, stable supply, andlower costs in the generic drug business by pro-

Promoting in-house development
projects and expanding businessas an outsourcer

Quality assurance
Stable supply
Lower costs
Strengthen alliances with sales
initiatives of KYORIN PharmaceuticalCo., Ltd. and KYORIN Rimedio Co., Ltd.

Stronger in-group collaboration

20

Annual Report 2013

moting stronger collaboration within the Groupand with local and global alliances. Reducing ourcost-of-sales ratio is a particularly important issue.
In addition to in-house development, we are
actively expanding joint development and production work as a contract manufacturer in a bid toreinforce our distinctive and competitive genericdrug business.

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Products under Development (As of July 30, 2013)

Ph III~Application
Compound/Code

Therapy area/Action

OriginFeatures

Comments

Stage
Ph I

Antiasthmatic

KRP-108(inhalant)

SkyePharma (U.K.)

Chronic
Obstructive
Pulmonary
Disease(COPD)KRP-AB1102(inhalant)

Almirall (Spain)

An ICS/LABA combination product, which
offers better compliance and convenienceto patients.

• License agreementwith SkyePharma(4/2008)
Domestic• Phase III Completed(3/2012)– New chemical entity: Aclidinium bromide– Long acting muscarinic agonist (LAMA)– Twice daily administration– Onset of action on the first day• License agreementwith Almirall (2/2011)

Ph III

NDA

9/2012

Genuair®
1. Designed with a feedback system, which
through a ‘colored control window’ and an
audible click helps confirm that the patient
has inhaled correctly
2. Counter for remaining doses
3. Safety features such as an anti-doubledosing mechanism and an end-of-dose
lock-out system to prevent use of an empty
inhaler

Anti-asthmatic

Kipres(chewabletablets, finegranules)

Ph II

Merck & Co., Inc.
(U.S.A.)

Allergic rhinitis (For children)• Additional indication• Co-developmentwith MSD K.K.

Domestic

9/2012

Domestic

4/2013[Reference Information] Overseas
KRP-108(U.S.A.) Application submitted by SkyePharma (3/2009)		(Europe) Launched by Mundipharma (9/2012)
KRP-AB1102 (Europe) Launched by Almirall (9/2012)
		
(U.S.A.) Launched by Forest Pharmaceuticals (12/2012)

Proof of Concept (POC) Projects (Ph I~Ph II)
Compound/Code

Therapy area/Action

OriginFeatures

Comments

Stage
Ph I

Tinnitus

KRP-209

Merz (Germany)

Chronic
Obstructive
Pulmonary
Disease (COPD)

Almirall (Spain)

Transplantation,
autoimmune
diseases,and IBD

In-house

KRP-AM1977X(oral agent)

New quinolone synthetic
antibacterial
agent

In-house

KRP-AM1977Y(injection)

New quinolone synthetic
antibacterial
agent

In-house

KRP-AB1102F(inhalant)

KRP-203

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

• License agreementwith Merz (11/2009)

Combination of aclidinium bromide with the longacting beta agonist formoterol: This combination is aimed at providing higher efficacy thaneach component alone, as well as the improved
convenience of having the two products in thesame easy to use inhalation device. This iscurrently in Phase III clinical development.

• License agreementwith Almirall (2/2011)

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

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

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

Domestic

8/2011

Domestic

5/2012

Domestic

3/2013

Domestic

8/2011

Domestic

7/2012Ph IIINDAPh III

NDA[Reference Information] Overseas
KRP-209
Merz: Phase III
KRP-AB1102F (Europe) Almirall: Phase III
		(U.S.A.) Forest Laboratories: Phase III

Licensing Development
Compound/Code

Licensee/
Collaborative research

Therapy area/Action

OriginComments

Stage
Ph I

KRP-203

Novartis(Switzerland)

Transplantation,
autoimmune
diseases, and IBD

In-house• An immunosuppressant with a novel mechanism called
an S1P-agonist. It may have a better safety profile thanprevious ones as well as an excellent effect underconcomitant use with other types of immunomodulators.
• License agreement with Novartis (2/2006) and new
license agreement for inflammatory bowel disease(11/2010).

Overseas

Ph II

POC 12/2010

KYORIN Holdings, Inc.

21

Corporate Governance

Basic Management Policies
As a group, our corporate philosophy is “to cherish life and benefit society by contributing tobetter health.” To realize this philosophy we will pursue diverse expansion and development ofour consumer healthcare business under our long-term vision HOPE100 (aiming for the Health
Of People and our Enterprise), striving to be a group that supports sound and healthy lifestyles.

Basic Policy on Corporate
Governance
The most important management goal for KYORIN Holdings,
Inc. is to continue raising shareholder value. To achieve thisgoal requires fostering a management environment thatenables us to build trust with the general public. Therefore,
having given better corporate governance a high priority,
we seek to ensure prompt decision-making, strong monitoring of the appropriateness of management, and ethicaland transparent corporate activities. To ensure transparency and fair disclosure, we release appropriate information without delay for the benefit of shareholders andinvestors. Within the Kyorin website, we have created ashareholder and investor information section on which welist business performance data, information presented atmeetings, our securities report, news releases and othercorporate information, enabling anybody to access information about Kyorin at any time. In the future, we intend toactively increase our disclosure of information, and expand
and improve our communications with all stakeholders.
We are an audit- and committee-based company
under Japanese law. The Board of Auditors endeavors to
fully demonstrate its auditing and supervising functions
and ensure the transparency of the decisions being madeby the Board of Directors. 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.
Corporate auditors carry out a diverse range of activities infulfilling 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, facilities, and Group companies.
In addition, in recognition of our corporate social
responsibility (CSR), for every Kyorin Group company weappoint compliance and risk management promotion
officers. We have established a Group-wide complianceand risk management system that is administered by theCompliance Committee and Risk Management Committee. We have established guidelines for each affiliatedcompany based on the Kyorin Compliance Guidelines andset up a system for employees to report and seek 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 holdmeetings with their management before deciding important issues. The Internal Audit Office conducts audits ofaffiliated 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.

Management Organization andInternal Control System
1. Management Organization

To clarify the roles of our ten directors, who are responsible for making business decisions and supervisingbusiness execution, and four corporate officers, who areresponsible for business execution, Kyorin has established

Corporate Governance and Management Structure (As of June 25, 2013)
Ordinary General Shareholders’ Meeting
Appointment/dismissal

Reports

Accounting
Auditing Firm
(Independent
Auditor)Appointment/dismissal

AuditsBoard ofAuditors(5 Auditors)

Exchangeofopinions

AuditsAppointment/dismissal

Board ofDirectors(10 Directors(2 Outside
Directors))

Cooperation
Representative
Director
Internal
Audit Office(6 Members)

Supervision

OutsideLegal
CounselManagement
Committee

AuditsAuditsAffiliated Companies
Guidance

22

Annual Report 2013

Corporate Officers/
Departments

Consolidated
Financial Highlights

ProfileTo Our Stakeholdersa 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 businessexecution, 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 inJune, 2013, Kyorin appointed two new 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 such auditing and supervisory
functions, we have built a system that facilitates highly
transparent decision-making.

2. Internal Control System and
Risk Management System
Kyorin is building an internal control system in accordancewith the basic policy determined by the Company:• We established the Compliance Committee, which ischaired by a director in charge and includes the Directorof the Internal Audit Office who serves as a member ofthe committee. Thoroughgoing guidance is provided to
executives and regular employees via training programs,
while the Corporate Ethics Hotline has been set up for
consultations and reporting matters concerning internal
violations. Moreover, we have set Company rules toensure the accuracy of financial reporting, and developed systems for ensuring the validity and reliability ofinternal 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 adirector in charge, with the General Affairs & Human
Resources Department responsible for overseeing thecommittee. For risks concerning compliance, the environment and accidents, we also formulated the Risk
Management Guidelines and the Corporate Ethics andCompliance 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 theleadership 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 staffed by six employees who report directly tothe president, and is independent from other sections.
Based on yearly auditing plans, the Internal Audit Officeregularly assesses and evaluates the effectiveness andefficiency of the legal compliance and internal control
systems in the parent and Group companies. After anaudit, the office communicates any problems or areas thatneed improvement directly to the president and makes theappropriate recommendations.
Another function of the office is to evaluate the Group’s
internal controls over financial reporting. The office evaluates the development and operation of these internal
controls according to a predetermined scope for 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 inimportant meetings, including those of the Board of

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

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 thatan executive officer or employee is acting in contraventionof 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 coordinating closely with executives and regular
employees and by fostering deeper understanding ofaudits. Furthermore, we assign auditing staff to assist theduties of the corporate auditors as necessary, and thesehuman resources are carefully checked by directors andauditors to ensure that they are independent.
Moreover, the statutory senior corporate auditor,
Seiyu Miyashita has experience as a director and headof accounting of KYORIN Pharmaceutical Co., Ltd, andhas a considerable level of knowledge about financeand accounting.
3 Outside Directors and Outside Corporate Auditors
Kyorin has two outside directors and three outside corporate auditors.
With rich management experience gained in his position as chairman of B-R 31 ICE CREAM Co., Ltd., Kyorin
deemed Senji Ozaki well-qualified overall for appointment
to outside director. In addition, no risk of conflicts ofinterest arising with our general shareholders was foundthat might affect the performance of his duties as outside
director, and we recognize that he brings a high degree of
independence to the position. Note that no purchasing,sales, or other trade relationship exists between Kyorin
and B-R 31 ICE CREAM Co., Ltd., where Mr. Ozaki serves
as chairman.
As an attorney well-versed in corporate law, outside
director Noriyuki Shikanai has also served on the board of
Keio University and in other important positions, and withhis high degree of specialization and rich experience, wasdeemed well-qualified overall for appointment to outside
director. In addition, no risk of conflicts of interest arisingwith our general shareholders was found that might affectthe performance of his duties as outside director, and we
recognize that he brings a high degree of independence tothe position.
Kyorin has three outside corporate auditors who areneutrally positioned and not compromised by relationships
with management or specified parties having a special
interest. These outside corporate auditors all have aconsiderable level of knowledge of corporate legal matters, and matters of finance and accounting. We utilize
their specialist understanding and wide-ranging knowledge and experience to strengthen and enhance our
auditing functions.
Outside corporate auditor Masaji Obata is well versedin the Corporation Law as a lawyer, and has considerable
knowledge concerning finance and accounting.
While Kyorin has no clearly established standards orpolicies 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 astandpoint independent from that of management, on theassumption that sufficient independence can be ensured
that said individuals are able to adequately carry out theirduties as outside directors and outside corporate auditors.
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

Financial Information

KYORIN Holdings, Inc.

23

valuable advice as an accounting auditing firm, as well asfrom 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, designatedlimited liability partner and engagement partner; andHidemitsu Kato, designated limited liability partner andengagement partner.
A further 12 certified public accountants and 10 assistant accountants assisted with the audit.
The Board of Auditors provides a forum for close,
regular exchange of information and opinions with theInternal Audit Office and the accounting auditing firm,
thereby enhancing the auditing system.

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

5. Compensation of Directors and Corporate
Auditors
In fiscal 2012, ended March 31, 2013, compensation paid
to directors and corporate auditors was ¥200 million: ¥170
million to six directors (excluding outside directors), and¥30 million to two corporate auditors (excluding outside
corporate auditors).
There were no payments to directors corresponding toemployee salaries.
Remuneration for outside auditors totaled ¥16 million
for three auditors.

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 Appointmentsof Directors and Corporate Auditors
The Company’s Articles of Incorporation stipulate that a
resolution to appoint a director or corporate auditor must
be made by the majority vote of attending shareholders

holding at least one-third of the voting rights of shareholders who are eligible to exercise voting rights.

8. Ordinary General Shareholders’ Meeting
Matters that May Be Resolved by the Boardof 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 ofIncorporation stipulate that the Company 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 toacquire treasury stock through market transactions, etc.
2 Decision-making body for cash dividends fromretained 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, theCompany’s Articles of Incorporation stipulate that cash
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 generalshareholders’ meeting must be passed by at least a
two-thirds majority vote of attending shareholders holding
at least one-third of the voting rights of shareholders
eligible to exercise voting rights. The aim is to lower therequired quorum for a special resolution of an ordinary
general shareholders’ meeting to facilitate the smooth
operation of the meeting.

Messages from Outside Directors
Through my many years in the food industry, I have worked
closely with consumers, in addition to being involved inestablishing and managing a joint venture company withforeign equity participation.
It is a great honor to be given the opportunity to use thatexperience in contributing to the enhancement of corporate
value at KYORIN Holdings, Inc.
Management conditions in the pharmaceutical industry
Outside Director
have seen significant changes, with increased globalization,
Senji Ozaki
healthcare system reforms, including drug tariff revisions, andthe growth of generic drugs. Kyorin is currently working to diversify its healthcare
business, centered on its pharmaceutical business, through the implementation of
its HOPE100 long-term vision. As an outside director, I will bring new, independentideas and principles to my participation in the Board of Directors’ highly transparent,
risk-managed decision making, responding to the needs and expectations of
Kyorin’s general shareholders and other stakeholders, making recommendations
where needed and working to ensure the lasting growth of the Company. Looking
ahead, I ask for the support of all shareholders in these endeavors.

24

Annual Report 2013

I feel extremely honored to be involved
as an outside director with a firm
responsible for assisting sustaining theworld’s health.
In my work as an attorney, I haveinteracted with a large number of both
corporations and individual consumers,
and I believe it is essential that comOutside Director
panies—particularly pharmaceutical
Noriyuki Shikanaicompanies, with their important role inhealth—continue to grow based on the trust they gainfrom society.
From the standpoint of an outside director, I hope tocontribute to highly transparent management in line withthat objective.
Going forward, I ask for the kind support of the shareholders in that effort.

Consolidated
Financial Highlights

ProfileFeature: The Source ofValue Creation

To Our Stakeholders

The Foundation of
Value Creation

Management Foundation

Financial Information

Directors, Auditors, and Corporate Officers (As of June 25, 2013)

From the left: Masakatsu Komuro, Noriyuki Shikanai, Minoru Hogawa, Yutaka Ogihara, Masahiro Yamashita,
Satoru Kanai, Mitsutomo Miyashita, Shigeru Ogihara, Tomiharu Matsumoto and Senji Ozaki

Representative Director,
President
and Chief Executive Officer

Executive Director

Senior Managing Director

Senior Executive Director

Executive Director

Mitsutomo Miyashita

Minoru Hogawa

Tomiharu Matsumoto

Yutaka Ogihara

Masahiro Yamashita

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

Management Planning
Finance & Accounting

General Affairs & Human Resources
Legal, Compliance

President's Office
Corporate Communication
Information System Management

Executive Director

Executive Director

Executive Director

Outside Director

Outside Director

Masakatsu Komuro

Satoru Kanai

Shigeru Ogihara

Senji Ozaki

Noriyuki Shikanai

Intellectual Property

KYORIN Medical Supply Co., Ltd.
Representative Director, President andChief Executive Officer

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

Senior Corporate
Auditors

Outside Corporate
Auditors

Senior Corporate
Officers

Seiyu Miyashita
Shigeru Abe

Masaji Obata
Junji Honda
Yasuyuki Hirota

Takayoshi Ishizaki
Yoh Ito

Corporate Officers

Masanori Masui
Yoshiya Yoshida

KYORIN Holdings, Inc.

25

Corporate Social Responsibility

The starting point of the Kyorin Group’s corporate social responsibility (CSR) endeavors is its
corporate philosophy, that is “to cherish life and benefit society by contributing to better
health.” For sustainable growth, Kyorin will prioritize 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 inthe areas of environmental and industrial safety and hygiene through activities that contributeto health and society.

Corporate Social Responsibility
In recognition of the importance of its corporatesocial responsibility, the Kyorin Group is enhancing
its corporate ethical standards and putting in placea system of compliance in line with the approach
set out below.

Compliance Measures
Basic policy
An enterprise should pursue profits through faircompetition as an economic entity, and at thesame time should be a force for the greater goodof society.
Based on its corporate philosophy “to cherish
life and benefit society by contributing to better
health,” the Kyorin Group will conduct its activities
in every country based on a high standard of corporate ethics, respecting human rights andobserving all laws, as well as standards of conduct
and the spirit thereof.
MeasuresTo ensure the Group’s activities are based on ahigh 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 inAugust 2010, and holds a Compliance Committee
meeting once a month.
1. The KYORIN Holdings Corporate Charter wasdeveloped 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 sound andproper business activities.
3. In March 2006, the Compliance Committee wasestablished 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.
Education and training
In-house training courses are conducted to promote understanding of and instill corporate ethics
and compliance.
1. Compliance managers organize education andtraining courses on corporate ethics and compliance, which are conducted at each level ofthe organization on a Company wide basis, andrun instructional activities for Company officers
and employees.
26

Annual Report 2013

2. Details relating to corporate ethics and compliance are incorporated into job function-specifictraining conducted by each division to promote
understanding and instill a sense of ethics andawareness of compliance among employees.
3. Each November is designated as complianceenhancement month, during which time theCompany works to tighten up on compliance atevery level.

Ongoing Environmental Initiatives
The main subsidiary of the Kyorin Group, KYORIN
Pharmaceutical, is implementing the following
activities on an ongoing basis. For details, pleaserefer to the Environment and Workplace Safety and
Health Report on the KYORIN Pharmaceutical Co.,
Ltd. website (Japanese only).
1. Preventing global warming• Reduce the amount of fuel used by installingcogeneration 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 fuelefficiency and reduce 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, andevaluate methods for reducing amounts used
and the use of alternatives
4. Preventing atmospheric pollution• Measure and control the amounts of soot andsmoke, nitrogen oxides (NOx) and sulfur oxides(SOx) emitted by boilers and generators

CO2 Emissions from Factories andResearch Laboratories(t)
20,00015,00010,000
5,000
0
2008

2009

2010

2011

2012 (FY)* FY2008 data is from the Environmental Report* FY2009–FY2012 data is from the Periodic ReportConsolidated
Financial Highlights

ProfileTo Our Stakeholders

5. Preventing water pollution• Process wastewater, including by primaryprocessing plants, and management of pH,
biochemical oxygen demand (BOD), and suspended solids (SS) levels
6. Preventing deforestation• Recycle paper, use recycled paper, and promotea paperless office environment
7. Noise reduction• Take steps to measure and manage noise levels
8. Preventing foul odors• Remove odors by installing draft chambers andusing scrubbers, etc.

Measures Relating to Industrial
Safety and Hygiene
In 2004, KYORIN Pharmaceutical obtained occupational health and safety management system certification (OHSAS 18001), and in 2005, consolidated
its ISO 14001 and OHSAS 18001 measures. The
subsidiary Rimedio Center of KYORIN Rimedio also
obtained ISO 14001 certification in 2008 and
OHSAS 18001 certification in 2009.
1. Rate and severity of work accidents
As a result of measures implemented to prevent
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.
2. Vehicle accidents
Despite setting a target of a year-on-year reductionin the number of vehicular accidents per branch, in
fiscal 2012 there were 212 accidents, slightly morethan the previous year. To turn around this increasing trend in vehicle accidents, for fiscal 2013, theKyorin Group is implementing various accidentprevention measures, incorporating both physicaland systematic approaches.

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

events that provide an
opportunity to further
promote understanding of the Company’s
activities.
• Local cleanup
activities
For more than ten
years, the Okaya Plant
has been a “foster
parent” responsible
for beautifying a section of the shore of
Lake Suwa as part of
the Lake Suwa Adoption Program. The plant
received an award in recognition of these activities. Employees also help to keep the lakesidepark clean.
Employees of the Noshiro Plant participate involuntary activities to maintain the Kaze-noMatsubara, a pine forest and recreational area thatacts as a barrier protecting the locality from wind.
In our head office, employees participate on a
voluntary basis in cleanup campaigns carried out
twice a year by the local Chiyoda City authorities.
• Supporting sporting events
The Kyorin Group supports sporting events.
Among these are the Shimotsuke Soccer
Workshops for children, with former J-League
players and other soccer athletes serving as
instructors.

Social Contributions Activities

2. Employee voluntary community/
Health activities (Kyorin Smile Program)
The Kyorin Group is promoting the Kyorin Smile
Program, a set of employee initiatives for making acontribution to society and people’s health. The
activities in this program include donating bloodand fund-raising.
In fiscal 2012, the Kyorin Group donated a totalof ¥110,484 contributed by employees to UNICEF.
The Group also collected 2.8 kilograms of usedstamps, which were donated to the Japanese
Organization for International Cooperation in Family
Planning (JOICFP). The stamps will be used tohelp fund White Ribbon Campaign activities aimed
at protecting the lives of mothers and babies
throughout the world.

1. Local community activities• Cherry blossom viewing party
The KYORIN Pharmaceutical Discovery
Research Laboratories and Development
Research Laboratories hold an annual party forviewing the blossoms of cherry trees that are
more than 40 years old. As usual, this year’s
party had many participants. The occasion was
also used as an opportunity to explain Kyorin’s
environmental and occupational safety activities.
• Summer evening parties
Each year, the KYORIN Pharmaceutical Development Research Laboratories and various
plants hold summer evening parties to which
local residents are invited. These are popular

3. Support for recovery from the Great East
Japan Earthquake• Sunflower Project
KYORIN Pharmaceutical Co., Ltd.’s Discovery
Research Laboratories, Development ResearchLaboratories and Sendai Branch Office havebeen participating since 2011 in the Sunflower
Project in which sunflower seedlings are grownand delivered to the areas afflicted by the Great
East Japan Earthquake. We will continue these
efforts with the aim of cheering up the locals
with sunflowers as everyone works to achieve
the region's recovery from the disaster as soon
as possible.

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 ateach company to raise awareness relating to risk
management.

Financial Information

KYORIN Holdings, Inc.

27

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)

120,000
99,764

104,069 103,232 107,031

90,88990,00060,00030,000

0

2008

2009

2010

2011

2012

Industry Trends in Japan

(FY)

20.0

In fiscal 2012, the Japanese economy remained pressured by lackluster internal andexternal demand against the backdrop of the yen’s appreciation against major currencies
and other developments. However, the economy started to show signs of a gradual
recovery toward the end of the fiscal year, including rising stock prices following the yen’s
rapid depreciation accompanying changes in Japan’s ruling party and monetary policy.
Under these circumstances, in the domestic pharmaceutical industry, where the corebusiness of the Kyorin Group operates, the business environment became increasingly
challenging as the Japanese government continued to implement various policies
designed to curtail spending on drugs, including an official drug price reduction implemented in April 2012 (industry average: 6.0%; KYORIN Pharmaceutical: around 6.0%).
The consumer healthcare business faced intensified competition among companies in acontracting market impacted by a slump in consumer spending and other factors.

15.0

Consolidated Operating Resultsn Ethical drug sales in Japan (Ethical drug business)n Ethical drug sales overseas (Ethical drug business)
n Generic drug businessn Consumer healthcare business

Operating income and operating income margin(Millions of yen)

(%)

40,00016.8

15.8
30,00020,00014.0

13.3

Net Sales

9.8

16,443
13,261

10,000017,94810.0

14,464

8,952

2008

5.0

2009

2010

2011

2012

(FY)

0

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

Net income and ROE(Millions of yen)

(%)

18,000

12.0
10.1
8.8

10.0
8.0

12,422

10,927

12,000

8.0
9,231

8,848

6,000

4.0
2.1

0

2,037

2008

2009

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

2010

2011

2012

(FY)

0

In fiscal 2012, overall net sales increased 3.7% year on year to ¥107,031 million, reachingan all-time high. Sales growth was driven by year-on-year increases in ethical drug andgeneric drug sales in the pharmaceutical business, despite lower sales in the consumer
healthcare business.
With regard to the ethical drugs business in Japan, although there was the impact of an
official drug price reduction implemented in April 2012, sales in existing businesses
increased year on year and there were contributions to sales from the KYORIN Pharmaceutical Facilities Co., Ltd., which started business on October 1, 2012. As a result, segment
sales rose to ¥88,286 million, up 2.7% year on year. Among our principal products, sales
increased year on year for Kipres, a treatment for bronchial asthma and allergic rhinitis,
and for Uritos, a treatment for overactive bladders. On the other hand, sales decreased
year on year for Pentasa, a treatment for ulcerative colitis and Crohn’s disease, and for
Mucodyne, a mucoregulant.
In ethical drug sales overseas, income related to gatifloxacin ophthalmic solution (outlicensed to Allergan, Inc. (U.S.A.)), nudged down slightly year on year, but acquired sales
income for the topical antifungal prescription drug Pekiron cream 0.5%, for which KYORIN
Pharmaceutical Co., Ltd. received the transfer of assets on February 1, 2013, based on
the assets transfer agreement for Pekiron cream concluded in October 2012 with Galderma
S.A. (Head office: Switzerland). As a result, segment sales increased year on year by
19.1% to ¥2,400 million.
Sales for generic drugs increased 16.6% year on year to ¥10,095 million. There wereincreased sales to insurance dispensing pharmacies mainly due to the implementation of
measures to promote the use of generic drugs since fiscal 2012, and increased sales for
products manufactured under outsourcing contracts.
Sales in the nonprescription drugs, etc., business increased 9.8% year on year to¥4,379 million. Sales of our core product, the Milton brand of baby bottle disinfectant,rose over the previous fiscal year, and sales of other products also increased.
As a result, net sales in the pharmaceutical business increased by 4.5% to ¥105,162
million. In the consumer healthcare business, sales declined 27.5% to ¥1,869 million.
This business faces intensified competition among medical companies in a market with acontracting tendency due to the slump in consumer spending, and sales fell year on year
at Dr. Program, which is engaged in a nanocapsule technology-based cosmetics business.

Cost of Sales Ratio, SG&A Expenses, and Operating Income
The cost of sales ratio increased 1.7 percentage points year on year to 37.5%, mainly due
to the impact of an official drug price reduction in Japan’s National Health Insurance drug
price list and the conversion into a consolidated subsidiary of KYORIN Pharmaceutical
Facilities Co., Ltd., which is mainly involved in contract manufacturing of third-party products. Gross profit was up by ¥591 million year on year due to the increase in sales.

28

Annual Report 2013

Consolidated
Financial Highlights

ProfileFeature: The Source ofValue Creation

To Our Stakeholders

The Foundation of
Value Creation

SG&A expenses decreased 5.6% year on year to ¥48,949 million, mainly attributable toa fall in R&D expenses of 20.8%, or ¥11,059 million. As a result, operating income
increased 24.1% year on year to a record ¥17,948 million. The operating income marginrose 2.8 percentage points to 16.8%.

(%)

60.0

40.5

FY2011FY2012

YoY change YoY change (%)

Net sales

103,232

107,031

3,798

3.7

Cost of sales

36,926

40,1333,207

8.7

Gross profit

66,306

66,897591

0.9

SG&A expenses

51,842

48,949(2,892)(5.6)(R&D expenses)

13,964

11,059(2,904)(20.8)

Operating income

14,464

17,948

3,484

24.1

879

790

(88)

(10.1)

Other income

67

62

(5)

(8.5)

Income before income taxes

Other expenses

15,262

18,603

3,340

21.9

Net income

9,231

12,422

3,190

34.6

Financial Information

Cost of sales ratio

Summary of Consolidated Statements of Income
Millions of yen

Management Foundation

40.0

37.6

36.1

35.8

37.5

2010

2011

2012

20.0

0

2008

2009

(FY)

Net assets
Summary of Consolidated Statements of Comprehensive Income
Millions of yen

Income before minority interests

FY2011FY2012

9,231

12,422150,000

129,099

YoY change YoY change (%)

3,191

34.6

120,000
96,501

Total other comprehensive
incomeComprehensive income(Millions of yen)

640

1,843

1,203

188.0

9,871

14,265

4,394

44.5

104,911

111,706

118,201

90,00060,000Net Income and Net Income Per Share
Net income increased 34.6% year on year to ¥12,422 million. Net income per share
increased ¥42.71 from the previous fiscal year to ¥166.25.

30,000
0

2008

2009

2010

2011

2012

(FY)

Assets, Liabilities and Net Assets
At March 31, 2013, current assets had increased ¥8,414 million due to increases in notes
and accounts receivable, and in short-term investments. The increases were partly offset
by decreases in raw materials and supplies. Fixed assets rose ¥880 million mainly due toan increase in property, plant and equipment, despite declines in investment securities
and deferred tax assets. As a result, total assets increased ¥9,295 million from a year
earlier to ¥154,968 million.
Liabilities at year-end were down ¥1,603 million to ¥25,868 million from the previous
year-end. This was mainly due to an increase in accrued income taxes, decreases innotes and accounts payable, short-term bank loans, and accrued retirement benefits
for employees.
Net assets at year-end amounted to ¥129,099 million, up ¥10,898 million from a year
ago. This was mainly attributable to increases in retained earnings and in unrealized
holding gain on securities.
As a result, the shareholders’ equity ratio at year-end was 83.3%, up 2.2 percentage
points from the previous fiscal year-end.

Return on Equity (ROE)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 is crucial to attaining those targets. In fiscal 2012, ROE
was 10.0%, up 2.0 percentage points from the previous fiscal year.

Total shareholders’ equity ratio
(%)

90.0

77.5

76.5

75.9

2008

2009

2010

81.1

83.3

2011

2012

60.0

30.0

0

(FY)

Summary of Consolidated Balance Sheets
Millions of yen

FY2011FY2012

YoY change YoY change (%)

Current assets

99,850108,265

8,414

8.4

Fixed assets

45,822

46,702880

1.9Total assets

145,673

154,968

9,295

6.4

Current liabilities

23,38522,897

(487)

(2.1)

Long-term liabilities

4,086

2,970

(1,115)(27.3)

Total liabilities

27,471

25,868(1,603)(5.8)

Total shareholders’ equity

117,931

126,985

9,054

7.7
685.5

Total accumulated othercomprehensive income
Net assets
Total liabilities and net assets

269

2,113

1,843

118,201

129,099

10,8989.2

145,673

154,968

9,295

6.4

KYORIN Holdings, Inc.

29

Cash Flows

Cash flows from operating activities,
cash flows from investing activities,
and free cash flow
(Millions of yen)

20,00012,027 12,439
6,805
4,999

4,575

0

11,544
8,913

10,000

346

3,987

4,357

412
(1,806)(4,229)(4,926)(7,187)–10,000

2008

2009

2010

n Cash flows from operating activitiesn Cash flows from investing activities
Free cash flow
n

2011

2012

(FY)

Net cash provided by operating activities totaled ¥11,544 million. The main components
were income before income taxes and minority interests of ¥18,603 million, depreciation
and amortization of ¥2,738 million, a decrease in accrued retirement benefits for employees of ¥1,010 million, an increase in notes and accounts receivable of ¥1,480 million, adecrease in notes and accounts payable of ¥486 million, and income taxes paid of¥4,623 million.
Net cash used in investing activities was ¥7,187 million. Cash was mainly used for
payments for purchase of short-term investment of ¥5,995 million, payments for purchaseof property, plant and equipment of ¥5,972 million, payments for purchase of investment
securities of ¥3,501 million. On the other hand, cash was provided by proceeds fromsales and redemption of short-term investments of ¥2,402 million, and proceeds fromsales and redemption of investment securities of ¥6,853 million.
Net cash used in financing activities was ¥5,132 million, largely attributable to a net
decrease in short-term loans of ¥1,675 million and payment of cash dividends of¥3,357 million.
As a result, cash and cash equivalents at the end of the fiscal year were down ¥667
million year on year to ¥22,543 million.
Cash flows for the next fiscal year, the fiscal year ending March 31, 2014, are projected
as follows. Investing activities are projected to use ¥4,500 million cash mainly for acquiringproperty, plant and equipment, including enhancing plant facilities. Financing activities areprojected to use approximately ¥3,700 million for the payment of dividends, comprising¥40.00 per share for the year-end dividend, and ¥10.00 per share for the interim dividend.

Summary of Consolidated Statements of Cash Flows
Millions of yen

FY2011FY2012

YoY change YoY change (%)

Cash provided by operating
activities

8,913

11,544

2,631

29.5

Cash used in investing activities(4,926)(7,187)(2,261)(45.9)Cash provided by (used in)financing activities(7,412)(5,132)

2,280

30.8

Cash and cash equivalents
at end of year

23,21022,543

(667)

(2.9)

Outlook for Fiscal 2013
The outlook for the domestic pharmaceutical industry is expected to remain challenging
mainly due to the fact that in Japan the authorities are continuing to debate about reforms
to the drug pricing system. In consumer healthcare also, the situation as regards futurebusiness conditions remains obscure.
In this environment, 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 2013 is the fourth year of this plan, and we will actively promote the plan’s business strategies, including the acceleration of the Pharma Complex Model and the development of new consumer healthcare operations. Our ultimate goal here is to achievesustainable growth and earn trust and improved assessments from all our stakeholders.
On the sales front, we are projecting record high sales mainly due to continuous growthof the bronchial asthma and allergic rhinitis treatment Kipres, and the overactive bladder(OAB) treatment Uritos, both primary products in the new drugs business, and to further
increased sales of new drugs. Moreover, we anticipate sales expansion in the genericdrugs business, and record through-year sales for KYORIN Pharmaceutical Facilities Co.,
Ltd. which started business in October 2012.
On the earnings front, the increased sales are expected to absorb the year-on-yearincrease in SG&A expenses (including a year-on-year increase of ¥1,000 million in R&D
expenses to ¥12,100 million). As a result, we expect operating income to achieve a
record high.

Forecasts for Fiscal 2013
Millions of yen

30

Annual Report 2013

FY2012FY2013 YoY change (%)

Net sales

107,031

113,000

5.6

Operating income

17,94818,6003.6

Net income

12,422

12,7002.2

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

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 affectits business.

1. Legal Regulations

7. Pharmaceutical Recalls

Legal regulations in Japan, such as the Pharmaceutical
Affairs Law, the National Health Insurance (NHI) system,
NHI drug prices and laws in other countries can affect theGroup’s business. Every stage of our operations, including pharmaceutical development, production, import, anddistribution, is regulated by various approval and licensing
systems. Unforeseen substantial shifts in future healthcare
administration policy could affect our business performance and financial health.

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.

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.

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.

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.

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
4. NHI Drug Price Revisions
Japan’s healthcare system, including National Health
Insurance (NHI) drug prices, is being revised. When forecasting business results, the Kyorin Group does its best to
predict and factor in the effects of such changes. Nevertheless, our performance could suffer as a result of greaterthan expected NHI drug price revisions or changes to the
NHI system.

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
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.

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 theNoshiro Plant (Noshiro, Akita Prefecture, Japan) of Kyorin
Group company KYORIN Pharmaceutical Co., Ltd. were
not affected by the Great East Japan Earthquake thatstruck on March 11, 2011. No plant personnel were
injured, and the plant itself sustained no physical damage
from the disaster.

KYORIN Holdings, Inc.

31

Consolidated Balance Sheet
KYORIN Holdings, Inc. and Consolidated Subsidiaries
As of March 31, 2013

Millions of yen

Thousands of
U.S. dollars(Note 3)

2013

2012

2013

¥ 21,370¥ 21,615$  227,365

Notes and accounts receivable (Note 11)46,55545,067495,319

Short-term investments (Notes 5 and 11)

11,667

7,372

124,130

11,405

11,016

121,343

837

632

8,905

Raw materials and supplies

7,694

9,089

81,860

Deferred tax assets (Note 14)

2,773

2,340

29,503

Other

6,013

2,774

63,975

(53)

(58)

(564)

108,265

99,8501,151,878

Land

2,466

1,619

26,237

Buildings and structures (Note 13)30,30628,222

322,439

Machinery and vehicle

16,66815,827

177,338

Leased assets (Note 10)

332

149

3,532

Construction in progress

1,071

39

11,395

Other (Note 13)

7,071

6,690

75,231(39,705)(38,003)(422,439)

18,20914,544

193,733

24,552

26,040261,219

Long-term loans

19

24

202

Goodwill

64

192

681

Trademark

7

11

74

Deferred tax assets (Note 14)

1,438

3,144

15,299

Other

2,534

2,284

26,960Less allowance for doubtful accounts

(123)

(421)

(1,309)28,49331,277303,149¥154,968¥145,673$1,648,771

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

Inventories:
Merchandise and finished goods
Work in process

Less allowance for doubtful accounts
Total current assets

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

Investments and other assets:
Investment securities (Notes 5 and 11)

Total investments and other assets
Total assets

32

Annual Report 2013

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Millions of yen

Thousands of
U.S. dollars(Note 3)

2013

2012

2013

Notes and accounts payable (Note 11)¥  8,556¥  9,043$   91,031

Short-term bank loans (Notes 6 and 11)

1,523

3,159

16,204

81

39

862

Accrued income taxes (Note 14)

3,356

2,111

35,706

Accrued bonuses to employees

3,327

3,110

35,397

Reserve for sales returns

43

52

457

Provision for point card certificates

45

65

479

5,962

5,802

63,432

22,897

23,385

243,611Long-term debt (Notes 6 and 11)

251

316

2,670

Lease obligations (Note 6)

184

45

1,958

1,938

2,949

20,619Accrued retirement benefits for directors and corporate auditors

33

32

351

Other

562

743

5,979

2,970

4,086

31,599

700

700

7,448

Capital surplus

4,752

4,752

50,559Retained earnings

121,856

112,797

1,296,478

(323)

(318)

(3,437)

126,985

117,931

1,351,048

Unrealized holding gain on other securities

2,293

537

24,396

Translation adjustments

(180)

(267)

(1,915)

2,113

269

22,481

Total net assets

129,099

118,201

1,373,540

Total liabilities and net assets¥154,968¥145,673$1,648,771

Liabilities and net assets
Current liabilities:

Lease obligations (Note 6)

Other
Total current liabilities

Long-term liabilities:

Accrued retirement benefits for employees (Note 12)

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 2013 and 2012
Issued—74,947,628 shares in 2013 and 2012

Treasury stock, at cost:
231,213 shares in 2013
228,377 shares in 2012
Total shareholders’ equity
Accumulated other comprehensive income:

Total accumulated other comprehensive income

See notes to consolidated financial statements.

KYORIN Holdings, Inc.

33

Consolidated Statement of Income
KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2013

Millions of yen

Thousands of
U.S. dollars(Note 3)

2013

2012

2013

¥107,031¥103,232$1,138,749

40,13336,926426,992

66,89766,306

711,746

48,94951,842520,789

17,948

14,464

190,956

Interest and dividend income

308

340

3,277

Rent income

268

269

2,851

Interest expense

(38)

(48)

(404)

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

Equity in earnings of affiliates

39

26

415

Loss on investments in partnership

(17)

(17)

(181)

Loss on sales and retirement of property, plant and equipment, net (Note 9)

(98)

(5)

(1,043)Gain on sales of investment securities, net (Note 5)

25

1

266

Loss on devaluation of investment securities

—

(7)

—

Other, net

168

242

1,787

655

800

6,969

18,603

15,262

197,925

Current

5,869

5,179

62,443

Deferred

312

851

3,320

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

Total income taxes
Income before minority interests
Net income

6,181

6,031

65,762

12,422

9,231

132,163¥ 12,422¥  9,231$  132,163

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, 2013

Income before minority interests

2013

2012

2013

¥12,422¥9,231$132,163

1,738

672

18,491

87

(34)

926

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

18

2

192

1,843

640

19,608¥14,265¥9,871$151,771¥14,265¥9,871$151,771———

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

34

Annual Report 2013

Consolidated
Financial Highlights

ProfileFeature: The Source ofValue Creation

To Our Stakeholders

The Foundation of
Value Creation

Management Foundation

Financial Information

Consolidated Statement of Changes in Net Assets
KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2013

Millions of yen

Balance as of April 1, 2011

Shareholders’ equity

Accumulated othercomprehensive income
Unrealized
Total
holding
accumulated
Translation
gain (loss)otheradjustments
on othercomprehensive
securities
incomeNumber ofshares issued(Commonstock)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at costTotal
shareholders’equity74,947,628¥700¥4,752¥106,928¥(304)¥112,076¥   (137)¥(232)

Total
net assets¥   (370)¥111,706

Cash dividends

—

—

—

(3,362)—(3,362)———(3,362)

Net income

—

—

—

9,231

—

9,231

—

—

—

9,231

Purchase of treasury stock

—

—

—

—

(13)

(13)

—

—

—

(13)

Other changes

—

—

—

—

—

—

674

(34)

640

640

Net changes during the year
Balance as of April 1, 2012

—

—

—

5,868

(13)

5,854

674

(34)

640

6,494

74,947,628

700

4,752

112,797(318)

117,931

537

(267)

269

118,201

Cash dividends

—

—

—

(3,362)—(3,362)———(3,362)

Net income

—

—

—

12,422—

12,422———

12,422

Purchase of treasury stock

—

—

—

—

(4)

(4)

—

—

—

(4)

Other changes

—

—

—

—

—

—

1,756

87

1,843

1,843

Net changes during the year

—

—

—

9,059

(4)

9,054

1,756

87

1,843

10,898

Balance as of March 31, 2013

74,947,628¥700¥4,752¥121,856¥(323)¥126,985¥2,293¥(180)¥2,113¥129,099

Thousands of U.S. dollars (Note 3)

Commonstock

Balance as of April 1, 2012

$7,448

CapitalsurplusRetainedearnings$50,559 $1,200,096

Shareholders’ equity

Accumulated othercomprehensive income

Total
shareholders’equityTotal
Unrealized
accumulated
Translation
holdingothergain on other adjustments
comprehensive
securities
incomeTreasurystock,
at cost$(3,383) $1,254,719

Total
net assets$ 5,713$(2,841)$ 2,862

Cash dividends——(35,770)—(35,770)———$1,257,591(35,770)

Net income——

132,163—

132,163———

132,163

Purchase of treasury stock

—

—

—

(43)

(43)

—

—

—

(43)

Other changes

—

—

—

—

—

18,683926

19,60819,608Net changes during the year——

96,383(43)

96,32918,683926

19,608

115,949

Balance as of March 31, 2013

$7,448$(3,437) $1,351,048$24,396$(1,915)$22,481$1,373,540$50,559 $1,296,478

See notes to consolidated financial statements.

KYORIN Holdings, Inc.

35

Consolidated Statement of Cash Flows
KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2013

Millions of yen

Thousands of
U.S. dollars(Note 3)

2013

2012

2013

¥18,603
2,738
128
(302)
211
(1,010)¥15,262
2,363
147
(7)
(110)
(816)

$197,925
29,131
1,362(3,213)
2,245(10,746)

1
(39)
(308)
38
98
(25)
—
(1,480)
800
(486)
(144)
(2,956)
15,865323(21)(4,623)
11,544

8
(26)
(340)
48
5
(1)
7
(2,474)(374)(1,809)(238)
3,451
15,098369(48)(6,505)
8,913

11
(415)
(3,277)
404
1,043
(266)
—
(15,746)8,512(5,171)(1,532)(31,450)
168,795
3,437(223)(49,186)
122,822

Investing 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(1,328)1,139(5,995)2,402(5,972)0(344)(3,501)
6,853(441)(7,187)

(822)
1,057
(799)
—
(1,686)25(357)(7,427)5,121(36)(4,926)(14,129)
12,118(63,783)
25,556(63,539)
0(3,660)(37,249)
72,912(4,692)(76,466)

Financing activities
Decrease in short-term bank loans, net
Repayments of lease obligations
Proceeds from long-term debt
Repayments of long-term debt
Redemption of bonds
Net increase in treasury stock
Cash dividends
Net cash used in financing activities
Effects of exchange rate changes on cash and cash equivalents
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 4)(1,675)
(70)
360
(386)
—
(2)
(3,357)(5,132)
108(667)
23,210¥22,543(3,840)
(43)
200
(328)
(30)
(12)
(3,357)(7,412)(29)(3,454)
26,665¥23,210(17,821)
(745)
3,830
(4,107)—(21)(35,717)(54,602)
1,149(7,096)
246,941$239,845

Operating activities
Income before income taxes and minority interests
Depreciation and amortization
Amortization of goodwill
Decrease in allowance for doubtful accounts
Increase (decrease) in accrued bonuses to employees
Decrease in accrued retirement benefits for employees
Increase in accrued retirement benefits for directors
and corporate auditors
Equity in earnings of affiliates
Interest and dividend income
Interest expense
Loss on sales and retirement of property, plant and equipment, net
Gain on sales of investment securities, net
Loss on devaluation of investment securities
Increase in notes and accounts receivable
Decrease (increase) in inventories
Decrease in notes and accounts payable
Decrease in consumption taxes payable
Other, net
SubtotalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities

See notes to consolidated financial statements.

36

Annual Report 2013

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Notes to the Consolidated Financial Statements
KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2013

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 2012 consolidated financial statements to conform to the2013 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 such investments, 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.

KYORIN Holdings, Inc.

37

(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.
(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 transaction. However, finance lease transactions that do not transfer ownership of the leased property
to the lessee whose term commences on or before March 31, 2008 are still accounted for in a similarmanner as operating lease transactions.
(h) Amortization of Goodwill
Goodwill is amortized over a period of 20 years or less on a straight-line basis except that when the amountis immaterial, it is fully charged to income as incurred.
(i) Research and Development Expenses
Research and development expenses are charged to income as incurred.
(j) 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.
(k) Retirement Benefits
Accrued retirement benefits for employees are provided mainly at an amount calculated based on the projected benefit obligation and the fair value of the pension plan assets at the balance sheet date, as adjusted
for unrecognized actuarial gain or loss and unrecognized prior service cost. The expected benefit is attributed
to each period by the straight-line method over the estimated years of service of the eligible employees. 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 in the year such gainor loss occurs (10 years). Prior service cost is amortized as incurred by the straight-line method over the average remaining years of services of the employees in the year such cost occurs (10 years).
In addition, directors and corporate auditors of certain consolidated subsidiaries are customarily entitledto 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 theassumption that all directors and corporate auditors retired at the balance sheet date based on their policy.

38

Annual Report 2013

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information(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) Change in Depreciation Method
Effective for the year ended March 31, 2013, due to the revision of the Corporation Tax Act, the Company
and its domestic consolidated subsidiaries changed their depreciation method into the method based on
the revised Corporation Tax Act for property, plant and equipment acquired on or after April 1, 2012. Thischange has little effect on profit or loss for the year ended March 31, 2013.

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 ¥93.99 = U.S.$1.00, the approximate rate of exchange on March
29, 2013. The translation should not be construed as a representation that yen have been, could havebeen, 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, 2013 and 2012 for the consolidated statement of cash flows
consisted of the following:
Millions of yen

Cash and cash in banks

Thousands of
U.S. dollars

2013

2012

2013

¥21,370¥21,615$227,365

Short-term investments

2,462

2,662

26,194

Time deposits with a maturity over three months(1,289)(1,067)(13,714)¥22,543¥23,210$239,845

Cash and cash equivalents

KYORIN Holdings, Inc.

39

5.

Short-Term Investments and Investment Securities
Information regarding marketable securities classified as other securities as of March 31, 2013 and 2012 isas follows:
Marketable other securities
Millions of yen

Thousands of U.S. dollars

2013

2013

Acquisition
cost

Carrying
value

Unrealized
gain (loss)

Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥ 6,144¥ 9,767¥3,622$ 65,369$103,915$38,536

Government bonds

13,597

13,69092

144,664

145,654979

Corporate bonds

2,338

2,414

75

24,87525,684

798

—

—

—

—

—

—

—

—

—

—

—

—

22,08125,871

3,790

234,929

275,253

40,323

1,042

935

(107)

11,086

9,948(1,138)

Securities whose carrying
value exceeds
their acquisition cost:
Equity securities
Debt securities:

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

6,400

6,378

(21)

68,092

67,858(223)

Corporate bonds

1,000

993

(7)

10,63910,565(74)

Other bonds

1,200

1,054

(145)

12,767

11,214(1,543)

—

—

—

—

—

—

9,642

9,361

(281)

102,585

99,596(2,990)¥31,724¥35,233¥3,509$337,525$ 374,859$37,334

Other
Subtotal
Total

Millions of yen
2012
Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥ 4,623¥ 6,027¥1,404Government bonds

11,79911,89596

Corporate bonds

4,733

4,794

60

–

–

–

18

19

0

21,17522,736

1,561

2,062

1,692

(369)

Securities whose carrying value exceeds
their acquisition cost:
Equity securities
Debt securities:

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

5,799

5,768

(30)

Corporate bonds

1,300

1,254

(45)

Other bonds

1,200

914

(285)

30

28

(2)

Subtotal

10,392

9,659

(733)

Total

¥31,567¥32,395¥  828

Other

40

Annual Report 2013

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

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 ¥433 million($4,607 thousand) and ¥511 million as of March 31, 2013 and 2012, respectively.
Sales amounts of securities classified as other securities and the related aggregate gain and loss for theyears ended March 31, 2013 and 2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen
2013

2012

2013

¥2,871¥301$30,546

Gains on sales

25

1

266

Losses on sales

—

0

—

Proceeds from sales

6.

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,
2013 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen
2013

2012

2013

¥1,180¥2,855$12,555

Current portion of long-term debt

343

304

3,649

Current portion of lease obligations

81

39

862

¥1,604¥3,198$17,066

Short-term bank loans

Total

The average interest rates applicable to short-term bank loans outstanding as of March 31, 2013 and2012 are 0.6% and 0.9%, respectively.
Long-term debt as of March 31, 2013 and 2012 consisted of the following:
Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

Long-term debt, due through 2016 and 2015 ataverage interest rate of 0.7% and 1.6% in 2013 and2012, respectively

¥ 594

¥ 620

$ 6,320

Lease obligations due through 2022 and 2015 in 2013
and 2012, respectively

265

84

2,819

Current portion of long-term debt and lease obligations
due within one year

(424)

(343)

(4,511)

Total

¥ 435

¥ 361

$ 4,628

The annual maturities of long-term debt and lease obligations are summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2014

¥424

$4,511

2015

209

2,224

2016

137

1,458

2017

26

277

2018 and thereafter

63

670

¥859

$9,139Year ending March 31

Total

KYORIN Holdings, Inc.

41

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 forcompanies that meet certain criteria such as;(1) having the board of directors,(2) having independent auditors,(3) having the 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 certain limitations and additional requirements.
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 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 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 purchaseboth treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of net assets or deducted directly from stock acquisition rights.

42

Annual Report 2013

Consolidated
Financial Highlights

8.

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Research and Development Expenses
Research and development expenses included in general and administrative expenses for the years ended
March 31, 2013 and 2012 were ¥11,059 million ($117,661 thousand) and ¥13,964 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, 2013 and 2012 are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

Gain:
¥   0

¥   0

$     0

Land

—

21

—

Other

0

—

0

¥   0

¥ 21

$     0

Buildings and structures

¥(13)

¥ (9)

$   (138)

Machinery and vehicle

(66)

(1)

(702)

Other

(18)

(16)

(192)

Machinery and vehicle

Loss:

Total

10.

(98)

(27)

(1,043)

¥(98)

¥ (5)

$(1,043)

LeasesLeased assets principally consist of medical devices and system devices (machinery and vehicle) for the
Pharmaceutical Business.
Pro forma information of the leased property whose term commences on or before March 31, 2008 andwhich does not transfer ownership of the leased property to the lessee on an “as if capitalized” basis as ofMarch 31, 2013 and 2012 is as follows:
Millions of yen
2013

Machinery and vehicle

Acquisition
costs

Accumulated
depreciation

Accumulated
impairment loss

Net book
value

¥—

¥—

¥—

¥—

Other

—

—

—

—

Total

¥—

¥—

¥—

¥—

$—

$—

Thousands of U.S. dollars

Machinery and vehicle

$—

$—

Other

—

—

—

—

Total

$—

$—

$—

$—
Millions of yen
2012

Machinery and vehicle

Acquisition
costs

Accumulated
depreciation

Accumulated
impairment loss

Net book
value

¥80

¥1,065¥  985

¥232

Other

74

69

—

4

Total

¥1,140¥1,055¥232¥85KYORIN Holdings, Inc.

43

For the years ended March 31, 2013 and 2012, lease payments relating to finance leases accounted forin a similar manner as operating lease transactions amounted to ¥317 million ($3,373 thousand) and ¥213
million, respectively, which were equal to the depreciation expense of the leased assets computed by thestraight-line method over the lease terms assuming no residual value, reversal of accumulated impairment
loss on leased assets amounted to ¥232 million ($2,468 thousand) and ¥111 million, respectively, andrelated impairment losses amounted to none.
Future minimum lease payments (including the interest portion thereon) subsequent to March 31, 2013
on noncancelable operating leases and finance leases accounted for as rental transactions are summarized
as follows:
Millions of yen
OperatingleasesFinanceleasesOperatingleases

2014

¥—

¥ 77

$—

$  8192015 and thereafter

—

384

—

4,086

Total

¥—

¥461

$—

$4,905

Accumulated impairment loss

¥—

¥  —

$—

$    —

Year ending March 31,

11.

Thousands of U.S. dollars

FinanceleasesFinancial Instruments(a) Investment Policy of Financial Instruments
The Company and its consolidated subsidiaries mainly operate funds by highly secured financial instruments
such as deposits and highly rated bonds, ensuring their 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 andits consolidated subsidiaries, in accordance with internal rules, keep track of the adverse financial conditionsof the customers from an 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 operatingreceivables 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 mainly used
to finance necessary funds for the capital investments and business expansion.
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.

44

Annual Report 2013

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information(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, 2013 and 2012
are as follows:
Millions of yen

Thousands of U.S. dollars

2013

Cash and cash in banks

Carrying
value

Fair value¥ 21,370
46,555

Notes and accounts
receivable
Short-term investments
and investment securities

2013

Difference

Carrying
value

Fair value

Difference¥ 21,370¥—$  227,365$  227,365$—

46,555—495,319495,319—

35,23335,233—374,859

374,859—¥103,159¥103,159¥—$1,097,553$1,097,553$—

Notes and accounts
payable¥  8,556¥  8,556¥—$   91,031$   91,031$—

Total liabilities¥  8,556¥  8,556¥—$   91,031$   91,031$—

Total assets

Millions of yen
2012
Carrying
value

Fair value

Difference

Cash and cash in banks¥21,615¥21,615¥—

Notes and accounts receivable

45,06745,067—

Short-term investments and investment securities

32,39532,395—¥99,079¥99,079¥—¥ 9,043¥ 9,043¥—¥ 9,043¥ 9,043¥—

Total assets
Notes and accounts payable
Total liabilities

Unlisted securities and others of ¥986 million ($10,490 thousand) and ¥1,017 million whose fair values
are extremely difficult to determine as of March 31, 2013 and 2012, 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.

45

The redemption schedule for monetary receivables and securities with maturities subsequent to March
31, 2013 is as follows:
Millions of yen
2013
Due in one
year or lessDue after one
year throughfive years

Due after five
years throughten years

Due after
ten years

Cash and cash in banks¥21,370

¥   —

¥   —

¥  —

Notes and accounts receivable

46,555———¥10,000¥6,000¥4,000

¥  —

1,600

300

1,000

500

Short-term investments andinvestment securities:
Other securities with maturities:
Government bonds
Bonds
Other
Total

—

—

1,000

200

¥11,600¥6,300¥6,000¥700

Thousands of U.S. dollars
2013
Due in one
year or lessDue after one
year throughfive years

Due after five
years throughten years

Due after
ten years

Cash and cash in banks$227,365$      —

$      —

$     —

Notes and accounts receivable

495,319———$106,394$63,837$42,558$     —

17,023

3,192

10,6395,320

Short-term investments andinvestment securities:
Other securities with maturities:
Government bonds
Bonds
Other
Total

46

Annual Report 2013——

10,6392,128$123,417$67,028$63,837$7,448

Consolidated
Financial Highlights

12.

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Retirement 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.
The following table sets forth the funded and accrued status of the plans and the amounts recognized in
the consolidated balance sheet as of March 31, 2013 and 2012 for the Company’s and the consolidated
subsidiaries’ defined benefit plans:Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥(30,577)¥(27,875)$(325,322)

Plan assets at fair value

25,46922,141

270,976

Unfunded retirement benefit obligation(5,108)(5,733)(54,346)

Unrecognized actuarial gain or loss

3,219

2,862

34,248

Projected benefit obligation

Unrecognized prior service cost

(49)

(77)

(521)

Net retirement benefit obligation(1,938)(2,949)(20,619)

Prepaid pension costAccrued retirement benefits for employees

—

—

—

¥ (1,938)¥ (2,949)$ (20,619)

The components of retirement benefit expenses for the years ended March 31, 2013 and 2012 areoutlined as follows:
Millions of yen

Service costThousands of
U.S. dollars

2013

2012

2013

¥  898¥  922$ 9,554

Interest cost

546

546

5,809

Expected return on plan assets

(659)

(619)

(7,011)

Amortization of actuarial gain or loss

413

509

4,394

Amortization of prior service cost

(28)

(28)

(298)

Premium of defined contribution pension plan andannuity in advance retirement severance plan, etc.
Total

290

289

3,085

¥1,461¥1,619$15,544

The assumptions used in accounting for the above plans are as follows:
2013

2012

Discount rates

1.3%

2.0%

Expected rate of return on plan assets

3.0%

3.0%

KYORIN Holdings, Inc.

47

13.

Pledged Assets
Assets pledged as collateral for guaranty deposits and plant mortgage as of March 31, 2013 and 2012
are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥10

¥   10$106¥10¥   10$106

Buildings and structures¥—¥1,668

$   —

Other

—

692

—

Total

¥—

¥2,360$   —Assets pledged as collateral:

For guaranty deposits
Cash and cash in banks
Total
For plant mortgage

14.

Income Taxes
Significant components of deferred tax assets and liabilities as of March 31, 2013 and 2012 are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥   729¥1,091$   7,756

Accrued bonuses to employees

1,242

1,162

13,214

Allowance for doubtful accounts

54

158

575

Accrued enterprise tax

265

189

2,819

Deferred tax assets:
Accrued retirement benefits for employees

Loss on retirement of inventories

259

205

2,756

Loss on devaluation of investment securities

238

250

2,532

Loss on retirement of property, plant and equipment

909

918

9,671

Amortization of deferred assets

673

944

7,160

Asset adjustment account

—

222

—

Tax loss carryforward

590

342

6,277

1,237

1,255

13,161

6,201

6,741

65,975

(698)

(909)

(7,426)

5,503

5,832

58,549

(33)

(48)

(351)

(1,250)(290)(13,299)

(7)

(8)

(74)

(1,291)(347)(13,736)¥ 4,212¥5,484$ 44,813

Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for reduction entry of property, plant andequipment
Unrealized holding gain on other securities
Other
Total deferred tax liabilities
Net deferred tax assets

48

Annual Report 2013

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Taxes on income consist of corporate, inhabitants and enterprise taxes. Reconciliation of the statutory
tax rate to the effective tax rate for the year ended March 31, 2013 is as follows:
2013

Statutory tax rate

		

38.0%

Entertainment expenses and others that are not tax deductible permanently

		

2.1

Inhabitants’ per capita taxes

		

0.4

Tax credits for research and development expenses

		

(4.5)

Valuation allowance

		

(1.5)

Internal profit elimination

		

(0.5)

Other

		

(0.9)

		

33.2%

Effective tax rate

Information on reconciliation of the statutory tax rate to the effective tax rate for the year ended
March 31, 2012 is not disclosed as their difference was less than 5% of the statutory tax rate for the year
ended March 31, 2012.

15.

Comprehensive Income
Reclassification adjustments and income tax effects on other comprehensive income for the years ended
March 31, 2013 and 2012 are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥2,724¥1,066$ 28,982

Unrealized holding gain on other securities:
Gain arising during the year
Reclassification adjustments

(25)

0

(266)

Before income tax effects

2,698

1,066

28,705

Income tax effects

(960)

(393)

(10,214)

Unrealized holding gain on other securities

1,738

672

18,491

87

(34)

926

Translation adjustments:
Adjustments arising during the year
Share of other comprehensive income of associates
accounted for using equity method:Gain arising during the year
Total other comprehensive income

16.

18

2

192

¥1,843¥  640$ 19,608

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.

KYORIN Holdings, Inc.

49

(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.
(Change in depreciation method)
Effective for the year ended March 31, 2013, due to the revision of the Corporation Tax Act, the Company
and its domestic consolidated subsidiaries changed their depreciation method into the method based on
the revised Corporation Tax Act for the property, plant and equipment acquired on or after April 1, 2012.
This change has little effect on segment profit or loss for the year ended March 31, 2013.
(c) Information about Net Sales, Profit (Loss), Assets and Other Items by Reportable Segment
Millions of yen
2013
Reportable segment
PharmaceuticalBusiness

Consumer
Healthcare(Skincare)Business

Total

Adjustments

Consolidated¥105,162¥1,869¥107,031¥        —¥107,031

39

0

40

(40)

—

¥105,202¥1,869¥107,071¥(40)¥107,031

Segment profit (loss)¥ 17,963¥    (200)¥ 17,762¥185¥ 17,948

Segment assets¥138,700¥  752¥139,452¥15,515¥154,968

Net sales:
Sales to third parties
Inter-segment sales or transfers
Total

Other items:
Depreciation and amortization¥  2,556¥35¥  2,592¥   146¥  2,738

Amortization of goodwill

128

—

128

—

128

Investments in associates
accounted for using equity
method

552

—

552

—

552

5,533

23

5,557

1,081

6,638

Increase in property, plant andequipment and intangible assets

50

Annual Report 2013

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Thousands of U.S. dollars
2013
Reportable segment
PharmaceuticalBusiness

Consumer
Healthcare(Skincare)Business

Total

Adjustments

Consolidated$1,118,864$19,885$1,138,749$     —

$1,138,749

415

0

426

(426)

—

$1,119,289$19,885$1,139,174$    (426)$1,138,749

Net sales:
Sales to third parties
Inter-segment sales or transfers
Total
Segment profit (loss)$  191,116$ (2,128)$  188,978$   1,968$  190,956

Segment assets$1,475,689$  8,001$1,483,690$165,071$1,648,771$   27,194$   372$   27,577$   1,553$   29,131

Other items:
Depreciation and amortization
Amortization of goodwill

1,362

—

1,362

—

1,362

Investments in associates
accounted for using equity
method

5,873

—

5,873

—

5,873

Increase in property, plant andequipment and intangible assets

58,868245

59,123

11,501

70,625
Millions of yen
2012

Reportable segment
PharmaceuticalBusiness

Consumer
Healthcare(Skincare)Business

Total

Adjustments

Consolidated¥100,654¥2,577¥103,232¥        —¥103,232

Net sales:
Sales to third parties
Inter-segment sales or transfers
Total

65

1

66

(66)

—

¥100,720¥2,578¥103,299¥     (66)¥103,232

Segment profit¥ 14,218¥   52¥ 14,270¥   193¥ 14,464

Segment assets¥134,354¥  968¥135,322¥10,350¥145,673

Other items:¥   2,214¥   34¥   2,248¥   115¥   2,363

Amortization of goodwill

Depreciation and amortization

147

—

147

—

147

Investments in associates
accounted for using equity
method

505

—

505

—

505

1,868

15

1,884

163

2,048

Increase in property, plant andequipment and intangible assets

1. “Adjustments” for “Segment profit (loss)” of ¥185 million ($1,968 thousand) and ¥193 million for the years
ended March 31, 2013 and 2012, respectively, were mainly eliminations of inter-segment transactions.
2. “Adjustments” for “Segment assets” of ¥15,515 million ($165,071 thousand) and ¥10,350 million as ofMarch 31, 2013 and 2012, respectively, were the Company’s assets and offset of inter-segment receivables and payables.
3. “Adjustments” for “Depreciation and amortization” of ¥146 million ($1,553 thousand) and ¥115 million forthe years ended March 31, 2013 and 2012, 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 ¥1,081 million($11,501 thousand) and ¥163 million for the years ended March 31, 2013 and 2012, 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.

KYORIN Holdings, Inc.

51

(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, 2013 and 2012.
(b) Information by Geographical Area
(1) Sales
Information about sales by geographical area is omitted for the years ended March 31, 2013 and2012, 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, 2013 and 2012, 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, 2013 and 2012
Millions of yen
2013
Name of customer

Sales amount

Related segments

Alfresa Corporation¥19,437

Pharmaceutical Business

SUZUKEN CO., LTD.

17,763

Pharmaceutical Business

MEDIPAL HOLDINGS CORPORATION

15,918

Pharmaceutical BusinessToho Pharmaceutical Co., Ltd.

14,483

Pharmaceutical Business and Consumer
Healthcare (Skincare) BusinessThousands of U.S. dollars
2013

Name of customer

Sales amount

Related segments

Alfresa Corporation$206,799

Pharmaceutical Business

SUZUKEN CO., LTD.

188,988

Pharmaceutical Business

MEDIPAL HOLDINGS CORPORATION

169,358

Pharmaceutical BusinessToho Pharmaceutical Co., Ltd.

154,091

Pharmaceutical Business and Consumer
Healthcare (Skincare) BusinessMillions of yen
2012

Name of customer

52

Annual Report 2013

Sales amount

Related segments

Alfresa Corporation¥18,405

Pharmaceutical Business

SUZUKEN CO., LTD.

17,141

Pharmaceutical Business

MEDIPAL HOLDINGS CORPORATION

15,504

Pharmaceutical BusinessToho Pharmaceutical Co., Ltd.

13,795

Pharmaceutical Business and Consumer
Healthcare (Skincare) BusinessConsolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information(d) Information about Amortization and Unamortized Balance of Goodwill by Reportable Segment
Millions of yen
2013
PharmaceuticalBusiness

Consumer Healthcare(Skincare) BusinessEliminations

Total

¥64

—

—

¥64

Balance as of March 31, 2013

Thousands of U.S. dollars
2013
PharmaceuticalBusiness

Consumer Healthcare(Skincare) BusinessEliminations

Total

$681

—

—

$681

Balance as of March 31, 2013

Millions of yen
2012
PharmaceuticalBusiness

Consumer Healthcare(Skincare) BusinessEliminations

Total

¥192

—

—

¥192

Balance as of March 31, 2012

Information about amortization of goodwill by reportable segment for the years ended March 31, 2013
and 2012 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, 2013 and 2012 are as follows:

Guarantors of indebtedness of employees

18.

Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥2

¥4

$21

Yen

U.S. dollars

Amounts per Share
Amounts per share for the years ended March 31, 2013 and 2012 are as follows:

Basic net income
Cash dividends
Net assets

2013

2012

2013

¥  166.25¥  123.54$ 1.77

50.00

45.00

0.53

1,727.86

1,581.94

18.38

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, 2013 and 2012.
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.

19.

Subsequent Events
There are no relevant items.

KYORIN Holdings, Inc.

53

Independent Auditor’s Report

54

Annual Report 2013

Consolidated
Financial Highlights

ProfileTo Our Stakeholders

Feature: The Source ofValue Creation

The Foundation of
Value Creation

Management Foundation

Financial Information

Non-consolidated Financial Summary

Non-consolidated Balance Sheet
KYORIN Holdings, Inc.
As of March 31, 2013

Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥14,938¥ 9,140$  158,932

Cash and deposits

10,112

8,259

107,586

Prepaid expenses

79

66

841

AssetsCurrent assets

Income taxes receivable

2,584

668

27,492

Short-term loans

2,000

—

21,279Deferred tax assets

138

133

1,468

Other

22

12

234

84,64980,958900,617

Property, plant and equipment

871

245

9,267

Intangible assets

512

198

5,447

83,26580,514885,892

99,58790,0991,059,549

466

586

4,958

7

8

75

474

594

5,043

Shareholders’ equity

99,11289,504

1,054,495

Total net assets

99,11289,504

1,054,495

99,58790,0991,059,549

Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

Operating revenue¥15,654¥6,139$166,550

Operating expenses

2,476

2,650

26,343Operating income

13,1783,489

140,206

38

33

404

13,126

3,523

139,653———

Noncurrent assets

Investments and other assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets

Total liabilities and net assets

Non-consolidated Statement of Income
KYORIN Holdings, Inc.
For the year ended March 31, 2013

Non operating income
Ordinary income
Extraordinary income
Extraordinary loss
Income before income taxes

185

7

1,968

13,031

3,515

138,642

Income taxes—current

27

3

287

Income taxes—deferred

29

97

308

12,973

3,414

138,025

Net income

Note: The rate of ¥93.99 to U.S.$1.00, prevailing on March 29, 2013, has been used for translation into U.S. dollar amounts.

KYORIN Holdings, Inc.

55

Organization Chart (As of June 25, 2013)

General Shareholders’ Meeting
Board of Corporate Auditors
Board of Directors

President’s Office

Representative Director,
President and Chief Executive Officer

Management PlanningManagement Meeting

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

Subsidiaries and Affiliates (As of July 2013)
Consolidated
Subsidiaries

KYORIN Pharmaceutical Co., Ltd.
¥4,317 million
Capital:Percentage of ownership: 100%
6, Kanda Surugadai 4-chome, Chiyoda-ku, Tokyo 101-8311
Head office:
Manufacture and sales of prescription medicines and quasi-drugs, diagnostics, and industrial chemicals
Operations:
KYORIN Medical Supply Co., Ltd.
¥488 million
Capital:Percentage of ownership: 100%
Kyorin Nishi-Shinjuku Building, 25-13, Nishi-Shinjuku 6-chome, Shinjuku-ku, Tokyo 160-0023
Head office:Sales promotion, planning and production of advertising, etc.
Operations:
KYORIN Rimedio Co., Ltd.
¥1,200 million
Capital:Percentage of ownership: 100%
287-1, Shimocho Moroe-cho, Kanazawa-shi, Ishikawa 920-0017
Head office:
Manufacture and sales of prescription medicines and quasi-drugs, diagnostics, and industrial chemicals
Operations:Dr. Program Co., Ltd.
¥251 million
Capital:Percentage of ownership: 100%
Kyorin Nishi-Shinjuku Building, 25-13, Nishi-Shinjuku 6-chome, Shinjuku-ku, Tokyo 160-0023
Head office:Development and sales of skincare products
Operations:
KYORIN Pharmaceutical Facilities Co., Ltd.
¥450 million
Capital:Percentage of ownership: 100%
1-4 Sasagaoka, Minakuchi-cho, Koka, Shiga 528-0061
Head office:
Manufacture and sales of prescription medicines
Operations:

KYORIN PharmaceuticalCo., Ltd. Subsidiaries

Kyorin USA, Inc.
US$500,000
Capital:Percentage of ownership: 100%
500 Frank W. Burr Boulevard, Teaneck, New Jersey 07666, United States
Head office:Research and analysis of other companies’ technologies and collection of information concerning clinical trials
Operations:
Kyorin Europe GmbH
50,000Capital:Percentage of ownership: 100%
Kaiserstrasse 8, 60311 Frankfurt am Main, Germany
Head office:Research and analysis of other companies’ technologies and collection of information concerning clinical trials
Operations:
ActivX Biosciences, Inc.
US$1
Capital:Percentage of ownership: 100%
11025 N. Torrey Pines Rd., La Jolla, California 92037, United States
Head office:Discovery and evaluation of candidate compounds
Operations:

Equity-method Affiliates

56

Annual Report 2013

Nippon Rika Co., Ltd.
¥411 million
Capital:Percentage of ownership: 29.2%
2-2, Nihonbashi Honcho 4-chome, Chuo-ku, Tokyo 103-0023
Head office:Production and sales of pharmaceuticals, reagents, intermediates, and other products
Operations:Corporate Information (As of March 31, 2013)

KYORIN Holdings, Inc.

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

Outstanding Shares

74,947,628

Shareholders

5,276

Major Shareholders

Percentage
of totalsharesoutstanding

Apricot Co., Ltd.
Japan Trustee Services Bank, Ltd. (Trust Account)
Yoshiko Ogihara
Tsurukame Co., Ltd.
Mykam Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)Hiroko Ogihara
Minoru Ogihara
Banrina Co., Ltd.
Archans Co., Ltd.
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

6.67％
4.91％
3.90％
3.86％
3.66％
3.53％
3.00％
2.97％
2.60％
2.60％

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 historical facts 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 inthis 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 andexchange rate fluctuations.

KYORIN Holdings, Inc.

57

KYORIN Holdings, Inc.
6, Kanda Surugadai 4-chome, Chiyoda-ku, Tokyo
101-8311, Japan
Corporate Communication
TEL+81-3-3525-4700
E-mail http://www.kyorin-gr.co.jp/contact/
URL
http://www.kyorin-gr.co.jp/

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