In Motion
Annual Report 2016

CONTENTS
02

What is Kampo?

03

More about Kampo

15

Special Feature	Driving Forces behind Tsumura’s
Growth and Value Creation

37	
CSR Management andCorporate Governance04	Tsumura and the Kampo Value Chain /Our Strengths

06

Financial and Non-Financial Highlights

08

To Our Stakeholders

	In May 2016, we announced our new
medium-term management plan, which
defines our vision for Tsumura six years
from now and the path we will taketoward that vision and to build corporate
value. In this section, the president
explains some of the key points about theplan as well as the strategic challenges
that will be tackled while enacting this plan.

TSUMURA & CO.

	In the special feature, key Tsumura
representatives discuss the sales measuresthat will be implemented to stimulate theongoing expansion of the Kampo medicines
market with the aim of achieving thegoals of the new medium-term management plan as well as our initiatives for
improving productivity to enhance profitability. The representatives also outline
our past successes and future efforts onthese fronts.

22

Review of Operations

33

Frequently Asked Questions

35

Research and Development

	In the CSR management section, we
present how Kampo medicines contribute to maintaining and improving
patients’ quality of life during cancer
treatment. In the corporate governancesection, we report our ongoing initiatives
to strengthen the corporate governancestructure to ensure transparent, efficient,and sound management.

47

Financial Section

81

Corporate Data / Investor Information

Corporate Philosophy
The Best of Nature and Science

Corporate Mission
To contribute to the unparalleled medical therapeutic powerof the combination of Kampo medicine and Western medicine

Tsumura’s Business
Tsumura’s core business is the manufacture and sale of prescription
Kampo products. As a leading company in the field of Kampo
medicine, Tsumura aims to achieve sustainable growth and build its
corporate value through the provision of a stable supply of high-quality
Kampo products.

GLOSSARY
Kampo Medicine
Kampo medicine is the medicine
traditionally practiced in Japan, basedon ancient Chinese medicine.
Crude Drugs
Crude drugs are the main raw materials
for Kampo products and primarily indicate
the portion of plants and minerals used for
medicinal purposes.
Western Medicine
Originating with the practice of medicine in
Greece, Western medicine is used as thecounterpart to Eastern medicine.

Kampo Medicines
Kampo medicines are used in
the practice of Kampo medicine, including
Kampo products.

“Drug Fostering” Program
The “drug fostering” program isa program that aims to build a bodyof scientific evidence on the efficacyof Kampo products.

Forward-Looking Statements
In this annual report, all statements that contain thewords “believe,” “anticipate,” estimate,” “expect,” orother similar words, and all numbers related to future
performance, are considered forward-looking statements that are not historical facts but rather reflect
management’s best judgment and the most information
available at the time this annual report was prepared.
The actual results that Tsumura will achieve in the future
may differ greatly from these estimates and forecasts
due to various uncertain factors in the business environment and various risks that are discussed later in thisannual report. The forward-looking statements contained
herein were deemed reasonable by management at thetime that we prepared this annual report, but it is important to exercise ample caution when making investment
decisions based on these statements.

Kampo Business
A business model including not only the
production and sale of Kampo products,
but also encompassing the cultivation,
processing, and storage of crude drugs.

Annual Report 2016

1

What is Kampo?

1,400 Years of History

Characteristics of Kampo Medicines

Kampo is a traditional form of medicine in Japan. This

Kampo medicines are therapeutic formulations based on

tradition was handed down from China sometime in the 5th

Kampo medicine principles, and the history of these medi-

and 6th centuries. Over the following 1,400 years, Kampo

cines is as long as that of the Kampo medical tradition

medicine has evolved into a unique traditional medicine thatitself, with some formulations having been establisheddiffers from traditional medicine in its country of origin, China,

1,800 years ago. While certain Kampo medicines entail

and from Korean traditional medicine, which also has its roots

boiling and drinking crude drugs, most of the prescription

in China. Throughout this history, the effectiveness of Kampo

Kampo products used in Japan today are powdered

has continued to be verified by the empirical accounts ofextracts, the active ingredients of which have been

physicians and patients alike and has thus come to hold aextracted from crude drugs and processed into powders.

distinctive position in the Japanese medical field of today.

2

Crude Drugs as Raw Ingredients

Tailor-Made Treatment

The raw materials for Kampo medicines are crude drugs

Kampo medicine seeks to improve the overall balance of a

derived from mainly plants. Crude drugs contain multiple

patient’s body by acting on a person’s natural healing power

active ingredients, and these ingredients are extracted as

and immune system. For this reason, treatment methods areis, as opposed to extracting a single ingredient from one

decided individually on an overall basis, taking into accounttype of crude drug. Therefore, Kampo medicines havethe various differences among patients, such as natural con-many active ingredients because they are formulations of

stitution, physical type, and physical and subjective symp-

at least two and sometimes up to 10 crude drugs. As such,toms, and emphasizing medical interviews and palpations.

multiple active ingredients are a special characteristic of

The most appropriate Kampo medicine is then selected to

Kampo medicines.

ease and treat the symptoms of each patient.

TSUMURA & CO.

More about Kampo

Difference between Western Drugs
and Kampo Medicines

Coverage under the Japanese
National Health Insurance Plan

Western drugs almost always contain only one ingredient

Currently, 148 prescription Kampo products are covered

made from chemical compounds. A single drug is thus

under the Japanese National Health Insurance (NHI) plan.

administered for a single symptom or disorder. In contrast,

The vast majority of prescription drugs applicable under

Kampo medicines often contain a mixture of ingredients

this plan have officially set prices, which are reviewed once

extracted from multiple crude drugs. As a result of containing

every two years in principle. The 129 Kampo formulations

many ingredients, one formulation can demonstrate positive

made by Tsumura are covered under the NHI plan and are

results for multiple symptoms. Furthermore, substance patents,

thus subject to the establishment of set official prices.

such as those available for Western medicine, do not exist in
Kampo medicine, which is a tradition formed over 1,400 years.

Kampo Medicines Prescriptions Madeby Physicians in Japan

Expanding the Scope of Kampo
Medicines Prescriptions

Although the Japanese medical field is primarily based

Along with the recent establishment of a greater body ofaround Western medicine, there is no differentiation

scientific evidence on the efficacy of Kampo medicines, there

between Western medicine and Kampo medicine in thehas been a growth trend in the scope of disorders for which

licensing system for physicians, and there are thosethese medicines are being prescribed. The scope has enlarged

physicians that prescribe both Western drugs and Kampo

from the traditional treatment areas of internal, mental, andmedicines. In fact, according to a 2011 survey by the Japan

chronic disorders to such advanced medical fields as surgery

Kampo Medicines Manufacturers Association, 89% of

and cancer treatment. Kampo medicines have also demon-

Japan’s physicians had prescribed Kampo products forstrated their effectiveness for disorders and symptoms specifictheir patients.

to women and the elderly. Consequently, the use of Kampo
medicines is spreading widely among various demographics
in Japan.

Annual Report 20163

Tsumura and the Kampo Value Chain

Tsumura has established a comprehensive Kampo value chain that integrates all processes in its operations. The value chain
includes the procurement of raw material crude drugs, product quality control and production, distribution, and the spread of Kampo
education and enables the Company to provide a stable supply of high-quality Kampo products. With regard to raw material crude
drug procurement, Tsumura researches cultivation methods and selective breeding techniques and also maintains Cultivated Land underOwn Management to secure sufficient quantities of drug materials that conform to the Company’s rigorous quality standards.

Cultivation and Procurement of Crude Drugs

Kampo Value Chain

CULTIVATIONANDPROCUREMENT

Cultivates andprocures crude
drugs for Kampo
products in China,
Japan, and LaosQUALITY
INSPECTIONSTORAGE

Conducts inspections to ensure
raw material crude drugs meet
Tsumura’s standards for ingredientconcentration and for residual
agricultural chemicals, heavy
metals, microorganisms, andother contaminants

Stores raw material crude drugs at
15℃ or lower and
60% or lower
humidity

Quality Control and Manufacturing

CUTTING

WEIGHINGAND
MIXING

Raw material crude drugs are finely chopped by acutting machine, then weighed and mixed according
to the compound ratio for each formulation. Followingthat process, their active ingredients are extractedusing a large extractor tank. The extracted liquid andthe biological residue are then separated using acentrifuge. Finally, a concentrate is formed by evaporating the water content.

Our Strengths
Kampo Formulation Specialist
Sales of prescription Kampo products account for 95% of
the Company’s total net sales. The concentrated allocation

Tsumura’s Net Sales

4.5%

of management resources to our prescription Kampo product operations is supporting the ongoing reinforcement of
our Kampo value chain and the establishment of scientificevidence on the efficacy of Kampo medicines.

4

TSUMURA & CO.

Prescription Kampo products
O ther products

EXTRACTION,SEPARATIONAND
CONCENTRATION

95.5%

A sophisticated value chain is essential to the supply of a diverse range of high-quality Kampo products, and theestablishment of such a value chain requires substantial investments of both time and money. While, unlike Western medicine,
there are no substance patents in Kampo medicine, the need for this type of Kampo value chain creates a high barrier forparticipation in the Kampo business.

Distribution and Marketing

DRYINGGRANULATIONFILLING AND
PACKAGINGSALESEDUCATION AND
POPULARIZATIONWHAT ISKAMPO?

Using spray-drying equipment, concentrate spray is instantaneously dried, becoming powdered extract. After being compacted into
tablets, the extract is crushed into granulated extract. Following aquality check, the granulated extract is packaged and boxed andshipped as product.

Makes sales to pharmaceutical wholesalers using thesame method as Western
drugs in Japan

Disseminates information to medical
institutions, holds seminars for thegeneral public, and sponsors portal
websites to popularize Kampo products and educate people about themMarket Leader
On an NHI drug price basis, the 129 prescription Kampo
products manufactured and sold by Tsumura account for

Tsumura’s Share* in Japan’s Prescription
Kampo Product Market

an 84.3%* share of the prescription Kampo productmarket. As the undisputed market leader, the Company isadvancing efforts to expand the market.
* Copyright 2016 IMS Health. All rights reserved. Estimated based on “IMS JPM Mar.
2016 MAT.” Reprinted with permission.

15.7%
T sumuraO ther pharmaceutical companies

84.3%

Annual Report 2016

5

Financial and Non-Financial Highlights
TSUMURA & CO. and subsidiaries
Years ended March 31¥ in millions

US$ in thousands*

2012

2013

2014

2015

2016

2016

Net sales¥95,450¥105,638¥110,057¥110,438¥112,625$999,516

Sales of prescription Kampo products

89,96499,457

102,680

105,193

107,599

Operating income

21,23323,124

22,461

19,491

19,826

175,952

Net income attributable to owners of the parent

13,431

15,37318,05014,075

12,557

111,442

Selling, general and administrative expenses

44,271

46,58648,80849,08747,743423,706

R&D expenses

4,565

4,904

5,949

6,252

5,968

52,968Depreciation

3,850

4,049

4,871

5,387

5,059

44,903

Capital expenditures for property,
plant and equipment

6,425

9,328

8,991

8,428

9,638

Total assets¥151,874¥170,466¥187,623¥215,654¥222,468$1,974,335

Total net assets

102,240

118,537

133,318

150,947

155,702

1,381,814

Interest-bearing debt

22,07022,05922,08837,08037,048

328,789

Cash flows from operating activities¥ 7,314¥12,011¥ 5,908¥ 4,992¥17,570$155,928

Cash flows from investing activities(5,342)(8,022)(1,694)(10,683)(7,461)(66,221)

Cash flows from financing activities(5,272)(4,275)(4,575)

10,408(4,608)(40,901)¥  190.45¥ 217.98¥ 255.94¥ 199.58¥ 178.06$ 1.58Dividends

60.00

62.00

64.00

64.00

64.00

Net assets

1,430.94

1,658.88

1,860.14

2,103.04

2,169.13

Operating income margin

22.2

21.9

20.4

17.6

17.6

ROE

14.1

14.1

14.5

10.1

8.3

ROA

14.5

14.3

12.5

9.7

9.1

Number of employees

2,784

2,831

2,898

3,335

3,242

Amount of crude drugs used (ton)10,657

10,765

11,78811,305

11,619Energy consumption per unit of production (GJ/t)

166.2

158.5

162.2

154.1

153.9

Greenhouse gas emissions
per unit of production (t-CO2/t)

8.5

8.7

8.9

8.9

8.5

Waste recycling rate (%)

99.4

99.1

99.2

99.2

99.2

Water consumption per unit of production (t/t)

192

180

179

162

161

For the year

At year-end

Other selected data

Per share data (yen/dollars)
Net income attributable to owners of the parent

Financial ratios (%)

Non-financial data

* U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥112.68=US$1, the prevailing Tokyo foreign exchange market rate as of March 31, 2016.

6

TSUMURA & CO.

19.25

Net Sales

Operating Income /Operating Income Margin¥ billion

Net Income Attributable to Ownersof the Parent / ROE¥ billion / %120¥ billion / %

30

112.6

30

20

30

19.8

12.5
17.6%

60

15

15

10

15

8.3%

0

12

13

14

15

0

16

12

13

14

15

0

16

 perating income
OOperating income margin (right scale)

SG&A Expenses /SG&A Expenses Margin

R&D Expenses /R&D Expenses Margin¥ billion / %¥ billion / %

60

60

0

12

13

14

15

0

16

 et incomeNROE (right scale)

Capital Expenditures / Depreciation¥ billion

8

6

10

3

5

0

0

9.6

5.3%

47.7

5.9
42.4%

30

0

12

13

14

15

16

SG&A expenses
SG&A expenses margin (right scale)

30

4

0

0

12

13

14

15

16

R&D expenses
R&D expenses margin (right scale)Free Cash Flow

Total Assets / ROA¥ billion¥ billion / %

15.0

300

5.0

12

13

14

15

16

Capital expenditures
Depreciation

Interest-Bearing Debt /Equity Ratio¥ billion / %
20

40

37.0

10.1

80

68.8%
222.4

0

–15.0

150

12

13

14

15

16

0

10

20

0

0

9.1%

12

13

Total assets
ROA (right scale)

14

15

16

40

12

13

14

15

16

0

Interest-bearing debt
Equity ratio (right scale)

Annual Report 20167

To Our Stakeholders

Under our new medium-term management
plan, we will adopt a forward-looking
perspective in creating new value
through innovations in Kampo.
Terukazu Kato
President and Representative Director

8

TSUMURA & CO.

We promise improved corporate value to our shareholders

from improved operational efficiency exceeded theand other investors. The fulfillment of this promise will require

increase in cost of sales, which was centered on crudethat we live up to not only the expectations of the patients

drug related expenses. As a result, we brought about anand medical practitioners that use our Kampo products but

end to the downward trend in income that continued for two

also to those of the greater society, which requires the pro-straight years beginning with fiscal 2014. We were thus able

vision of effective and efficient medical services.

to post operating income that was 10.1% higher than ourThat also means that the reason we are able to holdplan. I believe that our ability to achieve this success, evenabsolute confidence in the potential of our Kampo businessamid a difficult operating environment created by soaring

and its ability to create medium-to-long-term value is the daily

crude drug prices and revisions to prices under the

feedback we receive from stakeholders. Such feedback

Japanese National Health Insurance, or NHI, plan, was acomes sometimes as words of trust from patients using

testament to the benefits of the cost structure reforms we

Kampo medicines and other times as the expectations ofhave continued to implement. Net income attributable tomedical practitioners that have faith in the future potential ofowners of the parent, however, declined 10.8%, to ¥12,557

Kampo. Our mission is to provide a stable supply of high-million. This decrease was largely a result of a foreign

quality Kampo medicines. We are committed to fulfilling our

exchange loss recorded under other expenses. A productmission as the undisputed leader of the prescription Kampoof the rapid appreciation of the yen, this loss replaced the

product market and thereby building our corporate value.

foreign exchange gain posted in fiscal 2015 in association

In May 2016, we announced a new medium-term man-with loans to Chinese subsidiaries.

agement plan that sets out the strategic directives based

The conclusion of fiscal 2016 marked the end of the firston which we will chart our course over the six years leading

medium-term management plan that guided us toward ourup to fiscal 2022. I will discuss this plan in more detail later.

10-year, long-term business vision (Vision for 2021). Despite

Before that, I would like to explain our business results forthe year-on-year increases in net sales and operating income

fiscal 2016.

posted in fiscal 2016, we still fell short of our plan, and market
capitalization has not risen. As a member of Tsumura’s

Fiscal 2016 Business Results

management, I find these results most regrettable.

In fiscal 2016, net sales edged up 2.0%, to ¥112,625 mil-

Next, I would like to explain how we analyzed the causes

lion, and operating income rose 1.7%, to ¥19,826 million.

of these regrettable results and how the findings wereSolid sales of prescription Kampo products enabled us toincorporated into the new medium-term management plan.

secure higher revenues. At the same time, cost reductions

Fiscal 2016 Business Results
Vs. Planned¥ million / %

YoY

Plan

FY2016

AmountDifference

AmountChangeNet sales

113,000

112,625

–374

–0.3%

2,186

2.0%

Operating income

18,00019,826

1,826

10.1%

334

1.7%

Net income attributable to ownersof the parent

12,20012,557357

2.9%–1,517–10.8%

Operating income margin

15.9%

17.6%

+1.7 pts

0 pts

Annual Report 20169

To Our Stakeholders

Roadmap for Vision for 2021 and the New Medium-Term Management Plan
Our Vision for 2021 states that we will “aim to be a value-

External Factors Impacting Medium-Termcreation company that contributes to people’s healthManagement Plan Progress

through its Kampo business.” To further us on this path, we•R ising prices of ginseng and other crude drugs

launched the first medium-term management plan under

beginning in 2011

the vision in fiscal 2013, which was based on the theme of•R apid yen appreciation after 2013

“strengthening the growth base to achieve greater value•N HI price revisions

creation.” This plan ended with fiscal 2016.
The previous medium-term management plan generated¥ billion

qualitative benefits, but its initial quantitative targets went

110.0
105.6

unmet. Based on the shortcomings of this plan as well as
our successes and the challenges faced over its four-year

112.6

110.4

30

period, we established a new medium-term management
plan with the theme of “creating new value through innovations in Kampo.” The commencement of concrete initiatives

23.1

22.4

based on this plan began in April 2016.
19.4

There has, however, been no change to our vision for

19.8

Tsumura in fiscal 2022. By tackling the strategic challenges
set forth in the new plan, we will raise our resilience, by

15

which I mean our ability to respond flexibly, to changes in
the operating environment as we pursue medium-to-longterm growth and value creation.

0

2013

2014

2015

2016

First Medium-Term Management Plan
2013

Quantitative Results and Issues in Three Strategic Challenges

Overview of the First Medium-Term Management Plan
¥ billion

10

FY2013
results

FY2014
results

FY2015
results

FY2016
results

Net sales

105.6

110.0

110.4

112.6

Operating income

23.1

22.4

19.4

19.8

Operating income
margin (%)

21.9

20.4

17.6

17.6

Net income attributable toowners of the parent

15.3

18.0

14.0

12.5

EPS (Yen)

217

255

199

178

ROE (%)

14.1

14.5

10.1

8.3

TSUMURA & CO.

2016

Strategy

Expanding the Kampo
medicines market

Enhancing earning power

Results• Actively implemented Kampo
medicine seminars, lectures,and briefings• Produced high-quality scientificevidence• Created scientific quality evaluation method for TU-100(Daikenchuto)• Established new manufacturingsystem that uses less manpower
and is more efficient• Expanded Cultivated Land underOwn Management area
• Controlled selling, general andadministrative expenses by
increasing business efficiency

Remainingissues• Utilization of evidence in “drug• Improvement of marketing
fostering” program formulations,efficiency
especially TJ-43 (Rikkunshito)• Cultivation of crude drugs• Implementation of Phase II clinical • Technological development andtests for TU-100 (Daikenchuto)
actual production for raw material
crude drugs

Visionfor 2021
Medium-to-Long-Term Operating Environment Changes•R apidly aging society and growing awareness regarding

 et sales (right scale)NOperating income (left scale)longer healthy life expectancies¥ billion•A cceleration of cancer care measures150•P romotion and entrenchment of women’s careerdevelopment efforts
135.0

120.0
115.4

100

19.0

14.5

50

14.0

Resilience

2017(forecast)2019(plan)

02022(plan)New Medium-Term Management Plan
2017

Executing effective financial andcapital policies• Divested non-operating assets• Carried out stable dividend
payments• Strategically stockpiled raw
material crude drugs• Yet to achieve ROE of 14%• Inventory control for raw material
crude drugs

2019

2020

2022

(FY)

Numerical Targets of the New Medium-Term
Management Plan

Strategic challenge 1:¥ billion

Expansion and stable growth

FY2017
forecast

FY2019plan

FY2022plan

Net sales

115.4

120.0

135.0

Operating income

14.5

14.0

19.0

Operating income
margin (%)

12.6

11.5

14.0

Net income attributable toowners of the parent

10.7

10.0

13.0

EPS (Yen)

152

140

185

ROE (%)

6.9

6.0

8.0

in the Kampo medicines market
Strategic challenge 2:
Continued reinforcement of
profitability and maximizationof cash flow
Strategic challenge 3:
Challenge of new businesses
in China

Annual Report 201611

To Our Stakeholders

Evaluation of the Previous
Medium-Term Management Planthese changes in the operating environment occurred. To

We failed to meet the quantitative targets of the previous

address crude drug procurement issues, we expanded the

medium-term management plan for three main reasons.

area of Cultivated Land under Own Management,* which

The first reason was the slowdown in the sales of “drug fos-

allows for a stable supply of crude drugs, and began

tering” program formulations.

amassing strategic reserves of certain crude drugs. At the

Looking at the recent structure of disease, the Company

same time, proactive investments were conducted in new,has selected certain diseases in fields where medical treat-labor-saving manufacturing systems to prepare for future

ment needs are high that are difficult to treat with Western

crude drug price increases and NHI price revisions. We

drugs and that Kampo products have demonstrated spe-also sought to reduce selling, general and administrative

cial efficacy for. The Company will establish a base of sci-

expenses through exhaustive operational efficiency

entific evidence related to treating these diseases withimprovement measures while liquidating non-operating

Kampo medicines. To that end, we strove to bolster sales ofassets. However, these efforts proved insufficient for coun-

the five “drug fostering” program formulations targeted interacting the impacts of external factors.

these efforts by establishing scientific evidence on their effi-

Nevertheless, we did make headway in expanding thecacy and using this evidence in promotions aimed at spe-

Kampo medicines market, one of Tsumura’s duties as thecialized physicians.

undisputed leader of this massive market. For example, we

Expanding our focus after fiscal 2014, we diverged fromestablished highly viable scientific evidence on the efficacy

this approach when we commenced initiatives for establish-of the five “drug fostering” program formulations and cre-ing formulations other than the five “drug fostering” program

ated a scientific quality evaluation method for TU-100, or

formulations as drugs with high cost performance, which

Daikenchuto, with an eye for launching this product in the

included activities to have such formulations listed in medical

U.S. market. Researchers and physicians involved intreatment guidelines. A degree of progress was indeed madeKampo research have stated that such an achievementon this front. However, the act of expanding the focus ofwould represent a major breakthrough toward the combina-

our sales strategies to include promotions of formulations

tion of Kampo medicine and Western medicine.

other than the “drug fostering” program formulations andapproaching physicians in fields other than those targeted by
the program resulted in the dispersion of our sales resources.
The second reason for the failure to reach targets was* Cultivated Land under Own Management are farms for which Tsumura directly
provides cultivation guidance and has an understanding of cultivation costs based on
which it can set procurement prices. Not only limited to farms directly operated by the
Tsumura Group, these farms also include those operated by contracted farmers andagricultural associations.

reason was foreign exchange influences. Kampo products

Theme and Strategic Challengesof the New Medium-Term
Management Plan

differ from Western drugs in that the portion of their sales

The theme of the new medium-term management plan is

price attributable to cost of sales, particularly the cost of“creating new value through innovations in Kampo.” Whileraw material crude drugs, is quite high. Furthermore, as

it is common for people to misinterpret Kampo medicine

Tsumura procures roughly 80% of its raw material crude

as being “unscientific,” I prefer to think of Kampo as being

drugs from China, yen depreciation effectively increases“not-yet scientific.” Our corporate philosophy is “The Bestprocurement costs. Over the four-year period of the previ-of Nature and Science” and corporate mission is “To con-ous medium-term management plan, the impacts of rising

tribute to the unparalleled medical therapeutic power of theprices and foreign exchange influences on crude drug pro-combination of Kampo medicine and Western medicine.”

curement resulted in an increase of 5.1 percentage points

Acting in accordance with this philosophy and mission, we

the rapid rise in crude drug prices, particularly ginseng forwhich prices began a sharp increase in 2011, and the third

in the cost of sales ratio.

12

However, we did not sit by and watch complacently as

TSUMURA & CO.

embarked on a quest to establish scientific evidence on theStrategic Challenge 2:

efficacy of Kampo products in 2004. By breeding various

Continued Reinforcement of Profitability

innovations, we aim to advance the “science” of Kampo

and Maximization of Cash Flow

medicines and thereby fuel expansion and stable growth in

The second strategic challenge is the continued reinforce-the Kampo medicines market.

ment of profitability and the maximization of cash flow. In
tackling this challenge, optimization will be targeted in all

Strategic Challenge 1:

areas of the supply chain, including the cultivation of raw

Expansion and Stable Growth in the Kampo

material crude drugs and other aspects of crude drug pro-

Medicines Market

curement as well as production and sales. Under the previ-

The first of the three strategic challenges defined in the newous medium-term management plan, we expanded the

medium-term management plan is expansion and stablearea of Cultivated Land under Own Management andgrowth in the Kampo medicines market. Taking to heart thereformed production systems. These initiatives will belessons learned through the previous medium-term man-accelerated under the new medium-term management

agement plan, we will reinforce our frameworks for effective

plan. At the same time, we will revise our procedures for for-and ­efficient utilization of scientific evidence in sales promo-

mulating management plans and estimating demand andtion activities. We have already begun conducting trainings

sales at the sales stage. With a keen eye for quickly identify-

regarding evidence for the five “drug fostering” program

ing risks, we will strive to practice management that facili-

formulations targeting medical representatives responsible

tates swift and flexible responses in business operations.

for university hospitals and designated hospitals for clinicalFor example, we will monitor the cultivation status of crudetraining. Through such focused efforts in this area, whichdrugs at Cultivated Land under Own Management in real

had been insufficient during the past three years, we aretime and use this information to adjust crude drug purchasefacilitating the exchange and utilization of new information.

volumes in order to minimize inventories of raw material

The establishment of scientific evidence is the lynchpin

crude drugs. I believe that this completely new approachof our efforts to expand the Kampo medicines market, andwill help us realize productivity improvements.

we are working toward the enhancement of evidence collection on the five “drug fostering” program formulations

Strategic Challenge 3:

based on this realization. Moving away from our previous

Challenge of New Businesses in China

approach of accumulating evidence from individual

The third strategic challenge laid out in the new medium-term

research ventures, we have now set the goal of establishingmanagement plan is a completely new one: challenge of new

a complete evidence collection that encompasses clinicalbusinesses in China. In this regard, Tsumura has already been

evidence based medicine; action mechanisms; adverse

able to enter into the business of Chinese medicine com-

drug reaction frequency surveys; absorption, distribution,

pound granules through the establishment of a joint venture

metabolism, and excretion; and health economic data.

with a major Chinese medicine supplier. We also concluded a

In addition, the new plan defines three important domains—

business collaboration agreement with a local company fornamely, those of geriatric health, cancer, and women’s health.

the sale of Chinese crude drug pieces for decoction, andWe aim to grow formulations for responding to the significant

other announced concrete plans included those for the future

demand among patients and medical practitioners in theseestablishment of a holding company in China.

domains with regard to the behavioral and psychologicalApproximately 80% of raw material crude drugs neces-

symptoms of dementia, frailty, supportive care for cancer,

sary to manufacture Tsumura’s 129 Kampo formulations

menopausal disorders, and other areas. To this end, weare procured from China. Our bases in this country include

defined five new strategic “growing” formulations to stand

SHENZHEN TSUMURA MEDICINE CO., LTD., a crude drug

alongside the five “drug fostering” program formulations.

procurement and storage base established in 1991, andAnnual Report 201613

To Our Stakeholders

SHANGHAI TSUMURA PHARMACEUTICALS CO., LTD., aproduction base equipped with the same facilities used inJapan established in 2001. China has always been a key link

Human Capital, Social Relationship
Capital, and the Kampo Value Chain
In sowing these seeds for future growth, nothing will bein our Kampo value chain. All members of the Tsumura Group,

more important in our corporate management than the cul-

including those on Chinese shores, strongly hope to develop

tivation of our human resources. In conducting its Kampo

a business in this country that will contribute to both theand crude drug businesses, Tsumura has no rivals withGroup’s growth and to the health of the people of China.

which to gauge itself. For this reason, effective manage-

Through the aforementioned collaborative ventures, wement can only be conducted by securing human capital

have poised Tsumura to journey into fresh horizons with thecapable of cutting open new paths. Based on this belief,

start of new businesses that leverage our expertise in thewe will pursue innovations in Kampo on a Groupwide

procurement of high-quality raw material crude drugs andbasis, with all employees critically evaluating their own

that are conducted in collaboration with reliable, local com-work to drive change.

panies with which we have long business histories. As

Also, I hope my explanations thus far demonstrate thatthese new businesses in China are still in the preparation

our Kampo value chain could not exist without our connec-

phase, we currently lack the information necessary to dis-

tions to stakeholders, which could be seen as a sort ofclose quantitative figures for projected earnings contribu-“social relationship capital.” There are some crude drugs

tions. Our forecasts and targets will thus be disclosed at athat require a decade to cultivate, making procurement

later date.

plans based on long-term demand projections a must. The

Eye to 40 Years in the Future

implementation of such plans is supported by our trusting
relationships with farmers and agricultural associations. We

Our new challenge, that of new businesses in China, washope to maintain and strengthen these relationships going

included among the promises made to our shareholders

forward and will therefore continue to make precious, non-and other investors in the new medium-term managementmonetary investments into the future.

plan to demonstrate my resolve to practice management

As I mentioned at the beginning of this message, webased on a time frame that is longer than one, three, or

have absolute confidence in the ongoing growth of the pre-even five years. At the risk of being misunderstood, let me

scription Kampo product market and the strong demand

say that, I believe, there is not much point to evaluatingfor Kampo medicines driving this growth. By boldly pushing

Tsumura’s corporate value based on a single year’s perfor-forward with innovations in Kampo, we will provide a stablemance. The reason for this belief is that the Kampo value

supply of Kampo products boasting the high quality neces-chain, which encompasses everything from the cultivation

sary to live up to the expectations of patients and medical

and procurement of crude drugs to the manufacture andpractitioners as we pursue growth and value creation.

sale of Kampo products, moves in cycles of several years.
Furthermore, Tsumura is a unique pharmaceutical company

August 2016

with operations that extend to the agricultural field. Our current Kampo value chain was built based on the foresight ofpast managers who, roughly 40 years ago, predicted that
our future growth would hinge on crude drug procurement.

14

I too am committed to sowing the seeds for future growth

Terukazu Kato

with an eye to 40 years in the future.

President and Representative Director

TSUMURA & CO.

Special Feature

Driving Forces
behind Tsumura’s Growthand Value Creation
The Kampo business is characterized by an exceptionally long business cycle, spanning the time fromthe cultivation of crude drugs to the prescription of Kampo products to patients. As such, a forward-looking stanceis absolutely essential to achieving sustainable growth and ongoing value creation. In this special feature, we
explain the strengths that Tsumura has amassed from a long-term perspective and how these strengths will serveas the driving forces behind future growth and value creation.

Annual Report 201615

Special Feature

Driving Force 1:
Establishment and Utilization of Scientific Evidence

We are pushing forward with researchstrategies aimed at contributing to the
expansion of the Kampo medicines market by
establishing highly viable scientific evidence
as well as by aiding medical representatives(MRs) in providing medical practitioners
with timely information.
Ryuji Takasaki
Managing Executive Officer
Head of Kampo Scientific Strategies Division

Scientific Evidence for Explaining Kampo
Products Using Western Medical Language

Complete Evidence Collection for RaisingKampo’s Value

It has been found that close to 90% of Japan’s physicians

In our efforts to establish a body of scientific evidence, wehave prescribed Kampo products to their patients at somehave primarily concentrated our research resources on the

point in time.* Kampo medicine’s spread in the Japanese

five “drug fostering” program*2 formulations, which target

medical field has been driven by the establishment of scientificsuch fields as the gastrointestinal system, dementia, andevidence on efficacy.

cancer. We began this undertaking with a focus on TJ-100

1

TU-100 (Daikenchuto), for example, has traditionally been

(Daikenchuto), TJ-54 (Yokukansan), and TJ-43 (Rikkunshito).

prescribed for stomach pain. Today, this product is widely pre-In developing a body of evidence on these formulations, we arescribed to treat abdominal bloating resulting from postopera-

moving ever closer to our goal of creating complete evidence

tive ileus, a success driven by the accumulation of evidencecollection that encompasses clinical evidence based medicine;on its efficacy in this respect. As a result, sales of TU-100

action mechanisms; adverse drug reaction frequency surveys;(Daikenchuto) have grown by an average of 6.8% per year

absorption, distribution, metabolism, and excretion; and healthover the 10-year period ended fiscal 2016. As demonstrated

economic data. By expanding the scope of our research fromby this example, explaining the effectiveness of our products

clinical evidence based medicine to include safety andthrough the scientific approach that furnishes the language of

economic data, we expect to be able to enhance the infor-

Western medicine can make a direct contribution to Kampo’s

mation contained in package inserts.*3 These enhanced

recognition and appreciation among medical practitioners andpackage inserts, in turn, are expected to help heighten ourto the expansion of the Kampo medicines market.

ability to solicit the value of Kampo to medical practitioners,
particularly specialists in the fields targeted by the “drugfostering” program formulations, thereby serving as a driving
force behind the expansion of the Kampo medicines market.

16

TSUMURA & CO.

Enhancement of Evidence Collection

TJ-100(Daikenchuto)
TJ-54(Yokukansan)
TJ-43(Rikkunshito)
TJ-107(Goshajinkigan)
TJ-14(Hangeshashinto)

Actionmechanisms

Adverse drug
reactionfrequency
surveys

Listing in medical treatment guidelines(recommendation of Kampo medicines)

Metaanalysis

RCT

Paper
submitted

23

Pediatric chronic functional constipationdisease, systemic sclerosis

1

12

Dementia disease—16

OngoingFunctional gastrointestinal disease,diagnosis and treatment of psychosomaticd­ iseases, GERD

—

14

—

Benign prostatic hyperplasia, overactive
bladder syndrome

—

5

—

ADME

—

—

Clear Target Domains and Enhanced Support for
MR Activities Drawing out Latent Market Demand
To augment the power of this driving force, five new “growing”

who are responsible for catering to university hospitals andformulations were defined in fiscal 2017 to stand alongside thedesignated hospitals for clinical training.

existing “drug fostering” program formulations. We are currently

We have the utmost confidence with regard to the effective-

advancing research activities aimed at having these “growing”

ness of Kampo products and the scale of latent demand in theformulations listed in medical treatment guidelines. These

Kampo medicines market, and we have high expectations

activities will be aimed at three important domains—geriatricwith regard to both. By linking the establishment of a body ofhealth, cancer, and women’s health—in which we will focus on

scientific evidence with its utilization, we will create concrete

addressing unmet medical needs with regard to behavioral

results in drawing out latent market demand and thereby fueland psychological symptoms of dementia, frailty, supportive

steady growth of our Kampo business.

care for cancer (postoperative dysfunction, loss of appetite,and stomatitis), menopausal disorders, and other areas.
We are also committed to making good use of the scientificevidence we have already established. To this effect, membersof the Kampo Scientific Strategies Division assist in the periodic training sessions held for MRs by explaining the details
and significance of our latest scientific evidence. The goal ofthis participation is to enhance the sales capabilities of MRs,

1	Based on “Survey on Prescribing Kampo Products” 2011 by the Japan Kampo Medicines
Manufacturers Association; physicians that obtained nationally accredited licenses bystudying in Western medicine also investigate and prescribe Kampo products as there isno differentiation between Western medicine and Kampo medicine in the licensing systemfor physicians in Japan
2	Program for establishing a body of scientific evidence for formulations targeting diseases infields where medical treatment needs are high that are difficult to treat with Western drugs
and that Kampo products have demonstrated special efficacy for3	Official documents constructed in accordance with the Act on Securing Quality, Efficacy
and Safety of Pharmaceuticals, Medical Devices, Regenerative and Cellular Therapy
Products, Gene Therapy Products, and Cosmetics of Japan that contain information on
usage, dosages, and other characteristics of pharmaceuticals

Annual Report 201617

Special Feature

Driving Force 2:
Information Provision Appropriately Emphasizing Scientific Evidence, Guidelines,
and Utilization of Different Kampo Formulations

Our sales activities combine the dual
qualities of tradition and innovation
inherent in Kampo through an information
provision approach based on scientificevidence as well as an approach based on
Kampo medicine methodology.
Ryouichi Murata
Executive Officer
Head of Sales & Marketing DivisionMarket Share Expansion Exploiting
New Evidence

Promotion of Effective Kampo Use to Increase
Prescription Numbers

Promotions targeting physicians at university hospitals andAt present, roughly 70% of Tsumura’s sales come from thedesignated hospitals for clinical training exploiting scientificgeneral practitioner and clinic (GP) market, which consists

evidence will serve as a central pillar of our sales strategies

of relatively small, community-rooted medical institutions.

for expanding the Kampo medicines market.

The main task to be addressed through sales activities

In the gastrointestinal field, for example, despite the ability for TJ-43 (Rikkunshito) to treat lack of appetites andprescription numbers.

stimulate gastric motility, this formulation only has a 7%

In the GP market, only slightly above 10% of physicians

share of the market for gastric motility drugs. However, as

can effectively utilize more than 10 different Kampo formu-

there are many physicians seeking up-to-date information,

lations, but the majority of physicians have some form ofprimarily at university hospitals, achieving a larger market

experience prescribing Kampo products. Although many

share for this product will require us to continue producing

physicians are aware of the effectiveness of Kampo prod-

new scientific evidence on its efficacy.

ucts, they perceive a high barrier of entry to adopting a

Tsumura is forging ahead with concentrated sales

Kampo treatment approach—namely, utilizing the ideal

promotion activities focused on new scientific evidence.

Kampo formulations based on individual patients by deter-

At the Sales & Marketing Division, we coordinate with themining differences in their constitution and symptoms

Marketing Training Division to share the latest data collected

through diagnosis to issue different prescriptions regard-by the Kampo Scientific Strategies Division with the MRs.

less of how their disorder or symptom may be similar to thatWe thereby seek to facilitate efficient sales activities thatof other patients.

emphasize, in particular, the three important domains ofgeriatric health, cancer, and women’s health.

18

targeting this market is increasing Kampo medicines

TSUMURA & CO.

Sales Strategies for Expanding the Kampo Medicines Market

Appropriate provision of information emphasizing scientific evidence, guidelines, and proper use of different formulations
based on Kampo medicine methodology

Hospital market

Promotion activities

Focus on medical

centered on scientificspecialists in important

evidence

domains

Develop demand for
new formulations

Expansion andstable growthin the Kampo
medicines market
Promotion activities
GP market

based on Kampo

Enhance Kampo

Increase quantity ofproficiency level of GPs,

formulations / Increaseprimarily withnumber of prescribed

existing clients

formulations

medicine methodology

Enhanced Awareness of MR Roles
as a Driving Force behind Market Expansion
To help eliminate this barrier, Tsumura began implement-

Physicians with an interest in the latest data on the efficacy

ing the disorders and symptoms differentiated approach inand safety of Kampo products not only work in university

its sales activities targeting the GP market in April 2015.

hospitals conducting leading-edge research and desig-

This approach targets 44 disorders and symptoms that are

nated hospitals for clinical training but also can be found in

frequently treated at GP institutions and that Kampo medi-

small-scale medical institutions. In other words, the role ofcine addresses with particular effectiveness, preparing

MRs—namely, to provide physicians with highly viable

between three and five formulations for each, for a total of

information in accordance with their needs—is the same

77 formulations, with certain formulations treating several

in both of the two aforementioned information provision

disorders or symptoms. With a focus on providing informa-

approaches. By adopting an information provision approachtion about these formulations, we create visual aids andbased on scientific evidence as well as an approach based

other materials, which we use to explain such matters as

on Kampo medicine methodology, we aim to augment ourwhich formulations will serve as substitutes should a spe-sales capabilities to provide flexible responses to physi-

cific formulation fail to prove effective. Physicians havecians’ various needs and utilize these capabilities as aoffered much praise for how easy these explanations are­driving force behind the expansion of the Kampo medicines

to understand. These efforts have created clear results inmarket. Through this expansion, we will work toward ourincreasing Kampo medicines prescription numbers, asultimate goal of contributing to the lives of patients.

marked by a 4.5% rise in the total sales of the formulations
applicable under this approach in fiscal 2016 based onsales by pharmaceutical sales agents to medical institutions.

Annual Report 201619

Special Feature

Driving Force 3:
Ongoing Improvement of Productivity

By creating frameworks, in terms of bothinfrastructure and intangible elements,that allow for increased production
without increased staff numbers, we will
gradually improve productivity to prepare
for upcoming periods of brisk sales.

Hideo Mano
General Manager
Product Secretary Pharmacist
Shizuoka Plant

Three Characteristics of Kampo Production
at the Shizuoka Plant
Productivity improvements at the Shizuoka Plant arematerials used in production processes will also be large. In

heavily influenced by three characteristics of Kampo

addition, these intermediates and materials are made fromproduction. For this reason, the realization of improved

naturally sourced crude drugs, which come in various forms,

productivity implies addressing the issues that arise from

including tree bark, plant roots, leaves, and minerals, and canthese characteristics.

be quite large or heavy. Accordingly, the storage and trans-

The first characteristic is the large number of formula-portation of raw and other materials and products createstions needing to be produced. The Shizuoka Plant manu-

a significant obstacle toward productivity improvements.

factures 84 of Tsumura’s 129 prescription Kampo products

The third characteristic is that the various formulations

as well as 44 over-the-counter formulations and more thanmanufactured all have different traits. For example, all of the

100 crude drug pieces for decoction and other products.

84 prescription Kampo products manufactured at this facility

The second characteristic is the volume of materials han-end up as granulated extracts of the same size and shapedled. In Western medicine, the volume of active ingredientsin their final form. However, the physical qualities of eachin drugs is measured in milligrams, and it is rare for a drug

powder differ with regard to such factors as the viscosity of

to contain more than a gram of an active ingredient. For

fluids and the quantity of powdered extracts used during

Tsumura’s Kampo products, however, even the lightest for-production processes. As such, the production and clean-

mulations still require 1.25 grams of dry extract in eaching knowledge required for each formulation is different.

dosage package, while heavier formulations can require as
much as 7.00 grams. If the volume of a completed productis large, the volume and weight of the intermediates and

20

TSUMURA & CO.

Typical Production Flow for Kampo Products

Storing Crude Drugs

Spray-Drying

Cutting

Boxed
crude
drugs

Extracting

Mixed
crude drugs

MixingCompacting
and Crushing

Powdered
extract

To automatedwarehouse

To automatedwarehouse

Storing Crude Drugs

Cutting

Weighing and
Mixing

Granulated extract
Hopper

Weighingand Mixing

Choppedcrude drugs

Powdered
extract

Powdered
extract Lactose

Extraction and
Separation

Drying

Granulation

Filling andPackaging

Crushing

Powdered extract

Tablets

GranulesUse of automatedconveyance system

Productivity Improvements through AutomatedConveyance Systems and Know-How Transference
The issues arising from the first and second characteristics

expertise. In the past, experienced and highly skilledof Kampo production can be addressed by reducing theemployees were responsible for making adjustments tolabor requirements for transporting heavy articles. The

production processes based on the differing traits of formu-

Shizuoka Plant’s new granulation and packaging facility,

lations. However, production processes are becoming

which is scheduled to commence full-fledged operation inincreasingly automated and the employees that used tofall 2016, will be equipped with an automated conveyancehandle such adjustments are getting on in years. We aresystem that will store and transport the raw and other mate-

therefore working to compile the know-how and experiencerials and intermediates needed for each step of the manu-

accumulated on the production floor in the form of data

facturing process. This system will employ automatedwhile sharing the answers to the questions that arise withforklifts capable of retrieving even single pallets and robots

regard to newly introduced equipment among plant staff.

for transporting material containers. The need for employ-As the automation of production processes proceeds, theees to transport heavy articles will be almost completely

main role of our plant employees will naturally shift towardeliminated as a result. The automated conveyance systemmonitoring these processes, and the know-how required to

can also be used when switching over to the production

effectively control automated systems will become anof different products, lowering labor requirements forincreasingly more important part of operations. The intangible

exchanging and washing parts and creating subsequent

strengths of experience and know-how will thus serve as agains in production speed.

driving force for our efforts to realize ongoing productivity

To address the issues created by the third characteristic,
we are focusing our attention on the transference ofimprovements and maintain impeccable levels of quality bydrawing out the maximum potential of our production facilities.

Annual Report 201621

Review of Operations

In May 2016, Tsumura launched its new medium-term management plan, which covers theperiod from fiscal 2017 to fiscal 2022 and is designed to further the Company down the path
toward its long-term business vision (Vision for 2021): “Aim to be a value-creation company that
contributes to people’s health through its Kampo business.” Based on the theme of “creating
new value through innovations in Kampo,” the new medium-term management plan sets forththree strategic challenges: expansion and stable growth in the Kampo medicines market,­continued reinforcement of profitability and maximization of cash flow, and challenge of new­businesses in China.

Creating
New Value
throughInnovationsin Kampo

Expanding

Expansionand stable
growth in the
Kampo medicines
marketthe Japanese market

Developing
the U.S. market

Managing

Continued
reinforcement of
profitability andmaximization of
cash flow

Challenge of
new businesses
in China

22

TSUMURA & CO.

crude drug costs

Improvingproductivity

These three strategic challenges were selected based on the results of the measures Tsumura has advanced to date.
In this section, we review examples of the past measures and results that formed the basis for the new medium-term
management plan. Specifically, we review two of the strategic challenges of the first-stage medium-term management plan
implemented over the four-year period from fiscal 2013 to fiscal 2016: expanding the Kampo medicines market andenhancing earning power.

Conducting medical representative activities: physician visits, seminars,
information meetings, and other forums

P. 25

Increase in percentage of physicians prescribing more than
10 formulations from current 10% to 50% in future

Establishing scientific evidence

P. 26

Strategicallyincreasingprescriptions
by physiciansFive “drug fostering” program formulations contribute 27.1% of net sales

Supporting Kampo medicine education

P. 27

Kampo medicine taught at all 80 medical colleges anduniversities nationwide

Developing TU-100

P. 28

Progress in clinical trials targeting U.S. launch

Increasing area of Cultivated Land under Own Management

P. 29

Ratio of crude drugs procured from Cultivated Land under Own Management
to total procurement volume of 36%

Raising production efficiency

P. 29

Expansion of ginseng cultivation in preparation for future demand growth

Introducing and exploring new production technologies

P. 31

Average annual capital investment of ¥10.0 billion leading up to fiscal 2019

Taking on the challenge of new businesses in China

P. 32

Participation in traditional Chinese medicine compound granuleand other businesses

Annual Report 201623

Review of Operations

Trends in Pharmaceutical Kampo Product Sales and Profits
Pharmaceutical Kampo Product Sales

Actual Sales of Prescription Kampo Products

In fiscal 2016, the year ended March 31, 2016, net sales

On a unit sales basis, actual sales by pharmaceuticalrose 2.0% year on year, to ¥112,625 million. Within thiswholesalers to medical institutions increased 4.0% year on

amount, sales of the 129 formulations of prescription Kampo

year, to more than 19.00 million units. Sales also increased

products manufactured by Tsumura rose 2.3% from theon a monetary basis, rising 3.7%, to ¥123,053 million.*1

previous fiscal year, to ¥107,599 million. A total of 68 of the

Tsumura’s share of the overall market on a monetary basis

129 formulations registered year-on-year sales increases.

remained about the same as in fiscal 2015, at 84.3%.*1
1	Copyright 2016 IMS Health. All rights reserved. Estimated based on “IMS JPM Mar.
2007 MAT- Mar. 2016 MAT.” Reprinted with permission.

Sales of Prescription Kampo Products

Sales and Quantity ofTsumura Prescription Kampo Products*2¥ billion¥ billion / millions of units

120

107.5

150

20

100

15

50

10

80

40

0

〜
〜

12

13

14

15

16

0

07

08

09

10

11

12

13

14

15

16

0

Sales*1
Quantity (right scale)
2 Sales and quantity from pharmaceutical wholesalers to medical institutions

Top 10 Kampo Products by Sales Amount¥ million

Main effectively treatable disorders

FY2016FY2015Difference

YoY change

1 TJ-100 (Daikenchuto)

Product name

Abdominal pain / abdominal flatulence

10,273

9,993

279

2.8%

3 TJ-54 (Yokukansan)

Neurosis / insomnia, etc.

7,215

6,895

319

4.6%

2 TJ-41 (Hochuekkito)

Reinforcement of physical strength after illness / anorexia, etc.

6,968

6,965

3

0.1%

4 TJ-43 (Rikkunshito)

Gastritis / maldigestion / anorexia, etc.

6,604

6,633

–29

–0.4%

5 TJ-68 (Shakuyakukanzoto) Pain accompanying sudden muscle spasms, etc.

4,688

4,440

247

5.6%

7 TJ-29 (Bakumondoto)

Coughing / bronchitis / bronchial asthma

4,494

4,178

316

7.6%

6 TJ-24 (Kamishoyosan)

Oversensitivity to cold / menstrual irregularity / climacteric disturbance

4,465

4,285

179

4.2%

8 TJ-107 (Goshajinkigan)

Leg pain / low back pain / numbness / dysuria, etc.

3,838

3,814

23

0.6%

9 TJ-114 (Saireito)

Swelling (edema) / acute gastroenteritis, etc.

3,351

3,308

42

1.3%

10 TJ-1 (Kakkonto)

Common cold / coryza / shoulder stiffness, etc.

3,253

2,986

267

9.0%

— TJ-14 (Hangeshashinto)

Stomatitis / fermentative diarrhea / neurotic gastritis, etc.

Total sales of 129 prescription Kampo products

24

TSUMURA & CO.

1,250

1,230

20

1.7%

107,599

105,193

2,405

2.3%

Specialist Medical Representative Activities
Use of Prescription Kampo Products by Physicians
Kampo products are widely used in the healthcare workplace
in today’s Japan. According to a 2011 survey conducted by
the Japan Kampo Medicines Manufacturers Association,*3
89% of Japan’s physicians have prescribed Kampo products

Number of Types of Kampo Products Prescribedby Physicians
Physicians who actually prescribe Kampo products(Valid number of responses = 558)

3%

for their patients, and the average number of different1 to 47%

5%

5
 to 91
 0 to 141
 5 to 19

Kampo products prescribed by the respondent physiciansThis figure is up from 7.8 products in the previous survey
3	Japan Kampo Medicines Manufacturers Association, “Survey on Prescribing Kampo
Products” 2011

Disorders and Symptoms Differentiated Approach
In fiscal 2016, Tsumura deployed its new disorders andsymptoms differentiated approach, which entails focusing

Sales of 77 Formulations Promoted through Disorders
and Symptoms Differentiated Approach¥ million
75,00072,987

on disorders or symptoms for which Kampo products will
most likely be effective and proposing appropriate formula-M ore than 25
Source: Japan Kampo Medicines
Manufacturers Association,“Survey on Prescribing Kampo
Products” 201129%

done in 2008.

2
 0 to 24

40%

16%

that actually prescribe Kampo products was 8.5 products.

71,14470,000

tions to physicians. Through this approach, we aim toincrease the number of Kampo formulations prescribed byphysicians that actively utilize Kampo products. As a resultof these efforts, a total year-on-year increase of 2.6% wasseen in the sales of the 77 formulations promoted through65,000YoY Growth of 2.6%

60,000〜〜0

2015

this approach.
Provision of Information and Training
Opportunities for Physicians
Tsumura holds Kampo training sessions for physiciansin-training at university hospitals and designated hospitals

2016

Kampo Medicine Seminars
People / Times
6,000

240

4,923

5,000

170

200

for clinical training. By exposing such fledgling physicians

4,000

to Kampo products during the process of their medical

3,000

120

education, we aim to increase the usage of Kampo products

2,000

80

1,000

40

in clinical treatment. In addition, we provide fine-tuned
responses to the diverse education needs of physiciansthat actually utilize Kampo medicine in their practice byoffering various seminars based on different Kampo

0

1st half
FY2014

2nd half
FY2014

Number of participants

1st half
FY2015

2nd half
FY2015

1st half
FY2016

2nd half
FY2016160

0Number of seminars (right scale)understanding levels.

Annual Report 201625

Review of Operations“Drug Fostering” Program Results“Drug Fostering” Program Formulation Sales

Sales of “Drug Fostering” Program Formulations

Sales of the five prescription Kampo formulations in the¥ million / ¥ billion“drug fostering” program—TJ-100 (Daikenchuto), TJ-43

12,000

120

6,000

60

(Rikkunshito), TJ-54 (Yokukansan), TJ-107 (Goshajinkigan),
and TJ-14 (Hangeshashinto)—rose 2.1% year on year.
Sales continued to increase for all formulations except
TJ-43 (Rikkunshito), with particularly strong growth of 4.6%
posted for TJ-54 (Yokukansan). Sales of the top seller,
TJ-100 (Daikenchuto), climbed to more than ¥10.0 billion
and generated 9.5% of Tsumura’s total prescription Kampo
product sales.

0

07

08

09

10

11

12

13

14

15

16

0

TJ-100 (Daikenchuto)
TJ-43 (Rikkunshito)
TJ-54 (Yokukansan)
TJ-107 (Goshajinkigan)
TJ-14 (Hangeshashinto)
Total of 129 Kampo products (right scale)

Sales Growth of “Drug Fostering”
Program Formulations

Sales Contribution of Five “Drug Fostering”
Program Formulations

In the past, sales of the five “drug fostering” program¥ billion / %formulations drove growth in overall prescription Kampo

120,000

27.1%

products. In fiscal 2016, however, Tsumura began
implementing its disorders and symptoms differentiated30

78,41780,00020

40,00010approach to respond to the diversification of physician
needs, and the sales growth rate of the 77 formulations
applicable under this approach exceeded the sales growth29,182of the five “drug fostering” program formulations, although
the sales of these formulations did remain high, representing
27.1% of total net sales.

0

12

13

14

15

16

 ive “drug fostering” program formulations
FA ll other 124 formulations
Ratio of five “drug fostering” program formulations (right scale)Five “Drug Fostering” Program Formulations
Product name

Expected efficacy

Significance to program

TJ-100(Daikenchuto)This formulation improves abdominal bloating from illness, such as postoperative ileus(intestinal paralysis). Because it has been proven to stimulate or regulate enterokinesis and toincrease intestinal blood flow, it is expected to also have application in treating patients withdisorders thought to be caused by reduced intestinal blood flow.

Establishing scientific evidence of efficacy
of prescription Kampo products in thesurgical field

TJ-43(Rikkunshito)This formulation alleviates upper abdominal indefinite complaints arising from functional
dyspepsia (FD), gastro-esophageal reflux disease (GERD), and others. Besides helping gastric
emptying, it has been reported that TJ-43 (Rikkunshito) improves stomach content retention
and helps stimulate the appetite. It is drawing considerable attention for its multiple mechanismsof action (MOA) in sharp contrast to Western drugs.

Elucidating special characteristics ofmultiple ingredient based Kampo medicinesand correlation to MOA

TJ-54(Yokukansan)

This formulation improves behavioral and psychological symptoms of dementia, such as­ elusions, hallucinations, anxiety, insomnia, and other disorders.
dResearching the medical and economic
contribution of Kampo medicines to medicine
and medical treatment in an aged society

TJ-107(Goshajinkigan)This formulation alleviates neurotoxicity (numbness) adverse reactions of anticancer drugs
and other treatments used in chemotherapy.

Establishing a body of scientific evidence on
the efficacy of Kampo medicines in oncology
and other advanced medical treatment fields

TJ-14
This formulation mitigates mucosal damage (diarrhea and oral inflammation) resulting from
(Hangeshashinto) anticancer drugs and other causes.

26

TSUMURA & CO.

0Establishment of Kampo Medicine
Support for Kampo Medicine Education at Medical
Colleges and University Medical Departments
As one of its goals toward establishing Kampo medicine,
Tsumura is working toward the inclusion of questions on
Kampo medicine in the Japanese national examination for
medical practitioners.*4 To this end, Tsumura has been
supporting Kampo medicine education for medical students
at the 80 medical colleges and university medical departments
in Japan since 1997. The Company achieved its goal of
Kampo medicine education being implemented at all 80 ofthese medical colleges and universities in 2004. In recent

Three Objectives

FY2016 Record•A t least eight Kampo medicine
courses required for graduation• Implemented at
72 medical schools•S etting up Kampo medicine
outpatient clinics*5 at university
hospitals• Implemented at
79 medical schools•H aving medical schools
established Kampo medicine
lecturer development systems*6• Implemented at
all 80 medical schools

5 Outpatient clinics that provide Kampo medicine based diagnoses and treatment
6	Fostering education administrators within medical colleges and universities that promote
Kampo medicine programs

years, we have been encouraging nationwide medical
education institutions to include Kampo internships as partof their Kampo medicine education curriculum.

Cumulative Total of Medical Students Passing the National
Examination for Medical Practitioners*7
People100,000

93,562Integrated Kampo Medicine Education Support
As of February 2016, nearly 100,000 medical students havepassed the Japanese national examination for medical
practitioners since 2005, the year following the implementa-

50,000tion of Kampo medicine education at the 80 medical education institutions nationwide. In addition to providing support
for Kampo education at medical education institutions, weare also encouraging increased prescription of Kampo
products by providing information and training opportunities

0

05

06

07

08

09

10

11

12

13

14

15

16

7	In 2004, Kampo medicine education was implemented at all medical colleges anduniversities in Japan. The numbers are the cumulative total since 2005.

for newly graduated and practicing physicians.
4 	Currently, in Japan there is no differentiation between Western medicine and Kampo
medicine in the licensing system for physicians. Therefore, there is only one national
examination in which there are no questions on Kampo medicine.

Kampo Medicine Education System
Before graduation

Immediately after graduation

Post-graduation

Improvement, establishment, and evolution of Kampo medicine education
at university medical departments, medical colleges, designated hospitals for clinical training, and other medical institutions

Lectures

Medicalstudents

Kampo medicine
clinics (training)
Lecturers (instructors)
Text books
University medical departments and medical colleges

Kampo Medicine
Seminars

Designated hospitals
for clinical training

Physiciansin-training /Clinical
physicians

Clinical
physiciansContinuous flow ofphysicians educatedin Kampo medicine

Annual Report 201627

Review of Operations

Internationalization of Kampo Medicines
Growing Kampo Medicines Related Research

Kampo Medicines Related Papers Published

Scientific evidence is absolutely essential to realizing thePapers60

prescription of Kampo products in specialized medical
fields. We have thus set the goal of establishing a complete
evidence collection that encompasses clinical evidence

33

based medicine; action mechanisms; adverse drug reac-

30

tion frequency surveys; absorption, distribution, metabolism, and excretion; and health economic data. In addition,
we began establishing evidence for five new “growing” for0

mulations,*8 which were defined to stand alongside the five

11

12

13

14

15

16

“drug fostering” program formulations.
8	New strategic formulations defined to stand alongside the five “drug fostering” program
formulations as growth drivers that we aim to have listed in medical treatment guidelines
by establishing scientific evidence in fields where treatment satisfaction and contributions
from medicine are low

FDA Approval Process for General Pharmaceuticals

TU-100 (Daikenchuto) Clinical Trials• Investigational New Drug (IND) applicationin the United States• Phase I to Phase III Clinical Trials• Preliminary review—New Drug Application (NDA)

Tsumura has its sights set on introducing Kampo products into

• Review Process and Additional Submissions

the U.S. market, the world’s largest market for pharmaceuti-• Manufacturing Facility Inspection

cals. To accomplish this objective, we are advancing early-• New Drug Approvalstage Phase II clinical trials in the United States for TU-100• Post-Marketing Monitoring(Daikenchuto), a “drug fostering” program formulation forwhich a body of scientific evidence has been established. The
trials currently under way are set to conclude during fiscal
2018, and the findings of these trials will be used in setting
the policies for late-stage Phase II trials and other trials.

Development of TU-100 (Daikenchuto) in the United States
Previous medium-term management plan
FY2013
Quality control

Safety, etc.

New medium-term management plan
FY2016

using biological assessments and HPLC-FP

Scheduled to be completed in fiscal 2017

TSUMURA & CO.

FY2018FY2019 and after• Agree on quality control systems• Establish database for crude drug quality

PII (early stage)

Endpoint search clinical trials (patients with laparoscopic colectomy)
Scheduled to be completed in fiscal 2018
Responder trials (patients with Crohn’s disease)
Fiscal 2012–fiscal 2015
Adverse drug
reactions*1

PII (early stage)

Plan to decide on direction
and schedule for late stageof PII and on in fiscal 2019 after
finishing and analyzing all ofearly stage of PII for
IBS/POI and
Crohn’s disease

PII (early stage)

ADME*2

1 Submit results of surveys on the frequency of adverse drug reactions manifestation to the FDA
2 Submit clinical pharmacokinetic results on healthy U.S. citizens to the FDA28

FY2017

Endpoint search clinical trials (IBS patients)

POI

Crohn’sdiseaseFY2015

Through meetings with FDA, agree on quality evaluation methods

IBS
Efficacy and safety

FY2014

IBS: Irritable bowel syndrome, POI: Postoperative ileus

Stable Procurement of Crude Drugs and Production Efficiency Improvement
Expansion of Cultivated Land under Own Management

Cultivated Land under Own Management

The expansion of Cultivated Land under Own Management*%

9

forms the central pillar of the Company’s measures for50

43

securing a stable supply of crude drugs. The new mediumterm management plan commenced in May 2016 has set
the goal of raising the ratio of crude drugs procured from25

Cultivated Land under Own Management to our total commission volume from fiscal 2016’s 36% to 43% in fiscal 2019.
9	Cultivated Land under Own Management refers to farms with a cultivation area above
a defined amount for which Tsumura directly provides cultivation guidance and has anunderstanding of cultivation costs based on which it can set crude drug procurement
prices. Not only limited to farms directly operated by the Tsumura Group, these farms
also include collaborative cultivation in China and contracted cultivation in Japan.

0

16

17

Result

18

Plan

19

Plan

Plan

 atio of crude drugs produced in Cultivated Land under Own ManagementR
to total commission volume of crude drugs

Procurement of Crude Drugs from China
Demand for Kampo products is expected to increasesteadily going forward, and securing a stable supply ofhigh-quality raw material crude drugs that matches theAmount of Crude Drugs Used andGranulated Kampo Extracts Produced

scale of this demand will be among the most importantTons

management tasks for Tsumura. Currently, approximately

12,00011,61980% of the crude drugs used by the Company are procured
9,281

from China. In this country, local subsidiary SHENZHENTSUMURA MEDICINE CO., LTD., plays a central role inestablishing long-term cooperative business relationships

6,000

with crude drug production associations.
Expansion of Ginseng Cultivation
In 2011, the prices of ginseng and certain other raw material

011Crude drugs

12

13

14

15

16

Granulated Kampo extracts

crude drugs began to rise sharply, adversely impacting theCompany’s profitability. In fiscal 2016, however, the priceof ginseng began to fall due to a decrease in speculative
investment demand as well as an increased supply to themarket. Nonetheless, demand for ginseng in China is projected to grow over the medium-to-long term. The Company

Overall Procurement Price of Crude Drugs
Produced in China
Representation of weighted average of actual prices from production region
to ­affiliated company when 2006 price is set at 100
300

is therefore advancing joint research with the Institute ofChinese Materia Medica of the China Academy of Chinese

241

234 230217

200

Medical Sciences regarding ginseng cultivation and ongo-

190

156

ing use of ginseng cultivation sites.
100

06

117

110 110

07

08

09

10

11

12

13

14

〜
〜

0

100

15

18

21

Forecast

Annual Report 2016

29

Review of Operations

Crude Drug Cultivation in Japan and Laos

Traceability System Ensuring Stable Supply

In addition to China, Tsumura has been procuring raw

of High-Quality Crude Drugs

material crude drugs from within Japan since the 1960s.

Tsumura procures raw material crude drugs from China,

Today, the Company utilizes crude drugs cultivated based

Japan, and Laos among other countries, and it is therefore

on contracts with agricultural associations and other agricul-

critical to manage the quality of these crude drugs basedtural companies in Hokkaido, Iwate, Gunma, Wakayama,

on rigorous standards that are the same regardless of the

Kochi, and Kumamoto prefectures. In addition, subsidiary

producing region and to ensure a stable supply. For thisYUBARI TSUMURA & CO., LTD., was converted into an

reason, the Company has established a traceability system

agricultural production corporation in December 2014 withthat records and stores data on every stage of the produc-

the aim of expanding upon the functionality of this company

tion of crude drugs, from the cultivation of raw material

and thereby transforming it into an integrated production

crude drugs to processing, logistics, storage, and otherbase capable of everything from crude drug cultivation toprocesses. Moreover, this system allows for stored data toprocessing and storage.

be tracked and reviewed.

Furthermore, raw material crude drug cultivation subsidiary LAO TSUMURA CO., LTD., was established in Laos in
February 2010. The subsidiary began with only 150 ha ofCultivated Land under Own Management, which has since
expanded to approximately 770 ha spread across seven sites.

Crude drug cultivation in Hokkaido

Crude drug cultivation in Laos

Sharing Traceability Information
Crude drug cultivationsites in China
SHENZHEN TSUMURA

SHANGHAI TSUMURA

Ibaraki Plant

Crude drug cultivationsites in JapanYUBARI TSUMURALAO TSUMURA

30

TSUMURA & CO.

Quality control center
in Ishioka, Ibaraki

Shizuoka Plant

Introduction of New Manufacturing Technologies
Capital Investment for Increased Production Capacity

Productivity Improvement to Reduce Labor

In consideration of sales trends, Tsumura conducts

Requirements and Energy Consumption

systematic capital investment through which it implements

By conducting ongoing capital investment, Tsumura is

production system reforms to enable it to meet future demand.

improving its basic production capabilities and, given

Capital investment in fiscal 2016 totaled ¥10.4 billion, up

Japan’s participation in the Pharmaceutical Inspection¥0.7 billion year on year, and was directed at the construc-

Convention and the Pharmaceutical Inspection

tion of warehouses, manufacturing facilities, and office

Co-operation Scheme (PIC/S),*10 is advancing compliancebuildings at YUBARI TSUMURA, projects that were completedwith PIC/S GMP, the international good manufacturing prac-in September 2015. In fiscal 2017, the completion of con-tice (GMP) standards set forth by these instruments. We are

struction at a new granulation and packaging facility at thealso endeavoring to automate processes and reduce labor

Shizuoka Plant is scheduled for September 2016, with pow-

requirements through the introduction of robots. By under-

dered extract production at this plant as well as the opera-

taking such capital investment and other initiatives aimed attion of a new manufacturing facility at the Ibaraki Plant set to

optimization across the supply chain, we will target a 30%

begin later in the year.

improvement in labor productivity*11 versus fiscal 2016’s
level to be achieved by fiscal 2022.

Capital Investment

10	An organization that seeks to achieve international compliance regarding each country’s
GMP standards for manufacturing pharmaceuticals and The Convention for the Mutual
Recognition of Inspections in Respect of the Manufacture of Pharmaceutical Products;
membership is voluntary and mainly comprises health authorities from European nations¥ billion
15

11	Labor productivity = Production volume / Number of factory employees
10.4
10

5

0

12

13

14

15

16

Capital Investment Plan
Phased capital investment in accordance with sales
First-Stage Medium-Term Management Plan

Capital investment project

Crude drug
relatedProduction related

Shizuoka Plant

FY2013

FY2014FY2015

New Plan

FY2016

New granulation and packaging facilities, etc.

FY2017 and after

September

New crude drug warehouseMay

SD line related
Ibaraki Plant

New granulation facility

February

February

New standard-based facilities, etc.
STP (Shanghai)

SD facility

Production, other

Development / maintenance / renewal

Ishioka

Ishioka Center reconstruction

STM (Shenzhen)

Warehouse

YubariYUBARI TSUMURA buildings

September
January
March
September

Crude drugs, etc.

Scheduled start-up of operations

Annual Report 201631

Review of Operations

Challenge of New Businesses in China
Participation in Traditional Chinese Medicine

Comprehensive Business Collaboration Agreement

Compound Granule Businesswith Local Chinese Company

In May 2016, Tsumura established a joint venture company

The Company has entered into a comprehensive businesswith Shanghai Traditional Chinese Medicine Co., Ltd., acollaboration agreement with China Medico Co., Ltd., one

subsidiary of Shanghai Pharmaceuticals Holding Co., Ltd.,of its main suppliers of raw material crude drugs. Under thisa local company in China with which the Company has aagreement, both companies will strengthen their relation-

long business relationship regarding the procurement ofship with regard to the supply and procurement of raw

crude drugs. The joint venture company will deal in tradi-material crude drugs for Kampo products. The agreementtional Chinese medicines, manufacturing and selling tradi-also entails conducting joint research on key crude drugs,

tional Chinese medicine compound granules, which aresuch as ginseng, and managing related production sites aspowdered extracts that are used in the preparation ofwell as building a system that allows for stable, long-term

Chinese medicines and made by extracting a single crude

supply of crude drugs. Furthermore, we are advancing

drug from crude drug pieces for decoction. Through thisplans for joint development of a Chinese crude drug pieces

undertaking, we will utilize crude drug cultivation and pro-for decoction business in China and are examining the pos-cessing technologies accumulated in China as well as oursibility of expanding the scope of such joint operations inquality assurance expertise and powdered extract manu-

the future.

facturing technologies to contribute to the health of people
in China. The business operations of this joint venture arealso anticipated to help improve the quality of crude drugs
in China and protect crude drug resources in the country,
thereby enabling Tsumura to stably procure raw material
crude drugs over the medium-to-long term.

32

TSUMURA & CO.

Frequently Asked Questions

Tsumura places high priority on communicating with shareholders and other investors
and strives to provide information disclosure that will dispel as much as possible theirconcerns about the Company and its operations. This FAQ section provides answers to
the most commonly asked questions from shareholders and other investors received
through our investor relations (IR) activities.

Q.
Recently in Japan, it is often being said that Kampo

the physical constitution and subjective symptoms of

medicine and Kampo products are contributing topatients. While Western medicine faces difficulty in address-

women’s participation in the workforce. What is theing such disorders, Kampo medicine is able to formulate anconnection between these two?

effective treatment based on the physical conditions andA.

major symptoms of the patient. It is commonly known thatAs the number of working women increases, so does the

nomic nerve balances, and we therefore anticipate that the

number of women suffering from conditions thought tonumber of Kampo medicines prescriptions issued to treat

result from stress. Accordingly, Kampo medicine anddisorders unique to women will increase going forward.

Kampo products excel at recovering hormonal and auto-

Kampo products, which have traditionally demonstrated
efficacy in treating disorders in the female body, are once
again garnering attention.

Q.
What steps does Tsumura take to ensure effective quality

Lately, gender-based medicine, the idea that treatment

control and maintain appropriate working conditions forshould be based on the differences in disorders andemployees at its bases in Japan, China, and Laos?

symptoms between men and women, has been identified asa matter of importance, even in Western medicine. Kampo

A.

medicine, meanwhile, has always provided methods of

Quality control of crude drugs and Kampo products istreatment for disorders and symptoms that are unique to

conducted based on common standards that are applied

women, as indicated by articles focusing on gender differ-to all bases. At the same time, we provide various training

ences found in classical Kampo medicine documents. As

opportunities for employees at every base while striving tosuch, the recent attention directed at the relationship between

create an environment in which everyone can gain a sense

Kampo medicine and women can be seen as a result of theof fulfillment from their work.

rise in the number of working women and the subsequent
increase in the number of women suffering from various

Currently, the Group procures approximately 80% of the raw

stress-related symptoms.

material crude drugs it uses from China, 15% from Japan,

Menopausal disorders is one of the most noteworthy areas

and 5% from Laos, among other countries. We implementin which Kampo products can address disorders unique toquality control measures for crude drugs based on

women. Kampo medicine specializes in dealing with disorders

common standards, regardless of which country they werelike general malaise—that is, those disorders in which theprocured from. Crude drugs procured in China are col-patient feels significant discomfort despite examinationslected within SHENZHEN TSUMURA MEDICINE CO., LTD.,

being unable to determine any cause. Kampo’s strength inand the Ishioka Center in Ibaraki Prefecture, while thosetreating these disorders comes from the emphasis placed on

procured in Japan, Laos, and other countries are

Annual Report 201633

Frequently Asked Questions

accumulated at the Ishioka Center. After separating out any
foreign objects along with crude drugs that do not meetQ.

quality standards, quality inspections are conducted atWhat does the Company refer to when it speaks of “NHI

these locations. These inspections entail safety checks

drug price revisions”? Also, what measures does

for confirming that crude drugs do not contain residual agri-

Tsumura take to combat the effects of such revisions?

cultural chemicals, microbes, or heavy metals. To manage
product quality, the manufacture of Kampo products at

A.

Tsumura’s three production bases—SHANGHAI TSUMURA

The prescription Kampo products supplied by Tsumura

PHARMACEUTICALS CO., LTD., the Shizuoka Plant,

are sold based on set official drug prices, and theseand the Ibaraki Plant—is conducted in accordance withprices are periodically revised to reflect market prices. We

good manufacturing practice (GMP) standards* and withwork to ensure that Kampo products are sold at prices

Kampo GMP standards.

that reflect their true value.

Employees working at overseas bases are granted
opportunities to undergo training in Japan. Over the past

The 129 prescription Kampo products provided by Tsumura

five years, several management candidates have been

are all covered under the Japanese National Healthinvited to Japan from SHANGHAI TSUMURA

Insurance (NHI) plan. The Ministry of Health, Labour and

PHARMACEUTICALS, SHENZHEN TSUMURA MEDICINE,

Welfare sets official prices for all prescription pharmaceuti-and LAO TSUMURA CO., LTD., to take part in training at

cals that are applicable under the NHI plan and periodically

Tsumura’s Head Office, tour the Ibaraki Plant, and build ties

revises these prices to reflect market prices. These revisions

with other Group employees.

are conducted once every two years, in principle, with the

In addition, the Group’s long-term business vision (Vision

most recent revision taking place in April 2016.

for 2021) sets forth the goal of having Tsumura recognized

The rate of decrease in the NHI drug prices of Tsumura’s

as “the ‘people’ company.” We are therefore committed toprescription Kampo products is relatively low in comparison

creating an environment in which all employees can gain ato the overall rate of decrease for the entire pharmaceuticalsense of fulfillment from their work. Furthermore, the newmarket. For example, the average rate of decrease for all

medium-term management plan unveiled in May 2016 setspharmaceuticals was 7.8% in the April 2016 revision, but

forth the challenge of new businesses in China as a strate-

Tsumura’s 129 prescription Kampo products only saw their

gic challenge for the Company. In taking on this challenge,

prices decline by about 3.0% on average. This favorable

Tsumura will seek to expand its business while contributing

outcome is a result of our efforts to solicit the value ofto the health of people in China, and this undertaking is

Kampo products based on the amount of time and laborthus expected to lead to higher employee satisfaction,

devoted to creating these products through such pro-­particularly in China.

cesses as crude drug cultivation and quality control. To* Standards for the manufacture and quality control of pharmaceuticals set by the
Minister of Health, Labour and Welfare in accordance with the Act on Securing Quality,
Efficacy and Safety of Pharmaceuticals, Medical Devices, Regenerative and Cellular
Therapy Products, Gene Therapy Products, and Cosmetics. (Pharmaceutical andMedical Device Act)

minimize the adverse impacts of NHI drug price revisions,
we endeavor to maintain the market price of our products
and to expand the Kampo medicines market by increasing
the range of disorders and symptoms for which Kampo
products are prescribed along with the number of physicians that write such prescriptions.

34

TSUMURA & CO.

Research and Development

Through its R&D activities, Tsumura is actively seeking to elucidate the mechanisms of Kampo
products that have a history of use reaching back 1,400 years. The Company’s purpose is to establish Kampo medicine as a useful contributor to modern medicine.

Basic R&D Policy

In addition, in May 2016, we defined five strategic “grow-The most important area being addressed by Tsumura

ing” formulations to stand alongside the five “drug foster-

R&D programs is the establishment of a body of scientificing” program formulations as formulations for which we will

evidence for the efficacy of pharmaceutical Kampo products.

establish scientific evidence in fields where treatment satis-

Previously, the Company’s drug discovery programs

faction and contributions from medicine are low. For the five

focused on Western drugs similar to other pharmaceutical“growing” formulations, we are advancing research efforts

companies. However, in 2004, Tsumura halted thesemoving toward the milestone of having these formulations

programs and shifted the direction of its R&D policy tolisted in medical treatment guidelines.

concentrate its resources on the accumulation of a bodyWith regard to TJ-100 (Daikenchuto), one of the fiveof evidence for existing Kampo products. The backdrop to“drug fostering” program formulations, our development

this action was a determination by management that for

activities are targeting the launch of this product as a

the Company to achieve its mission of “contributing to theprescription pharmaceutical in the U.S. market (see page

unparalleled medical therapeutic power of the combination

28). The Company is working to conduct efficient R&D

of Kampo medicine and Western medicine,” it had toefforts by linking its results in Japan with its development

demonstrate the efficacy of Kampo products using thedrive in the United States.

same logic as applied to Western medicine—a scientificbody of evidence.

Utilization of New Technologies and Coordination
with External Research and Educational Institutions

Establishment of Scientific Evidence

Tsumura actively takes advantage of new analysis methods,

Guided by the new R&D policy, Tsumura has continued to

big data utilization methods, and other cutting-edge tech-concentrate its research efforts on the five “drug fostering”

nologies with the aim of increasing the speed and efficiency

program formulations in its endeavor to establish a body ofof its research activities as it works to establish scientificscientific evidence for the efficacy and safety of Kampo

evidence. In addition to accumulating fundamental data at

products. These five formulations target disorders in fields

the Company’s research laboratory, we also coordinate

where medical treatment needs are high that are difficult towith leading domestic and overseas research and educa-

treat with Western drugs and that prescription Kampo prod-

tional institutions, such as Kobe University, the University ofucts have demonstrated special efficacy for. For these for-

Chicago, the University of Tokyo, and the University of Oxford,

mulations, we have set the goal of establishing a complete

to acquire and analyze fundamental and clinical data.

evidence collection that encompasses clinical evidence
based medicine; action mechanisms; adverse drug reaction

Contributions to the Kampo Value Chainfrequency surveys; absorption, distribution, metabolism,

One of the research areas of Tsumura’s R&D program isand excretion; and health economic data. We are thus taking

solving issues related to the Kampo value chain. These

steps to enhance the information contained in the package

activities directly contribute to advancing the sophistication

inserts that are constructed in accordance with the Act onof the Kampo value chain and to increasing Tsumura’s cor-

Securing Quality, Efficacy and Safety of Pharmaceuticals,

porate value. The three main research themes in this area

Medical Devices, Regenerative and Cellular Therapy

are (1) researching cultivation technology to secure stable

Products, Gene Therapy Products, and Cosmetics.

supplies of raw material crude drugs, (2) enhancing theAnnual Report 201635

Research and Development

quality of raw material crude drugs, and (3) improving Kampo

product quality control, in light of Japan joining the

product quality control and manufacturing technology.

Pharmaceutical Inspection Convention and theIn the case of researching cultivation technology, we

Pharmaceutical Inspection Co-operation Scheme (PIC/S)*

have succeeded in developing cultivation technologies foron July 1, 2014, we are pushing forward with initiatives toephedra herb and licorice, enabling us to completely shiftachieve compliance with PIC/S GMP at the Ibaraki Plant

from harvest to cultivation for ephedra herb and begin theand the Shizuoka Plant.

shift for licorice. We are also seeking to improve the quality ofsuch crude drugs by developing variants that contain greater
amounts of active ingredients. As for improving Kampo* An organization that seeks to achieve international compliance regarding each country’s
GMP standards for manufacturing pharmaceuticals and The Convention for the Mutual
Recognition of Inspections in Respect of the Manufacture of Pharmaceutical Products;
membership is voluntary and mainly comprises health authorities from European nations

Establishment of Scientific Evidence
Clinical EBM

Product name36

Ia

Ib-IIb

Actionmechanisms

Adversedrug
reactionfrequency
surveys

ADME

Listing in medical treatment guidelines(recommendation of Kampo formulation)

TJ-100 (Daikenchuto)—

59

Pediatric chronic functional constipation disease,systemic sclerosis

TJ-41 (Hochuekkito)—

30

Lower urinary tract symptoms

TJ-54 (Yokukansan)

1

36

Dementia disease

TJ-43 (Rikkunshito)—31

TJ-24 (Kamishoyosan)—

21

Gynecological diagnosis, diagnosis andtreatment of psychosomatic diseases

TJ-107 (Goshajinkigan)—

38

Benign prostatic hyperplasia, overactive
bladder syndrome

TJ-68 (Shakuyakukanzoto)—

35

Amyotrophic lateral sclerosis

TJ-1 (Kakkonto)—

4

Chronic headache

TJ-17 (Goreisan)—

19

Chronic headache

TJ-114 (Saireito)—

15

IgA nephropathy

TJ-29 (Bakumondoto)—

15

Cough, asthma treatment

TJ-14 (Hangeshashinto)

—

8

—

TSUMURA & CO.

OngoingFunctional gastrointestinal disease, diagnosis andtreatment of psychosomatic diseases, GERD, others

CSR Management andCorporate Governance

Annual Report 2016

37

CSR Management

Contributions to Maintaining
and Improving QOL during
Cancer Treatment
The “super graying” of society is proceeding faster in Japan than anywhere else in theworld, making responses to issues associated with an aging population a key to sustainedsocial development. One such issue is growth in the number of cancer patients, which isa symptom of an aging society. At Tsumura, we position cancer as an important domainalongside geriatric health and women’s health in our efforts to contribute to patients’quality of life (QOL).

Increased Incidence of Cancer

Kampo’s Role in Cancer Treatment

and Government Measures

The reason that palliative care and supportive therapy haveJapan has a large number of cancer patients in a developed

become a focus of attention in cancer treatment is that acountry comparison and the number is rising. The number

growing number of people are emphasizing the signifi-

of people diagnosed with cancer was more than 851,000 incance of patients’ QOL and ties with society. The elimina-

2011 and the number of people dying of cancer exceededtion of suffering caused by cancer treatment and the368,000 in 2014.*

maintenance and improvement of QOL that has been

1

Government initiatives to reduce cancer death rates

diminished by treatment have come to be regarded asinclude the Cancer Control Act of 2009 and the Cancer

equal in importance to the treatment itself. As a result,Control Acceleration Plan announced in 2015.* The plan

medical professionals and patients have high hopes forseeks to improve QOL for those in recuperation and enable

Kampo, with its comprehensive approach to body andpatients to combine treatment with work without undue

mind. Kampo targets overall balance between body andstress. To this end, it calls for research into nutritional ther-mind, seeking not only to alleviate physical distress but also

apy, rehabilitation therapy, and supportive therapy using

to contribute to mental well-being.

2

Kampo medicines, with particular emphasis on reducing

cancer treatment centers is growing steadily and all five ofplan put the spotlight on the role of Kampo medicines inthe “drug fostering” program formulations, for whichcancer treatment.

Tsumura is creating the complete evidence collection, are

1 Cancer Information Services, The Center for Cancer Control and Information Services,
National Cancer Center
http://ganjoho.jp/reg_stat/statistics/stat/summary.html(Available in Japanese only; accessed July 2016)
2 Cancer Control Acceleration Plan, Ministry of Health, Labour and Welfare
http://www.mhlw.go.jp/file/04-Houdouhappyou-10901000-Kenkoukyoku-Soumuka/
0000107766.pdf(Available in Japanese only; accessed July 2016)38

The number of Kampo medicines prescriptions written at

postoperative complications and after-effects. As such, thisTSUMURA & CO.

being used in palliative care and supportive therapy.

Examples of the Use of Tsumura’s Five “Drug Fostering”
Program Formulations in the Field of Cancer

We are collecting scientific evidence in collaboration withmedical and research institutions and providing support for

Product namePrincipal conditions

related academic undertakings. One example is the DKT

TJ-100 (Daikenchuto)

Abdominal flatulence

Forum organized by the Japanese Foundation for

TJ-54 (Yokukansan)

Neurosis, insomnia

Multidisciplinary Treatment of Cancer (JFMC) for the scien-

TJ-43 (Rikkunshito)

Anorexia, nausea, vomitingtific study of the clinical efficacy of TJ-100 (Daikenchuto).

TJ-107 (Goshajinkigan)

Numbness, leg pain

Participants in the forum were 46 medical facilities in differ-

TJ-14 (Hangeshashinto)

Stomatitis, fermentative diarrhea

Collection of Scientific Evidence
and Dissemination of Information
Cancer is one of the specialist fields where scientific evidence is particularly crucial to treatment. To ensure the bestuse of our “drug fostering” and other Kampo formulations

ent parts of Japan and the findings were substantial.
Tsumura also plays a part in planning educational activities
for the general public. These efforts include providing information on the latest trends in cancer treatment, including
new methods and drugs, to patients and society at large.
Information is also provided on local initiatives, palliative
care, and supportive therapy.

and to contribute to maintaining and improving patients’ QOL,
it is therefore necessary to collect scientific evidence on
Kampo formulations and constantly disseminate information.

Annual Report 2016

39

CSR Management

Environmental Capital Policy

Medium-Term Environmental Targets

Kampo medicines are made chiefly from raw material

We set medium-term environmental targets in tandem

crude drugs derived from plants. At Tsumura, we position

with our first-stage medium-term management plan,

the natural environment of regions that produce the raw

which ran from fiscal 2013 to fiscal 2016. Our activities

material crude drugs as important “capital” and we pursue

encompass our Group companies in Japan and center on

our own environmental capital policy, which includes

measures to save energy and combat global warming

research into cultivation and measures to conserve theand conserve resources.

environment, to promote sustainable procurement of raw
material crude drugs. In addition, the Group as a whole has
a framework for recycling crude drug botanical residues
and other natural resources.
Medium-Term Environmental Targets
Topic

Measures to saveenergy and combat
global warming

Measures toconserve resources

TargetResultReduce energy
consumption perunit of production*

5% average reduction over 4 years from fiscal 2013
in comparison with fiscal 2012

8.1% reduction incomparison with fiscal 2012

Reduce greenhousegas emissions

6% average reduction over 4 years from fiscal 2013 in­comparison with fiscal 1991 (total fiscal 2013 to fiscal 2016
reduction to less than 217,000 metric tons of CO2)

12.5% reduction incomparison with fiscal 1991

Reduce waste

Reduction of industrial waste through conversion tovaluable resources and attainment of sustained 100%
recycling (zero emissions)100.0% recycling ratio

Conserve water

Reduction in water use through efficient utilization andrecycling to protect biodiversity

16.0% reduction incomparison with fiscal 2013

* Energy consumption per unit of production = Energy used (GJ) / Production volume of drug granulated extracts (t)Our Recycling-Oriented Company Aspirations
Approximately 90% of the industrial waste produced by
Tsumura consists of crude drug botanical residues fromthe production of Kampo medicine granulated extracts.
The volume of residue is increasing along with growthComposition of the Tsumura Group’s Industrial Waste

0.3%
1.6% 0.3%

6.0%

Total

23,809in production.
We recycle all the crude drug botanical residues fromour Shizuoka Plant and Ibaraki Plant and SHANGHAIA nimal and plant residues

91.9%

S
 ludgeW aste plastics

TSUMURA PHARMACEUTICALS in the form of raw materialW aste subject to special control

for fertilizer, substitutes for reductants used in steelmaking,O therand fuel for thermal power plants. In the future, we want toconvert all our crude drug botanical residues to fertilizer
for use in crude drug cultivation, thus recycling resourcesin a way that reduces waste and is considerate of thenatural environment.

40

metric tons

TSUMURA & CO.

Corporate Governance

Basic Policy
Tsumura positions corporate governance as one of its most important management issues. We do so in recognition thatfurther strengthening our corporate governance organization is essential to achieving sustained growth and development aswell as to fulfilling our social responsibilities based on our corporate philosophy of “The Best of Nature and Science.”

Corporate Governance Structure
General Meeting of Shareholders
elect /
dismiss
cooperateelect /
dismiss

elect /
dismiss

Audit & Supervisory Board
4 Audit & Supervisory Board Members(including 2 Outside Audit &Supervisory Board Members)

submit / suggest

Board of Directors
6 Directors

audit

inquiry

Outside Directors’ Meeting(including 3 Outside Directors)

Board of Directors’ Office

Independent Auditors

accounting audit
supervise

submit resolution /reportDisclosure Committee

Executive Committee
President andExecutive Officer

Internal
Auditing
Department

Compliance Committee
Risk Management Committee
Officers’ Meeting

accounting audit
internal
audit

Executive Officers

internal
control

instruct /present policy

execute businessBusiness Units and Group Companies

Overview of Corporate Governance Systeminternal directors, reviewing documents related to important

Board of Directors

decisions, and, as necessary, conducting hearings withAs management’s top decision-making body, the Board of

directors and other corporate officers on business operations.

Directors makes decisions related to law, the articles ofincorporation, and other important matters regarding

Audit & Supervisory Board

Tsumura’s business, as well as overseeing business execution.

The Audit & Supervisory Board, comprising all appointed

Number of directors: 6 (including 3 outside directors)

Audit & Supervisory Board members, determines auditing
policies based on the Audit & Supervisory Board’s regula-Outside Directors’ Meetingtions, pertinent laws, and Tsumura’s articles of incorporation.

This meeting, comprising the outside directors, shares andAlso, the Audit & Supervisory Board forms its audit opinion

exchanges information necessary for management andby integrating all auditor reports.

provides recommendations, as needed, to the Board of

Number of Audit & Supervisory Board members: 4

Directors from an independent perspective.

(including 2 outside Audit & Supervisory Board members)

Number of members of Outside Directors’ Meeting: 3
Executive Committee
Audit & Supervisory Board Members

This body, comprising directors (excluding outside directors)

Audit & Supervisory Board members monitor the decision-and executive officers at the level of managing executive officer

making processes of the Board of Directors and the Boardor above, assists the Board of Directors in its decision-makingof Directors’ execution of duties by attending Board ofprocesses by deliberating and deciding important items related

Directors’ meetings and other important meetings, holding

to operational execution with regard to general management.

periodic meetings with the representative director and other

Number of members of Executive Committee: 4
Annual Report 201641

Corporate GovernanceDirectors and Audit & Supervisory Board Members(Standing, from left) Terunari Nakayama, Kiyomi Haneishi, Yasunori Fuji, Terukazu Kato, Toru Sugita, Tsuyoshi Iwasawa, Shigeru Sugimoto(Seated, from left) Yayoi Masuda, Kenichi Matsui, Kuniko Ouchi

42

TSUMURA & CO.

Name
Position
Number of Company shares owned(As reported in Fiscal 2016 Financial Report)

Directors
Terukazu Kato

Toru Sugita

Yasunori Fuji

President and Representative Director
President and Executive Officer
12,700 shares

Director
Senior Managing Executive Officer
16,700 shares

Director
Senior Executive Officer
18,600 shares

Appointed president and representative director andpresident and executive officer of the Company in June
2015. Served as director of the Company and Head of
the Corporate Communications Department from June
2011 through June 2012 and as president and representative director of the Company from June 2012 throughJune 2015. Joined the Company in 1986.

Appointed director and senior managing executive officerof the Company in June 2015. Following appointment as
director of the Company and Head of the Production
Division in June 2007, appointed managing director andsenior managing director of the Company in June 2010
and June 2014, respectively. Joined the Company in 1980.

Appointed director and senior executive officer of

Shigeru Sugimoto

Kenichi Matsui

Yayoi Masuda

Director (Outside Director)
2,100 shares

Director (Outside Director)
500 shares

Director (Outside Director)
200 shares

Has served as outside director of the Company sinceJune 2012 and supervisory officer of Hulic Reit, Inc., sinceNovember 2013. In addition has served as representativeof Sakura Horwath & Co. since July 1988 and as representative of Sakura Horwath LLC (now Sakura Horwath
Audit Corporation) since December 1995. Registered as
certified public accountant in 1989.

Appointed outside director of the Company in June 2015.
Has served as outside director of The Mie Bank, Ltd.,
since June 2014. After joining Idemitsu Kosan Co., Ltd.,in 1972, appointed managing director of that company inJune 2005 and served as executive vice president, representative director from June 2010.

Appointed outside director of the Company in June 2015.
Has served as president and representative director of Yayoi
Japan Co., Ltd., since February 2012. After joining RicohCo., Ltd., in 1979, has served in various leadership roles
specializing in field of human resources. Such roles include
general manager of the OD & HRD at Levi Strauss Japan
KK, director of the Global Leadership Planning andDevelopment at Levi Strauss & Co., (the United States),
talent director of Asia Pacific Division at Levi Strauss &Co., director at the Human Resources Division at Levi
Strauss Japan KK, and head of Human Resources at
the Asia Pacific Region at Nike, Inc.

Terunari Nakayama

Tsuyoshi Iwasawa

Kuniko Ouchi

Standing Audit & Supervisory Board Member
11,200 sharesStanding Audit & Supervisory Board Member
10,700 shares

Appointed Audit & Supervisory Board member of theCompany in June 2015. Appointed director of theCompany and Head of the Compliance Advancement
Department in June 2011, followed by director of theCompany and Head of the Compliance Control
Department in April 2015. Joined the Company in 1979.

Appointed Audit & Supervisory Board member of theCompany in June 2015. Served as director of theCompany and Head of the Botanical Raw Materials
Division from June 2012 to June 2015. Joined theCompany in 1982.

Audit & Supervisory Board Member(Outside Audit & Supervisory Board Member)
200 shares

Kiyomi Haneishi

Corporate Governance Activities

the Company and Head of the Compliance Control
Department in June 2015. Following appointment as
advisor in 2008, appointed director of the Company andHead of the CSR Advancement Department in June 2011
and Head of the Internal Control Department in April
2013. Joined The Mitsubishi Bank, Ltd. (now The Bankof Tokyo-Mitsubishi UFJ, Ltd.), in 1979.

Audit & Supervisory Board Members

Audit & Supervisory Board Member(Outside Audit & Supervisory Board Member)
200 shares
Appointed outside Audit & Supervisory Board memberof the Company in June 2015. Has served as president of
the Kiyomi Haneishi Certified Public Accountancy since
September 2013 and as ­outside director of MAXVALUCHUBU CO., LTD., since May 2016. After joining Ohta
Showa Ernst and Young (now Ernst & Young Tax Co.) in
1993, moved to Sakura Horwath & Co. in 1997. After
registering as certified public accountant in 2000, joined
Asahi Auditing Co., Ltd. (now KPMG AZSA LLC), thatsame year. Served at KPMG AZSA LLC from 2009
through 2012.

Appointed outside Audit & Supervisory Board member of
the Company in June 2015. Has served as president of
the Kuniko Ouchi Law Office since March 1978. After
registering as an attorney in April 1971, joined the Nagano
Kunisuke Law Office, before moving to the Mamoru
Fukazawa Law Office (now the Fukazawa General Law
Office) in April 1972.

Item

Details

Corporate structure

Company with Audit & Supervisory Board Members under Japanese law

Annual number of Board of Directors’ meetings 19 times (13 times after the 79th Ordinary General Meeting of Shareholders)
Board of Directors’ meetings attended
by outside directors

Mr. Shigeru Sugimoto
Mr. Kenichi Matsui
Ms. Yayoi Masuda

18 times
13 times
13 times

Annual number of Audit & Supervisory
Board meetings

18 times (after the 79th Ordinary General Meeting of Shareholders)

Audit & Supervisory Board meetings attended
Ms. Kuniko Ouchi
by outside Audit & Supervisory Board members Ms. Kiyomi Haneishi

18 times
18 times

Board of Directors’ meetings attended
Ms. Kuniko Ouchi
by outside Audit & Supervisory Board members Ms. Kiyomi Haneishi

13 times
13 times

Standards for determination of independenceof outside directors and outside Audit &Supervisory Board members

Contained in the Notice of the 80th Ordinary General Meeting of
Shareholders held on June 29, 2016, available through the following link:
http://www.tsumura.co.jp/english/ir/meeting/general/pdf/internet_080.pdf

Audit corporation

Ernst & Young ShinNihon LLC

Audit corporation compensation¥45 million

Annual Report 201643

Corporate Governance

Methods of Determining Director and
Audit & Supervisory Board Member Compensation
Directors
The Company’s basic policy is to pay an amount of compen-(2) T he upper limit for the number of stocks issued will be 60,000
shares*2 for this period.
(3) C ommon shares of the Company’s stock will be allocated toapplicable individuals through issuance of stocks by the Company or
disposal of treasury stock. The individuals applicable for such allo-

sation to directors that will contribute to their motivation tocations and the number of shares to be allocated will be determined

pursue the sustained growth of the Company through theby the Board of Directors after the period of the plan. The applicable

improvement of performance and increased corporate value.

individuals will then receive monetary compensation claims, which

Compensation standards and the types of compensation
paid were selected to ensure an appropriate level of compen-

are to be used to acquire common shares of the Company’s stockat the time of the Company’s issuance of shares or disposal of treasury shares. The upper limit for the total amount of monetary

sation given the roles, duties, and rank of each director. We

compensation claims granted to applicable individuals based on

strive to increase objectivity in establishing compensation

the plan will be set at ¥300 million for the period of the plan.

standards by utilizing survey data from third-party specialists
and considering the compensation levels of industry peers
as well as the salary levels of Tsumura employees.

Calculation Formulas
Reference deliverable shares=A mount determined according to compensation criteria based onroles, duties, and rank of individual directors / Reference share price*

The types of director compensation paid are as follows.
1. B asic compensation is paid as a monthly sum of no more than ¥50
million,*1 and the amount paid to each director is decided on an individual basis. For the representative and other directors with operational execution authority, basic compensation is determined basedon standards that account for roles, duties, and ranks, and a portionof this compensation is adjusted to reflect the Company’s businessresults and the degree of accomplishment of performance goals set
for each director in the respective fiscal year. Outside directors andother directors without operational execution authority receive a fixed× 3 (fiscal years)* Reference share price = Closing price for ordinary transactions of common shares ofCompany stock on March 31, 2016

Number of shares to be issued to individual directors=R eference deliverable shares × (Sum of (Achievement ratios
for fiscal 2019 numerical targets* × Applicable numerical target
allocation ratio))* “Achievement ratios for fiscal 2019 numerical targets” is determined depending on theachieved degree, within the range of 0% to 120%, with the level corresponding to thenumerical target set at 100%.

amount of basic compensation based on their roles in supervising
operational execution.
2. B ased on a resolution of the 80th Ordinary General Meeting of
Shareholders held on June 29, 2016, the Company has introduced

For details on the performance-linked stock compensation
plan, please refer to the related news release and the Noticeof the 80th Ordinary General Meeting of Shareholders helda performance-linked stock compensation plan with the aim ofon June 29, 2016, available through the following links:

enhancing awareness among directors toward contributing to the

http://www.tsumura.co.jp/english/newsrelease/2016/pdf/20160603.pdf

sustained growth of the Company through the improvement of its

http://www.tsumura.co.jp/english/ir/meeting/general/pdf/internet_080.pdf

medium-to-long-term performance in accordance with the mediumterm management plan and to increased corporate value.
The stock compensation plan covers the three-year period ending

Compensation for Audit & Supervisory Board members

fiscal 2019. At the end of this period, the Company will issue a number

consists of fixed basic compensation, which has an upperof common shares of Company stock to individual directors that is to belimit of ¥6 million per month*3 and is decided for eachdetermined in consideration of their roles, duties, and rank and calculated using the following formulas based on the extent to which theCompany’s fiscal 2019 targets for consolidated net sales, operating
income, and return on equity are met.
(1) T his plan is available to directors, excluding non-operating directors,
as well as to executive officers with which the Company has concluded delegation agreements.

44

Audit & Supervisory Board Members

TSUMURA & CO.

individual Audit & Supervisory Board members throughdeliberation among Audit & Supervisory Board members.
1	Based on a resolution of the 70th Ordinary General Meeting of Shareholders held on
June 29, 2006; does not include employee salaries paid to directors that also serve as
employees of the Company
2	Based on a resolution of the 80th Ordinary General Meeting of Shareholders held on
June 29, 2016
3	Based on a resolution of the 69th Ordinary General Meeting of Shareholders held on
June 29, 2005

Director and Audit & Supervisory Board Member Compensation
Breakdown of total compensation

Total compensation(¥ in millions)

Basic

Stock options

Incentive

Number of officers
compensatedDirectors (excluding outside directors)

199

199

—

—

7

Audit & Supervisory Board members(excluding outside Audit & Supervisory Board members)

46

46

—

—

4

Outside directors andoutside Audit & Supervisory Board members

37

37

—

—

7

Category

Note: The figures include compensation for four directors and four Audit & Supervisory Board members who retired at the conclusion of the 79th Ordinary General Meeting of Shareholders
held on June 26, 2015.

Message from the Chairperson of the Outside Directors’ Meeting
Shigeru Sugimoto
In fiscal 2016, Tsumura dramatically reformed its Board ofmeasure each division’s periodic performance so as to

Directors’ structure. Two outside / independent directors

enhance corporate value over the medium-to-long term.

were newly installed as the number of directors was reduced

The setting of appropriate KPIs with sufficient accounting

from eight to six. With the number of operating officers reduced

literacy can turn around performance evaluations of operatingfrom ten to nine, half of the board members became out-

officers and each division, thus improving efficiency andside / independent directors to enhance the transparency of

productivity.

governance. Additionally, at the same time, the Company

Our diversity plays an important part in monitoringlaunched the Outside Directors’ Meeting of which I havemanagement. For instance, one of my missions as a certified

served as chairperson from the start. The Meeting greatly

public accountant is to drive awareness in the boardroom,

facilitates the exchange of ideas and information not only

as early as possible, about potential accounting and taxation

with outside directors but also with statutory Audit &risks hidden in significant decisions. Although each director

Supervisory Board members and operating officers.

has a different background and expertise, our integrated

The main role of the outside / independent directors isand organized approach toward each management issue

twofold. First, they monitor significant decisions by thehelps to streamline the Company’s system of approval.

Company while providing oversight from the perspective

The passion with which the Meeting strives to bringof how to resolve conflicts of interests as well as assuage

about better business decisions prevents one of thethe concerns of minority shareholders. Second, they

Company’s strengths, which is its assiduous and conser-

advise on business policy from an independent andvative workforce, from becoming organizationally compla-

objective standpoint. By attending Board of Directors’cent and inflexible on occasion. Our mission is to raise

meetings, outside / independent directors contribute toawareness of various economic threats posed by interna-sustainable Company growth and greater corporate value

tional situations and to promote continuous organizational

over the medium-to-long term.

reform to cope with potential threats.

The Meeting has pushed hard to fulfill this role since day

As the market for prescription Kampo products isone. Although the Meeting has been working for only a year,

regarded as global, the new medium-term management

our expertise, diversity, and passion together enable us toplan could face additional challenges in the future.

tackle various issues while sharing ideas that lead to solutions.

Therefore, the Meeting will push harder to have manage-

Our expertise contributes to promoting more transparent

ment adopt policies deemed favorable to sustainable

and fair business judgment. For example, the Company

Company growth and greater corporate value over the

introduced Key Performance Indicators (KPIs) not only tomedium-to-long term.

evaluate performance remuneration for officers but also to

Annual Report 201645

Corporate Governance

Other Management Systems
Item

Details

Compliance

The Company has formulated the Tsumura Compliance Program, which includes the Tsumura Code of Conduct, to provide the basic­guidelines for practicing compliance in business activities. In addition, the Company has established the Compliance Program for­implementation at Group companies.
The Company has formulated the Tsumura Code of Practice (the “Tsumura Code”) to ensure corporate activities are always conducted ina highly ethical and transparent manner; foster accountability in interactions with researchers, healthcare managers, patient organizations,wholesalers, and other parties; and earn the trust of society. The Tsumura Code Committee, established in conjunction with the Tsumura
Code, is responsible for managing, administering, and thoroughly instilling the code.
The Company has established the Compliance Committee to deliberate and formulate policies and plans for promoting compliancewithin the Group. Following Board of Directors’ approval, the committee provides explanation of and instruction on these policies to the
managers of various departments and Group companies.
The Tsumura Group Hotline has been established as an internal whistle-blowing system for employees in Japan that can be used to makeconsultations or reports on compliance issues. Individual whistle-blowing systems have been established at each overseas Group company.

Internal Controls

The Internal Auditing Department, an internal audit organization under the direct jurisdiction of the president, established the Internal Audit
Rules to help maintain an understanding of operating conditions and to facilitate improvements. Effective internal audits are conducted inaccordance with these rules. In addition, the Affiliate Company Audit Standards describe the procedures and methods to be used for internal audits of Group companies and are used to verify that corporate activities are being conducted in an appropriate manner.
The Company has in place internal controls that it uses to ensure the appropriateness of financial reports and has established basic policies and plans, based on which the Internal Auditing Department verifies the effectiveness of internal controls.
To ensure appropriate information management for documents related to the execution of duties by directors and other information, theCompany takes steps to establish internal systems and implement training based on relevant laws and the Basic Rule of Information
Management. These steps include appointing a top manager of information management, an officer in charge of information management,
and managers of information management and designating the main division of information management (General Affairs Department).

Risk Management

The Company has decided basic guidelines regarding risk management by the Group and created the Risk Management Rules tosupport their effective implementation.
The Company has established the Risk Management Committee to deliberate and formulate risk management policies and plans for theGroup. Following Board of Directors’ approval, the committee provides explanation of and instruction on these policies to the managers
of various departments and Group companies.
The Company has built an organization to promote risk management, including a chief risk management officer, a director in charge ofrisk management, a chief risk compliance officer, risk compliance officers, and the risk management office (General Affairs Department).
The Company has also established systems for setting up internal risk management systems, for determining and evaluating businessrisks, for taking measures to avoid the occurrence of risk events, and for minimizing damages and losses should a risk event occur. The
Board of Directors is kept informed of the overall status of risk management within the Tsumura Group through regular reports by the
director in charge of risk management (Head of the General Affairs Department).
If an emergency situation occurs that threatens to have a serious impact on the business operations of the Group, the chief risk management officer has the authority to establish an emergency crisis management office with himself as senior manager and implement
measures to resolve the crisis.

OthersThe Organization and Operational Authority Rules define the duties, authority, and responsibilities of each rank of officer, and decisionmaking procedures based on these rules are used to ensure the appropriate and efficient execution of duties. Similar decision authority
regulations are established and enacted at Group companies to ensure efficiency.
Clear standards have been defined for managing Group companies, and the Company provides instruction to Group companies andpromotes the appropriate leadership and cultivation of Group companies. Furthermore, the Affiliate Management Rules have been formulated to improve internal controls, compliance, corporate ethics, and management efficiency at Group companies. The Company
also receives periodic reports from Group companies with regard to such matters as financial statements, organizational and employeedistribution documents, records of decisions made by the boards of directors, and minutes of meetings of other reporting bodies.
The Compliance Control Department relays information on consultations or reports through the Tsumura Group Hotline to Audit &Supervisory Board members when appropriate. The Internal Auditing Department periodically provides Audit & Supervisory Board
members with information on the results of internal audits as well as on the results of verification activities conducted as part of internal
controls for financial reporting. Audit & Supervisory Board members of Group companies periodically report the results of audits
conducted at Group companies to Audit & Supervisory Board members of the Company.

46

TSUMURA & CO.

Financial Section
48 Eleven-Year Selected Financial Data (Unaudited)
50 Management’s Discussion and Analysis
56 Consolidated Balance Sheets
58 Consolidated Statements of Income /Consolidated Statements of Comprehensive Income

59 Consolidated Statements of Changes in Net Assets
61 Consolidated Statements of Cash Flows
62 Notes to the Consolidated Financial Statements
80 Report of Independent Auditors

Annual Report 201647

Financial Section

Eleven-Year Selected Financial Data (Unaudited)
TSUMURA & CO. and subsidiaries
Years ended March 31¥ in millions

2016

2015

2014

For the year
Net sales¥ 112,625¥ 110,438¥ 110,057

Cost of sales*1

45,05541,85938,787Gross profit

67,56968,57871,269Selling, general and administrative expenses

47,74349,08748,808Operating income

19,826

19,491

22,461

Income before income taxes

18,89820,07828,118Net income attributable to owners of the parent

12,557

14,07518,050¥ 52,348¥ 50,716¥ 43,424

Property, plant and equipment, net

62,82260,624

57,148Long-term liabilities

23,06323,3399,126

At year-end
Inventories

Total liabilities

66,76564,70654,305

Total net assets*2

155,702150,947

133,318

Total assets

222,468

215,654

187,623¥   9,638¥   8,428

R&D expenses

5,968

6,252

5,949

Depreciation

5,059

5,387

4,871

Free cash flow

10,109(5,691)

4,214

Cash flows from operating activities

17,570

4,992

5,908

Cash flows from investing activities(7,461)(10,683)(1,694)

Cash flows from financing activities(4,608)

10,408(4,575)

Cash and cash equivalents, end of year

25,12819,343

14,418¥ 178.06¥ 199.58¥ 255.94

Other selected data
Capital expenditures for property, plant and equipment

¥

8,991

Per share data (yen)Net income attributable to owners of the parent
Dividends

64.00

64.00

64.00

Net assets*2

2,169.13

2,103.04

1,860.14

Gross profit

60.0%

62.1%

64.8%

Selling, general and administrative expenses

42.4

44.4

44.3

Operating income

17.6

17.6

20.4

Income before income taxes

16.8

18.2

25.5

Net income attributable to owners of the parent

11.1

12.7

16.4

8.3

10.1

14.5

Financial ratios (%)
As a percentage of net sales:

ROE
ROA
Current ratio

9.1

9.7

12.5

305.9

310.6

240.6

1 Including credit (debit) for allowance for sales returns
2 Due to a change in accounting standards, figures for the fiscal year ended March 2006 are net shareholders’ equity

48

TSUMURA & CO.

2013

2012

2011

2010

2009

2008

2007

2006

¥ 105,638¥ 95,450¥ 94,778¥ 90,933¥ 90,016¥ 94,799¥ 91,227¥ 90,419

35,92729,94429,43528,51829,02831,60929,43828,00069,71165,50565,34262,41460,987

63,19061,78862,41946,58644,271

43,78943,47544,50447,36946,28245,951

23,124

21,233

21,55318,93816,483

15,82015,505

16,46724,062

22,44821,05818,71017,94014,605

21,261

14,726

15,373

13,431

12,945

10,704

10,777

9,139

13,152

12,380¥  35,565¥ 30,570¥ 22,057¥ 22,335¥ 19,810¥ 19,651¥ 17,073¥ 16,468

50,65744,86942,15440,85738,75440,251

41,28948,497

9,448

8,093

8,587

8,773

8,970

14,44021,40026,28751,92949,63350,39450,94452,85562,73473,76079,482

118,537

102,240

91,15483,75273,96872,411

69,61854,625

170,466

151,874

141,549

134,697

126,824

135,146

143,378

135,158¥   9,328¥  6,425¥  5,264¥  5,237¥  5,479¥  3,124¥  3,906¥  4,090

4,904

4,565

4,123

3,770

3,958

4,368

4,829

4,856

4,049

3,850

3,453

3,225

3,298

3,396

2,777

2,761

3,988

1,972

5,232

5,864

7,293

1,309

23,521

12,14412,011

7,314

12,047

12,01910,634

5,358

12,687

14,593(8,022)(5,342)(6,815)(6,155)(3,341)(4,049)10,834(2,448)(4,275)(5,272)(3,355)(5,085)(6,354)(7,419)(13,071)(8,964)

13,762

13,906

17,19815,318

14,596

13,71819,812

9,326¥  217.98¥ 190.45¥ 183.55¥ 151.77¥ 152.80¥ 129.57¥ 186.43¥ 173.62

62.00

60.00

58.00

46.00

34.00

23.00

17.00

14.00

1,658.88

1,430.94

1,274.06

1,175.04

1,037.76

1,015.46

970.50772.34

66.0%

68.6%

68.9%

68.6%

67.8%

66.7%

67.7%

69.0%

44.1

46.4

46.2

47.8

49.4

50.0

50.7

50.8

21.9

22.2

22.7

20.8

18.3

16.7

17.0

18.2

22.8

23.5

22.2

20.6

19.9

15.4

23.3

16.3

14.6

14.1

13.7

11.8

12.0

9.6

14.4

13.7

14.1

14.1

15.0

13.7

14.9

13.0

21.3

26.5

14.3

14.5

15.6

14.5

12.6

11.4

11.1

12.8

222.5

207.8

189.1

173.8

157.2

142.3

133.7

107.7

Annual Report 201649

Financial Section

Management’s Discussion and Analysis

Tsumura’s Financial History

This news was followed by the announcement of a
­ arning about using the product in 1991. Although the frewquency of occurrence of interstitial pneumonia caused bytreatment with TJ-9 (Shosaikoto) was low compared with
Western drugs, the public’s confidence was shaken
because it was commonly believed that Kampo medicines
did not have any adverse reactions. This news had a negative impact on the public’s image of Kampo products andconsequently sales slumped. Moreover, we pursued abusiness diversification strategy at that time, and many of
those businesses began to produce red ink, resulting in
deterioration in our financial position.

Favorable Growth for Kampo Products
Following NHI Listing

In 1976, 33 of Tsumura’s pharmaceutical Kampo products
were approved under the National Health Insurance (NHI)
plan. Tsumura’s Kampo product sales were only ¥1.87 billion in the fiscal year ended March 1977, but grew steadily
starting in the following year. Three years later, in the fiscal
year ended March 1980, Tsumura’s Kampo product sales
surged to ¥10 billion. In 1987, the Company had a total of
129 prescription Kampo products approved under the NHIplan. Later, clinical data was announced demonstrating
the efficacy of TJ-9 (Shosaikoto), a Kampo medicine forcolds, in treating chronic hepatitis. Consequently,
Tsumura’s sales of prescription Kampo products rose
substantially to approximately ¥100 billion in the fiscal year
ended March 1992. Of this amount, about one-third wassales of TJ-9 (Shosaikoto).

Specialization in Kampo BusinessTo overcome its business crisis, Tsumura changed its
business policy drastically, shifting to one specializingin the development of the Kampo business. Under therevised business policy, the Company focused its efforts
on patiently promoting the popularization of Kampo
medicine through actions aimed at disseminating a proper
understanding and awareness of Kampo medicine among
students at medical schools and universities, clinicalphysicians, and general consumers. Specifically,

Adverse Reactions Problem Causes Sales to Stagnate

Prescription Kampo product sales continued to record
favorable growth, but then news of an unexpected adverse
reaction from treatment with TJ-9 (Shosaikoto) emerged.

Total Liabilities / Equity Ratio¥ billion / %
200

70

68.8%

100

35

66.7

0

97

98

99

Total liabilities

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

0

Equity ratio (right scale)

Net Sales / Operating Income Margin¥ billion / %
180

24

136.1
17.6%
112.6
90

12

 irst reported TJ-9 (Shosaikoto) related deaths
FExtensive media coverage of possible adverse
reactions of TJ-9 (Shosaikoto)
C Education ministry introduces model core curriculum—
Outline of Kampo drugs approved
D	Kampo education available at all 80 Japanese
medical schools
A
B

0

0

97

98

99

00

A, B

Pharmaceutical products

50

TSUMURA & CO.

01

02
C

03

04

05

06

07

08

09

10

11

12

13

D

Household products

Operating income margin (right scale)

14

15

16

the Company began activities to support Kampo medicine
education at medical schools and universities, implemented Kampo medicine seminars for clinical physicians,
and held public lectures on Kampo medicine for general
consumers. As a result of these efforts, sales bottomed
out in the fiscal year ended March 2000 and have continued to rebound since then—as has Tsumura’s financial
position. Moreover, in 2008, the Company divested its
household products business in order to further specialize
in its Kampo business.

Net Sales

During fiscal 2016, there was no change in the Japanese
government’s policy of curtailing medical care expenses,
and the business environment in the domestic prescription
product market remained difficult as a result.
In this environment, Tsumura’s consolidated net sales
grew 2.0% year on year, to ¥112,625 million, due to strong
sales of prescription Kampo products. Total sales for
Tsumura’s 129 prescription Kampo products rose 2.3%
year on year, to ¥107,599 million, primarily reflecting
increased sales of the five “drug fostering” program formulations as well as of the 77 formulations applicable under
the disorders and symptoms differentiated approach,which is explained below.
Underlying the firm growth in revenues was the steadyprogress we made in expanding the Kampo medicines
market. We continued to provide information regarding
Kampo medicine and Kampo products through basic
activities, including face-to-face meetings with physicians,
explanatory meetings at university hospitals, training sessions for physicians-in-training at designated hospitals forclinical training and university hospitals, and Kampo medicine seminars. In addition, to complement our previous
Western medicine style approach centered on the five
“drug fostering” program formulations, we also deployed
the disorders and symptoms differentiated approach infiscal 2016. This new approach is designed to address thediversifying needs of physicians for information on Kampo
medicine and Kampo products. As part of this approach,we compiled information on evidence and theses related
to applicable formulations, their listing in medical

Tsumura’s Business
Our principal business is the manufacture and sale ofpharmaceutical products, including primarily prescription
Kampo products covered under the NHI plan as well as
OTC Kampo products. Previously, we also had a household products business that manufactured and marketedhousehold products, mainly bath additives and hairgrowth agents. However, with the sale of all of the sharesof Tsumura Lifescience Co., Ltd., on August 29, 2008, we
now focus only on pharmaceutical products.

Income Statement
Overview of Results
2016

2015

Net sales
Gross profit¥112,625
67,569¥110,438
68,578Gross profit margin
Operating income
Operating income margin

60.0%¥ 19,826
17.6%

62.1%
¥ 19,491
17.6%

Net income attributable toowners of the parent¥ 12,557¥ 14,075¥ in millions, except ratios

Japanese Market Size for
Prescription Kampo Products*

Net Sales

Cost of Sales / Cost of Sales Ratio¥ billion¥ billion / %¥ billion / %
180

84.3%

90

120

112.6

50

50

45.0

146.0

90

0

12

13

Overall market* NHI Listed Price

14

15

16

40.0%

45

60

0

0

Tsumura’s share (right scale)

25

12

13

14

15

16

0

25

12

Cost of sales

13

14

15

16

0

Cost of sales ratio (right scale)©2016 IMS Health. All rights reserved. Estimated based on “IMSJPM Mar. 2012 MAT- Mar. 2016 MAT.” Reprinted with permission.

Annual Report 201651

Financial Section

treatment guidelines, and their uses into new materials
organized based on different disorders and symptoms.
Using these materials, we promoted several specific formulations that demonstrate efficacy for these disorders
and symptoms with the aim of offering physicians a wider
range of treatment options. As a result of these activities,
total sales of the five “drug fostering” program formulations rose 2.1% while sales of the 77 disorders andsymptoms differentiated approach formulations grew
2.6%, driving overall growth in the Company’s prescription
Kampo product sales.
Cost of Sales

Cost of sales rose 7.6% year on year, to ¥45,055 million.
This increase primarily reflects higher costs related to raw
material crude drugs imported from China. The cost of
sales ratio rose 2.1 percentage points year on year, to40.0%, as we were unable to offset the increase in crude
drug related costs, despite successfully lowering processing costs to a certain degree.
Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses
decreased 2.7% year on year, to ¥47,743 million, coming in
below our forecast thanks to Companywide efforts to limit
costs through improved operating efficiency. As a result,
the SG&A expenses margin declined 2.0 percentage points,
to 42.4%. Among major SG&A expenses, salaries andallowances decreased 1.8%, to ¥16,974 million, and sales
promotion expenses declined 10.0%, to ¥3,823 million.
Meanwhile, sales rebates rose 2.3%, to ¥9,363 million.

SG&A Expenses /SG&A Expenses Margin

Among other major expenses, advertising cost fell
19.4% year on year, to ¥539 million, while R&D expenses
declined 4.5%, to ¥5,968 million.
Major Expenses¥ in millions

Personnel expenses
Sales promotion expenses
Advertising cost
R&D expenses

2016

2015

¥28,845
3,823
539
5,968

¥29,290
4,249
669
6,252

Operating Income

Operating income increased 1.7% year on year, to ¥19,826
million, while the operating income margin was unchanged
at 17.6%.
Net Income Attributable to Owners of the Parent

Net income attributable to owners of the parent declined
10.8%, or ¥1,517 million, year on year, to ¥12,557 million.
This decrease was due to a foreign exchange loss of ¥975
million recorded under other expenses that stemmed fromthe yen appreciation trend seen beginning in the fourth
quarter of fiscal 2016. This loss was a stark change fromthe ¥1,386 million foreign exchange gain recorded underother income in fiscal 2015 as a result of the yen depreciation trend. As a result, net income attributable to owners of
the parent per share decreased to ¥178.06, comparedwith ¥199.58 per share in the previous fiscal year.

Factors in Increase / Decrease of Operating Income¥ billion¥ billion / %
60

60

30

FY2015
Operating Income

47.7

19.4

42.4%
30

0

12

13

14

15

SG&A expenses
SG&A expenses margin (right scale)

52

TSUMURA & CO.

16

30

15

0

0

Sales Increase

Sales Cost
Increase

2.1

3.1

SG&A Expenses
Decrease
1.3

FY2016
Operating Income
19.8

Liquidity and Capital Resources

Balance Sheet
Balance Sheet Data

Cash Flows

2016

2015

¥222,468
66,76537,048
155,702¥215,654
64,70637,080150,947¥ in millions

Cash Flows Data
¥ in millions

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

2016

2015

¥17,570(7,461)(4,608)¥ 4,992(10,683)
10,408

Total assets
Total liabilities
Interest-bearing debt
Total net assets

AssetsNet cash provided by operating activities amounted to¥17,570 million during fiscal 2016, up ¥12,577 million year
on year. This increase was a result of lower income taxes
paid and only a slight increase in inventories as well as therecording of decrease in receivables, as opposed toincrease in receivables in the previous fiscal year.
Net cash used in investing activities amounted to ¥7,461
million, down ¥3,221 million year on year. This decrease in
net outflow was a result of an increase in proceeds fromsales of property, plant and equipment associated with
the West Japan Distribution Center as well as lower outlays for purchase of property, plant and equipment.
Net cash used in financing activities amounted to¥4,608 million, compared with net cash provided byfinancing activities of ¥10,408 million in the previous fiscal
year. While increase in long-term loans payable wasrecorded in fiscal 2015, such an increase was not recorded
in fiscal 2016, which led to a net financing outflow.
As a result, the balance of cash and cash equivalents at
the end of the fiscal year under review was ¥25,128 million,
an increase of ¥5,784 million from the beginning of the
fiscal year.

Net Income Attributable to Owners of
the Parent / Net Income Attributableto Owners of the Parent per Share

As of March 31, 2016, current assets stood at ¥133,668
million, up ¥5,184 million from a year earlier. Cash andtime deposits increased in conjunction with higher
retained earnings; raw materials and supplies rose as aresult of higher prices for certain raw material crude drugs;
and deferred tax assets grew due to the implementationof tax effect accounting. Meanwhile, long-term assets
increased ¥1,629 million, coming to ¥88,799 million asof March 31, 2016. Property, plant and equipment, net,increased accompanying higher capital expenditures,
while investment securities rose due to increases frommark-to-market valuation.
As a result of the above, total assets amounted to¥222,468 million, an increase of ¥6,814 million from theprevious fiscal year-end.
Liabilities

Current liabilities rose ¥2,335 million compared with theprevious fiscal year-end, to ¥43,702 million, reflecting
increases in income taxes payable and trade notes andaccounts payable. Meanwhile, long-term liabilities
decreased ¥276 million, to ¥23,063 million, due to a
decline in deferred tax liabilities. Interest-bearing debt
decreased ¥31 million, to ¥37,048 million.
Consequently, total liabilities at the end of the fiscal year
under review increased ¥2,059 million from the previous
fiscal year-end, to ¥66,765 million.

Cash Flows fromOperating Activities

Total Assets / ROA¥ billion / %¥ billion

Total Assets/ROA¥ billion / ¥
20

300

20

20

300

17.5
222.4
12.5
178.1
10

150

10

10

150

9.1%

0

12

13

14

15

16

Net income attributable to owners of the parent
 et income attributable to owners of the parentN
per share (right scale)

0

0

12

13

14

15

16

0

12

Total assets

13

14

15

16

0

ROA (right scale)

Annual Report 201653

Financial Section

earnings levels and cash flow trends. Based on this policy,
Tsumura paid a total annual dividend of ¥64.0 per share infiscal 2016, the same as in fiscal 2015, and the consolidated
dividend payout ratio rose 3.8 percentage points, to 35.9%.

Net Assets

Total net assets amounted to ¥155,702 million at the fiscal
year-end, climbing ¥4,754 million from a year earlier. This
increase can be attributed to higher retained earnings and arise in unrealized holding gain on other securities, net of taxes.

Key Financial Indicators

Financial Policy and Dividend Policy
To increase profitability, the Company is working tosecure free cash flow and optimize its capital structure
going forward.
Seeking to further enhance corporate value, Tsumura’s
management has positioned return on equity (ROE) as a
key performance indicator. In fiscal 2016, net income
attributable to owners of the parent decreased and—following the increase in retained earnings—shareholders’equity rose. As a result, ROE fell 1.7 percentage points
year on year, to 8.3%. Return on assets (ROA) declined 0.6
percentage points, to 9.1%. The equity ratio was
unchanged year on year, at 68.8%, while the debt-toequity ratio decreased from 0.25 times at the previous
fiscal year-end to 0.24 times. Going forward, Tsumura willremain committed to continuing its efforts to thoroughly
improve its profitability and implement efficient operations
while strengthening its financial structure.
Currently, the Company is moving forward with reforms
to its manufacturing cost structure, and it plans to allocate
the cash generated from operating activities to capital andother investment to support future growth, such as
through increases in the production capacities of existing
facilities and the introduction of new manufacturing technologies. At the same time, Tsumura places importanceon returning profits to shareholders. For that reason, theCompany’s policy is to issue stable dividend payments
after taking into consideration medium-to-long-term

Interest-Bearing Debt /Debt-to-Equity Ratio

%

2016

2015

ROE
ROA
Equity ratio
Debt-to-equity ratio (times)
Dividend payout ratio

8.3%
9.1
68.8
0.24
35.9

10.1%
9.7
68.8
0.25
32.1

Risk Factors
In the following discussion of risk factors, major risks related
to the Group’s business that may exert a significant influence on investors’ judgment are outlined. From thestandpoint of proactive information disclosure, we haveincluded references to matters that do not necessarily
constitute risk factors but we believe are important forinvestors to consider. The Tsumura Group will strive to avoid
the materialization of such risks; however, should suchrisks materialize, we will endeavor to minimize their impact.
This discussion includes issues that are not yet pertinent
to the Group’s performance. However, they have been
included as management has deemed them important asof June 29, 2016.
(1) Medical system

In the pharmaceutical industry, changes to medical care­systems exert a major influence on the market environment. Depending on the direction of change, a negative
effect on the industry as a whole and on the TsumuraGroup could result.

Net Assets / Equity Ratio¥ billion / Times

Dividends per Share /Dividend Payout Ratio¥ billion / %

40

37.0

0.4

¥/%

180

80

80

50

155.7
68.8%

64.0
35.9%

0.24
20

0

12

13

14

15

Interest-bearing debt
Debt-to-equity ratio (right scale)

54

TSUMURA & CO.

16

0.2

90

0

0

12

Net assets

13

14

15

Equity ratio (right scale)

16

40

40

0

0

25

12

13

14

15

Dividends per share
Dividend payout ratio (right scale)160(2) Competition

In Japan, we have long maintained a dominant positionin the field of prescription Kampo products, which is themainstay of the Group. However, if a major domestic or
foreign pharmaceuticals company entered the Kampo
medicines market, competition would intensify further,and the Group’s performance could suffer.

methods of use may be restricted, and a loss of confidence
in the Group and its pharmaceutical products may resultin a drop in the dispensation of our medicines or inpatients’ refusal to take them. The Tsumura Group’s
performance may suffer if a situation such as that
described results in a decline in sales volume, demand forlarge amounts of damage compensation, or a large-scale
recall, among other possibilities.

(3) Product supply

Approximately 80% of the crude drug medicinal plantsthat constitute the main ingredients of Tsumura’s Kampo
formulations are imported from China, and someprocesses in the production of Kampo products are commissioned to subsidiaries situated in China. Because mostof the medicinal plants grow wild, we are researching thecultivation of major medicinal plants for the future.
However, in the event of unforeseeable changes in legal
regulations or political or economic conditions, it could
become difficult to secure or import sufficient quantities.
In addition, bad weather, natural disasters, or wars could
destabilize social conditions, creating instability in thecirculation of demand of the raw materials and supply ofthem procured domestically and internationally for the
manufacture of products, which could have a negative
impact on the supply of products due to hikes in the market
prices of the raw materials or scarcity of their supply.
Likewise, while we have incorporated earthquakeresistant features in construction and conduct regularinspections of equipment and facilities within Japan,
we cannot completely guarantee that the functioning of
our facilities will not be hampered or lost in the event ofa massive earthquake, fire, power outage, or other disaster.
The Group’s social standing or performance could be
negatively affected should the supply of products beinterrupted or delayed due to the above.
(4) Product safety and adverse reactions

In the manufacturing of the Group’s products, we strictly
adhere to the quality control standards of the countries inwhich we operate and our own original standard for crude
drugs. However, we cannot completely guarantee that
there will not be a defect or safety problem, including
undetected pesticide residue on a medicinal plant used ina Kampo product. In addition, should consumers experience unexpected adverse reactions from a pharmaceuticalproduct marketed by the Tsumura Group, the existing(5) R&D

In the interest of future growth and better corporate
performance, the Tsumura Group conducts R&D activities
related to new products and new technologies both inJapan and abroad. However, we cannot guarantee that allof these activities will be successful. The Group’s performance could suffer if for some reason R&D activities werecanceled or delayed or if costs increased significantly.
(6) International business

The Tsumura Group engages in the manufacture and sale ofpharmaceuticals in China, South Korea, and other foreigncountries. Because of this involvement in international
business, it is possible for the Group to be negatively
affected by unforeseeable changes in legal regulations orin political, economic, or other conditions.
(7) Financial condition

The Group’s performance and financial condition could be
negatively affected by such conditions as sharp increases
in declining share prices or increased retirement liabilities
arising from a drop in the discount rate.
(8) Intellectual property

We cannot guarantee the full protection of the intellectual
property owned by the Group in relation to Kampo products
and others. The Group’s performance may be negatively
affected if there were leakage of such information, leading to
a decline in competitiveness.
(9) Exchange rate fluctuations

The Group imports from China most of the crude drugs
used in the Kampo products that it markets. Therefore, sharp
movements in exchange rates could impact negatively on
the Group’s business results and financial position.

Annual Report 201655

Financial Section

Consolidated Balance Sheets
TSUMURA & CO. and consolidated subsidiaries
March 31, 2016 and 2015

¥ in millions

US$ in thousands(Note 2)

2016

2015

2016

¥ 25,150¥ 19,379$  223,199

41,87542,142

371,633

(4)

(4)

(36)

Inventories (Note 5)

52,34850,716

464,580

Deferred tax assets (Note 8)

1,271

284

11,286ASSETS
Current assets:
Cash and time deposits (Notes 4 and 13)
Trade notes and accounts receivable (Note 4)Less allowance for doubtful receivables

Other current assets

13,026

15,965

115,605

Total current assets

133,668

128,484

1,186,268

Investments and other assets:
Investments in non-consolidated subsidiaries and affiliates (Note 4)

2,645

2,197

23,480Investment securities (Notes 3 and 4)

18,49916,547

164,175

122

1,123

1,088

Net defined benefit asset (Note 9)
Deferred tax assets (Note 8)
Other assets

32

33

284

4,453

6,436

39,519Less allowance for doubtful accounts

(2)

(2)

(25)

Total investments and other assets

25,75026,336

228,523

Property, plant and equipment, at cost:
Land (Note 6)

9,009

9,531

79,956

Buildings and structures

56,22657,353498,991

Machinery and equipment

42,421

40,773

376,479

Tools, furniture and fixtures

9,652

9,257

85,664

Construction in progress

12,815

8,479

113,732

OthersLess accumulated depreciation
Property, plant and equipment, net
Intangible assets, net of accumulated amortization
Total assets

56

TSUMURA & CO.

239

249

2,125

(67,542)(65,020)(599,417)

62,82260,624

557,531

226

209

2,011

¥222,468¥215,654$1,974,335

¥ in millions

US$ in thousands(Note 2)

2016

2015

2016

¥ 21,957¥ 21,957$  194,861

31

35

275

Trade notes and accounts payable (Note 4)

3,157

2,828

28,026

Income taxes payable (Notes 4 and 8)

2,838

635

25,189Accounts payable—other (Note 4)

4,927

6,251

43,732

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term bank loans (Notes 4 and 7)
Current portion of long-term debt (Notes 4 and 7)

Allowance for sales returns

16

8

145

Other current liabilities

10,773

9,649

95,611

Total current liabilities

43,702

41,366

387,842

Long-term loans payable, less current portion (Notes 4 and 7)

15,00015,000133,120

Deferred tax liabilities other than unrealized revaluation gain on land (Note 8)

1,202

1,557

10,667

Deferred tax liability—unrealized revaluation gain on land (Note 6)

1,339

1,413

11,888

66

64

593

Long-term liabilities:

Net defined benefit liability (Note 9)
Other long-term liabilities

5,454

5,304

48,408

Total long-term liabilities

23,06323,339204,677

19,487

19,487

172,948

1,940

1,940

17,222122,047

114,313

1,083,135

(392)

(389)

(3,479)143,084

135,351

1,269,827

3,835

2,432

34,0394,257

Net assets (Note 10):
Shareholders’ equity:
Common stock
Authorized—250,000,000 shares in 2016 and 2015
Issued—70,771,662 shares in 2016 and 2015
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain on other securities, net of taxes
Deferred gain on hedges, net of taxes

479

3,559

Unrealized revaluation gain on land, net of taxes (Note 6)

2,513

2,130

22,305

Translation adjustments

3,549

4,207

31,497

Remeasurements of defined benefit plans, net of taxes

(485)

633

(4,311)

Total accumulated other comprehensive income

9,891

12,96487,788

2,726

2,631

24,199155,702150,947

1,381,814¥222,468¥215,654$1,974,335

Non-controlling interests in consolidated subsidiaries
Total net assets
Total liabilities and net assets
See notes to consolidated financial statements.

Annual Report 201657

Financial Section

Consolidated Statements of Income
TSUMURA & CO. and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

¥ in millions

Net sales
Cost of sales (Note 5)
Gross profit before allowance for sales returns
Provision of allowance for sales returns
Gross profit
Selling, general and administrative expenses (Note 12)
Operating income
Other income (expenses):
Interest and dividends received
Interest expenses
Equity in income of affiliates
Foreign exchange gain (loss)
Gain on sales of property, plant and equipment
Loss on sales and disposition of property, plant and equipment
Impairment losses (Note 18)
Gain on sales of investment securities (Note 3)
Gain on sales of investments in subsidiaries and affiliates
Loss on valuation of investments in subsidiaries and affiliates
Other, net
Total other income (expenses)
Income before income taxes
Income taxes (Note 8):
Current
Deferred
Subtotal
Net income
Total net income attributable to:Non-controlling interests
Owners of the parent

US$ in thousands(Note 2)

2016

2015

2016

¥112,625
45,04867,577
7
67,56947,743
19,826¥110,438
41,85968,5790
68,57849,087
19,491$999,516
399,788599,72767
599,659
423,706
175,952

461
(182)
8
(975)
0
(32)
(563)
0
–
–
355
(927)
18,898

416
(201)
44
1,386
4
(379)
(973)
–
61
(217)
445
586
20,0784,091(1,617)79(8,654)3(287)(4,999)0––
3,150(8,233)
167,719

5,949
123
6,072
12,825

5,455
299
5,754
14,323

52,7991,095
53,895
113,823(268)¥ 12,557(248)¥ 14,075(2,381)$111,442¥ in millions

US$ in thousands(Note 2)

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
TSUMURA & CO. and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

Net income
Other comprehensive income (loss) (Note 16):
Unrealized holding gain on other securities, net of taxes
Deferred gain (loss) on hedges, net of taxes
Unrealized revaluation gain on land, net of taxes
Translation adjustments
Remeasurements of defined benefit plans, net of taxes
Share of other comprehensive income (loss) of affiliates accounted forusing equity method
Total other comprehensive income (loss)
Comprehensive income
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
See notes to consolidated financial statements.

58

TSUMURA & CO.

2016

2015

2016

¥12,825¥14,323$113,823

1,402(3,079)382(753)(1,119)

571
3,006
146
2,192
1,079

12,449(27,329)
3,397(6,689)(9,935)(29)(3,196)¥ 9,629

63
7,058¥21,382(260)(28,368)$ 85,455¥ 9,485
144¥20,826555$ 84,176
1,278

Consolidated Statements of Changes in Net Assets
TSUMURA & CO. and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

¥ in millions
Shareholders’ equity

Balance at April 1, 2015
Cash dividends paid
Net income attributable to owners of the parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes in items other than those in shareholders’ equity
Total changes during the year
Balance at March 31, 2016

Number ofshares ofcommon stock

Common stock

Capital surplus

Retainedearnings

Treasury stock

Total
shareholders’equity70,771,662
–
–
–
–
–
–
70,771,662¥19,487––––––¥19,487¥1,940––––––¥1,940¥114,313(4,513)
12,557
(309)
–
–
7,734
¥122,047¥(389)
–
–
–
(2)
–
(2)
¥(392)¥135,351(4,513)
12,557
(309)
(2)
–
7,732
¥143,084¥ in millions

Accumulated other comprehensive income

Balance at April 1, 2015
Cash dividends paid
Net income attributable to ownersof the parent
Reversal of revaluation
reserve for land
Purchase of treasury stock
Net changes in items other thanthose in shareholders’ equity
Total changes during the year
Balance at March 31, 2016

Unrealized
holding gainon othersecurities,
net of taxes

Deferred gain
on hedges,
net of taxes

Unrealized
revaluation
gain on land,
net of taxes(Note 6)

Translation
adjustments

Remeasurements of defined
benefit plans,
net of taxes

Total
accumulated
othercomprehensive
incomeNon-controllinginterests inconsolidated
subsidiaries

Total
net assets¥2,432–¥ 3,559–¥2,130–¥4,207–¥   633–¥12,964–¥2,631–¥150,947(4,513)

–

–

–

–

–

–

–

12,557

–
–

–
–

–
–

–
–

–
–

–
–

–
–

(309)
(2)

1,402
1,402
¥3,835(3,079)(3,079)¥   479

382
382¥2,513(658)(658)¥3,549(1,119)(1,119)¥  (485)(3,072)(3,072)¥ 9,891

94
94¥2,726(2,977)
4,754¥155,702

US$ in thousands (Note 2)
Shareholders’ equity

Balance at April 1, 2015
Cash dividends paid
Net income attributable to owners of the parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes in items other than those in shareholders’ equity
Total changes during the year
Balance at March 31, 2016

Number ofshares ofcommon stock

Common stock

70,771,662
–
–
–
–
–
–
70,771,662$172,948
–
–
–
–
–
–
$172,948

Capital surplus

Retainedearnings

Treasury stock

Total
shareholders’equity$17,222––––––$17,222$1,014,494(40,056)
111,442(2,745)––68,640$1,083,135$(3,459)
–
–
–
(19)
–
(19)
$(3,479)$1,201,206(40,056)
111,442(2,745)(19)–
68,620$1,269,827

US$ in thousands (Note 2)
Accumulated other comprehensive income

Balance at April 1, 2015
Cash dividends paid
Net income attributable to ownersof the parent
Reversal of revaluation
reserve for land
Purchase of treasury stock
Net changes in items other thanthose in shareholders’ equity
Total changes during the year
Balance at March 31, 2016

Unrealized
holding gainon othersecurities,
net of taxes

Deferred gain
on hedges,
net of taxes

Unrealized
revaluation
gain on land,
net of taxes(Note 6)

Translation
adjustments

Remeasurements of defined
benefit plans,
net of taxes

Total
accumulated
othercomprehensive
incomeNon-controllinginterests inconsolidated
subsidiaries

Total
net assets$21,590–$ 31,587–$18,907–$37,344–$ 5,623–$115,053–$23,356–$1,339,616(40,056)

–

–

–

–

–

–

–

111,442

–
–

–
–

–
–

–
–

–
–

–
–

–
–

(2,745)(19)

12,44912,449$34,039(27,329)(27,329)$  4,257

3,397
3,397
$22,305(5,847)(5,847)$31,497(9,935)(9,935)$(4,311)(27,265)(27,265)$ 87,788

842
842$24,199(26,422)
42,198$1,381,814

See notes to consolidated financial statements.

Annual Report 201659

Financial Section¥ in millions
Shareholders’ equity

Balance at April 1, 2014

Number ofshares ofcommon stock

Common stock

Capital surplus

Retainedearnings

Treasury stock

Total
shareholders’equity¥124,974

70,771,662¥19,487¥1,940¥103,934¥(388)

Cumulative effects of changes in accounting policies

–

–

–

817

–

817

Restated balance at April 1, 2014–

19,487

1,940

104,751(388)

125,791

Cash dividends paid

–

–

–

(4,513)–(4,513)

Net income attributable to owners of the parent

–

–

–

14,075–

14,075(1)

Purchase of treasury stock

–

–

–

–

(1)

Net changes in items other than those in shareholders’ equity

–

–

–

–

–

–

Total changes during the year

–

–

–

9,561

(1)

9,560

Balance at March 31, 2015

70,771,662¥19,487¥1,940¥114,313¥(389)¥135,351¥ in millions

Accumulated other comprehensive income

Balance at April 1, 2014

Unrealized
holding gainon othersecurities,
net of taxes

Deferred gain
on hedges,
net of taxes

Unrealized
revaluation
gain on land,
net of taxes(Note 6)

¥1,861¥  552¥1,984

Cumulative effects of changes
in accounting policies
Restated balance at April 1, 2014

Total
accumulated
othercomprehensive
incomeNon-controllinginterests inconsolidated
subsidiaries

Total
net assets¥2,259¥ (445)¥ 6,212¥2,131¥133,318

–

–

–

–

–

–

–

817

1,861

552

1,984

2,259

(445)

6,212

2,131

134,135

Cash dividends paid

–

–

–

–

–

–

–

(4,513)

Net income attributable to ownersof the parent

–

–

–

–

–

–

–

14,075Purchase of treasury stock

–

–

–

–

–

–

–

(1)

Net changes in items other thanthose in shareholders’ equity

571

3,006

146

1,948

1,079

6,751

500

7,252

Total changes during the year

571

3,006

146

1,948

1,079

6,751

500

16,812

Balance at March 31, 2015

¥2,432¥3,559¥2,130¥4,207¥  633¥12,964¥2,631¥150,947

See notes to consolidated financial statements.

60

Translation
adjustments

Remeasurements of defined
benefit plans,
net of taxes

TSUMURA & CO.

Consolidated Statements of Cash FlowsTSUMURA & CO. and consolidated subsidiaries
For the years ended March 31, 2016 and 2015

¥ in millions

US$ in thousands(Note 2)

2016

2015

2016

Income before income taxesAdjustments to reconcile income before income taxes
to net cash provided by operating activities:¥18,898¥ 20,078$167,719

Depreciation

5,059
563
(461)
182
(8)
25
(0)
–
215
(2,440)
0
390
(510)
(100)
(693)
21,120486(182)(3,854)
17,570

5,387
973
(416)
201
(44)
339
–
(61)
(2,454)(5,669)
(1)
(438)
(403)
(96)
(1,979)15,414441(194)(10,668)
4,992

44,903
4,999(4,091)
1,617
(79)
222
(0)
–
1,911
(21,659)
1
3,463(4,527)(888)(6,154)
187,440
4,320(1,623)(34,209)
155,928(7,675)
1,200
(60)
(10)
8

(9,628)
8
(41)
(9)
–

(68,121)
10,658
(540)
(90)
77

–
(934)
5
(34)
48
(10)
(7,461)91(1,103)5(45)
36
3(10,683)–(8,290)
52
(301)
425
(90)
(66,221)–(2)(4,515)(54)(36)(4,608)285
5,784
19,343¥25,128

15,000(1)(4,515)(39)(35)
10,408207
4,925
14,418¥ 19,343–(19)(40,072)
(487)
(321)
(40,901)
2,530
51,336
171,668$223,004

Cash flows from operating activities:

Impairment losses (Note 18)
Interest and dividends received
Interest expenses
Equity in (income) of affiliates
Loss on sales and disposition of property, plant and equipment(Gain) on sales of investment securities(Gain) on sales of investments in subsidiaries and affiliates(Increase) decrease in receivables(Increase) in inventories
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in payables and accrued expenses(Increase) in net defined benefit asset(Decrease) in net defined benefit liability
Others, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
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 securitiesProceeds from sales of investments in subsidiaries and affiliates
resulting in change in scope of consolidation
Payments of loans receivableCollection of loans receivable
Deposits of time deposits with maturity of more than three months
Refunds of time deposits with maturity of more than three months
Others, net
Net cash used in investing activities
Cash flows from financing activities:
Increase in long-term loans payable
Purchase of treasury stock
Cash dividends
Cash dividends paid to non-controlling shareholders
Others, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 13)
See notes to consolidated financial statements.

Annual Report 201661

Financial Section

Notes to the Consolidated Financial Statements
TSUMURA & CO. and consolidated subsidiaries
For the year ended March 31, 2016

1 Summary of Significant Accounting Policies

62(a) Basis of presentation
The accompanying consolidated financial statements of
TSUMURA & CO. (the “Company”) and its consolidated subsidiaries
are prepared on the basis of accounting principles generally
accepted in Japan, which are different in certain respects as to theapplication 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 (the “FIEA”).
As permitted by the FIEA, amounts of less than one million yen
have been omitted. As a result, the totals shown in the accompanying consolidated financial statements (both in yen and in U.S. dollars)
do not necessarily agree with the sums of the individual amounts.

(d) Translation of foreign currencies
Monetary assets and liabilities denominated in foreign currencies
are translated into yen at the rates in effect at the balance sheet
date and the accounts of the overseas consolidated subsidiaries,
etc., except for the components of shareholders’ equity, which aretranslated into yen at the rates of exchange in effect at the balance
sheet date. Foreign exchange gains and losses are credited or
charged to operations and translation differences are included in
net assets.
(e) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash
flows consist of cash on hand, demand deposits, and liquid shortterm investments with a maturity of three months or less from

Certain amounts in the prior year’s financial statements havebeen reclassified to conform to the current year’s presentation.
(b) Principles of consolidation and accounting for investments
in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include
the accounts of the Company and any significant companies
controlled directly or indirectly by the Company. Companies overwhich the Company exercises significant influence in terms of theiroperating and financial policies have been accounted for by theequity method.
The consolidated financial statements include the accounts of
the Company and its four and five significant subsidiaries for theyears ended March 31, 2016 and 2015, respectively. All significant
inter-company balances and transactions have been eliminated inconsolidation.
The equity method is applied to investments in significant
affiliates in accordance with the provisions of the Accounting Standard for Consolidated Financial Statements.
Investments in non-consolidated subsidiaries and otheraffiliates are stated at cost. If the equity method had been applied
to the investments in these companies, there would have been
no material effect in the accompanying consolidated financial
statements.
The consolidated financial statements for the year ended March
31, 2015, do not include the operating results of Creative Service,
Inc., formerly a consolidated subsidiary, from the second quarter ofthe fiscal year, because all of the shares owned by the Company
were sold off on August 1, 2014.
(c) Accounting period
The accounting period of the Company begins on April 1 andends on March 31 of the following year. The three overseas consolidated subsidiaries have fiscal years ending on December 31.
The necessary adjustments for significant transactions, if any,
during the intervening period are made on consolidation.

a­ cquisition date.
(f) Marketable securities and investment securities
Trading securities are carried at market value and held-to-maturity
securities are amortized or accumulated to face value. Money intrust with a market value is carried at market value.
Other securities with determinable market value are carried atmarket value with any changes in unrealized holding gain or loss
included in net assets. Other securities without determinable
market value are stated at cost determined principally by the moving average method. The cost of other securities sold is principally
computed based on the moving average method. The Company
and its consolidated subsidiaries do not have any trading securities
or held-to-maturity securities.
(g) Inventories
Inventories of the Company and its consolidated subsidiaries
are mainly stated at cost determined by the average cost methodof reducing book value when the contribution of inventories toprofitability declines.
(h) Property, plant and equipment (except for leased assets)
Property, plant and equipment are stated at cost and depreciationof property, plant and equipment is computed by the straight-line
method.
The estimated useful lives of the major depreciable assets are
as follows:
Buildings and structures
3 to 65 years
Machinery and equipment 3 to 8 years(i) Intangible assets (except for leased assets)
Intangible assets are amortized by the straight-line method.
Cost of software purchased for internal use is amortized by thestraight-line method over five years, the useful life applicable tocommercially available software.

TSUMURA & CO.

(j) Allowance for doubtful receivables
The Company and its consolidated subsidiaries provide allowances
for losses on bad debts at the amounts estimated specificallyon each doubtful receivable and the amounts calculated basedon past experience for receivables other than specific doubtfulr­ eceivables.
(k) Allowance for sales returns
Allowance for sales returns is provided for estimated losses onsales returns subsequent to the balance sheet date.
(l) Employees’ retirement and severance benefits
The benefit formula method is used as the method of attributing
expected benefits to the current period in calculating retirement
and severance benefit obligations.
Actuarial gains and losses and prior service costs are amortizedusing the straight-line method over 10 years, which is within theestimated average of remaining service years of employees.
The Company’s consolidated subsidiaries use the simplified
method in calculating net defined benefit liability and retirement
benefit expenses. Under this method, the severance payment
amount to be required at the year-end for voluntary termination isdeemed as retirement and severance benefit obligations.
(m) Leased assets
Leased assets under finance lease transactions that do not­transfer ownership to the lessee are depreciated under thestraight-line method over the lease term with no residual value.
Among finance lease transactions that do not transfer ownershipto the lessee, those lease transactions that commenced on or
before March 31, 2008, are accounted for in a similar manner as
operating lease transactions in accordance with generally accepted
accounting standards.
(n) Income taxes
Deferred tax assets and liabilities are determined based on the­differences between financial reporting and the tax bases of theassets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are­expected to reverse.
(o) Accounting for consumption taxes
Transactions subject to consumption taxes are recorded at
amounts exclusive of consumption taxes. Consumption taxes paidby the Company and its consolidated subsidiaries on the purchasesof goods and services that are not deductible under theConsumption Tax Law of Japan are expensed as incurred.
(p) Consolidated taxation system
The Company has applied the consolidated taxation system.
(q) Reclassifications
Certain prior year amounts have been reclassified to conform to
the 2016 presentation. These changes had no impact on previously
reported results of operations or net assets.

(r) Changes in accounting policies
From the year ended March 31, 2016, the Company has applied“Revised Accounting Standard for Business Combinations” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 21,
September 13, 2013 (hereinafter, the “Business Combinations Accounting Standard”)), “Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, September
13, 2013 (hereinafter, the “Consolidation Accounting Standard”))
and “Revised Accounting Standard for Business Divestitures”(ASBJ Statement No. 7, September 13, 2013 (hereinafter, the“Business Divestitures Accounting Standard”)). As a result, theCompany changed its accounting policies to recognize in capitalsurplus the differences arising from the changes in the Company’sownership interest of subsidiaries over which the Company continues to maintain control and to record acquisition related costs as
expenses in the fiscal year in which the costs are incurred. In addition, the Company changed its accounting policy for the reallocation of acquisition costs due to the completion following
provisional accounting to reflect such reallocation in the consolidated financial statements for the fiscal year in which the businesscombination takes place. The Company also changed the presentation of net income and the term “non-controlling interests” isused instead of “minority interests.” Certain amounts in the prioryear’s consolidated financial statements were reclassified to conform to the current year’s presentation.
With respect to application of the accounting standards regarding business combinations, the Company followed the provisional
treatment in Article 58-2 (4) of the Business Combinations Accounting Standard, Article 44-5 (4) of the Consolidation Accounting Standard and Article 57-4 (4) of the Business Divestitures
Accounting Standard with prospective application from the beginning of the current fiscal year.
In the consolidated statement of cash flows from the fiscal year
ended March 31, 2016, cash flows from the acquisition or disposalof shares of subsidiaries that do not result in changes in the scopeof consolidation are included in “Cash flows from financing activities,” and cash flows from acquisition related costs for shares ofsubsidiaries that result in changes in the scope of consolidation or
costs related to the acquisition or disposal of shares of subsidiaries that do not result in changes in the scope of consolidation are
included in “Cash flows from operating activities.”
There was no effect on the consolidated financial statements
and per share information for the year ended March 31, 2016, asa result of these changes.
(s) Accounting standard issued but not yet adopted“Revised Implementation Guidance on Recoverability of Deferred
Tax Assets” (ASBJ Guidance No. 26, March 28, 2016)

Annual Report 201663

Financial Section(a) Overview
Following the framework in Auditing Committee Report No. 66­“Audit Treatment regarding the Judgment of Recoverability of­Deferred Tax Assets,” which prescribes the estimation of deferred
tax assets according to the classification of the entity into one of fivecategories, the following treatments were changed as necessary:1) Treatment for an entity that does not meet any of the criteria
in categories 1 to 5;
2) Criteria for categories 2 and 3;
3) Treatment for deductible temporary differences which an­entity classified as category 2 is unable to schedule;

2 Basis of Translation

The consolidated financial statements presented herein are
expressed in yen and, solely for the convenience of the reader,have been translated into U.S. dollars at ¥112.68=US$1.00, theapproximate exchange rate prevailing on the Tokyo Foreign4) Treatment for the period which an entity classified as category 3 is able to reasonably estimate with respect to future taxable income before consideration of taxable or deductible
temporary differences that exist at the end of the current­fiscal year; and5) Treatment when an entity classified as category 4 also meetsthe criteria for categories 2 or 3.
(b) Effective date
The guidance is expected to be effective from the beginning of theyear ending March 31, 2017.
(c) Impact of the application of the guidance
The impact is under assessment at the time of preparation of theaccompanying consolidated financial statements.

Exchange Market on March 31, 2016. This translation should not
be construed as a representation that the amounts shown could
have been, or could in the future be, converted into U.S. dollars atthat or any other rate.

3 Investment Securities

The cost and related aggregate market value of securities, other than those held for trading and held-to-maturity purposes, with a readily
available market value at March 31, 2016 and 2015, are summarized as follows:¥ in millions

Cost
Market value
Total unrealized gain
Total unrealized loss

US$ in thousands

2016

2015

2016

¥12,978
18,4095,575(144)¥12,968
16,4483,905(424)$115,178
163,377
49,484(1,286)

Securities as of March 31, 2016 and 2015, that are excluded from the above table are summarized at their book values as follows:

Non-current assets:
Unlisted stocks other than those on the over-the-counter market¥ in millions

US$ in thousands

2016

2015

2016

¥90

¥98

$798

Securities, other than those held for trading and held-to-maturity purposes, which were sold during the years ended March 31, 2016 and2015, are summarized as follows:¥ in millions

Proceeds received
Total gain
Total loss
The Company recognized impairment losses on all securities
whose market value had declined by 50% or more of book value
and on some securities whose market value had declined by 30%
or more of book value. Impairment losses were, if any, recognized

64

TSUMURA & CO.

US$ in thousands

2016

2015

2016

¥18
9
–

¥–
–
–

$164
87
–

at the amount of the difference between book value and market
value. No impairment losses on securities were recognized for theyears ended March 31, 2016 and 2015.

4 Financial Instruments

The Company and its consolidated subsidiaries finance necessary
funds through bank loans, considering capital investments forthe pharmaceutical production and selling business. Temporary
excess funds are operated by highly rated financial institutions.
Derivative transactions are only utilized to hedge the following
risks, and it is the Company’s policy not to enter into derivativetransactions for speculative purposes.
Operating receivables such as trade notes and accounts
receivable are exposed to credit risk. The Company and its
consolidated subsidiaries manage the due date and balance foreach customer following internal rules and asking for deposits
depending on the customer’s credit conditions.
Investment securities mainly consist of securities of counterparties and are exposed to market fluctuation risk. The fair value ofthe investment securities is regularly reported to the responsible
board of directors.
Operating payables such as trade notes and accounts payable
are due within one year. Some of the operating payables relating
to imports of raw materials are denominated in foreign currencies
and are therefore exposed to foreign currency fluctuation risk. The
Company and its consolidated subsidiaries utilize foreign exchange
forward contracts to hedge the risk.

Short-term bank loans are used to finance operating capital andare exposed to interest rate fluctuation risk.
Long-term loans payable is used to finance capital investment,
and interest rate fluctuation risk is mitigated by fixed interest rateborrowings.
Accounts payable—other and income taxes payable are eachdue within one year.
The Company and its consolidated subsidiaries utilize
derivative financial instruments to hedge against such risks, suchas foreign exchange forward contracts to hedge their foreign
currency fluctuation risk. Please refer to Note 15: Derivatives for
information on hedge accounting.
Implementation and management of derivative transactions are
based on internal rules. The Company and its consolidated subsidiaries only enter into derivative transactions with highly rated­financial institutions to mitigate credit risk.
Operating payables and loans are exposed to liquidity risk. The
Company and its consolidated subsidiaries manage the risk by
preparing the cash management plans monthly.
The contract amount and other information regarding derivativetransactions described in Note 15: Derivatives does not indicate
market risk related to derivative transactions.

Carrying value reported in the consolidated balance sheet, fair value, and differences of financial instruments as of March 31, 2016 and2015, are as follows:¥ in millions

2016

Cash and time deposits
Trade notes and accounts receivable
Investment securities:
Other securities
Total
Trade notes and accounts payable
Short-term bank loans
Accounts payable—other
Income taxes payable
Long-term loans payable, less current portion
Total
Derivative transactions

Carrying value
reported in thebalance sheet

Fair value

Difference¥25,150
41,875¥25,150
41,875¥ ––18,409¥85,435¥ 3,157
21,957
4,927
2,838
15,000¥47,881¥   693

18,409¥85,435¥ 3,157
21,957
4,927
2,838
15,031¥47,913¥   693

–
¥ –
¥ –
–
–
–
31
¥31
¥ –

Annual Report 201665

Financial Section¥ in millions

2015

Cash and time deposits
Trade notes and accounts receivable
Investment securities:
Other securities
Total
Trade notes and accounts payable
Short-term bank loans
Accounts payable—other
Income taxes payable
Long-term loans payable, less current portion
Total
Derivative transactions

Carrying value
reported in thebalance sheet

Fair value

Difference¥19,379
42,142¥19,379
42,142¥––

16,448¥77,971¥ 2,828
21,957
6,251
635
15,000¥46,672¥ 5,293

16,448¥77,971¥ 2,828
21,957
6,251
635
15,000¥46,672¥ 5,293

–
¥–
¥–
–
–
–
–
¥–
¥–
US$ in thousands

2016

Cash and time deposits
Trade notes and accounts receivable
Investment securities:
Other securities
Total
Trade notes and accounts payable
Short-term bank loans
Accounts payable—other
Income taxes payable
Long-term loans payable, less current portion
Total
Derivative transactions
Unlisted stocks of ¥90 million (US$798 thousand) and ¥98 million as of March 31, 2016 and 2015, respectively, whose fair value isextremely difficult to determine were not included in the above table.
Furthermore, unlisted stocks of ¥1,619 million (US$14,376 thousand) and ¥1,619 million included in “Investments in nonconsolidated subsidiaries and affiliates” as of March 31, 2016
and 2015, respectively, whose fair value is extremely difficult to­determine were not included in the above table.
The valuation method of fair value of financial instruments andinformation regarding marketable and investment securities andderivative transactions is summarized as follows.
Cash and time deposits and trade notes and accounts receivable:
The carrying value is deemed as the fair value since these items
are scheduled to be settled in a short period of time.

66

TSUMURA & CO.

Carrying value
reported in thebalance sheet

Fair value

Difference$223,199
371,633$223,199
371,633$

163,377$758,210$ 28,026
194,861
43,732
25,189133,120$424,930$  6,158

163,377$758,210$ 28,026
194,861
43,732
25,189133,403$425,213$  6,158

–
–
–
–
–
–
283
$283
$ –

–
–

$
$

Investment securities:
The fair value of stocks is based on the quoted market prices.
The fair value of bonds is based on the price provided by thecounterparty financial institutions. Please refer to Note 3: Investment
Securities for information regarding securities by classification.
Trade notes and accounts payable, short-term bank loans,accounts payable—other, and income taxes payable:
The carrying value is deemed as the fair value since these items
are scheduled to be settled in a short period of time.
Long-term loans payable, less current portion:
The fair value of long-term loans payable less the current portion is
calculated by discounting the total of principal and interest using anassumed interest rate applicable to a similar type of new borrowings.
Derivative transactions:
Please refer to Note 15: Derivatives.

The redemption schedule of monetary assets and securities with maturity dates at March 31, 2016 and 2015, is summarized as follows:¥ in millions

2016

Cash and time deposits
Trade notes and accounts receivable
Total

Within one year

Over one year
within five years

Over five years
within ten years

Over ten years¥25,132
41,875¥67,007

¥–
–
¥–

¥–
–
¥–

¥–
–
¥–
¥ in millions

2015

Cash and time deposits
Trade notes and accounts receivable
Total

Within one year

Over one year
within five years

Over five years
within ten years

Over ten years¥19,339
42,142¥61,482

¥–
–
¥–

¥–
–
¥–

¥–
–
¥–
US$ in thousands

2016

Cash and time deposits
Trade notes and accounts receivable
Total

Within one year

Over one year
within five years

Over five years
within ten years

Over ten years$223,039
371,633$594,672

$–
–
$–

$–
–
$–

$–
–
$–

¥ in millions

US$ in thousands

The repayment schedule of long-term loans payable after the fiscal year-end:
Please refer to Note 7: Debt.

5 Inventories

Inventories at March 31, 2016 and 2015, consisted of the following:

Merchandise and finished goods
Work in process
Raw materials and supplies
Total

2016

2015

2016

¥ 8,438
12,42831,482¥52,348¥ 8,887
13,27628,552¥50,716$ 74,886
110,299
279,394$464,580

Inventories at March 31, 2016 and 2015, are stated at net selling value. Losses valuation of inventories included in cost of sales were¥796 million (US$7,064 thousand) and ¥203 million for the years ended March 31, 2016 and 2015, respectively.

6 Land Revaluation

In accordance with the Land Revaluation Law (Proclamation No.
34, dated March 31, 1998), land used for business activities wasrevalued at March 31, 2002. Unrealized revaluation gain on land,
net of related deferred taxes, has been presented as a componentof net assets.

The market value of land as of March 31, 2016 and 2015, decreased by ¥2,572 million (US$22,828 thousand) and by ¥2,525
million after the revaluation, respectively.

Annual Report 201667

Financial Section

7 DebtShort-term bank loans at average interest rates of 0.6% and 0.6% amounted to ¥21,957 million (US$194,861 thousand) and ¥21,957 million
at March 31, 2016 and April 1, 2015, respectively.
Long-term debt at March 31, 2016, and April 1, 2015, consisted of the following:¥ in millions

Long-term loans payable, maturing through 2018, average interest rate of 0.3%
Lease obligations, maturing through 2022
Less: current portion

US$ in thousands

2016

2015

2016

¥15,00091(31)¥15,060¥15,000
123(35)¥15,087$133,120809(275)$133,653

The aggregate annual maturities of long-term loans payable subsequent to March 31, 2016, are summarized as follows:
Years ending March 31¥ in millions

US$ in thousands

2017
2018
2019
2020 and thereafter
Total¥      –
–15,000–¥15,000$       –
–133,120–$133,120

The aggregate annual maturities of lease obligations subsequent to March 31, 2016, are summarized as follows:
Years ending March 31

2017
2018
2019
2020 and thereafter
Total¥ in millions

US$ in thousands

¥31
21
14
23
¥91

$275
192
131
209
$809

No assets were pledged as collateral for short-term bank loans and long-term loans payable at March 31, 2016 and 2015.
The Company and its consolidated subsidiaries had no credit commitments with a bank at March 31, 2016 and 2015.

8 Income Taxes

At March 31, 2016 and 2015, the significant components of deferred tax assets and liabilities are summarized as follows:

Deferred tax assets:
Net defined benefit liability
Accrued bonuses
Accrued enterprise tax
Consigned research expenses
Impairment losses
Loss on valuation of inventory
Other
Total deferred tax assets
Valuation allowance
Deferred tax assets recognizedDeferred tax liabilities:
Unrealized holding gain on other securities
Deferred gain on hedges
Net defined benefit asset
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

68

TSUMURA & CO.

¥ in millions

US$ in thousands

2016

2015

2016

¥   20
726
192
469
173
188
600
2,371
(183)
2,187

¥   20
838
103
384
321
19
553
2,242
(193)
2,048

$   181
6,444
1,712
4,167
1,541
1,671
5,325
21,043(1,629)19,414(1,595)
(274)
(37)
(178)
(2,085)¥  101(1,038)(1,734)(362)(152)(3,288)¥(1,239)(14,158)(2,437)(333)(1,581)(18,510)$   903	 The Company and its consolidated subsidiaries are subject to anumber of taxes based on income which, in the aggregate, resulted in statutory tax rates of approximately 33.1% and 35.6% for theyears ended March 31, 2016 and 2015, respectively. The differences between the statutory tax rate and the effective tax rate for theyear ended March 31, 2016, are not disclosed because the total
differences are less than 5% of the statutory tax rate. The statutory
tax rate reflected in the accompanying consolidated statement ofincome for the year ended March 31, 2015, differs from the effective tax rate for the following reasons:
2015

Statutory tax rate
Effect of:
Inhabitants per capita taxes
Permanent differences such as entertainment and donation expenses
Nontaxable dividend income
Tax credit for research and development expense
Decrease in valuation allowance
Reduction of deferred tax liabilities due to income tax rate change
Other
Effective tax rate
The “Act on Partial Revision of the Income Tax Act (Act No.15
of 2016)” and the “Act on Partial Revision of the Local Income
Tax Act (Act No.13 of 2016)” were passed by the Japanese
National Diet on March 29, 2016 and the statutory tax rate applied
to calculate deferred tax assets and deferred tax liabilities waschanged from 32.3% to 30.9% for temporary differences expected
to be realized in the period between April 1, 2016 and March 31,
2018, and to 30.6% for temporary differences expected to be realized on or ­after April 1, 2018.
As a result, deferred tax assets, net of deferred tax liabilities,­decreased by ¥22 million (US$197 thousand), income

35.6%
0.4
0.6
(0.4)
(4.9)
0.3
(0.7)
(2.2)
28.7%

taxes-deferred, unrealized holding gain on other securities, net oftaxes, and deferred gain on hedges, net of taxes increased by¥114 million (US$1,012 thousand), ¥87 million (US$776 thousand),and ¥16 million (US$148 thousand), respectively, and remeasurements of defined benefit plans, net of taxes, decreased by ¥11
million (US$101 thousand) as of and for the year ended March 31,
2016. The deferred tax liability—unrealized gain on land decreased by ¥73 million (US$652 thousand) and unrealized­revaluation gain on land, net of taxes, increased by the sameamount as of and for the year ended March 31, 2016.

9 Employees’ Retirement and Severance Benefits
The Company maintains a combination plan of a funded andunfunded defined benefit plan, defined contribution plan, andemployees’ pension fund plan (multi-employer pension plan).
The Company maintains a cash-balance plan, which is a contract-type corporate pension plan, as a defined benefit corporate
pension plan (funded). Under this plan, a hypothetical individual
account balance corresponding to each participant’s fundedamount and the basis of the pension amount is established. An
earned interest credit based on market interest rate trends and apoint allocation, which is determined by the number of service
years and employee rank times a unit value for each point, areaccumulated in this hypothetical individual account balance.
Under the lump-sum severance payment plan (unfunded),
employees who terminate their employment are entitled to
lump-sum severance benefits based on their length of service
and level of compensation at the time of the termination.

The Company’s consolidated subsidiaries maintain a defined

benefit corporate pension plan, defined contribution corporate
pension plan, and employees’ pension fund plan (multi-employer
pension plan). The Company’s consolidated subsidiaries use thesimplified method for the calculation of net defined benefit liability
and retirement benefit expenses.
In addition, the Company and its consolidated subsidiaries
pay meritorious service awards to employees in excess of theprescribed formula.
The employees’ pension fund, in which the Company and its
consolidated subsidiaries participate, is a multi-employer type.
Since it is difficult to reasonably calculate the Companies’ portionof the plan assets corresponding to its contributions, the contributions to the plan assets are recorded as periodic benefit expenses.

Annual Report 201669

Financial Section(Defined benefit plan)(1) The changes in retirement and severance benefit obligations for the years ended March 31, 2016 and 2015, are as follows:¥ in millions

Balance at beginning of year
Cumulative effects of changes in accounting policies
Restated balance at beginning of year
Service cost
Interest cost on benefit obligation
Actuarial gain or loss
Benefits paid
Other
Balance at end of year

US$ in thousands

2016

2015

2016

¥14,369–¥14,369
780
212
1,400
(1,113)
4¥15,653¥15,446(1,269)¥14,176
781
209
(181)
(617)
1
¥14,369$127,524–$127,524
6,925
1,883
12,430(9,884)42$138,921¥ in millions

US$ in thousands(2) The changes in plan assets for the years ended March 31, 2016 and 2015, are as follows:

Balance at beginning of year
Expected return on plan assets
Actuarial gain or loss
Employer’s contribution
Benefits paid
Other
Balance at end of year

2016

2015

2016

¥15,428
534
(209)
1,053
(1,103)
6¥15,709¥13,104
452
1,388
1,070
(592)
3
¥15,428$136,924
4,739(1,863)9,351(9,791)
55$139,416(3) The reconciliation between the liability recorded on the consolidated balance sheet and the balances of retirement and severance benefit
obligations and plan assets as of March 31, 2016 and 2015, are as follows:¥ in millions

Funded retirement and severance benefit obligations
Plan assets
Unfunded retirement and severance benefit obligations
Net liability for retirement and severance benefit obligations
on the consolidated balance sheet

Net defined benefit liability
Net defined benefit asset
Net defined benefit liability on the consolidated balance sheet

US$ in thousands

2016

2015

2016

¥ 15,620(15,709)(89)
33¥ 14,339(15,428)(1,088)29$ 138,624(139,416)
(791)
296

¥    (55)¥ (1,059)$    (494)¥ in millions

US$ in thousands

2016

2015

2016

¥ 66
(122)
¥ (55)¥    64(1,123)¥(1,059)$   593(1,088)$  (494)(4) The components of net retirement benefit expenses for the years ended March 31, 2016 and 2015, are as follows:¥ in millions

Service cost
Interest cost on benefit obligation
Expected return on plan assets
Amortization of actuarial gain or loss
Amortization of prior service cost
Other
Net retirement benefit expenses

70

TSUMURA & CO.

US$ in thousands

2016

2015

2016

¥ 780
212
(534)
(5)
2
17
¥ 473

¥ 781
209
(452)
155
(96)
14
¥ 611

$ 6,925
1,883(4,739)(50)
24156$ 4,199

(5) The components of remeasurements of defined benefit plans (before income tax effect) in other comprehensive income for the years
ended March 31, 2016 and 2015, are as follows:¥ in millions

Prior service cost
Actuarial gain or loss
Total

US$ in thousands

2016

2015

2016

¥    2(1,616)¥(1,613)¥  (96)
1,725¥1,628$24(14,345)$(14,320)(6) The components of remeasurements of defined benefit plans (before income tax effect) in accumulated other comprehensive income
as of March 31, 2016 and 2015, are as follows:¥ in millions

Unrecognized prior service cost
Unrecognized actuarial gain or loss
Total

US$ in thousands

2016

2015

2016

¥ 12
665
¥677

¥  15
(951)
¥(936)$  1095,904$6,013

2016

2015

36%
29%
35%
0%
100%

26%
43%
29%
2%
100%

(7) The components of plan assets as of March 31, 2016 and 2015, are as follows:
Debt securities
Equity securities
General accounts
Other
Total

The expected long-term rate of return on plan assets is determined considering the long-term rates of return, which are expectedcurrently and in the future, from the various components of the plan assets.
(8) The assumptions used for the years ended March 31, 2016 and 2015, are as follows:
Discount rate
Expected long-term rate of return on plan assets

2016

2015

0.4%
3.5%

1.5%
3.5%

(Note)
Expected future salary increase rates are not presented since retirement and severance benefit obligations are calculated without taking into account estimated future­accumulated points according to the benefit formula method.

(9) Simplified method
Plans for which the simplified method is applied are included in the above tables due to their immateriality.
(Defined contribution plan)
The required contributions to the defined contribution plan (including the multi-employer employees’ pension fund plan accounted for in
the same way as the defined contribution plan) are ¥967 million (US$8,586 thousand) and ¥1,044 million for the years ended March 31,
2016 and 2015, respectively.
(The multi-employer plan for which the required contributions are recorded as retirement benefit expenses)(1) The overall funding status as of March 31, 2016 and 2015, is as follows:¥ in millions

Plan assets
Total of actuarial obligation and minimum actuarial reserve
Difference

US$ in thousands

2016

2015

2016

¥571,380
561,736¥  9,644¥512,488
522,289¥   (9,801)$5,070,824
4,985,234$    85,589

The amounts in the above table are provided based on the most recently available information (as of March 31, 2015 and 2014, for fiscal
2016 and 2015, respectively).

Annual Report 201671

Financial Section(2) The contribution ratios of the Company to the entire plan during
the years ended March 31, 2016 and 2015, are 3.82% and 3.76%,
respectively.
(3) Supplemental information
As of March 31, 2016, the difference described in (1) was calculated by the sum of the balance of the unamortized prior service
cost of ¥(40,107) million (US$(355,940) thousand), earnings of thefund of ¥14,310 million (US$127,004 thousand), and voluntary reserve of ¥35,440 million (US$314,526 thousand).

10 Net Assets

The Companies Act of Japan (the “Act”), which superseded
most of the provisions of the Commercial Code of Japan, went
into effect on May 1, 2006. The Act provides that an amount equal
to 10% of the amount to be disbursed as distributions of capitalsurplus (other than the capital reserve) and retained earnings­(other than the legal reserve) be transferred to the capital reserveand the legal reserve, respectively, until the sum of the capital

As of March 31, 2015, the difference described in (1) was­ alculated by the sum of the balance of the unamortized priorc­service cost of ¥(45,242) million, and earnings of the fund of¥35,440 million.
The balance of unamortized prior service cost represents thepresent value of special premium income and is amortized using
the straight-line method with a 15.5‰ premium ratio burdened by
the employer. The remaining amortization periods are 7 years and0 months and 8 years and 0 months as of March 31, 2015 and2014, respectively
The ratios in (2) are not equal to the actual share ratio.

­reserve and the legal reserve equals 25% of the capital stock account. Such distributions can be made at any time by resolutionof the shareholders, or by the Board of Directors if certain conditions are met. The legal reserve amounted to ¥2,931 million(US$26,014 thousand) and ¥2,931 million as of March 31,
2016 and 2015, respectively.

11 Amounts per Share

Net assets per share as of March 31, 2016 and 2015, were ¥2,169.13 (US$19.25) and ¥2,103.04, respectively.
Net income per share for the years ended March 31, 2016 and 2015, was ¥178.06 (US$1.58) and ¥199.58, respectively.
The basis for calculation of basic total net assets per share as of March 31, 2016 and 2015, was as follows:

Basic total net assets per share:
Total net assets
Less: Non-controlling interests in consolidated subsidiaries
Amounts attributable to shareholders of common stock
Number of shares outstanding at the end of the periods¥ in millions

US$ in thousands

2016

2015

2016

¥   155,702
2,726¥   152,976
70,524,031¥   150,947
2,631¥   148,316
70,524,779$ 1,381,814
24,199$ 1,357,615
70,524,031

The basis for calculation of basic net income per share for the years ended March 31, 2016 and 2015, is as follows:

Basic net income per share:
Net income attributable to owners of the parent
Amounts attributable to owners of the parent related to common stock
Weighted-average number of shares outstanding

72

TSUMURA & CO.

¥ in millions

US$ in thousands

2016

2015

2016

¥    12,557¥    12,557
70,524,330¥    14,075¥    14,075
70,524,999$      111,442$      111,442
70,524,330

Basic net income per share is computed based on net ­income
attributable to owners of the parent and the weighted-average
number of shares of common stock outstanding during each year.
Diluted net income per share is computed based on net ­income
attributable to owners of the parent and the weighted-­average
number of shares of common stock outstanding during each year
after giving effect to the dilutive potential of shares of common
stock to be issued. Diluted net income per share for the years
ended March 31, 2016 and 2015, has not been presented

because there were no potentially dilutive securities at March
31, 2016 and 2015, respectively.
Net assets per share are based on the number of shares ofcommon stock outstanding at each balance sheet date.
The Company and its consolidated subsidiaries and nonconsolidated subsidiaries and other affiliates to which the equity
method had been applied had 247,631 and 246,883 shares oftreasury stock at March 31, 2016 and 2015, respectively.

12 Major Expenses

Major expenses included in selling, general and administrative expenses for the years ended March 31, 2016 and 2015, are as follows:¥ in millions

Sales promotion expenses
Sales rebates
Salaries and allowances
Research and development expenses
Provision for employees’ retirement and severance benefits
Provision of allowance for doubtful accounts

US$ in thousands

2016

2015

2016

¥ 3,823
9,363
16,9745,968
972
0¥ 4,249
9,155
17,279
6,252
1,012
0

$ 33,936
83,095
150,639
52,9688,634
0Research and development expenses included in general and administrative expenses and cost of sales for the years ended March 31,
2016 and 2015, amounted to ¥5,968 million (US$52,968 thousand) and ¥6,252 million, respectively.

13 Cash and Cash Equivalents

A reconciliation of cash and cash equivalents at March 31, 2016 and 2015, to the accounts and amounts in the accompanying balance
sheets is summarized as follows:¥ in millions

Cash and time deposits
Less: Time deposits with a maturity in excess of three months
Cash and cash equivalents

US$ in thousands

2016

2015

2016

¥25,150(22)¥25,128¥19,379(36)¥19,343$223,199(195)$223,004

Annual Report 201673

Financial Section

14 Leases

Finance lease transactions that do not transfer ownership
Leased assets consisted of forklifts in the factories, etc.
Finance lease transactions that do not transfer ownershipcommenced on or before March 31, 2008, are still accounted forin the same manner as operating lease transactions.

Pro-forma information of leased assets such as acquisition
cost, accumulated depreciation, obligations under finance leases,
depreciation expense, interest expense, and other information offinance leases that do not transfer ownership of the leased assets
to the lessee on an “as if capitalized” basis for the years ended
March 31, 2016 and 2015, are as follows:(1) A summary of the pro-forma amounts for acquisition cost, accumulated depreciation, and net book value relating primarily to tools,
furniture and fixtures at March 31, 2016 and 2015, is as follows:¥ in millions

US$ in thousands

2016

2015

2016

Acquisition cost

¥3

¥61

$33

Accumulated depreciation

3

60

33

¥–

¥ 0

$     –Net book value(2) Future minimum lease payments at March 31, 2016 and 2015, are summarized as follows:¥ in millions

US$ in thousands

2016

2015

2016

Payments in one year or less

¥–

¥0

$–

Payments after one year

–

–

–

¥–

¥0

$–

Total

(3) Lease payments and pro-forma depreciation charges for the years ended March 31, 2016 and 2015, are analyzed as follows:¥ in millions

US$ in thousands

2016

2015

2016

Lease payments

¥0

¥5

$3

Pro-forma depreciation charges

0

5

3

(4) Depreciation and interest allocation policy
The pro-forma effects of depreciation are computed using the straight-line method over lease terms with no residual value.
Operating leases
Future minimum lease payments for non-cancellable operating leases subsequent to March 31, 2016 and 2015, are as follows:¥ in millions

Payable in one year or less
Payable after one year
Total

74

TSUMURA & CO.

US$ in thousands

2016

2015

2016

¥54

¥61

$479

16

15

142

¥70

¥77

$621

15 Derivatives

The Company and its consolidated subsidiaries have entered into
foreign exchange forward contracts to reduce their exposure to therisk of future adverse fluctuations in foreign exchange rates related

to assets and liabilities denominated in foreign currencies.
An unrealized gain or loss on a hedge instrument is deferred
until the Company recognizes a gain or loss on the hedged item.
It is the Company’s policy not to enter into any speculative
derivatives transactions. The Company and its consolidated
subsidiaries have entered into derivative transactions to hedge
foreign currency fluctuation risk of normal foreign currency transactions based on past import activities, etc.

The management of the Company considers that the Company
would not be significantly impacted by market risk related toderivative transactions because their effects on income would be
opposite to the effects of the underlying hedged transactions. As
the Company enters into contracts with domestic banks with highcredit ratings, the Company does not anticipate any risk of nonperformance by these counterparties.
The Company and its consolidated subsidiaries enter into andmonitor derivative transactions in accordance with internal execution
and control regulations relating to derivative transactions, which
stipulate control policies, purpose, scope, and reporting system ofderivative transactions.

Derivative transactions for which hedge accounting has been applied at March 31, 2016 and 2015, are as follows:
Currency related¥ in millions

US$ in thousands

2016
Hedge
accounting
methodTransaction

Allocation
methodForeign exchange
forward contracts
USD (Buying)
CNY(Buying)

Hedged items

Forecast transactions
denominated in foreign
currencies

Total

Contract
amountContract
amount over
one year

Fair value¥18,058¥2,70911,436¥29,495

Contract
amountContract
amount over
one year

Fair value¥663$160,263$24,042$5,8893,894

30

101,499

34,561

269¥6,603¥693$261,762$58,603$6,158¥ in millions

2015
Hedge
accounting
methodTransaction

Allocation
methodForeign exchange
forward contracts
USD (Buying)
CNY(Buying)

Total

Hedged items

Forecast transactions
denominated in foreign
currencies

Contract
amountContract
amount over
one year

Fair value¥27,563¥ 7,935¥4,303

9,448

4,899

990

¥37,011¥12,834¥5,293

Fair value is principally based on obtaining quotes from counterparty financial institutions.
Information on derivative transactions for which hedge accounting does not apply is omitted since all outstanding derivative positions
qualified for hedge accounting.

Annual Report 201675

Financial Section

16 Comprehensive Income

Reclassifications and adjustments and income tax effects attributable to other comprehensive income (loss) for the years ended March 31,
2016 and 2015, are as follows:¥ in millions

US$ in thousands

2016

2015

2016

¥ 1,960¥    694$  17,398

Unrealized holding gain on other securities, net of taxes:
Gains arising during the year
Reclassifications and adjustments

(9)

–

(87)

Before income tax effects

1,950

694

17,310

Income tax effects

(547)

(123)

(4,861)¥ 1,402¥    571$  12,449¥(4,599)¥ 4,434$(40,820)

1,520(1,428)13,491¥(3,079)¥ 3,006$(27,329)¥

309¥     –

$ 2,745

73

146

652

¥

382

¥    146$ 3,397

Adjustments arising during the year¥  (753)¥ 2,192$ (6,689)

Translation adjustments¥  (753)¥ 2,192$ (6,689)

Adjustments arising during the year¥(1,610)¥ 1,569$(14,294)

Reclassifications and adjustments

(2)

58

(26)

(1,613)

1,628(14,320)

494

(549)

4,385

¥(1,119)¥ 1,079$ (9,935)

Unrealized holding gain on other securities, net of taxes
Deferred gain (loss) on hedges, net of taxes:
Gains (losses) arising during the year
Income tax effects
Deferred gain (loss) on hedges, net of taxes
Unrealized revaluation gain on land, net of taxes:
Gains arising during the year
Income tax effects
Unrealized revaluation gain on land, net of taxes
Translation adjustments:

Remeasurements of defined benefit plans, net of taxes:

Before income tax effects
Income tax effects
Remeasurements of defined benefit plans, net of taxes
Share of other comprehensive income (loss)of affiliates accounted for using equity method:76

Gains (losses) arising during the year¥   (29)¥   63$    (260)Share of other comprehensive income (loss) ofaffiliates accounted for using equity method¥   (29)¥   63$    (260)

Total other comprehensive income (loss)¥(3,196)¥ 7,058$(28,368)

TSUMURA & CO.

17 Segment Information

Information about reportable segments is not disclosed since
the Company and its consolidated subsidiaries have categorized
their reportable segments into a single segment, pharmaceuticalproducts operation.
(Related information)(1) Information about products and services
Information about products and services is not disclosed sincesales amount of single product or service classification to externalcustomers exceeded 90% of net sales on the consolidated statements of income.

(2) Information about geographical areas(a) Sales
Information about sales by geographical area is not disclosed
since sales to external customers in Japan exceeded 90% of net
sales on the consolidated statements of income.
(b) Property, plant and equipment
Information about property, plant and equipment by geographicalarea for the years ended March 31, 2016 and 2015, is as follows:¥ in millions

2016
Japan

China

Other

Total

¥51,530¥11,290¥0¥62,822¥ in millions

2015
Japan

China

Other

Total

¥47,995¥12,627¥0¥60,624
US$ in thousands

2016
Japan

China

Other

Total

$457,321$100,202$8$557,531(3) Information about major customers for the years ended March 31, 2016 and 2015, is as follows:
Sales¥ in millions

US$ in thousands

Name of major customers
Alfresa Holdings Corporation¥27,577$244,745

Pharmaceutical products

MEDIPAL HOLDINGS CORPORATION

24,957

221,487

Pharmaceutical products

Suzuken Co., Ltd.

18,595

165,031

Pharmaceutical products

TOHO HOLDINGS CO., LTD.

14,244

126,415

Pharmaceutical products

2016

Segment

Sales¥ in millions

Name of major customers
Alfresa Holdings Corporation
MEDIPAL HOLDINGS CORPORATION
Suzuken Co., Ltd.
TOHO HOLDINGS CO., LTD.

2015

¥28,046
24,22017,417
13,433

Segment

Pharmaceutical products
Pharmaceutical products
Pharmaceutical products
Pharmaceutical products

Since the Company and its consolidated subsidiaries have categorized their reportable segments into a single segment,
pharmaceutical products operation, information regarding impairment losses on fixed assets by reportable segment for the years
ended March 31, 2016 and 2015, was omitted.

Annual Report 201677

Financial Section

18 Impairment Losses

The Company and its consolidated subsidiaries group their assets used for business on the basis of business segments, considering thecharacteristics of the products and similarity of markets. Idle assets and assets to be disposed of are grouped individually.
(Fiscal 2016)
For the year ended March 31, 2016, the Company and its consolidated subsidiaries recognized ¥563 million (US$4,999 thousand) of impairment losses on fixed assets used for business, which consisted of the following:
Location

Description

Classification

Inashiki-gun, Ibaraki, Japan

Accommodation facilities for employees

Buildings and land, etc.

The Company concluded that it was necessary to close down
accommodation facilities for employees after comprehensively
considering employees’ needs and maintenance costs, etc., andtheir carrying values have been reduced to their recoverable
amounts and the difference ­recognized in other income (expenses) as impairment losses.
The recoverable amount of the buildings and land, etc. wasmeasured at net selling price and its value in use. The net selling

price is based on an appraisal value estimated by a real estate appraiser. Discount rates are considered to be immaterial and are nottaken into account since the usage period of the assets is short.
Impairment losses of ¥563 million (US$4,999 thousand) c­ onsistof ¥72 million (US$641 thousand) for land and ¥491 million(US$4,358 thousand) for buildings and structures for the year ended March 31, 2016.

(Fiscal 2015)
For the year ended March 31, 2015, the Company and its consolidated subsidiaries recognized ¥973 million of impairment losses on fixed
assets used for business, which consisted of the following:
Location

Description

Classification

Kasai-shi, Hyogo, Japan

Distribution facilities

Buildings and land, etc.

The Company disposed of assets related to distribution facilities
and their carrying values have been reduced to their recoverable
amounts and recognized in other income (expenses) as impairment losses.
The recoverable amount was measured at net selling price.
­Discount rates are considered to be immaterial and are not taken

into account since the assets are scheduled to be sold off in ashort period of time.
Impairment losses of ¥973 million consist of ¥365 million forland, ¥525 million for buildings and structures, ¥73 million for­machinery and equipment, and ¥9 million for tools, furniture andfixtures for the year ended March 31, 2015.

19 Note to Consolidated Statements of Changes in Net Assets
Issued stock and treasury stock as of March 31, 2016, are as follows:
Number of issued shares
Common stock
70,771,662 shares
The number of treasury stock is as follows:
SharesCommon stock

78

TSUMURA & CO.

At April 1, 2015

Increase

Decrease

At March 31, 2016

246,883748–

247,631

Dividends from surplus as of March 31, 2016, are as follows:(1) Dividend payments

Scheduled resolution

Category

Ordinary general meeting of shareholders heldon June 26, 2015
Board of Directors’ meeting held on
November 5, 2015

Total amountof dividends(¥ in millions)

Dividend
per share(¥)

Total amount ofdividends (US$in thousands)

Dividend
per share(US$)

Record date

Effective date

March 31,2015

June 29,2015

September 30,

December 4,
2015

Dividend
per share(US$)

Record date

Effective date

$0.28

March 31,2016

June 30,
2016

CommonStock¥2,256¥32$20,028$0.28

Common
Stock

2,256

32

20,0280.28 2015

Dividend
per share(¥)

Total amount ofdividends (US$in thousands)(2) Dividends whose effective date is subsequent to March 31, 2016

Scheduled resolution

Category

Source ofdividends

Ordinary general meeting of shareholders held on June 29, 2016

CommonStockRetained
Earnings

Total amountof dividends(¥ in millions)¥2,256¥32$20,028

20 Subsequent Events(1) At the shareholders’ meeting held on June 29, 2016, the following appropriation from unappropriated retained earnings of the Company
was approved by the shareholders:Cash dividends, ¥32.00 (US$0.28) per share(2) Joint venture agreement in China
On May 6, 2016, the Company entered an agreement to establish
a joint venture company with Shanghai Traditional Chinese Medicine Co., Ltd., a subsidiary of Shanghai Pharmaceuticals Holding
Co., Ltd., thereby enabling it to enter the business of traditional
Chinese medicine compound granules.
(a) Purpose of establishing the joint venture
The Company agreed to establish this joint venture believing thatthe expertise in research, technologies, quality control, and otherelements related to the cultivation and processing of crude drugs
and the manufacturing technologies for Kampo, which have beendeveloped in China, will be utilized in the business of traditional
Chinese medicine compound granules, and this will enable aneven more stable supply of crude drugs to Japan while improving
the quality of crude drugs in China and protecting crude drug
­resources in China.

¥ in millions

US$ in thousands¥2,256$20,028(b) Outline of the joint venture
Name of company: SPH TSUMURA PHARMACEUTICALS CO., LTD.
Location: Shanghai
Representative: Chairman (To be determined)
Capital: 600 million RMB
Investment ratio: Shanghai Traditional Chinese Medicine: 51%,
The Company: 49%
Business description: Manufacturing and sales of traditional Chinese medicine compound granules, establishment of criteria for
traditional Chinese medicine compound granules, research anddevelopment of products, research and development of manufacturing methods, and other operations.
(Note 1) Traditional Chinese medicine compound granules
A single crude drug is extracted from crude drug pieces for decoction, made into a
product through a series of processes that consists of separation, concentration,
drying, and granulation, and used for preparation of a drug in the same way as
crude drug pieces for decoction.
(Note 2) Traditional Chinese medicines
Traditional medicines used in China

Annual Report 201679

Financial Section

Report of Independent Auditors

80

TSUMURA & CO.

Corporate Data
As of March 31, 2016

Head Office: 2-17-11, Akasaka,

Founded: April 10, 1893

Minato-ku, Tokyo 107-8521, Japan

Incorporated: April 25, 1936

Corporate Communications Department

Number of Employees: 3,242 (Consolidated)

Phone: 81-3-6361-7101

Plants: Shizuoka, Ibaraki, Shanghai

Fax: 81-3-5574-6630

Research Laboratory: Ibaraki

URL: http://www.tsumura.co.jp/english/

Subsidiaries and Affiliates:
Country

Company

BusinessJapan

LOGITEM TSUMURA CO., LTD.

Logistics, storage, distribution, and materials handling services

United States

TSUMURA USA, INC.

Development of pharmaceutical products in the United States

China

SHENZHEN TSUMURA MEDICINE CO., LTD.

Procurement, sorting, processing, and storage of botanicalraw materials

SHANGHAI TSUMURA
PHARMACEUTICALS CO., LTD.

Production and sale of Kampo extract intermediates

SICHUAN CHUANCUN TRADITIONALCHINESE MEDICINES CO., LTD.

Procurement and sorting of botanical raw materials

Investor Information
As of March 31, 2016

Stock Exchange Listing: Tokyo
Stock Code: 4540

Major Shareholders
Japan Trustee Services Bank, Ltd. (Trust Account)

Paid-in Capital: ¥19,487 million

The Master Trust Bank of Japan, Ltd. (Trust Account)

4.28

Net Assets: ¥155,702 million

Japan Trustee Services Bank, Ltd. (Trust Account 9)

4.07

Common Stock:

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

3.12

Authorized: 250,000,000

Employees’ Stockholding

2.69

Issued: 70,771,662

BNYML-NON TREATY ACCOUNT

2.38

Closing Date of Accounts: March 31

JP MORGAN CHASE BANK 385632

2.24

Independent Auditor:

DAIICHI SANKYO COMPANY, LIMITED

2.16

Ernst & Young ShinNihon LLC

Trust & Custody Services Bank, Ltd.
(Securities Investment Trust Account)

2.02

BBH FOR FIDELITY LOW-PRICED STOCK FUND
(PRINCIPAL ALL SECTOR SUBPORTFOLIO)

1.55

Hibiya Kokusai Bldg.,
2-2-3, Uchisaiwai-cho, Chiyoda-ku,
Tokyo 100-0011, Japan
Shareholder Register Agent for
Common Stock in Japan:
Mitsubishi UFJ Trust and% of equity

5.24

Ownership and Distribution of Shares%

Banking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan
Number of Shareholders: 12,278

Japanese financial institutions
Foreign institutions
Other Japanese corporations
Japanese individuals and others
Japanese securities firms

33.22%
38.93%
13.02%
14.14%
0.69%

Annual Report 201681

TSUMURA & CO.
2-17-11, Akasaka, Minato-ku, Tokyo 107-8521, Japan

オンプロダクト-スタンドードタイプ 英語版

CCC
Printed in Japan

オンプロダクト-ミニラベル

英語版（印刷スペースが無い場合）