Feature Topic

1

Quality control andstable supply

each production process through thoroughmanagement using MES and LIMS systems in
addition to performing human check.

Towa works diligently to ensure reliable quality andsafety of generics.
In recent years, the generics industry saw various issues arising from quality and safety matters.
Towa acknowledges these incidents as a situation that may undermine trust in all generic drugs.
This section introduces our manufacturing control and quality control initiatives for pharmaceuticals.

Compliance with the threeprinciples of GMP
Pharmaceutical production is based on GMP*, astandard laid down by the nation for manufacturingcontrol and quality control of pharmaceuticalproducts. GMP is composed of three principles: 1)
minimizing human error, 2) preventing contaminationand quality degradation of medical products, and 3)
designing a system to assure high quality.
In order to have patients take generic drugs without
feeling uneasy, Towa not only complies with relevant
regulations including GMP ordinance, a standard for
manufacturing control and quality control ofpharmaceutical products, but also establishes its
original system and education and trainings, among
others, so that the employees can acquire proper
understanding of the meaning of “minimizing humanerror,” one of the GMP three principles. In this way,
we strive to assure adequate quality and safety ofgenerics.
To be specific, the procedures set out at all thethree plants of Towa, located in Yamagata, Osaka,
and Okayama, follow the three principles of GMP.
Furthermore, employee trainings are carried out on acontinuous basis to ensure high awareness among
each and every employee as a pharmaceuticalmanufacturer and to encourage such a mindset in thedaily work. In addition, we proactively adopted

9TOWA PHARMACEUTICAL Integrated Report 2021

international guidelines such as PIC/S GMP and ICH
Guideline to manufacture appropriate goods understricter rules and to create a system that is morecapable of eliminating human errors.
Mock audit was carried out at Yamagata Plant by
an external institution (former FDA investigator) to
confirm conformity with the international standards.
The plant was found to be compliant, and we are
expanding the audit to other plants as well.
*GMP: Good manufacturing practice. A standard for strict manufacturing control
and quality control in pharmaceuticals production.

Double checked by human andthe management system adopted
Towa works to minimize human errors, one of thethree principles of GMP, by introducing a
manufacturing execution system (MES*1) that
supports the management and control of production
process and gives directions to workers using
computers, and also a laboratory information
management system (LIMS*2) that supervises andcontrols the management of quality testing ofpharmaceuticals.
In parallel to these systems, the products aredouble checked by human to increase the eliminationof human errors. As a generics manufacturer that
produces a wide range of pharmaceutical drugs, weare making the detailed check system function at*1 MES: Manufacturing execution system. A system to manage and control
production process and give directions to and support workers.
*2 LIMS: Laboratory information management system. An integrated
management system for testing where analysis results are directly enteredinto the system from analytical instrument via network.

Education and training, andoriginal qualification system
In addition to implementing systems such as MES
and LIMS to minimize human errors in the
manufacturing process and the quality testing, we
prepared a manual that lists the details of theauthorization document and specifies thepharmaceutical requirements behind those rules, forobservation during production. We use this manual in
education and training intended to instill theimportance of adhering to the authorization
document in manufacturing products.
Furthermore, in addition to the general educationand training, we have introduced an original
qualification system to recognize those with higher
skills and knowledge in departments such as
manufacturing, packages, testing, and quality
assurance, as an “expert.” Our system ensures thatspecialists in each field perform manufacturingcontrol and quality control, in addition to promoting
the development of employees who have highawareness in quality assurance.

Furthermore, we have organized a structure
capable of providing technical advices and pointing
out technical matters by including members who
acquired qualification as a technical expert (in APIs,
formulation, packaging, etc.) in the audit team. We
will enhance the quality of GMP audit system throughthis approach, and going forward, strengthen theaudit system by increasing the frequency of fieldaudits. This will be done by implementing GMP
auditor and technical expert education across theCompany to raise the number of GMP auditors.
Headquarters and the three plants, meanwhile, aresharing information on quality issues and conducting
case studies to work towards continuous
improvement of quality control and to raiseawareness on the matter. Furthermore, regularbriefing sessions are attended by managements aswell. By building a system where information isshared across people from those working in the field
to top management without delay, we are striving toensure adequate quality and safety ofpharmaceuticals.

From personnel working in the field to top
management, information is sharedperiodically to bring about prompt cooperation

Management
Officers in charge
The Three Officers within Marketing
Authorization Holders of Medicinal Products
Headquarters Quality Assurance Division

Audit system backed by corporate
wide involvement
Currently, Towa manufactures over 750
pharmaceutical products. In order to bring to thepatients all these products after thorough quality
control, we are conducting periodic audits in ourplants as well as in outsourcing companies. The
audits are led by the Headquarters Quality Assurance
Division and are conducted by auditors certified
based on GMP auditor system established by theCompany.

Pharmaceutical Research& Technology Division

API Business Division

Okayama Plant

Yamagata Plant

Quality Assurance
Division

Quality Assurance
Division
Production Division
Osaka Plant
Quality Assurance
Division

TOWA PHARMACEUTICAL Integrated Report 2021

10

Towa Pharma International Holdings, S.L.

The EU/US Regional Headquarters
leads the business development inEurope and the United States.

Feature Topic

2

Developing
overseas market

As a comprehensive generics manufacturer in Japan, Towa makes efforts to strengthen its quality assurance system, maintain abroad range of product lineup, and manufacture sophisticated products with No. 1 total product performance, while aiming to offer
our value-added products to the overseas market. Based on our vision of “contribution to people’s health,” we are utilizing the sales
network in several European countries and the United States as well as the production bases in Europe compliant to European andthe United States standards to further expand our business not only in Japan but also globally.

EU/US Regional Headquarters located in six countries across Europe and the
U.S. and provides products to over 20 countries worldwide
Currently, the company has business bases in five European nations in addition to one in the United States. It
provides over 210* APIs of generics in over 20 countries worldwide. The company controls Pensa Pharma,
S.A., a generics sales company in Europe, Breckenridge Pharmaceutical, Inc., a pharmaceuticals sales
company in the United States, and Towa Pharmaceutical Europe, S.L, a company that owns B2B business,plants, and a R&D base. It steadily operates the existing business while providing Towa’s value-added
products to European and the U.S. markets in addition to promoting further advancement into new markets.

TOWA* The figure includes no double counting between Europe and the United States.

Headquarters location: Catalonia, Spain
Established: 2019
Business: EU/US regional headquarters
Number of employees: Approximately 30

Established a bridgehead in developing business in the European and the U.S. markets“Entry into new market” was laid out as one of our basic policyin the 4th Mid-term Business Plan 2018–2020 PROACTIVE. As
part of our efforts to deliver our value-added products tooverseas markets, we acquired Pensa Investments, S.L., agenerics business company, from a Spanish pharmaceuticalcompany, Esteve Group, in January 2020, making it aconsolidated subsidiary. In July of the same year, thecompany changed its name to Towa Pharma International
Holdings, S.L (hereinafter referred to as “Towa HD”).
This series of actions effected Towa’s advancement into
the overseas market to proceed in full swing. Having Towa
HD under our Group, we gained a market base for generics

in Europe and the United States, knowledge in the
manufacturing approval process in each country which had
been our long-standing issue in advancing overseas,knowledge in business practice in different regions, andproduction facilities that have experience of exporting
products to other countries and are in compliance with thestandards of competent authorities in Europe and theUnited States such as European Medical Agency (EMA) and
U.S. Food and Drug Administration (FDA). We expect that
Towa HD will play the role as a bridgehead in offering Towa
Quality products in a number of countries in the overseas
market in the future.

Aim to offer Towa’s value-added products in Europe and the U.S. markets
The 5th Mid-term Business Plan 2021–2023 PROACTIVE II thatbegan in FY2021 sets out “expanding and growing business inoverseas market” as the second policy. We intend to increase thenumber of countries and regions in the overseas market where our
products are sold while expanding the scale of our businessthrough initiatives such as achieving sustainable business growthwith Towa HD as a hub through new products launches in Europe
and the United States, developing Towa Quality products meetingthe needs of the overseas market, and exploration of market
opportunities in new countries/regions.
As for Towa HD’s business by region, it offers over 160 APIs
mainly for gastrointestinal drugs in Europe. We are working tomaintain and enhance our market competitiveness by launching
new products utilizing the strength in ingenious formulation suchas pellet formulation technology and implementing marketingstrategy based on the data of each market. Additionally, we are
expanding the B2B out-licensing of value-added products

developed in-house to a wide range of regions.
Meanwhile, over 70 APIs, mainly therapeutic drugs for highblood pressure and epilepsy, among other indications, are sold in
the U.S. market. Going forward, we will develop the business bycreating a strategic product portfolio based on our determinationof which product has the least competitor, can anticipate market
needs, and ensures profit, while reducing development risk byselecting business partners appropriately.
Furthermore, in order to offer our products that are acclaimed inJapan to overseas market in the future, we are exploring thepotential needs for our value-added products in overseas
countries and regions. We are also carrying out research activities
aimed at advancement into new markets in addition to Japan, theUnited States, and Europe. We intend to establish a global
business foundation centered around Towa HD to provide highquality, value-added generics to patients all around the world fromthe three poles, Japan, the United States, and Europe.

Overview of Towa Pharma International Holdings, S.L. GroupTOWA PHARMACEUTICAL CO., LTD.
TOWA

Pensa Pharma, S.A. (Spain)
toLife, Ltd(Portugal)
11

Pensa Pharma GmbH
(Germany)

TOWA PHARMACEUTICAL Integrated Report 2021

Towa Pharma International Holdings, S.L. (Spain)

Breckenridge Pharmaceutical, Inc. (United States)
Pensa Pharma, SpA(Italy)Pensa Pharma, AB(Sweden)Towa Pharmaceutical Europe, S.L. (Spain)

Pensa Pharma, S.A.
Generics sales company in Europe
Headquartered in Barcelona, Catalonia,
Spain, Pensa Pharma, S.A. engages insales of generics mainly in the European
market through its five bases in Europe.

Headquarters location: Catalonia, Spain
Established: 2006
Business: Generics business mainly in Europe
Number of employees: Approximately 180
Business bases: Five in Europe

Breckenridge Pharmaceutical, Inc.
Generics business company in the United States
Headquartered in Berlin, Connecticut, United States,
Breckenridge Pharmaceutical, Inc. engages in generics
business in the country. It analyzes the competitiveenvironment and the needs in the fast-changing U.S. market,
and builds and enhances strategic product portfolio.

Headquarters location: Connecticut, United States
Established: 1983
Business: Generics business mainly in the United States
Number of employees: Approximately 50
Business bases: One in the United States

Towa Pharmaceutical Europe, S.L.
Generics production base in Europe
Headquartered in Barcelona, Catalonia, Spain, Towa Pharmaceutical
Europe, S.L. engages in manufacturing of generics including thosemarketed as pellets, capsules, tablets, and liquid formulations. The
company also engages in the research and development of new
products. It operated under the name Dose Innova, S.L. before changing
it to the current name in June 2020. Since the company has production
facilities meeting the European and the U.S. approval standards, it takes
on an important role in realizing the policy of “developing Towa Quality
products meeting the needs of overseas market.”

Headquarters location: Catalonia, Spain
Established: 2019
Business: M anufacturing of pharmaceuticals and abase for research and development
Number of employees: Approximately 600
Building area: Approximately 35,000 m2
Products manufactured: Pellets, capsules, tablets,
liquid formulations, and others

TOWA PHARMACEUTICAL Integrated Report 2021

12

Financial Highlights

Non-Financial Highlights

Net sales

JPY

154,900

million(JPY million)
180,000

JPY

19,923(JPY million)
20,00084,94993,430

million19,923

154,900

90,000

Profit attributable toowners of parent

Operating profit

JPY(JPY million)
16,00013,475

2018

2017

2019

14,503（t-CO 2）40,00013,958

2021

2020

0

5,576

2018

2017

38,450 38,718 39,082
31,790

2019

2021

2020

(FYE March)

0

2017

2018

0.375

2019

2020

0

2021

2017

0.360

0.3

2018

2019

2020

2021

0

JPY

116,599

million116,599

JPY

245,668

104,665

230,016

91,771
74,94579,920165,247

60,000

12.6

(t)
2,000

245,668

15.7

10

7.7

1,301

2017

2018

2019

2020

2021

0

2017

2018

2019

2020

(FYE March)

8.4

2021

0

2017

2018

1,937

2019

2020

0

2021

2017

0.015

2018

0.016

2019

0.018

2020

JPY
(JPY)
300

283.62273.85294.74283.62

JPY
(JPY)
3,000

15.5
(%)
30

113.321,500

132.00

0.04

0.02

10

2021

0

0

9.2

10.3

10.6

2018

2018

61.8

%

13.1

15

0

Ratio of women in
new graduate hires

37.38

%

%

2017

2018

30

2019

2020

37.38

32.95

11.1

0

2021
(FYE March)

31.25
22.41

2017

2018

2019

15.5
50

43.6

51.5

53.7

2020

2021
(FYE March)* Towa (non-consolidated)* Towa (non-consolidated)

Employee turnover rate
within the first three years

2.80

%

Medical expense reduced%

JPY

228,434

million(JPY)
300,000

(%)
20

63.8
14.9

2021

2020

2019

0.166

(FYE March)

7.3

61.8
8.62

10

150,000

177,123 185,580
155,292

228,434
206,356

6.81

1.04
2017

2017

0.171

(%)
60

2.43
0

0

0.170

24.0

1,864.92

150

0

0.162

Energy use intensity
Energy usage* Three Towa plants* Per sales of JPY 1 million (non-consolidated)

11.1

0.017

(%)
100

27.9

2,369.21
2,126.72
1,522.99 1,624.09

2021

(%)
20

Ratio of paid leave taken

Dividend payout ratio

2,369.21

2020(FYE March)(FYE March)

Net assets per share

2019

t

Waste generation intensity
Waste generated* Three Towa plants* Per sales of JPY 1 million (non-consolidated)

Earnings per share

2018

2.464

0.2

0.167

39.89

1,000

(FYE March)

0.4

14,70810,000

2.352

1,385

0.016

0

kl

1,621
12.6

140,000

2017

2.619

Ratio of women in
management positions

1,887

14.8

188,803

177,1813

2.474

Water use intensity
Water usage* Three Towa plants* Per sales of JPY 1 million (non-consolidated)

1,937

%

(%)
20

18,361 19,108

17,448(FYE March)

Waste generated

million(JPY million)
280,000

150,0000

CO2 emissions intensity
CO2 emissions* Three Towa plants* Per sales of JPY 1 million (non-consolidated)(JPY million)
120,000

6

13,787(FYE March)

ROE

19,108(kl)
20,000

0.339

0.375

(FYE March)

Total assets

268,278 265,297 271,269

2.674(FYE March)

Net assets(m 3)
300,000m3

221,225 225,079

20,0006,495

0.6Energy usage271,269

t-CO2

34,078

0.384
8,000

Water usage

39,082

million

11,643
10,0006,869

013,95815,968 16,143

105,104 110,384

CO2 emissions

2019

2020

2021
(FYE March)

0

2017

2018

2019

2020

2021
(FYE March)

0

2017

2018

2019

2020

2021

0

2017

2018

2019

2020

2021

0

2017

2018

* Towa (non-consolidated)

2019

2020

2021

0

2017

2018

* Towa (non-consolidated)

New graduates only

2019

2020

2021
(FYE March)(FYE March)(FYE March)(FYE March)

2.80* Towa (non-consolidated)

Note: The Company conducted a 3-for-1 stock split of common shares effective April 1, 2019.
We calculated net income per share and net assets per share assuming that the said stock split had been conducted at the beginning of the fiscal year ended March 31, 2017.

13

TOWA PHARMACEUTICAL Integrated Report 2021

TOWA PHARMACEUTICAL Integrated Report 2021

14

T OP MESS AGE

With the generics business as our core,
we will increase our corporate value by
creating related businesses that
contribute to people’s health.
Itsuro YOSHIDA
President and Representative Director

Endeavoring to develop
products from patients’viewpoints
I would like to express my heartfelt sympathy to all
those who have contracted COVID-19 and to theirrelated people. I would also like to extend mydeepest gratitude to the healthcare professionals andothers, who are working so hard to prevent the
spread of the disease.
In June this year, we celebrated our 70th
anniversary. I would like to express my heartfelt
gratitude to shareholders, investors, and all otherstakeholders for their support over the years.
On June 1, 1951, Towa Pharmaceutical Company
was established in Osaka-shi and began wholesale
and brokerage of pharmaceutical raw ingredients.
Later, it was decided to transition to a manufacturer,
as the sale of pharmaceutical raw ingredients isdirectly affected by economic fluctuations, while theoperations of manufacturers are relatively stable. On
April 19, 1957, TOWA PHARMACEUTICAL CO., LTD.
was established for the purpose of wholesale andmanufacturing of pharmaceutical products. Initially,
we manufactured over-the-counter (OTC) drugs(non-ethical drugs). Although the going was tough,we managed to keep operating smoothly. With thelaunch of the National Health Insurance System inJapan in 1961, our predecessor predicted that ethical

15

TOWA PHARMACEUTICAL Integrated Report 2021

drugs covered by medical insurance would become
the mainstream, and decided to change the businessmodel even though the business at that time wasdoing well. He steered the business towards the
manufacture and sale of ethical drugs. The start of
the National Health Insurance System eliminatedfinancial concerns about undergoing treatment for
illness. I was still in elementary school at the time, butwhen I heard that a friend of mine had become ill andhad an operation with almost no medical expenses, I
realized that everyone, rich and poor alike, would be
able to receive treatment when needed. I was just achild, but to this day I still remember feeling that thiswas going to be a wonderful system.
It was in 1965 that we established a production
system for ethical drugs and started manufacturingthem. At that time, the term “generic drugs,” let alone“generics,” was not existent. Our predecessor did
everything he could to develop the business basedon his strong commitment to “making the world aplace where everyone can benefit equally frommedical care by supplying inexpensive
pharmaceuticals.” He also mentioned from time totime that “the business will grow because we pursue
what is useful to society.” His management policy ofcontributing to society by selling “more” while
maintaining the basic principle of “better products atlower prices” drove the growth of the Company until
the beginning of the 2000s.

Aiming for distinctive generics
through the pursuit of addedvalue
In the 2000s, the form of the Company’s managementchanged dramatically. As increasing social security
and medical costs became a major social issue, thegovernment accelerated its policy of promoting theuse of generics. At that time, we held the top share in
the generics market and were also the industry priceleader in the industry. However, securing profits was apain point back then due to intensifying sales
competition and NHI price revisions.
I was appointed president in 1996, and I had
decided to follow the management policy of mypredecessor for the first three years of my tenure. But
considering the situation at that time and 10 years into
the future, I felt a strong sense of crisis and decided tochange the management policy, saying, “If we
continue as we are, the survival of our business will be
at risk.” This marked our switch to the development ofdistinctive generics through the pursuit of added value
and to sales at fair prices that are commensurate withvalue, and this switch has led to our growth to date.
We made our formulation techniques moresophisticated and launched high value-added drugs,
and as a result, our generics have a great reputation in
healthcare settings as drugs that are easy to handle
and easy for patients to take.

In addition, we have established the unique Towa
Sales System for pharmaceutical products. It’s anapproach to selling that consists of two sales systems:
a direct sales system based on sales offices and sales
agents that deliver directly to medical institutions, anda sales system that delivers through wholesalers. By
adopting this system, we have established amechanism for delivering high value-added productsthat meet the needs of medical institutions, and by
explaining the added value of our products and having
doctors and pharmacists understand and accept
them, we are able to sell our products at fair prices. At
the same time, our MRs, of which we have the largest
number in the industry, provide information to the
medical frontline, and also collect information, whichenables us to quickly share requests from medical
institutions for product improvement andenhancement with each department.
In the beginning, when we started to sell our
distinctive generics, we received some puzzled
comments from sales agents such as, “Your sales
method is completely different from the conventional
one based on price competition.” Towa
Pharmaceutical’s sales offices were also perplexed at
first, but worked hard to provide medical informationand sell our products at fair prices, based on the belief
that understanding the formulation technology for the
drug and its added value will surely be useful topatients. As a result, although we experienced atemporary decline in both sales and profits, theTOWA PHARMACEUTICAL Integrated Report 2021

16

T OP MESSAG E

number of doctors and pharmacists who understood
our pharmaceuticals increased, and the volume ofpharmaceuticals we supplied grew. In recent years, wehave been able to introduce our products to a broader
range of doctors and pharmacists through increased
collaboration with wholesalers. We will continue tomake daily efforts to build relationships of trust withthe medical community.

Pursuing the improvement ofpharmaceutical quality by
valuing the bond of trust withthe medical community
In terms of building relationships of trust, we play amajor role not only in sales activities but also intranslating voices from the healthcare frontline into
the creation of products. As mentioned above, we arealso focusing on technological development toenhance the added value of our pharmaceuticals. In
addition to gathering feedback from the medical
frontline through MRs, we actively share information
with R&D and technical departments. We have set up
an in-house request review committee, whichconstantly reviews product improvement proposals
and other issues based on information received from
MRs. The committee makes more than 200
improvements per year, facilitating the creation of
distinctive generics.
RACTAB, an example of our value-added
formulation technology, is a proprietary formulation
technology that enables us to produce tablets thatdisintegrate readily, making them easy to take, butthat are hard enough to allow them to be subjectedto the same treatment as conventional pills. In

17

TOWA PHARMACEUTICAL Integrated Report 2021

addition to this, we are continuing to develop otherproducts. This involves us doing everything fromconducting research on what makes a medicine
easier to take to designing the packaging design. We
will continue to improve and refine our products withthe latest technology, constantly updating them to be
the latest and greatest at that time.
With regard to our efforts to ensure the quality ofour pharmaceutical products, we have been diligently
addressing each and every issue as laws andregulations have become stricter and demands fromhealthcare professionals have increased. For
example, under the revised Pharmaceutical Affairs
Act, which came into effect in 2005, the number ofmatters to be included in the marketing approval
document for pharmaceutical products increased
significantly. At the time, we had a lineup of morethan 400 products. We had to carefully prepare thedocuments for each of them one by one, a task that
we only completed in December 2019.
And today, not only do all of our plants perform
manufacturing based on procedures that are incompliance with the GMP three principles, but wealso provide continuous education and training to ouremployees, so that each and every one of them isengaged in manufacturing with a high awareness ofquality. Furthermore, to manufacture products thatmeet specifications based on stricter rules, we haveactively adopted international standards such as
PIC/S GMP and the ICH guidelines to build a systemthat can eliminate human errors.
As for ensuring the stable supply ofpharmaceuticals, we have been steadily making
capital expenditure in response to the government’s
target of having 80% of generics volume share by
September 2020. With the new building at the
Yamagata Plant having gone into operation in 2018,
our annual production capacity in FY2020 was 11.5
billion tablets. This figure includes output from the
Osaka and Okayama plants, so there are three plants
in total. Through these three plants, we will expand
our production capacity to 12.0 billion tablets by theend of FY2021, and again to 14.0 billion tablets by
the end of FY2022 in order to meet global demand. In
addition, we are planning to construct the 3rd solid
formulation building at the Yamagata Plant by theend of FY2023, which will take our production
capacity to 17.5 billion tablets from FY2024.
As a result of quality-related wrongdoings that haveoccurred in the industry, production at othercompanies has been halted, which has raised
concerns in some quarters about the stable supply ofpharmaceuticals. We regard this as an issue that
affects the trust placed in the entire generics sector,
and we will continue to fulfill our mission of ensuring
a stable product supply by addressing this issue on
an industry-wide basis, which includes the Company.

Considering how to ensurestable procurement of APIs andintermediates from a long-term
perspective
In FY2020, the COVID-19 pandemic had a serious
impact on society. We have been carrying out ourbusiness with the mission of not interrupting the stablesupply of pharmaceutical products at any time, nomatter what the situation may be. Although the
COVID-19 pandemic did not interfere with ouroperations to any great extent, it did temporarily raise
concerns about the securing of APIs and intermediates,
which are essential for the manufacture ofpharmaceuticals.
Currently, we procure APIs and intermediates not only
from Japan but from all over the world. In response tothese concerns, we recognize the need to review our
supply chain to guarantee stable procurement from theperspective of “local production for local consumptionof products,” which is what we consider ideal. From along-term perspective, we are conducting R&D in therealm of continuous flow precision synthesis technology,
which has less environmental impacts and is safer, andusing such new technology in manufacturing issomething that we are considering. We believe that thepractical application of new technology will not only
facilitate stable procurement that avoids country risk,
but will also lead to the launch of a green sustainablechemistry industry in Japan and the creation of jobs
stemming from that.

Health-related businesses
paving the way for new growth
The Company has been implementing the 5th Mid-term
Business Plan 2021-2023 PROACTIVE II (hereinafter, the“new mid-term plan”) since FY2021. Under the 4th
Mid-term Business Plan, we achieved our major
objectives for net sales, operating income, R&D
expenses, capital expenditure, and other items, and weare now making strong progress toward a new stage of
growth despite this being a difficult period marked by
the COVID-19 pandemic.
Our basic policy is to further evolve our core generics
business. But we also intend to expand and grow ourbusiness in overseas markets and to develop new
health-related businesses.
Toward enhancing generics business, as mentioned
above, we will be aiming to “maintain and strengthen astable product supply system,” “work on stable API
procurement,” “enhance the production capacity,”“optimize the Towa Sales System,” “maintain andstrengthen the quality assurance system,” “offer a broad
product lineup,” and “manufacture sophisticatedproducts with No.1 total product performance.” We willcontinue to work diligently to address each of theseissues.
As for expanding and growing our business inoverseas markets, we have been exploring thepossibility of establishing a system to supply our valueadded products to overseas markets. This led us toacquire Spain’s Pensa (official name, Pensa
Investments, S.L.; the current trade name, Towa Pharma
International Holdings, S.L.) in January 2020. As a resultof this acquisition, our consolidated net sales for the
fiscal year ended March 31, 2021 increased byapproximately 40%. With the aim of offering products
highly regarded in Japan to overseas markets, we willcontinue to search for latent needs for our value-added
products in other countries and territories, and conduct
surveys with an eye to expanding our business into
regions that we have not yet entered. To sell our
products overseas, we are working to establish alliancesand cooperative relationships with local companies
while taking into consideration factors such as productmarketability and risks.
Meanwhile, with regard to the development of newhealth-related businesses, growing awareness of theimportance of extending healthy life expectancy has
prompted the construction of a comprehensive
community care system to become national government
policy, and progress is now being made in this area.
Against this backdrop, we are aiming to build a personal
health information platform for pre-symptomatic careand disease prevention through digital transformation(DX) facilitated by collaboration with IT companies. In
addition to managing and utilizing health information on
the platform, we intend to provide health-related
products and services ranging from disease treatment
and prevention to nursing support.
Specifically, we will provide OTC drugs andmedication support tools, and also develop healthfoods, supplements, and health promotion tools. One
such product is “comuoon,” an interactive support
device that helps address problems in society related tohearing. It is a desktop conversation support systemthat converts the voice of the person talking into one
with a level of sound quality that is easier to hear, and is
expected to be used in medical institutions, nursing
homes, and local communities. Early detection ofhearing loss and maintenance of hearing quality is
expected to help prevent mild cognitive impairment(MCI) and dementia, and this is in line with our policy ofcontributing to health from broad perspectives. And to
reduce the burden on those engaged in nursing care,rehabilitation, and other similar services, we have takena stake in a manufacturer of care welfare equipment that
manufactures a product called Muscle Suit, a wearable
work support robot. It is our hope that we can grow our

TOWA PHARMACEUTICAL Integrated Report 2021

18

T OP MESS AGE

health-related businesses and contribute to therevitalization of local communities by providing society
with products based on innovative technologies.
And as another health-related business, we haveentered the testing business by making Protosera Inc., aprovider of testing services, a subsidiary. Since thisbusiness has great social significance in terms of
disease prevention, we will aim to get it off the groundas part of our efforts to develop new health-related
businesses, one of the basic policies contained in the
new mid-term plan.

Focusing on the development
and utilization of eachindividual human resource
Going forward, it will be important for us to further
strengthen our human resource base so as to steadily
implement the new mid-term plan and achievesustainable growth over the medium to long term. In thisregard, we have a long history, from our founding to thepresent day, of fostering a corporate culture that values
human resources.
For example, this is what I felt when we acquired MectCo., Ltd.’s Tohoku plant back in 1998. For starters, I
visited the plant in September of that year, when theacquisition was being discussed. It was around threemonths after operations at the plant had beensuspended, and at that time it was hard to see how thecompany itself could survive. The corridor leading to thefactory floor had been kept clean and tidy. On the shop
floor, the machinery and equipment were arranged in aneat and orderly fashion. It had been well preserved,
maintained, and managed.
In front of the clean manufacturing area, one of theemployees turned to me and said: “We are so grateful tohave been able to work here for so long that until the
final decision [about the acquisition] is reached, we aremaking sure the equipment can be restarted
immediately at any time.” I still remember those words.
This was one of the main reasons we decided to go
ahead with the acquisition.
After the acquisition, but before we started
manufacturing medicines at the plant, which was now
known as our Yamagata Plant (and which was later
renamed the Yamagata 1st Plant), we interviewed all
108 employees to confirm their individual intentions.
Through these interviews, we realized that everyone wasserious and sincere, and we decided that the plant
could be operated by these 107 people, who included
managers (one person had declined to be hired). So, we
didn’t send any of our officers or employees to work
there. What we did was have me visit the factory in
Yamagata every month, and gradually adjust the pay

19

TOWA PHARMACEUTICAL Integrated Report 2021

T OP MESSAG E

structure over a period of 10 years to match ours.
Factory operation went smoothly and has continued tothis day. This is an example of a situation in which werealized the importance of human resources.
To strengthen our human resource base, the new
mid-term plan calls for “making job satisfaction andfostering talented human resources,” and we are
therefore working from various angles on humanresource development, career-path enrichment, and job
satisfaction. In the area of career development, inparticular, we are endeavoring to develop each
employee according to their abilities and aptitudes froma cross-organizational perspective, namely one that is
not limited to each department, while also taking into
account the wishes of the individual with respect tobuilding their career from the time they join the
Company until their retirement.
The word “PROACTIVE,” which we have used as thename of the new mid-term plan, encompasses suchmeanings as enthusiastic, autonomous, and visionary.
The name represents our hope that as we continue toexpand our business, each and every one of ouremployees will be able to anticipate possible futurechanges and risks and take the necessary measures inadvance to expand the scope of their work
enthusiastically and autonomously.

Becoming a company that willcontinue to safeguard genuine
smiles even after 100 years

management policy in every era.
In addition, we in the Towa Group believe that it isimportant to continue to contribute to local
communities and people around the world as apublic institution in society.
As an example of our contribution to local
communities, I’d like to tell you about our futureoriented initiatives in Mongolia.
By chance, more than 10 years ago we started
trading pharmaceuticals, and when I researched thecountry’s situation, I found that Mongolia had very
few unique industries to support its economy, whichalong with the desertification of its land was a major
problem for the country.
In the vast grasslands of Mongolia, licorice grows
wild everywhere. Licorice is frequently used as anatural food additive and is also used in traditional
Chinese medicine. A pharmaceutical ingredient called
glycyrrhizic acid can also be extracted from it, so it’s
an incredibly valuable plant. In recent years, licorice
has been designated by the national government as
a protected plant because its uncontrolled picking
contributes to desertification. However, the problemof over-picking doesn’t appear to have disappeared
completely, and desertification remains a problem
along with the depletion of underground resources
through mining.
Thinking that we could do something to help, wesecured a vast plain several years ago and have been
trying to grow licorice, as an herbal medicine, there.
Licorice requires at least five years from planting toharvesting if it is to be used in Chinese medicine. It
takes a lot of time and effort to cultivate it, but wehope that this initiative will contribute to therevitalization of local communities by providing
employment opportunities for the local people andcurtailing the desertification of the country. Although
it’s only a small project, we believe that it can also
play a part in producing the “genuine smiles” that wewish to create as a Company. If all goes well, after
planting, managing, and harvesting the licorice, wewill be able to dry, cut, and sell it, and we hope tocontribute to the industrial development of Mongolia
by localizing the process of extracting and selling it
to make medicines.
Considering its profitability as a business, I doubt
this project will last more than five years. That is why
we are calling this initiative the Mongolia 100-Year
Plan.
Being a company, it is obviously important to pursue
economic value. And from the perspective ofsustainable corporate growth, I believe, after
considering the value of the existence of a company,that the Towa Group needs to develop on a scale thatmeets the needs of the people of the era and regionin which it operates.
Our priority is to be a company that can continue toprovide value to all the people connected with the
Towa Group.
By doing that, I believe that the value of theCompany will be recognized and that earnings will
follow.
In the future, we will achieve sustainable growth
while aiming to be a company that can contribute
more than ever to people’s health. We would like to
ask for your continued support in these endeavors.

In June this year, we celebrated our 70th anniversary.
Taking this as an opportunity to look back on our
history, I believe that corporate management must
look ahead 10 years, 20 years, and even 100 years
into the future and beyond. As the birthrate declines
and the population ages, how will Japanese society
have changed 100 years from now, and what will be
important then? Also, what should we be aiming tobecome as a company in the future? As a project tomark our 70th anniversary, we are going to determine
what we should do right now for the sake ofourselves a century from now.
As part of that, what we have emphasized morethan anything else are “genuine smiles” and“people’s health,” as stated in our vision. From a
global perspective, Japan today is a free, peaceful,and prosperous country where the dignity and humanrights of each and every citizen are respected. Aslong as we exist, we will continue to pursue therealization of “genuine smiles” and “people’s health,”
and we believe it is important to make the ability tocontribute to the continued preservation of thisprosperous country an unwavering part of our

TOWA PHARMACEUTICAL Integrated Report 2021

20

Our Value Creation Process
To address social issues, Towa Group has created value by allocating its business capitals to every business that
contributes to people’s health. We will contribute to the health of all people and help them achieve a genuine smile
based on the “5th Mid-term Business Plan 2021–2023 PROACTIVE II.”

Towa
Quality

INPUT Business Capital
Financial capital

Towa Group’s
value proposition

Total assets: JPY 245.6 billion (consolidated)
Net assets: JPY 116.5 billion (consolidated)

Social Issues

Manufactured capital
Production sites: 8

Extension of healthy
life expectancy anddisease prevention
Production ofhigh-quality
pharmaceuticalproducts(7 in Japan [including Towa’s 3 plants], 1 in Europe)

Production capacity (Towa’s 3 plants):
11.5 billion tablets (tablets and capsules)
Production facilities for various dosage forms

Better accessibility
to primary
healthcare services
Application ofadvanced technology
to healthcare services
Improvement ofworkingenvironment

Extending healthy
life expectancy ofmore than 7billion people
around the world

R&D offices: 7 (6 in Japan, 1 in Europe)

R&D Expenditure: JPY 35 billion and more

5th Mid-term
Business Plan
2021–2023
PROACTIVE II

API synthesis process knowhow

Human capital
Employees: 3,456 (consolidated)
Consolidated subsidiaries: 11(3 in Japan, 8 in overseas countries)

Qualified pharmacists: 234 (consolidated in Japan)

Enhancing generics
business as a coreSocial and relationship capital
Collaborate with business partners including
raw material manufacturers, medical products
distributors and agents
Medical institutions coverage ratio (Towa)
Hospitals 89.2%
Dispensing pharmacies 95.2%

Energy input(crude oil equivalent, Towa’s 3 plants)

Water consumption(Towa’s 3 plants)

TOWA PHARMACEUTICAL Integrated Report 2021

19,108 kl
271,269 m

3

Corporate Governance(Compliance and Risk Management)

Our Commitments (T-SMILE)Entering newhealth-related business

GenuinesmilesControlling
healthcare costs ofthe government,
administrative
agencies, and local
communities

Expanding andgrowing business inoverseas market

MRs: 800 (consolidated in Japan)

Natural capital

21

Manufacturing sophisticated productswith No. 1 total product performance

We will support everyone
who cares about good
health to live a healthy
lifestyle by making it easier
to be and stay healthy aspart of everyday life.

SocialImpactIntellectual capital(Accumulative) (FY2021-FY2023)

Quality assurance
and stable supplyof pharmaceuticalproducts

OUTCOME

Maintaining
sustainable
healthcare system

People’shealthCreating technology
innovations
and product values

Towa Philosophy
Foundations supporting
value creation

Making job satisfaction
and fostering talented
human resources

TOWA PHARMACEUTICAL Integrated Report 2021

22

External Environment Surrounding Towa Group

Towa Group’s CapitalEntering the era where measures for new challenges are required
despite having achieved the government’s generics volume share target

Towa focuses on creating value across its Group by working sincerely to solve social issues while leveraging various
capitals gained in the past business operations. By solving issues including the extension of healthy life expectancy,
we will contribute to the health of people around the world.

a full speed revolution at a stroke that would take 10
years under normal circumstances. Achieving ahigh-quality economic society in the “New Normal
Lifestyle” is set as a goal for the New Future in the
post-pandemic.
Meanwhile, under the “Future Social Security
Reform-Looking to 2040” issued by the Ministry of
Health, Labour and Welfare, the government aims torealize a society where everyone can work longer andmore energetically by solving issues such as “diverse
employment and social participation,” “extension ofhealthy life expectancy” and “medical and welfare
service reforms.” Generics are playing a greater role
under these government policies and we are
expected to contribute to extending healthy life
expectancy by forming an infrastructure to create
ideal local communities and providing necessary
health promotion services to people in need of them.

In recent years, generics have come to play anincreasingly vital role in the society. Under the “Basic
Policy on Economic and Fiscal Management andReform 2017” approved by the Cabinet in 2017, thegovernment has set a target to increase the generics
volume share to 80% by September 2020. In
response to this, the generics industry including
Towa has focused on enhancing production capacityand ensuring stable supply. The results of analysis
issued by the Japan Generic Medicines Association
show the volume share reached 80.1% in the fourth
quarter of fiscal 2020 (January to March 2021) andindicated the target of 80% was achieved.
Furthermore, in the “Basic Policy on Economic andFiscal Management and Reform 2020,” thegovernment says to “protect people’s lives,
livelihoods, jobs, and businesses” to achieve the“New Future in the post-pandemic.” The government
also envisions achieving a “New Normal Lifestyle” by

There is a pressing need of industry-wide initiative to restore
confidence in generics which has been erodedTotal assets (consolidated)

80.1%

85%

Total assets at the end of FY2020 increased JPY
15,651 million YoY to JPY 245,668 million. Net assets
at the end of FY2020 increased JPY 11,934 million YoY
to JPY 116,599 million. As a result, capital-to-asset
ratio was 47.5% at the end of the fiscal year underreview.

Research hubs:

7(6 in Japan, 1 in Europe)

R&D Expenditure: JPY

35 billion and more

(Accumulative) (FY2021–FY2023)

API synthesis process knowhow
R&D is conducted in 7 hubs in total comprising 6 inJapan and 1 in Europe. Target R&D expenditure fromFY2021 to FY2013 is JPY 35.0 billion (accumulative).
This covers the leading-edge research on API synthesis
including molecular control technology.

 ollaborate with business partners including raw
Cmaterial manufacturers, medical products
distributors, and agents
Medical institutions coverage ratio (Towa)

Turmoil80%

89.2

Hospitals%
Dispensing pharmacies

75%
70%
65%

FY2016

TOWA PHARMACEUTICAL Integrated Report 2021

FY2017FY2018FY2019FY2020

FY2021

4Q

3Q

2Q

1Q

4Q

3Q

2Q

1Q

4Q

3Q

2Q

1Q

4Q

3Q

2Q

1Q

4Q

3Q

2Q

1Q

4Q

3Q

2Q

1Q

60%

Manufactured capital
Production sites:

8(7 in Japan [including Towa’s 3 plants], 1 in Europe)

Production capacity (Towa’s 3 plants):

11.5 billion tablets(tablets and capsules)

Production facilities for various dosage forms

Social andrelationship capital

Generics volume share

23

245.6 billion
JPY 116.5 billion
JPY

Net assets (consolidated)Intellectual capital

public confidence in generics, the entire industry
shall implement measures for ensuring a stablesupply based on thorough manufacturing and quality
management.
While still pursuing Towa Quality, we will make theutmost efforts to restore public confidence in theindustry by enhancing the product lineup needed andmaintaining and strengthening the system for stablesupply/quality assurance as well as for information
provision.
Our activities on health-related business conform tothis direction and we will strive to become a valued
company that contributes to the society.

While the generics volume share has steadily risen,
the recent quality problems in the generics industry
have affected the entire industry. Public confidence ingenerics built by the industry so far is declining. As
the drug companies involved in quality problems
suspended their operations, the industry as a wholehas failed to fulfill its responsibilities for stable supply.
As a result, the generics market is in turmoil and thefuture of generics companies is worrisome.
Under such circumstances, the Ministry of Health,Labour and Welfare mentioned that the industry
would never gain understanding from patients andhealthcare professionals only by setting new
numerical targets for generics. In order to regain

Financial capital

95.2%

We engage in nationwide marketing activities through71 sales offices, 31 agents at 60 sites, and medical
products distributors, among others, in Japan. Towa
has a high coverage ratio of medical institutions: 89.2%
for hospitals and 95.2% for dispensing pharmacies.

Towa Group has 8 production bases in total, comprising of 7
in Japan and 1 in Catalonia, Spain. Production capacity
stands at 11.5 billion tablets for tablets and capsules
produced at Towa’s 3 main plants. Our subsidiaries produce
ointment, soft capsules, etc. and the Group is distinguishedby its capacity to produce diverse dosage forms.

Human capitalEmployees:

3,456(consolidated)11Qualified pharmacists: 234
MRs: 800

C onsolidated subsidiaries:(3 in Japan, 8 in overseas countries)(consolidated in Japan)(consolidated in Japan)

Towa Group hires 800 MRs and 234 qualified
pharmacists (both consolidated in Japan). In addition,
we have introduced an internal qualification system forbusiness operations (experts, etc.) to nurture
professionals.

Natural capitalEnergy input(crude oil equivalent, Towa’s 3 plants)

Water consumption(Towa’s 3 plants)

19,108 kl
271,269 m

3

We use good quality water and energy resources to
produce high-quality pharmaceutical products. In thisregard, from an environmental perspective, we manage
chemical substances properly, enhance the plants’water discharge and air emission systems, take energysaving measures, and make other efforts.

TOWA PHARMACEUTICAL Integrated Report 2021

24

Looking Back on Previous Mid-term Business Plan

PROACTIVE

Previous Mid-term
Business Plan 2018–2020

Under the 4th Mid-term Business Plan 2018-2020
PROACTIVE, we steadily expanded our domestic
generics business to ensure its steady growth andcontinuation of stable supply. Among other things,
we increased production capacity at three plants toensure the continuation of stable supply.
In addition, we continued research on fundamental
technologies and practical applications for the further
evolution of product quality. And based on our policyof entering new markets, we began full-scale entry
into overseas markets. Furthermore, with an eye tothe creation of new businesses, we endeavored tolaunch IT-centered services.

Mid-term Business Plan
2021-2023

Basic Policy (3)Entry to new markets and creation of new businesses

Basic Policy (1)Steady growth ofdomestic generic businessContinuationof stable
supplyPROACTIVE

Under our 5th Mid-term Business Plan 2021-2023
PROACTIVE II (hereinafter, the “5th Mid-term Plan”), theGroup will be developing health-related businesses inline with five policies as shown in the diagram below.
With our domestic generics business, which is our corebusiness, we will be aiming to make an even greater
contribution as we move forward into the future. And as
for overseas markets, we will be expanding the numberof countries and territories in which we offer the

Further evolution of product quality for sustainable growth

Towa Group’s
Health-Related
Businesses

Policy 3Entering new health-related
business

Expanding and growing businessin overseas market

Policy 1

Basic Policy (2)With the aim of further improving product quality, we continued research on fundamental technologies andpractical applications for tackling various issues. In addition, we conducted research on molecular control
technology, as well as continuous flow precision synthesis and integrated continuous manufacturing, asmeans of achieving green sustainable chemistry.

Basic Policy (3)Entry to new markets andcreation of new businesses

As a means of entering new markets, we began full-scale entry into overseas markets by making Pensa
Investments, S.L. (current trade name, Towa Pharma International Holdings, S.L.; hereinafter, “Towa HD”) awholly-owned subsidiary. In the area of the creation of new businesses, we established T Square Solutions
Co., Ltd. as a joint venture with TIS Co., Ltd. in order to provide IT-centered services that contribute to therealization of a society in harmony with local communities. Furthermore, we acquired Protosera Inc. as a
subsidiary and launched a testing service business. Besides these initiatives, we also began developing newhealth-related products and services including launching interactive support devices that convert voice intosound that is easy to hear and, and medication support tools to improve drug adherence.

Major Objectives
Net sales

Operating income(accumulative)

Capital-to-asset ratio

Targets

Initial target of

JPY 100.0 billion
or moreJPY 30.0 billion
or more50% or higher

Modified target

Improvement of financial
stability

From May 2019

JPY 40.0 billion
or more(accumulative)

JPY 26.0 billion
or moreCapital investment(accumulative)

JPY 20.0 billion
or more•Product development plan
aiming for stable launches•Improvement of products in
response to requests fromhealthcare professionals andpatients

Capital investment for
maintaining and strengthening
a stable supply system

Dividend policy

Stable payout
On top of stable dividend
payouts, the Company willseek to return profits toshareholders through share
repurchases, etc., dependingon the circumstances

Achievements

Achieved

Achieved

Not achieved

Achieved

Achieved

Achieved

JPY 154.9 billion

JPY 52.0 billion

47.5%

JPY 27.1 billion

JPY 22.6 billion

Stable dividend

Net sales(consolidated) (fiscal year)
JPY 105.1 billion (2018)
JPY 110.4 billion (2019)
JPY 154.9 billion (2020) 1)

Operating income(consolidated) (fiscal year)
JPY 16.0 billion (2018)
JPY 16.1 billion (2019)
JPY 19.9 billion (2020) 1)

Capital-to-asset ratio(fiscal year)
48.6% (2018)45.5% (2019)47.5% (2020)

R&D expenditure(consolidated) (fiscal year)
JPY 7.9 billion (2018)
JPY 8.6 billion (2019)
JPY 10.6 billion (2020) 1)

Capital investment(consolidated) (fiscal year)
JPY 6.0 billion (2018)
JPY 6.2 billion (2019)
JPY 10.4 billion (2020) 1)

Dividend per share(fiscal year)
JPY 35.8 yen (2018)
JPY 44.0 yen (2019) 2)
JPY 44.0 yen (2020)(accumulative)1) Towa HD included in consolidation in FY2020
2) Stock split on April 1, 201925

R&D expenditure

TOWA PHARMACEUTICAL Integrated Report 2021

(accumulative)(accumulative)

FuturePolicy 2

We expanded generics business in Japan by newly launching 76 items of 30 APIs during the three years to
FY2020. In addition, we concluded a joint sales agreement with Celltrion Healthcare Japan Co., Ltd., and madea start in selling biosimilar products. Furthermore, we expanded manufacturing facilities to ensure thecontinuation of stable supply, and have achieved a production capacity target of 11.5 billion tablets* per year
at the three plants in Osaka, Okayama, and Yamagata. *Production capacity of tablets and capsules

Further evolution of productquality for sustainable growthGroup’s products. Furthermore, in the realm of newhealth-related businesses, we are embarking on a newera, so will be steadily doing what’s necessary as we
look ahead to the future.
To implement these policies, it will be important tocontinuously create technology innovations andproduct values, and we will therefore be continuously
working to enhance job satisfaction and foster talented
human resources.

Basic Policy (2)Basic Policy (1)Steady growth of domestic
generic business / continuationof stable supply

New Mid-term Business Plan

Enhancing generics
business as a core

Present

Policy 4

Creating technology innovations and product values

Policy 5

Making job satisfaction and fostering talented human resources

Challenges

PolicySecuring stable supply and providing appropriate
information based on thorough manufacturingcontrol and quality control to regain trust in generics
Being a more trusted and needed company as acomprehensive generics manufacturer[ Policy 1 ]Enhancing generics
business as a core

Delivering high-quality, value-added generics tocontribute to the health of people around the world[ Policy 2 ]Expanding and growing businessin overseas market

Contributing to the realization of healthcare and nursing
care for society with a long and healthy life expectancy
and also to society that shifts from medical care to careof pre-symptomatic disease and prevention[ Policy 3 ]Entering new health-related
business

Contributing to society by constantly supplying the Towa
Quality products and achieving sustainable growth[ Policy 4 ]Creating technology innovations
and product values

Continuing to be an ever growing company that provides
job satisfaction to each and every employee throughgrowth of both the company and its employees[ Policy 5 ]Making job satisfaction andfostering talented human resources

Key Theme• Stable product supply- Stable API procurement- Enhanced production capacity- Optimized Towa Sales System• Quality assurance• Broad product lineup• Manufacturing sophisticatedproducts with No. 1 total
product performance• Entry to testing service business

TOWA PHARMACEUTICAL Integrated Report 2021

26

New Mid-term Business Plan

Policy1

Policy2

Expanding and growing business in overseas market

Enhancing generics business as a coreprovide Towa products to medical institutions,
pharmacies, and patients, who need the products, byincreasing production capacity through our three-plant
production structure and by optimizing the Towa Sales
System. In particular, we will be pursuing initiatives
that take into account the risks in API procurement.

To maintain and strengthen a stable supply system,
we will emphasize the perspective of supply chain
management, and will share information andencourage cooperation across departments tooptimize the entire system. In this way, we will goahead with risk-adapted initiatives. Specifically, we will

We will strive for the sustainable growth ofour business by introducing new productsin Europe and the United States, mainly
through Towa HD, which we acquired in2020. At the same time, we will develop
Towa Quality products meeting patients’needs overseas. Furthermore, we will
explore market opportunities in new
countries/regions.

Business Scale

Stable Supply System

Sustainable business growth with Towa HD as a
hub through new products launches in Europe andthe United States

GrowthDevelopment of Towa Quality products meeting
existing and potential patients’ needs overseas

Exploration of market opportunities
in new countries/regions

Overseas
market with
Towa HD
as a hubQuality Assurance System
testing of finished products, product shipment
decision-making by plants, and product shipment
decision-making by the HQ QA Dept, we will
strengthen our management systems and schemes,
and continue to work to ensure reliable quality andsafety.

Throughout manufacturing and quality control
processes, we will comply with GMP, GQP, and GVP
ministerial ordinances and the GDP guidelines tomaintain and strengthen our quality assurance
system. In every process from the acceptance ofAPIs to the testing of intermediate products, theExpansion

Market / Area

Policy3Entering new health-related businessBroad Product Lineup
We will put together a generic-drug
product lineup with a focus on medicines
deemed necessary for future medicinal
treatment. We established lineups of
products in a broader range of therapeuticareas, and conducted joint sales ofInfliximab BS as a steppingstone of entry
into the biosimilar market. In addition, we
will be taking on challenges in diversified
areas such as drug re-positioning with iPS
drug discovery, development of
Rivastigmine transdermal system twice-aweek medicine, etc.

FY2020 Product Composition by
Therapeutic Area

FY2030 Product Composition by
Therapeutic Area (Forecast)

Bio Pharmaceuticals

Other

Other

Cardiovascular

Oncology

Oncology

Respiratory
VitaminRespiratory
Vitamin120

Gastrointestinal

Medicinal
effect andmechanism

Anti-allergic

Antibiotics andchemotherapeutic

Bio Pharmaceuticals
New TA
Cardiovascular

130

Medicinal
effect andmechanism

Gastrointestinal
Anti-allergic

Antibiotics andchemotherapeutic

Neurological
Metabolic etc.

NeurologicalKeymeasures

Metabolic etc.

Manufacturing sophisticated productswith No. 1 total product performance
Manufacture of sophisticated productswith No. 1 total product performance refers
to our initiatives in providing the market
with products characterized by “Towa
Quality” that are desired and needed bycustomers. This guarantees the quality ofthe products that we supply underthorough quality control. We are constantly
using the latest technologies to improveand modify the quality of the products, andwe are constantly upgrading the products
to the latest and best. We arestrengthening and streamlining researchand development functions throughinvestment in facilities and equipment.

27

TOWA PHARMACEUTICAL Integrated Report 2021

• Building a foundation for extending healthy life expectancy by utilizing data
• Contributing to the Comprehensive Community Care System• Further enhancing lineup of products and services to maintain and improve health• Entering disease risk testing service business• Creating synergies between and with existing businesses
Sports facilities etc.

Ideal
products

Pursuit of
Towa Quality
Development andlaunch of
new products

Application oftechnologies
Improvement andmodification

Towa
Quality

Public health nurses
Community
Comprehensive
Support Center
etc.

Certifiedsocial workers

Information collection
Ideas for improvements

Analysis and evaluation

In-house manufacturing of APIs / innovative technology development and application researchStrengthening and streamlining of research and development functions

Nursing
supportGenerics

Local residents etc.

Treatment
tic

a
mptom
Pre-sy disease

In d•OTC drugs•Medication support tools

ase
Doctors

Caregivers•Communication
support•Nursing support

Pharmacists

Dise

Care managers

Nursing homes etc.

City offices / community centers

Researchers

Prevention

Frai
l
Care
d

Core businessCompanies anduniversities

Good
HealthTrainers

Public health centers

Information provision

Feedback

and contribute to extending healthy life expectancy byproviding necessary health promotion services topeople in need of them. Among our key measures, wewill be launching testing services for determining
disease risks, expanding the KENTO Healthcare
Science Center, which opened in 2019 to conduct joint
research with the National Cerebral and CardiovascularCenter to extend healthy life expectancy, and collecting/utilizing information obtained from testing to provide
appropriate health-related services.

As one of our challenges, we aim for creating a futurethat provides full coverage from medical care to care ofpre-symptomatic disease and prevention for society
with a long and healthy life expectancy. In line with our
vision of contributing to people’s health, we will work tocreate new health-related businesses that are suited to
the new medical system, while acquiring newtechniques and integrating them with completely new
knowledge and technologies. Specifically, we will help
build an infrastructure to create ideal local communities,

Dispensing
pharmacies

NursesMedical institutions

m
ivid
tfor
ual HealPnalth Informatio•Health foods•Supplements•Health promoting tools

Contributing to forming of infrastructure for the creation of ideal local communities
Providing necessary health promotion services to people who need them and contributing to the extension of healthy life expectancy

TOWA PHARMACEUTICAL Integrated Report 2021

28

New Mid-term Business Plan

Businesses Pursued by Towa Group
Policy4Creating technology innovations and product values
To contribute to society by constantly supplying the
Towa Quality products and achieving sustainablegrowth as a company, we will continue to work on
creating technology innovations and product values. In
particular, we will pursue technological innovation in
API technologies such as molecular control
technology, chiral synthesis technology, andcontinuous-flow precision synthesis, in formulation
technologies, such as ones that allow the productionof OD tablets that are easy to take, and in
manufacturing technologies for continuous
production. By conducting joint research aimed at
obtaining a new indication for Bromocriptine, we will
be aiming to create new product value.

API Technology

Formulation Technology
Pursuing OD tablets that are easy to take

Establishment of molecular control technology
Freely controlling crystal form and particle size of APIs
Contribution to the development of value added products

Further improvement of RACTAB
Masking technology to reduce bitterness, miniaturization of tabletsand better oral disintegration

Establishment of chiral synthesis technology
Enabling efficient API synthesis

Realization of stable formulations
Development of formulations stable in term of heat, light, moisture and oxygen
Assurance of expiration period of formulations for three years and more

Development of continuous flow precision synthesis
Pursuing green sustainable chemistry with wastes reductions
and low CO2 emissions as key initiatives

Based on our vision: “We contribute to people’s
health; we are dedicated to people’s genuine smiles,”Towa Group contributes to people’s health bycreating superior products and services. Through our
corporate activities, we aim to be a company that isvalued and needed by patients, healthcare
professionals, local communities, and others.
Under the 5th Mid-Term Business Plan, we will
maintain our vision while expanding the scope of ourbusiness to include health-related businesses.
Nevertheless, our core generics business in Japanand overseas will maintain its central role in ouroperations.
In this core business, we will further strengthen andutilize the results of all the efforts we have made so
far. Based on the premise of “pursuit of Towa quality,”
we will strengthen our “assortment of needed
products” to meet the demands of society as acomprehensive generics manufacturer. In addition,
we will maintain and strengthen our system toprovide a stable supply of products that meet quality
standards and to deliver information on safety andquality in a timely and accurate manner.
Furthermore, the Group will pursue corporate
activities to contribute to the creation of new healthrelated businesses. Through these businesses, wewill help form an infrastructure to create ideal local
communities, and contribute to extending healthy life
expectancy by providing necessary health promotion
services to people in need of them.
And with regard to the Sustainable Development
Goals (SDGs), international objectives to be achievedby 2030, we aim to contribute mainly to theattainment of Goal No.3 “Good Health and Wellbeing” along with the other goals.

Creation of New Product Values
Manufacturing Technology
Establishment of technology to monitor products in real time
(PAT: Process Analytical Technology)
Application to integrated continuous manufacturing system
Production carried out under an integrated flow leading to labor saving
Smaller manufacturing facilities and occupation areas

Joint research aimed at obtaining a new indication for Bromocriptine
Clinical trials for familial Alzheimer’s disease started
Development of new Rivastigmine formulation
Development of transdermal system twice-a-week medicine
Hope for reducing the burdens on patients, their families, and caregivers
Phase III clinical trials planned for the summer 2021

Restoration of healthat pre-symptomatic
stage

Maintenance of
healthy conditions

Assortment ofneeded products

Policy5

Making job satisfaction and fostering
talented human resources

As the growth of employees leads to the strengtheningof corporate fundamentals and facilitates growthcorresponding to change, we are working to establish
an environment for the enhancement of corporate
fundamentals. In connection with this, we are aiming
to create workplaces where there is respect fordiversity in work styles and motivation for each andevery employee. We also view our employees as vital
investment resources and assets for the Company,
and are stepping up fostering talented humanresources who can make an impact as we pursue
growth.

Net sales

Operating income (accumulative)

JPY 200.0 billion (consolidated)
JPY 150.0 billion (non-consolidated)
Achievement of single-year sales target

JPY 35.0 billion or more
Lineup of needed products and improvementof products based on the requests frommedical institutions and patients

29

TOWA PHARMACEUTICAL Integrated Report 2021

Pursuit of
Towa Quality

Generics
business

Build up basics
on health related
infrastructure

Maintenance andstrengthening of stablesupply and quality
assurance systems
Response to local
Comprehensive
Community Care System

Grasping healthconditions

Maintenance andstrengthening of
information provision

Health-related
businesses

OthersWith generics business set as our core, expansion of
all health-related businesses contributing to people’s health

Major Objectives

R&D expenditure (accumulative)

Extension of healthy
life expectancy

JPY 57.0 billion or more

In response to the international initiatives of SDGs to
be achieved by 2030, we will focus on the Goal No. 3“Good Health and Well-being” along with other goals.

Achieving cumulative operating income for the period to invest in
sustainable growth and return profits to shareholders

Capital investment (accumulative)

JPY 75.0 billion or more

Investment in strengthening and streamlining
our production facilities and R&D functions tomaintain and strengthen our quality
assurance and stable supply systems

Dividend policy

Stable dividend
Ensuring stable dividends and returning
profits to shareholders through improved
corporate value

TOWA PHARMACEUTICAL Integrated Report 202130