INDEX

VisionOur History and Today

We contribute to people’s health
We are dedicated to people’s genuine smiles

1
2
3
5
7
9

VisionContents and Editorial Policy
Our History
Social Issues Addressed by Towa Group
Towa Group’s Strength
Financial and Non-Financial Highlights

Towa Group’s Value Creation

Genuine smiles

People’s health

11
17
19
20
21
23
24
25
30

Message from the President
Feature Topic 1: Production Capacity Expansion
Feature Topic 2: Overseas Markets Development
Feature Topic 3: Sunsho Pharmaceutical
Our Value Creation Process
External Environment Surrounding Towa Group
Towa Group’s Capital
Mid-term Business Plan
Towa Group’s Target Business

Foundation Supporting BusinessSupporting genuine smiles througheverything that is contributing to health

Towa Group contributes to people’s health by creating superior products and services.
Through our corporate activities, we aim to be a company that is valued and needed by patients,
medical professionals, local communities, and others.

31
35
36
37
38
39
40
46

GovernanceRisk Management
Risk Information
Compliance
Message from the Outside Directors
Board Members
Society
Environment

Financial and Corporate Data
47 11-Year Financial Summary
49 Management Discussion and Analysis of Financial
Position, Operating Results, and Cash Flows
51 Corporate Data

[ Editorial Policy ] We issue Towa Pharmaceutical Integrated Report to communicate to shareholders, investors, and other stakeholders
Towa Group’s efforts to enhance our corporate value. This year’s report presents our value creation story in the value
creation process and the message from the President. It also describes our efforts to realize our vision through the 5th
Mid-term Business Plan (2021–2023) PROACTIVE II. We strive to improve the content of the report to respond to various
opinions and interests of our stakeholders. We look forward to your candid feedback.
[ Scope Covered ] Towa Group’s consolidated accounts including some consolidated and non-consolidated figures in Japan.
[ Period Covered ] FY2021 (From April 1, 2021 to March 31, 2022)* The financial information is as of March 31, 2022. The report also covers some initiatives that were taken before April 1, 2021 or after March 31, 2022.

[ Guidelines for Reference ] International Integrated Reporting Framework issued by the International Integrated Reporting Council (IIRC)
Guidance for Collaborative Value Creation issued by the Ministry of Economy Trade and Industry[ Forward-looking Statements ] In this report, described statements other than historical facts are future forecasts based on forward-looking statements
and plans. These future forecasts contain factors, such as risks and uncertainties, and actual results and performances
may differ from the forward-looking statements.

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TOWA PHARMACEUTICAL Integrated Report 2022

TOWA PHARMACEUTICAL Integrated Report 2022

2

Our History

1957

Itsuro YOSHIDA was appointed President
and Representative Director

Started selling OTC drugs

2003

Acquired J-Dolph Co., Ltd. as a
subsidiary

1965

2004

Established RACTABTechnology

2004

Listed on the first section of theTokyo Stock Exchange

Constructed new corporate headquarters

1998

14.0 billion
tablets

Acquired Sunsho PharmaceuticalCo., Ltd. as a subsidiary

140.0

Production capacity

10.5 billion
tablets

Transitioned to the Prime Market of
the Tokyo Stock Exchange in April
2022

120.0

Production capacity

Established Greencaps PharmaceuticalCo., Ltd.

Launched value-added products

1997
Shifted to manufacturing andselling ethical drugs from OTC
drugs

Overseas
sales

Production system

2022

160.0

11.0 billion
tablets

2021

2010

2016
2000

billion

Production capacity

History of Towa * The years shown are fiscal years.

1996

165.6

12.0 billion
tablets

14.0 billion
tablets

Acquired Daichi Kasei Co., Ltd. as a
subsidiary

Established

JPY

Production capacity

Production system

Since our establishment in 1951, we have strived to research, develop, manufacture, and sell generics for morethan 70 years. While promoting stable supply, quality assurance, and information provision, we will continue tofocus on research and development of ingenious pharmaceutical products that are “easier to take” and “easier tohandle.” At the same time, we work to construct a structure that can provide Towa Group’s value-added products
to patients around the world and to create new health-related businesses in response to the new medical system.

1951

Consolidated Sales
for FY2021

Production system

14.0 billion
tablets

8.5 billion
tablets

Production capacity

2018

Established T Square Solutions Co., Ltd. as a
joint venture with TIS Co., Ltd. to create new
businesses

2019

Acquired Pensa Investments, S.L. in Spain as
a subsidiary to enter into new markets
Current trade name: Towa Pharma
International Holdings, S.L.

7.5 billion
tablets

100.0

80.0

60.0

40.0

Constructed Osaka Research Center

20.0[ Trends in Consolidated Sales ]1951 1970

1980

1990

2000

2002

2003

2004

2005

2006

2007

2008

1st Growth Period from our establishment to FY2001

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

0

2nd Growth Period from FY2002 to FY2020
3rd Growth Period
from FY2021

History of initiatives based on measures to promote the use of generics
Generics volume share targets set
by the government

Osaka
Production
OkayamasystemYamagata

1977

1983

Constructed
Osaka Plant

1981

Constructed Osaka
2nd Plant

Completedrebuilding thesolid formulation 1995
building inOkayama Plant

2007

30% or more
by FY2012

1998

60% or moreby the end of FY2018(Production capacity:
2.5 billion tablets)

Expanded theformulationbuilding
Purchased Mect Co., Ltd.’s
Tohoku Plant

Boosting volume share target of generics up to 70% ormore in mid-FY2017 and 80% or more in
the earliest possible period before the end of FY2020

Constructed New Osaka Plant(current Osaka Plant)

2005
Constructed
thepackaging 1996
building

2015

2013

2008

Started the plan
to construct
Yamagata Plant

2012

Constructed the 2nd solid
formulation building in WestJapan Distribution Center2012

Constructed Yamagata
Plant and East Japan
Distribution Center

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TOWA PHARMACEUTICAL Integrated Report 2022

2011
Towa Direct Sales
SystemActual volume share
in FY2021

79.5%

by September 2020

Expanded the warehouse andtesting area in the Osaka Plant

2013

2016

Expanded the 2nd solid
formulation building(Production capacity: 2.5 billion tablets→ 3.5 billion tablets)

2017(Production capacity:
2.5 billion tablets)

Sales
system2017

80% or more

2017

Constructed(relocated)
2017
East Japan
Distribution Center

Rebuilt the solid
formulation building(Production capacity: 3.5 billion tablets→ 5.0 billion tablets)

Renovated the solid formulationbuilding and constructed the
2nd solid formulation building
The 2nd solid formulation building was
sequentially equipped with facilities.
(Production capacity: 2.5 billion tablets → 4.5 billion tablets)*Production capacity will be further increased by 2.0 billion tabletsby the end of FY2022.

Sales offices (as of October 2022): 71 offices
Agents (as of October 2022): 31 agents at 62 sites
Started collaboration with two wide-area wholesalers in 2017

Shifted to
Towa Sales System

TOWA PHARMACEUTICAL Integrated Report 2022

4Social Issues Addressed by Towa Group
Japan’s National Health Insurance System boasts the highest degree of fulfillment in the world. Every
individual must save on medical costs to maintain this system. In this regard, choosing generics is an easy
way for everyone to save the costs and one of the possible social contributions in our daily lives. We willaddress the social issues by creating related businesses that contribute to people’s health with generics
business set as our core business.

Challenges

Towa Group’s Initiatives

Swelling medical costs in Japan

Generics contribute to cutting medical costs

To maintain the National Health Insurance System in the future

Offering more than 770 products in our lineup

In Japan, medical costs continue to increase at a rate of
approximately JPY 1 trillion per year in the context of an aging
population and sophisticated medical care. The Ministry of Health,Labour and Welfare estimates that the amount will exceed JPY 60
trillion in 2025. On the other hand, as the workforce supporting
insurance premiums and taxes decreases, the prerequisites for systemdesign are likely to collapse. If medical costs continue to swell as
estimated, some undesirable events may happen: an increase inpatients’ burden of medical costs and the taxes, and a loss of accessto medical care that we naturally have had up to now. Stemming theincrease in medical costs is essential to keep the National Health
Insurance System in the future.

1985 1990 1995 2000 2005 2010 2015 2025

Desiring to be of service to as many patients as possible, we provide
value-added generics through cumulative improvements by
responding to and satisfying requests voiced by medical
professionals. We offer more than 770 products in our lineup to covervarious therapeutic areas. We manufacture our products withparticular attention to active pharmaceutical ingredients (APIs) todeliver safe and secure generics, which is one of our unique features.
Our mission is to deliver drugs that are not merely low-cost but “moreeasily taken and handled” to a large number of people.

Ministry of Health, Labour and Welfare: “Outline of
National Medical Care Expenditure in 2015” and“Materials for the Medical Insurance Subcommittee,
76th Social Security Council”

Ingenuity for products that can be more easily and safely taken by patients

Medical costs continue toincrease at a rate of approx.
JPY 1 trillion per year

(Forecast)

Choosing generics cuts medical costs
Choosing generics enables us to cut the burden of medical costs(drug costs). This will reduce both the burden of medical expenses on
individuals and contributions by the Japanese government and healthinsurance associations. For instance, we can save approximately JPY
1.9 trillion in the annual cost of drugs just by replacing as many drugs
as possible with generics.
* Page 8 in the “Outline of Revisions to the Drug Price Standard in FY2022” by the Ministry of Health,Labour and Welfare

New drugs(brand-name drugs)

Generics

Raw materials costand business
operation cost

Raw materials costand business
operation cost

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TOWA PHARMACEUTICAL Integrated Report 2022

Micro-granulation that reduces roughness
perceived when taking medicines

Smaller tablets with the same amountsof active ingredients

Masking technology used to reduce
bitterness by coating tablets

Product name printing to make medicine
identity easily discernable even after scoring

Efficacy labels and letters to make drugs
more easily discernable

R&D expenditure

R&D expenditure

Efficacy label

Comparison of drug prices (conceptual chart)

Extension of healthy life expectancy and disease prevention
Extending the healthy life expectancy toward the era of the 100-year
life is a major issue in Japan facing a super-aging society. The healthy
life expectancy was proposed by World Health Organization (WHO) in
2000. In the past, we had emphasized the average life expectancy of achild aged 0, indicating how many years he or she can live. However,
the healthy life expectancy, a period of healthy living, has attracted
attention in recent years. Preventing disease and staying healthy andactive are key to prolonging the healthy life expectancy. Moreover,extending the healthy life expectancy is essential from the viewpoint of
curbing medical costs.

Orally disintegrating (OD) tabletsthat can be taken without water

Considering care of pre-symptomatic diseases and disease
prevention as well as contribution in medical care
Towa Group aims to contribute to extension of the healthy life expectancy
through the care of pre-symptomatic diseases and disease prevention. To thisend, we seek to develop new health-related businesses in addition to thegenerics business.
Specifically, we are working to build an Individual Health Information Platform
with a view to enabling proper medical examination and treatment andpromoting health, to help solve issues faced by the elderly through a businessusing ICT promoted by the Osaka Prefecture, and to promote the early
detection and prevention of cognitive decline. We are also seeking to develop
health-related businesses by developing medication support tools, health foods,
and supplements, and by entering the Disease risk testing service business.

TOWA PHARMACEUTICAL Integrated Report 2022

6

Towa Group’s Strength
Generics are marketed later than new drugs (brand-name drugs); therefore, we can produce better productswith the same efficacy, quality, and safety as the new drugs by utilizing the latest formulation technologies.
We are engaged in various initiatives to provide easy-to-take, easy-to-handle and safe drugs, let alone quality
and safety.

Relatedinformation
See page

Development of APIs

41.

Development of APIs

Product development

Quality control

Stable product supply

Information provision

Fostering of talented human resources

Relatedinformation
See page

Stable product supply

41.

Developing and selecting the best API for
manufacturing products

Established production capacity with three plants toensure stable supply at any time

We use APIs meeting our original strict quality standard among countryauthorized APIs. We also actively research APIs and select the best APIs
for creating products based on our accumulated know-how. Additionally,
we have established manufacturing methods for the APIs in-house and asystem to outsource the production of the APIs to Daichi Kasei Co., Ltd.,a group API manufacturer, and collaborative API manufacturers. We
regularly inquire and confirm each manufacturer whether it manufactures
APIs in accordance with standards, laws, and regulations to enable thestable procurement of the APIs.

By adopting a back-up system supported by three sites, we ensure that any
production disruption at one plant can be compensated by efforts at the other plants.
Furthermore, by dividing the physical distribution bases in East Japan and West Japan,
we have established an efficient arrangement and a reliable back-up system even in aworst-case scenario. At present, all the three plants can produce a total of 12.0 billion
tablets* annually. We are expanding our production volume to 14.0 billion tablets by theend of FY2022 to respond to a further increase in demand. Furthermore, we plan tobuild the 3rd solid formulation building in Yamagata Plant by the end of FY2023 and toachieve the production capacity of 17.5 billion tablets from FY2024 onward.
* Production capacity of tablets and capsules

Relatedinformation
See page

Product development

Relatedinformation
See page

Information provision27.

Based on our technologies and experiences, developing
products that can be more easily taken and handled
We have the lineup consisting of more than 770 products to cover various
therapeutic areas. With the desire to serve as many patients as possible,
we offer value-added generics by responding to voices and requests frommedical professionals and reflecting them in our manufacturing process.
Among them, we have developed better dosage forms and tastes so thatdrugs can be easily taken by pediatric and elderly patients, and enhanced
visibility and stability against light, temperature, and humidity so thatdrugs can be easily handled at hospitals and pharmacies.

Relatedinformation
See page

Quality control

42.

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TOWA PHARMACEUTICAL Integrated Report 2022

40.

Active provision of relevant information to enable patientsand medical professionals to feel comfortable while using
ethical medicines
We have established a system that enables the prompt and appropriate
provision of information on the proper use of our products and academic
information to medical professionals, mainly through specially trained
medical representatives (MRs), to ensure that generics are used withreassurance. We also provide patients and their families with information
to ensure their safe use of pharmaceuticals. In addition to providing
information, we collect opinions from medical institutions and share
feedback internally for creating better products.

Fostering of talented human resources

Relatedinformation
See page

43.

Working diligently to ensure reliable
quality and safety

Focusing on making job satisfaction and fostering talented
human resources, aiming for being a reliable company

In order to be a trustworthy company, we comply with strict quality
control standards stipulated by the government, from product R&D,
manufacturing, and marketing to after-sales operations. We carry out
company-wide quality control initiatives to establish the quality assurance
system required for ethical medicines. Especially in manufacturing
pharmaceutical products, we strive to ensure adequate quality and safety
through our specific system, education and training, and other ways aswell as to comply with the Good Manufacturing Practice (GMP)
established by the government and other related laws and regulations.

We aim to be a more trusted and needed company as a comprehensive
generics manufacturer. Under the belief that talented human resources are thefoundation of a trusted company, we work to make job satisfaction, foster
talented human resources, and strengthen our organization. The 5th Mid-term
Business Plan 2021–2023 PROACTIVE II that will end in FY2023 sets out“Making Job Satisfaction and Fostering of Talented Human Resources” as
one of the priority policies. While aiming for job satisfaction for each
employee motivated by individual talent improvement and career enrichment,
we seek to strengthen our system for encouraging employee growth.

TOWA PHARMACEUTICAL Integrated Report 2022

8

Financial Highlights

Net sales
JPY

165,615
154,900

90,000

Profit attributable toowners of parent

Operating profit(JPY million)
180,000

93,430Non-Financial Highlights

million

165,615

JPY

19,205(JPY million)
20,00019,923

million

19,205JPY

15,914(JPY million)
16,00013,475

14,503

Water usage

39,415

million(t-CO 2 )40,00015,914

15,968 16,143

105,104 110,384

CO2 emissions

13,958278,060

t-CO2

38,450 38,718 39,082 39,415

0.6(m 3 )
300,000

34,0782019

2020

11,643

2021

2022

8,000

0

2018

2019

2020

JPY

2022

2021

(FYE March)

Net assets

20,000

6,495

million(JPY million)
150,000

JPY

329,935

0.375

0.375

0.360

0.339

2020

2021

91,771230,016200,000

0

2022

2018

2019

2018

2019

2020

2021

2022

0

12.8

million

15.7

0.3

150,000

3

2019

2020

0

0

2022

0

2018

2019

2020

2021

JPY

Net assets per share

323.36

(JPY)
400

JPY

2,221

(JPY)
3,000

273.85294.74 283.62

2,685.18

2,221

0.04

(%)
30

0

2018

0.016

2019

0.018

2020

0.02

10

0

0

0.018

9.2

10.3

10.6

30

2021

2022

2018

2019

2020

31.25
22.41

2021

0

2022

2018

2019

2020

2022

2021

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

Employee turnover rate
within the first three years

Medical expense reduced

2.55

%
(%)
20

%

JPY

261,010(JPY million)
300,000

million

261,010
228,434

13.1

14.9

63.8

15.5

51.5

53.7

61.8

64.4

50

177,123 185,580
8.62

10

206,356

150,000

6.81

1.04
2018

%

0.017

64.4

%

0

38.06

37.38

32.95

24.0

15

2022

2021

38.06

13.5

132.00

0

2020

%

11.1

(FYE March)

18.6

1,500

2019

(%)
60

1,621

(%)
100

1,864.92
1,624.09

200

2018

(FYE March)

(%)
20

1,937

Ratio of paid leave taken

18.6

2,369.21
2,126.72

323.3613.5

t(FYE March)

2,685.18

0

0.164

0.166

Ratio of women in
new graduate hires

12.8

Dividend payout ratio

0

0.171

Ratio of women in
management positions

1,887

2022

2022

2021

0.170

Waste generated

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

Earnings per share

2020

2.352

0.162

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

1,250(FYE March)

2019

2.464

0.2

2.255

(FYE March)

1,385

2021

2018

2.619

12,500

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

8.4

20,20318,361 19,108

14,708

0.320

2022

kl

0.4

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

14.8
12.6

10

(FYE March)

2021

(t)
2,500

245,668

177,181 188,803

2018( kl )
25,00017,448(FYE March)

0.015

0

2020

(FYE March)

329,935

116,599

75,000

2019

(%)
20

132,169

79,9202018

ROE(JPY million)
400,000

104,6650(FYE March)

Total assets

132,1696

225,079

10,0002018

20,203m3

268,278 265,297 271,269 278,060

2.474

0

Energy usage

2019

2020

2021

2022
(FYE March)

0

2018

2019

2020

2021

2022
(FYE March)

0

2018

2019

2020

2021

2022

0

2018

2019

2020

(FYE March)

2021

2022
(FYE March)- Towa (non-consolidated)

0

2018

2019

2020

2.80

2021

2.55
2022

0

2018

2019

2020

(FYE March)- Towa (non-consolidated), new graduates only

2021

2022
(FYE March)- Towa (non-consolidated)

Note: The Company conducted a 3-for-1 stock split of common shares effective April 1, 2019.
We calculated earnings 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, 2018.

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