11-Year Financial Summary
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023 (FYE March)

Net sales (JPY million)

55,241

61,351

71,47082,11584,94993,430105,104

110,384

154,900

165,615

208,859

Operating profit (JPY million)

7,723

7,706

11,105

11,134

6,869

11,643

15,96816,14319,923

19,205

5,514

Ordinary profit (JPY million)

9,544

8,834

15,437

10,157

7,417

11,717

18,86520,99018,67722,7395,141Profit attributable to owners of parent (JPY million)

6,201

5,992

11,118

7,684

5,576

6,495

13,475

14,503

13,95815,9142,201

Comprehensive income (JPY million)

6,348

5,999

11,175

7,313

5,858

6,533

13,40914,948

14,46917,9607,825

Net assets (JPY million)

55,61060,14770,04870,60574,94579,92091,771

104,665

116,599

132,169

136,894

Total assets (JPY million)

89,705

103,318

121,187

156,851

165,247

177,181

188,803

230,016

245,668

332,097371,347

Net assets per share (JPY)1,090.70

1,179.69

1,373.89

1,434.79

1,522.99

1,624.09

1,864.92

2,126.72

2,369.21

2,685.18

2,781.17

Earnings per share (JPY)121.62117.54218.07154.19113.32132.00273.85294.74283.62323.3644.72---

436.29314.23122.03253.32272.62271.93316.19-

Capital-to-asset ratio (%)

62.0

58.2

57.8

45.0

45.4

45.1

48.6

45.5

47.5

39.8

36.9

ROE (Return on equity) (%)

11.7

10.4

17.1

10.9

7.7

8.4

15.7

14.8

12.6

12.8

1.6

Price-earnings ratio (%)

13.68

12.63

10.50

9.98

16.56

16.79

10.64

7.69

8.61

8.50

42.37

Cash flows from operating activities (JPY million)8,645

8,144

8,037

3,732

10,195

19,23019,002

19,16412,00822,1292,544

Cash flows from investing activities (JPY million)(11,298)(11,300)(8,230)(19,032)(22,206)(20,093)(3,994)(39,541)(9,100)(59,729)(30,284)

Cash flows from financing activities (JPY million)

2,793

3,529

238

27,970

(92)

4,670

(809)

11,748

184

46,54017,481

Cash and cash equivalents at end of year (JPY million)

3,985

4,675

5,208

18,526

7,112

11,511

26,652

18,713

22,91532,83024,257

Number of employees

1,696

1,879

2,060

2,203

2,408

2,449

2,472

3,325

3,456

4,078

4,298

R&D expenditure (JPY million)

4,478

5,296

6,144

8,924

9,352

7,725

7,916

8,566

10,642

11,48815,265

Capital investment (JPY million)

7,855

9,727

13,816

15,79225,026

12,166

6,011

6,236

10,353

14,84839,645

Depreciation (JPY million)

4,909

5,407

5,724

7,329

7,980

8,173

8,340

8,285

9,674

10,153

14,261Dividend per share (JPY)

75.0

75.0

95.0

95.0

95.0

95.0

107.544.0

44.0

60.0

60.0

Dividend payout ratio (%)

20.6

21.3

14.5

20.5

27.9

24.0

13.1

14.9

15.5

18.6

134.2

Diluted earnings per share (JPY)

Note: The Company conducted a 3-for-1 stock split of common shares effective April 1, 2019. We calculated net assets per share and earnings per share assuming that thesaid stock split was conducted at the beginning of the fiscal year ended March 31, 2013.
During the fiscal years ended March 31, 2021 and 2023, the Company finalized provisional accounting treatments for the business combination. Accordingly, major
management indices and other relevant data for the fiscal years ended March 31, 2020 and 2022 reflect contents of the finalization of provisional accountingtreatments.

51

TOWA PHARMACEUTICAL Integrated Report 2023

The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) and other standards from the beginning of the fiscal year
ended March 31, 2022. Major management indices and other data for the fiscal year ended March 31, 2022 and the following years reflects these accounting standards.
Diluted earnings per share for the fiscal year ended March 31, 2023 are not stated since there were no dilutive shares.
The fiscal year ended March 31, 2023 represents a transitional period for the change in the fiscal period for nine consolidated subsidiaries, scoped 15-month period fromJanuary 1, 2022–March 31, 2023.

TOWA PHARMACEUTICAL Integrated Report 202352

Management Discussion and Analysis of Financial
Position, Operating Results, and Cash Flows
The details of the financial reports are excerpts from the Annual Securities Report (from April 1, 2022 to March 31, 2023).

Financial position
The Group’s financial position for the fiscal year under review is as follows:

Overview of Performance[1] Business environment
Under the “Basic Policy on Economic and Fiscal
Management and Reform 2017” approved by theCabinet in 2017, the Japanese government set thetarget of increasing the volume share of generics to80% by September 2020. To meet the target, thegenerics industry including Towa strived to enhance
production systems and ensure a stable supply ofproducts. The resultant wider use of generics led to
an 81.2% volume share in December 2022
(according to the survey by the Japan Generic
Medicines Association in October–December 2022).
On the other hand, pursuant to the “Basic Policy on
Economic and Fiscal Management and Reform 2020”
approved by the Cabinet in July 2020, thegovernment has since FY2021 revised the drug
prices every year—namely, adding revisions inintermediate years to regular biennial revisions. Thishas made the business environment for thepharmaceutical industry extremely difficult.
Amid such drastic changes in the industry, we
announced the 5th Mid-term Business Plan 2021–
2023 PROACTIVE II in May 2021 in keeping with ourvision, “We contribute to people’s health, and we arededicated to people’s genuine smiles.” Based on theMid-term Business Plan, we implemented various
initiatives with the aim of developing health-related
businesses that contribute to the realization ofhealthcare and nursing care for society with a longand healthy life expectancy and also to society thatshifts from medical care to care of pre-symptomatic
disease and prevention, while positioning thegenerics business at home and abroad as our core.
[2] Initiatives for sales growth
In 2022, we launched 13 new items of seven APIs inJune and 14 new items of seven APIs in December.
As a result, the number of our generics reached 768
items of 345 APIs.
[3] Initiatives for entering overseas markets
To expand and grow our business in overseas
markets, we develop our generics business in theEuropean and U.S. markets through Towa Pharma
International Holdings, S.L. In the fiscal year underreview, we worked at harnessing this change tofoster a sense of unity and encourage collaborationin the Group, and deliver value-added products
under the unified brand, with a view to53

TOWA PHARMACEUTICAL Integrated Report 2023

communicating a clearer image of the Towa brand tostakeholders and further expanding our business.
[4] Creation of new businesses
As one of our challenges, we aim for contributing to
the realization of healthcare and nursing care forsociety with a long and healthy life expectancy andalso to society that shifts from medical care to careof pre-symptomatic disease and prevention. With
such recognition, we are working to develop newbusinesses. As part of that effort, in the fiscal year
under review we focused on integrating Sunsho
Pharmaceutical, a company added to the scope ofconsolidation in March 2022, into the Group. Sunsho
possesses the strong technological capabilities,
extensive customer base, and health-food expertisethat have been developed over the years. Utilizingthese assets is expected to help us achieve thediversification of the health-related business portfolio
as we have aimed for, and increase corporate value
further. Meanwhile, to provide healthcare services
utilizing medical and health data, we launched a
Hana Support smartphone app in September 2022.
Incorporating a particular game method, the app isdesigned to help users take their medicines correctly.
Furthermore, we opened a KENTO Life Innovation
Center, our new life sciences R&D base, in October
2022 in the Northern Osaka Health and Biomedical
Innovation Town. Moving forward, we will continue
striving to create new businesses in keeping with theGroup’s vision of contributing to people’s health.
[5] Operating results
For the fiscal year under review, the Group recorded
net sales of JPY 208,859 million, gross profit of JPY
72,713 million, selling, general and administrative
expenses of JPY 67,199 million, operating profit ofJPY 5,514 million, ordinary profit of JPY 5,141 million,and profit attributable to owners of parent of JPY
2,201 million.
Operating results by segment are as stated below.
Note that profit from each reporting segment isbefore goodwill amortization. Net sales from thedomestic segment amounted to JPY 155,538 million
with segment profit of JPY 10,931 million. Net sales
from the overseas segment amounted to JPY 53,487
million with a segment loss of JPY 277 million.

[1] Assets
Total assets at the end of the fiscal year under review
amounted to JPY 371,347 million, up JPY 39,250
million YoY. This was mainly due to increases ininventories of JPY 20,225 million and in constructionin progress of JPY 19,445 million.
[2] Liabilities
Liabilities amounted to JPY 234,453 million, up JPY
34,525 million YoY. This was mainly due to increases
in long-term borrowings of JPY 71,119 million and innotes payable–facilities of JPY 8,119 million, which
offset a decrease in short-term borrowings of JPY
45,658 million.
[3] Net assets
Net assets amounted to JPY 136,894 million, up JPY
4,725 million YoY. This was mainly due to an increasein foreign currency translation adjustment of JPY
5,630 million. Consequently, the capital-to-asset ratio
came to 36.9% at the end of the fiscal year underreview.

Cash flows
The Group’s cash and cash equivalents at the end of the fiscal year under review amounted to JPY 24,257 million,down JPY 8,573 million YoY. Each cash flow for the fiscal year under review and factors behind it are as follows:[1] Net cash provided by (used in) operating activities
Net cash provided by operating activities amountedto JPY 2,544 million (down JPY 19,585 million in theinflow YoY). This was mainly due to depreciation of
JPY 14,261 million (up JPY 4,107 million YoY), which
partially offset an increase in inventories of JPY
18,496 million (up JPY 10,545 million YoY).
[2] Net cash provided by (used in) investing activities
Net cash used in investing activities was JPY 30,284
million (down JPY 29,445 million in the outflow YoY).
This was mainly attributable to purchase of property,
plant and equipment of JPY 28,731 million (up JPY
17,590 million YoY).

[3] Net cash provided by (used in) financing activities
Net cash provided by financing activities amountedto JPY 17,481 million (down JPY 29,058 million in theinflow YoY). This was mainly due to proceeds fromlong-term borrowings of JPY 78,831 million (up JPY
69,670 million YoY), which cancelled out a net
decrease in short-term borrowings of JPY 45,680
million (compared to the net increase of JPY 47,135
million for the previous fiscal year), repayments oflong-term borrowings of JPY 8,118 million (up JPY
936 million YoY), and redemption of bonds with stockacquisition rights of JPY 4,150 million.

Dividend policy
In regard to distribution of profits, we have a basic
policy of paying dividends continuously and steadilyin accordance with our performance, while enhancing
internal reserves to prepare for future businessdevelopment, such as strengthening research anddevelopment capabilities and securing capital
expenditure funds.
Based on this policy, for the fiscal year underreview we paid a dividend of JPY 60 (an interim
dividend of JPY 30 and a year-end dividend of JPY30) per share. Our basic policy is to pay dividends ofsurplus twice a year for the interim dividend and theyear-end dividend. The decision-making bodies forthese dividends of surplus are the General Meeting of
Shareholders for the year-end dividend and theBoard of Directors for the interim dividend.
We have stipulated in the Articles of Incorporationthat the Company, by resolution of the Board ofDirectors, may pay an interim dividend as of
September 30 of each year, which is set to be therecord date for the interim dividend.

TOWA PHARMACEUTICAL Integrated Report 2023

54

Corporate Data

Corporate Data

Business Locations

Company Outline

As of March 31, 2023

Overview of Company
Yamagata Plant

Kyoto Analytical Science Center

East Japan Distribution Center

KENTO Healthcare Science Center
KENTO Life Innovation Center

Business locations and sales outlets
Headquarters
Research &Development
Laboratories

Amagasaki Research CenterTokyo Office

Headquarters

Osaka Research Center

PlantsDistribution
centers
Sales offices
and sales sites

Moriguchi Annex
Himeji ResearchCenter
Okayama Plant

Company name TOWA PHARMACEUTICAL CO., LTD.
Headquarters
2-11, Shinbashi-cho, Kadoma-shi, Osaka 571-8580
Main phone: +81(0)6-6900-9100
Representative President and Representative Director Itsuro Yoshida
Established
June 1951
IncorporatedApril 1957
Listing
The Prime Market of the Tokyo Stock Exchange (TSE)(Securities code: 4553)
Capital stock
JPY 4,717.70 million
Business operations Manufacturing and selling of ethical drugs

Headquarters Moriguchi Annex Tokyo OfficeOsaka Research Center Kadoma Laboratory
Kyoto Analytical Science Center
KENTO Healthcare Science Center
KENTO Life Innovation Center
Amagasaki Research Center Himeji Research Center
Osaka Plant Okayama Plant Yamagata Plant
West Japan Distribution Center
Kansai Distribution Center
East Japan Distribution Center
71 sales offices
62 sites of agents

Consolidated subsidiaries
Osaka Plant

West Japan Distribution Center
KadomaLaboratory

J-DOLPH Pharmaceutical Co., Ltd.
Daichi Kasei Co., Ltd.
Greencaps Pharmaceutical Co. Ltd.
Sunsho Pharmaceutical Co., Ltd.
Towa Pharma International Holdings, S.L. and seven companies

Stock Data

As of March 31, 2023

Shares authorized .............................................. 147,000,000 shares
Shares issued ....................................................... 51,516,000 shares
Number of shares constituting one unit ......................... 100 shares
Number of shareholders ..................................... 8,267 shareholders

Major shareholders (Top 10)
Number of Ownershipshares(%)(Thousand)Shareholder nameYoshida Office Co., Ltd.

20,100The Master Trust Bank of Japan, Ltd. (Trust Account)

3,895

40.84
7.91

BNYM AS AGT⁄CLTS NON TREATY JASDEC

2,448

4.98

TOWA PHARMACEUTICAL Kyoeikai

1,494

3.04

Itsuro Yoshida

1,455

2.96

Custody Bank of Japan, Ltd. (Trust Account)

1,407

2.86

TOWA PHARMACEUTICAL Employee Stock Ownership Group

966

1.96

State Street Bank and Trust Company

751

1.53

Yoshida Estate Ltd.

648

1.32

Nippon Life Insurance Company

438

0.89

Note: The Company holds 2,294,167 shares of treasury stock but is excluded from the above major
shareholders. The Company calculated the ownership by deducting the number of treasury shares.

Share breakdown by shareholder type
Financial institutions
0.26%

Japanese corporations
1.16%
Non-Japanese
corporations
2.23%

Securities
companies
0.40%

Number ofshareholders ratio
Individuals
and others
95.95%

Financial institutions
14.49%

Individuals
and others
22.76%

Non-Japanese
corporations
18.67%

Securities
companies
1.03%

Number ofshares ratio
Japanese
corporations
43.05%

Stock Price(JPY) 3,500

Major Group Companies3,000
2,500
2,000
1,500
1,000

J-DOLPH
PharmaceuticalCo., Ltd.

Daichi Kasei Co.,
Ltd.

Greencaps
Pharmaceutical
Co. Ltd.

SunshoPharmaceuticalCo., Ltd.

Towa Pharma
International
Holdings, S.L.

Manufacturing and selling of
ethical drugs

R&D and manufacturing of APIs
and intermediates

Producing soft capsules forpharmaceutical products

Manufacturing and selling of
ethical and OTC drugs

Headquarters: Koka, Shiga

Headquarters: Fukusaki,
Kanzaki, Hyogo

Headquarters: Fujinomiya,
Shizuoka

Planning, development, andcontract manufacturing ofhealth foods, pharmaceuticalproducts, etc.

Headquarters: Barcelona, Spain

Headquarters: Fuji, Shizuoka

Non-consolidated subsidiaries
T Square Solutions Co., Ltd.

Protosera Inc.

Provision of healthcare related IT services

Disease risk testing service business and research and development of diagnostic drugs

Headquarters: Moriguchi, Osaka

Headquarters: Settsu, Osaka

13.9 14.3 14.9 15.3 15.9 16.3 16.9 17.3 17.9 18.3 18.9 19.3 19.9 20.3 20.9 21.3 21.9 22.3 22.9 23.3 23.9

(Year and month)

Supporting Expo 2025 Osaka, Kansai, Japan
Among the Signature Pavilions, thematic projects of Expo 2025 Osaka, Kansai, Japan,
the Company is supporting the Co-being Pavilion (thematic project “Resonance ofLives”) produced by Hiroaki Miyata, a professor of the Keio University School ofMedicine, as a bronze partner. The idea promoted by Miyata, “Better Co-Being,”
represents conditions where people are connected to one another while their wellbeing is maintained. This theme is highly compatible with the Company’s vision, “Weare dedicated to people’s genuine smiles.” We will work for the success of theSignature Pavilions through co-creation with Miyata and other supporting companies.
Provided by the Japan Association for the 2025 World Exposition

55

TOWA PHARMACEUTICAL Integrated Report 2023

TOWA PHARMACEUTICAL Integrated Report 202356