Foundation Supporting Business:

Governance
Basic approach
As an important issue, we focus on implementing abetter corporate governance. By conducting businessstrictly in compliance with the ethical standard andimproving transparency of the management, we
continuously raise the corporate value for theshareholders. To achieve this, we endeavor to respect
and protect shareholders’ rights as well as establish andmaintain good relationships with all of our stakeholders
including shareholders.At the same time, we
continuously make efforts to achieve our social missions
as a healthcare company by focusing on maintaining
and improving corporate ethics and ethical standards ofofficers and employees.
This policy also applies to the Towa Group companies.
Each of the Group companies fulfills required roles andobligations to increase the corporate value of the Towa
Group as a whole.

Overview of the corporate governance structure
General Meeting of Shareholders
Appointment/dismissal

Decision-making andsupervising function

Appointment/dismissal

Board of Directors
Recommendation

Nominating andCompensation
Committee

Audit/
supervising

Directors(Excluding Audit and Supervisory
Committee Members)

Consultation

Appointment/dismissal

Audit and Supervisory
Committee

Appointment/
removalCooperation
Reporting

Reporting

Audit

Cooperation

Supervising

Business operating function

President and Representative Director
ReportingAccounting
AuditorExecuting organization/meeting

Risk
Management
Committee

Executive Strategy
Meeting

Operating Officers
Departments

Executive Monitoring
Meeting

Audit

Affiliate companies

Internal
Audit
OfficeTowa continuously makes efforts to enhance its
corporate governance structure. Towa is a company
with an audit and supervisory committee system.
The Company is governed mainly by the Board of
Directors consisting of seven Directors and the Audit
and Supervisory Committee consisting of four
Directors who are Audit and Supervisory Committee
Members (including three Outside Directors).
One of the main roles of the Board of Directors is tomake decisions on mid- to long-term management
policies and important operations. Their importantroles also include resolving the basic policy of
the internal control system and supervising Directors’
business execution. To ensure the effectiveness ofsuch decision making and supervision, we need toreduce the number of Directors, separate Directors
and Operating Officers and clarify their roles, andbuild an environment that encourages Outside
Directors to express their opinions.
Under these policies, Towa has made several
efforts. This includes the transition to audit andsupervisory committee system, introduction of midto long-term performance-based stock compensation
system, establishment of the Nominating andCompensation Committee, enhancement of functionsof Outside Directors, and stimulation of the Board of
Directors. Going forward, Towa will continue to focus
on enhancing the corporate governance structure.

Board of Directors

Directors
Audit and Supervisory Committee Members

Basic policy for developing the internal control system

Supervising

Enhancement of the corporate
governance structure

The Board of Directors of the Company is chairedby the Representative Director. Meetings of the Boardof Directors are held monthly in principle. The Board
discusses important management matters at themeetings and makes decisions promptly. With regard
to business execution, the Company has introduced
an operating officer system and built a governancestructure to clarify the Directors’ responsibilities.
With the structure, Operating Officers bear
the responsibility for business execution while
the Board of Directors focuses on decision making
and supervision of management issues.

Audit and Supervisory Committee
The Audit and Supervisory Committee of
the Company consists of four members including three
Outside Audit and Supervisory Committee Members.
Audit and Supervisory Committee Members conduct
effective audits according to audit plans formulatedby the Audit and Supervisory Committee. Specifically,
they attend important meetings such as the Board of
Directors meetings; receive reports from Directors,
Operating Officers, employees, and the Accounting
Auditor; and conduct on-site audits of major offices.

Nominating and Compensation
Committee
The Nominating and Compensation Committee of
the Company is chaired by the Representative
Director and more than half of whose members are
Independent Outside Directors. The purpose of
the Nominating and Compensation Committee is todeliberate matters on the appointment and dismissalof Directors and Operating Officers, nomination ofcandidates, succession planning, and compensationin consultation with the Board of Directors, and to
make recommendations to the Board of Directors.

Analysis and evaluation of
the effectiveness of the Boardof Directors as a whole
The Company conducted a self-evaluate survey for
Directors from February to March 2021 to analyze
and evaluate the effectiveness of the Board of
Directors. The survey used a questionnaire consistingof 19 questions including those on the structure,operations, and discussions of the Board of
Directors. Results of the survey were reported at
the meeting of the Board of Directors held on April
19, 2021.
Although the survey showed no significant issues
on the effectiveness as a whole, it reminded us that
we need to discuss mid- to long-term management
challenges. Based on those results of the evaluation,
the Company will further endeavor to enhancethe effectiveness of the Board of Directors.

Accounting
audit

Cooperation

Investigation/correction

Compliance Committee(Whistle-blowing helpline)

31

TOWA PHARMACEUTICAL Integrated Report 2021

TOWA PHARMACEUTICAL Integrated Report 2021

32

Roles and independence of Outside Directors

Compensation for officers

The Company believes that fair and efficient
corporate management can be achieved throughOutside Directors’ advice and opinions on soundand efficient management. The Company has
established the Nominating and Compensation
Committee as an advisory body to the Board of
Directors in order to further enhance and strengthen
the corporate governance structure. In particular,
the committee contributes to appropriately providing
the Outside Directors with opportunities for
involvement and advice so as to increase
the objectivity and transparency of the decisionmaking process on the matters such as appointment/
dismissal and compensation for Directors and other

The Company formulated the basic policy forthe determination of Directors’ compensation. Under
the policy, compensation shall:· Contribute to secure talented people to ensure “Towa Group
Philosophy,” “Our Commitments,” “Corporate Policy,”and “The Charter of Corporate Behaviors in Towa Group,”· Be linked with clear targets for corporate and individual
performance to increase Directors’ motivation and moraleas they perform their duties,· Help to raise awareness of the contribution to improving
mid- to long-term performance and corporate value, and· Be determined with a focus on raising awareness of
sharing interests with shareholders and shareholdercentered management.
With the basic policy above, the Company introduced
the mid- to long-term performance-based stock

officers. Currently, all of the Outside Directors are
Audit and Supervisory Committee Members.
The Company has built a system to help them fulfill
their duties as Audit and Supervisory Committee
Members. Specifically, agenda items of the Board of
Directors are sent to them in advance by the General
Affairs Department, the administrative office of
the Board of Directors, so that the Members canconsider matters to be discussed thoughtfully.
In addition, they are provided necessary support
by the assistant staff of the Audit and Supervisory
Committee as well as reports and explanations onimportant matters by the full-time Audit
and Supervisory Committee Member.

compensation system for Directors (excluding Outside
Directors and Directors who are Audit and Supervisory
Committee Members). This introduction was made to further
clarify the link between compensation and the Company’s
mid- to long-term performance and shareholder value, as
well as to improve corporate value over the medium to longterm by granting incentives while raising Directors’
awareness of contribution to the improvement of corporate
value and shareholder-centered management.
In addition, the Company has established the Nominating
and Compensation Committee as an advisory body to
the Board of Directors with the aim of increasing
the objectivity and transparency of the decision-making
process of compensation for Directors or other matters aswell as further enhancing and strengthening the corporate
governance structure.

Reasons for nomination of Outside Directors
Name/position

Reasons for nomination

Norikazu Eiki
Outside Director(Audit and Supervisory
Committee Member)
Assumed the officein June 2019

Kaori Oishi
Outside Director(Audit and Supervisory
Committee Member)
Assumed the officein June 2020

Kenryo Goto
Outside Director(Audit and Supervisory
Committee Member)
Assumed the officein June 2021

Norikazu Eiki has wide-ranging insights and extensive experience at a global
company, and the Company expects that his advice and opinions will promotesound, efficient and objective management, for which reason it has appointed
him as an Outside Director.

Kaori Oishi has expertise and extensive experience as an attorney-at-law.
The Company expects that her advice and opinions based on such abackground will ensure sound corporate management and promote compliancemanagement, for which reason it has appointed her as an Outside Director.

Kenryo Goto has expertise in fields including finance and accounting as acertified public accountant and extensive experience as a corporate managerof an audit firm. The Company expects that his advice and opinions based onsuch a background will improve the transparency and objectivity ofmanagement, for which reason it has appointed him as an Outside Director.

Total amount of compensation for Directors

Attendance

Board of Directors
meetings(held 13 times)
100%

Board of Directors
meetings(held 10 times)
100%

Audit and Supervisory
Committee(held 13 times)
100%

Audit and Supervisory
Committee(held 10 times)
100%

-

-

October 2019 The Nominating and Compensation
Committee was established
Towa transitioned to a company
with an audit and supervisorycommittee system
The mid- to long-term performance-based
stock compensation system
was introduced

June 2020
A woman assumed
the position of Outside
Director

June 2018 The number of Outside Directors increased to twoJune 2015 An Outside Director assumed the position

33

TOWA PHARMACEUTICAL Integrated Report 2021

Position

Basic compensation

Annual bonuses (basedon individual
performance)

Monetary
compensation

Non-monetarycompensation

Directors(Excluding Audit and Supervisory
Committee Members)

175

103

13

48

10

3

47

(-)

(-)

4
(3)

10

7
(3)

Directors(Audit and Supervisory
Committee Members)(of which Outside Directors)
Total(of which Outside Directors)

(24)

(24)

(-)

223
(24)

151
(24 )

(-)

47

Cross-shareholdings

History of Towa’s corporate governance

June 2019

Amount of compensation by type (in millions of yen)

Total amount ofcompensation(in millions of yen)

The Company may hold cross-shareholdings upon requestfrom a business partner as a means to build, maintain, andstrengthen long-term and stable transactional relationships
with the business partner. In that case, however, the Company
holds cross-shareholdings only when it is deemed thatholding of such shares will contribute to the enhancement of
its corporate value over the medium to long term.
Whether to hold cross-shareholdings is determined yearly by
the Board of Directors with consideration of mid- to long-term
economic rationality and future outlook. The Company
exercises its voting rights of cross-shareholdings appropriately
after closely examining the proposals and determining whether
the holding of such shares will contribute to the enhancementof shareholder value. The Company does not make anaffirmative determination on proposals that may damage
shareholder value. In addition, the Company will be against
proposals of appointment of Directors and other officers who
committed any antisocial act or violation of legal obligations.
If a cross-shareholder expresses an intention to sell
the shares, the Company does not hinder the sale orother acts. When conducting transactions with cross-13

Performance-based compensation

48

(-)

(-)

Number of eligible
officers

shareholders, the Company will thoughtfully examine
the economic rationality of those transactions, just as
with those with other business partners.

Dialogues with stakeholders
The Company discloses the information on its management
strategies and finance/performance status, among othermatters, to shareholders, investors, and other stakeholders
through investor relations activities in an appropriate
and timely manner. In addition, the Company emphasizes
constructive dialogues with stakeholders including
shareholders and investors so as to deliver opinions, requests,
and other similar things obtained from such dialogues tothe Board of Directors for the improvement of corporate value.
The Company recognizes the importance of appropriate
collaboration with not only shareholders and investors but
also other stakeholders including patients, healthcare
professionals, business partners, local communities,
and employees. For creating corporate value, we arecommitted to disclosing information in an appropriate
and timely manner to all of our stakeholders in order tomaintain good and smooth relationships with them.

TOWA PHARMACEUTICAL Integrated Report 2021

34

Risk Management
Basic approach to risk
management
To ensure company-wide risk management,
the Company has formulated the “Basic Regulations
for Risk Management,” which shall be complied withby all the departments, officers, and employees of
the Towa Group. It is critical for the Group’s
continuation and growth to respond to the risks
surrounding the Group promptly and appropriately.
We aim to prevent risks as well as to minimize the lossof stakeholders’ profits and impacts on corporate
managers when a risk occurs. The Group’s risk
management is administered by the Risk Management
Committee, established under President andRepresentative Director, who is the chief risk officer.

Risk Management Committee
The Risk Management Committee consists of
20 members including the President andRepresentative Director, the Senior Managing Director,
Directors, Senior Operating Officers, Operating
Officers, and Division Managers. In addition,
the full-time Audit and Supervisory Committee
Member attends meetings of the committee as anobserver. The committee addresses the risks
surrounding the Group promptly and appropriately tominimize the loss of stakeholders’ interests andimpacts on corporate management when a risk occurs
while preventing risks.

Risk Information
Information security
To increase the Company’s trustworthinessand competitiveness, the Company has formulated
its information security regulations. The regulations
consist of basic rules for appropriate use, storage,
and operation of information assets that all
the officers and employees must comply with in
the course of their duties. Based on the regulations,the Company works to secure information security as
part of daily management activities, businesspromotion, and organizational operation.

Disaster countermeasures
Towa Group takes various measures to prepare for alarge-scale disaster.
Specifically, those measures include: (1) provisionof emergency supplies, (2) clarification of initial
responses and preparation of manuals, and (3)introduction of a safety verification system. In
addition, we hold twice-a-year meetings of the Risk
Management Committee to share information.

Towa Group mainly handles prescription products,
and among them, generics are our leading products.
A generic drug has the same active ingredients,
indications, dosage, and administration as a branded
drug that has been on the market after its efficacy
and safety have been confirmed for a certain periodof time. Thus, the Group faces specific risks as aControl in accordance with
the Pharmaceutical andMedical Device Act, etc.

Patent andre-examination periods

Re-evaluation based on
the Pharmaceutical andMedical Device Act

Adverse drug
reactionsFire evacuation drill

working hours and encouragement of holding online
in-house and external meetings), preventing
the spread of COVID-19 (e.g., review of meetingroom capacity, installation of acrylic resin panels,
and checking for individuals with fever using
thermography cameras), and decreasing
opportunities of exposure to COVID-19 (e.g.,
cancelation/postponement of business trips
and events in principle). The Group will continue to
implement appropriate countermeasures to ensurebusiness continuity.

TOWA PHARMACEUTICAL Integrated Report 2021

The active ingredients of branded drugs are usually protected by patent rights, and the period is 20 years fromthe date of application (the period may be extended for up to 5 years). Since generics are approved for marketing after
the expiration of the patent period, the extension of the patent period is expected to affect the Group’s launch of new
products (new generics).
To address these risks, the Group collects information on patents and re-examination periods as well as facilitatescollaboration among related departments. This helps us obtain approval for partial changes such as additional
indications as soon as possible after the patent on a branded drug expires. At the same time, the information collected
contributes to resolving discrepancies in indications by applying for partial change after the re-examination period.
Re-evaluation of drugs is a system in which the quality, efficacy, and safety of approved drugs are reviewed fromthe current academic standards. If the drug efficacy re-evaluation shows no usefulness, the product is recalled
and disposed of. To address the risk, the Group collects information on scientific and technological progress toappropriately evaluate drugs.

Generics are released after branded drugs have been used for many years. Their safety information has been
confirmed, and they have been re-examined. Therefore, the risk of serious adverse reactions is minimal.
However, if they occur, it may affect the Group’s financial condition and business performance. To address
the risk, the Group collects information on drugs including that on the occurrence of adverse drug reactions incompliance with each country’s regulations. This allows us to determine and conduct necessary measures
based on the results obtained through assessment and consideration.
Owing to the drastic reform of the drug price system, drug prices will be revised every year, beginning in 2021.
The Group’s financial condition and business performance could be affected if the medical insurance system isreviewed, the drug price system is significantly changed, or the medical cost containment policy is reinforced. To
address these risks, the Group aims to sell products at fair prices that match the value of the products whileworking to reduce cost by increasing production efficiency.

Patent litigation

Since our generic drugs sometimes use API that still has patent rights for their crystal form, formulations, use of
the drug, etc., a patent suit may be filed by a manufacturer of new drugs. To address these risks, the Group collects
information on patents and facilitates collaboration among related departments, including the development department.
This enables us to develop drug formulations that have not been covered by patents held by other companies.

Mark-to-market
valuation of derivatives

Stagnation and delay of
production owing todisasters and other causes

Global risks

35

The Group has been manufacturing and marketing prescription products in accordance with the Pharmaceuticaland Medical Device Act and related laws and regulations. Any violation of those laws and regulations may cause
administrative sanctions by the authorities concerned, which may affect the Group’s business activities. To addressrisks related to regulations, the Group collects information on the laws and regulations to conduct business inaccordance with them. In addition, we have developed a company-wide plan and system for compliance promotion.

Drug price system andmedical cost
containment policy

Response to the COVID-19 pandemic
The effects of the COVID-19 pandemic are minor
within our group. However, should the effects prolong
or worsen in the future, closure or shutdown of aparticular business facility of our group owing to acluster of COVID-19 cases identified therein, effectsof patients’ reluctance to visit hospitals and clinics onsales, and effects of the spread of COVID-19 outside
Japan on supply chains for raw materials and APIsmight spill over into production.
To address COVID-19, the group implements
countermeasures for the following: workstyle (e.g.,
encouragement of working at home and staggered

generic business in addition to risks as a holder ofmarketing authorization for drugs. After recognizingthese risks, the Group makes every effort to avoid
their occurrence and set up a system for unexpected
events. The Group has been striving to enhance
and accumulate corporate strength to endure
the impact of such risks.

The Group imports certain semi-finished and raw materials from overseas manufacturers in foreign currencies.
To avoid the risk of cost increase due to depreciation of yen and to provide a stable supply of our products, we
conduct long-term derivatives transactions. Such transactions are subject to mark-to-market valuation at
the time of financial closing, and valuation loss or gain may occur depending on the exchange rate andthe interest rate trend in Japan and the US. The Company estimates the future amount of import transactions
made in foreign currencies to conduct long-term derivatives transactions within the estimated range. This helps
us prevent derivatives transactions from being speculative.
The Group has production sites in Japan (Osaka, Okayama, Yamagata, Shiga, Hyogo, and Shizuoka Prefectures)and Spain (Province of Catalonia), and any of these production sites could be forced to cease business
operations owing to the occurrence of natural disasters or technical/regulatory issues to affect the stable supplyof products. Besides, if natural disasters and other causes force us to halt purchasing raw materials from somespecific supplier(s) and these halted raw materials are challenging to substitute, our business performance could
be affected. To mitigate these risks, the Group strives to organize a mutual backup system among our domestic
plants and promote multiple sourcing of APIs. Moreover, the Group possesses its own API manufacturing plant
to secure a stable supply of APIs.
We completed the acquisition of Pensa Investments, S.L. (current trade name, Towa Pharma International Holdings,
S.L.; hereinafter, “Towa HD”) in 2020. The Group’s financial status and business performance could be affected if
the acquisition of Towa HD fails to produce the expected effects owing to changes in business environments andbusiness operations of Towa HD, effects of local systems and regulations, likely delay in the progress of the integration
process between Towa HD and us, or events unrevealed during due diligence. To address these risks, the Group
strives to strengthen a global management structure through the integration process between Towa HD and us.

TOWA PHARMACEUTICAL Integrated Report 2021

36

Compliance

Message from the Outside Directors

Compliance policy

Compliance education

The Company is committed to ethical and law-abiding
corporate behavior in accordance with the “Towa Group
Code of Conduct.” We have established
the Compliance Committee to conduct measures toraise compliance awareness of the officers
and employees and provide them with training
and education for the correct understanding ofcompliance. Furthermore, we develop and appropriately
utilize a whistle-blowing system so as to promptly
detect and correct fraudulent acts of the Group’s
officers and employees.
The Internal Audit Office, which is under the directsupervision of the President and Representative
Director, conducts internal audits for all the departments
and reports the results directly to the top management.
In the case where the Internal Audit Office finds anythingthat needs improvements, it conducts a follow-up audit
to check how the improvements.

The Company conducts awareness-raising activities forthe officers and employees on a daily basis under
the leadership of the Compliance Committee. In addition,
we set specific periods to promote compliance to takevarious measures across the Group. Specifically, the top
management of the Company conveyed a message tothe officers and employees on the importance ofcompliance. We also conducted a survey to ask
the employees of the Group companies in Japan about
issues to be addressed regarding their duties
and compliance. This not only allowed each employee
the opportunity to consider compliance but also allowed
the Company to use their answers for measures to betaken in the future.
In addition, we conducted e-learning programs on
harassment and whistle-blowing for the officers
and employees. Furthermore, we developed aharassment prevention handbook and provided its copies
to the Group companies as a measure for the preventionof harassment to respond to the amendment of the Labor
Measures Comprehensive Promotion Act. For our
subsidiaries overseas, we formulated the code of
conduct to comply with laws and regulations, and shared
it with those subsidiaries’ officers and employees.
Other than the above, we have been delivering easy-tounderstand example cases through our groupnewsletters.

Compliance structure
Under the Group’s compliance policy, the officers
and employees shall promptly report to
the Compliance Committee when they find a problem
that may cause damage to the Group’s businessand financial condition. The Compliance Committee
is in charge of the whistle-blowing system. It regularly
reports the information from the officers andemployees of the Group collected throughthe system to the Board of Directors. The Audit
and Supervisory Committee shares information with
the Internal Audit Office and the Compliance
Committee on a regular basis. It has a right torequest report submission.

An attitude of “people are all that matters, let’s be the nailthat sticks up” as the starting point for corporate growth

Norikazu Eiki
Outside Director (Audit andSupervisory Committee
Member)Leveraging my viewpoint as a lawyer to offer opinions
concerning management issues

Kaori Oishi
Outside Director (Audit andSupervisory Committee
Member)Group newsletters: What and Why for Compliance
Board of Directors
Audit/appointment/removal

Whistle-blowing helpline

ReportingExecuting organization/meeting
Investigation/correction
Compliance Committee

Helpline

Compliance
Committee Office
Persons in charge of compliance at respective businesssites including plants, distribution centers, and laboratories

37

TOWA PHARMACEUTICAL Integrated Report 2021

The Company’s whistle-blowing system is used as ahelpline shared within the Group companies in Japan.
The Compliance Committee appropriately deals withthe problems notified through the helpline while
protecting whistle-blowers. Together withthe monitoring by the Internal Audit Office,the system has contributed to prompt detection
and correction of problems. We have also establishedand started operating whistle-blowing helplines in our
subsidiaries overseas.

I have been worked a lawyer for 20 years, dealing with corporate disputes, M&A, and businessrestructuring. This is my second year as Outside Director of the Company, and the recent
scandals in the generics industry have come unexpectedly, shaking confidence with respect toquality and stable product supply. The Company is thus facing a serious management
challenge, namely to maintain the trust of the market.
The Company shares information with Outside Directors in a timely and precise manner, with
the information covering the management issues it faces and its efforts to enhance corporate
value, such as its entry into new health-related businesses. I recognize that it is my role toprovide frank opinions from a legal and objective perspective based on the information sharedwith me.

Genuine smiles and people’s health throughhonest and sound management

Overview of the compliance structure

President and Representative Director

For a company to grow stably over the long term, it is necessary for its organizations to contain a diverse
group of people, rather than employees who are just cookie-cutter copies of one another. It has been six
years since I took up my post as Outside Director, and during that time I have put my management
experience at a pharmaceutical company to provide training for around 140 middle-managers, and during
the training sessions, I have exchanged various opinions with them.
One of the Company’s standout strengths is the high level of trust and solidarity that its employees feeltoward the Company and its management team. But on the flipside of that, I also feel that there aren’t
many people willing to be the “nail that sticks up” [from the Japanese proverb: “The nail that sticks up will
be hammered down.”]. In the face of upcoming major changes in the medical and pharmaceuticalindustries, it will be important for the Company to take on various challenges without fear of failure while
respecting the strengths it already possesses.
Through human resource development, I hope that I can continue to play a part in enabling the Company
to live up to its vision: We contribute to people’s health; We are dedicated to people’s genuine smiles.

Kenryo Goto
Outside Director (Audit andSupervisory Committee
Member)The concept of Towa Quality, namely to provide the world with products that rather than justmeeting the quality standards required by law, actually offer the levels of quality and added
value that are truly needed, and to keep updating the products so that they are the state of
the art for the era, is similar to the maxim that informed me during my days at an audit firm towhich I belonged: maintaining a sense of ethics that is a step higher than the rest of the world.
I am therefore familiar with this sort of serious culture.
Abiding by this concept is not an easy task in the generics industry, which is still waiting torecover its credibility after the quality problems, but one of the things that support this iscorporate governance. In accordance with our vision of supporting “genuine smiles” bycontributing to people’s health, I hope that with my perspective as an outsider, I can help
the Company ensure a stable supply of products that can be used with peace of mind not onlyin Japan but all over the world.

TOWA PHARMACEUTICAL Integrated Report 2021

38

Foundation Supporting Business:Society

Board Members
Basic approach

Toshio Shirakawa

To fulfill our responsibilities as a company providing
ethical drugs, the Company strives to provide
information to patients and healthcare professionals
in many different ways, which include providing
and collecting pharmaceutical information throughour medical representatives. We also focus on our
responsible business activities ranging from stablesupply to quality assurance.

Director (Full-time Audit andSupervisory Committee Member)

Itsuro Yoshida
President and Representative Director

May 1979
Joined the Company
October 1983 General Manager of Finance & Accounting Department
December 1983 Director / General Manager of Finance & Accounting Department
August 1986 Director / General Manager of General Affairs Department
April 1990
Director / General Manager of President Office
June 1990
Senior Managing Director / General Manager of President Office
June 1991
Senior Managing Director / Division Manager, Production Division /General Manager of President OfficeNovember 1991 Senior Managing Director / General Manager of President Office
June 1996
President and Representative Director (to present)
October 2003 Chairman and Representative Director of J-DOLPH Co., Ltd.
(currently J-DOLPH Pharmaceutical Co., Ltd.) (to present)
October 2010 Chairman and Representative Director of Daichi Kasei Co., Ltd.

Kazuhiko Konno
Senior Managing Director

November 1998 J oined the Company / Deputy General Manager of Quality
Assurance Department, Yamagata Plant, Production Division
April 2005
General Manager of Quality Assurance Department, Yamagata
Plant, Production Division
April 2007
General Manager of Quality Assurance Department,
Pharmacovigilance & Quality Assurance Division
October 2009 Plant Manager, Osaka Plant, Production Division
June 2013
Director / Deputy Division Manager, Production Division
April 2014
Director / Division Manager, Production Division
June 2017
Managing Director / Director in charge of Production Division,
Research & Development Division, Pharmaceutical Research &Technology Division and API Business Division
April 2019
Managing Director / Director in charge of Pharmacovigilance &Quality Assurance Division, Production Division andPharmaceutical Research & Technology Division
May 2019
Chairman and Representative Director of Greencaps
Pharmaceutical Co., Ltd. (to present)
June 2020
Senior Managing Director of the Company (to present)

Masao Tanaka

39

October 2006 Joined the Company / General Manager of Development Strategy Department,
Research & Development Division
April 2008 General Manager of Product Portfolio Management Department, Corporate
Planning Division
June 2015 Managing Director / Director in charge of Business Development Office andInternational Business Development Department / General Manager of ProductStrategy Management Department
January 2017 Chairman and Representative Director of Greencaps Pharmaceutical Co., Ltd.
April 2017 Managing Director / Director in charge of Product Strategy Division, International
Business Division and Development Planning Office of the Company
April 2019 Managing Director
June 2019 Director (Audit and Supervisory Committee Member) (to present)

Norikazu Eiki
Outside Director (Audit andSupervisory Committee Member)August 1979 Joined Ciba-Geigy Japan Limited
January 1994 Joined Bayer Yakuhin, Ltd.
March 1997 Director / Plant Manager of Shiga Plant, Bayer Yakuhin, Ltd.
July 2002
President and Representative Director, Bayer Yakuhin, Ltd.
January 2007 Chairman and Representative Director, Bayer Yakuhin, Ltd.
April 2010
Chairman and Director, Bayer Yakuhin, Ltd.
May 2014
O utside Director of AnGes MG, Inc. (currently AnGes, Inc.) (topresent)
April 2015
Director of the Board, FunPep Co., Ltd. (to present)
June 2015
Outside Director of the Company
April 2016
Outside Director of Solasia Pharma K.K. (to present)
June 2018
O utside Director of the Board, Gene Techno Science Co., Ltd.
(to present)
June 2019O utside Director (Audit and Supervisory Committee Member)of the Company (to present)

Kaori Oishi

Information Provision by
Medical Representatives
Our medical representatives, whose number isproudly reported to be the largest among
the domestic manufacturers of generics, work on
the provision, collection, and transmission ofpharmaceutical information. We are also enhancing
the network of medical representatives to be able torespond to various needs of diverse medical service
providers, including clinics, local flagship hospitals,
and health insurance pharmacies. Further, we provide
a qualification system for medical representatives torecognize and enhance their specialized capabilities
in cancer, immunology, CNS areas, etc., so that wecan provide information requiring more specialized
expertise.

Outside Director (Audit andSupervisory Committee Member)
October 2001 Registered as an attorney at law
October 2001 Joined Kitahama Law Office (currently Kitahama Partners)
January 2013 Partner of Kitahama Partners (to present)
June 2017
Outside Director of PALTAC CORPORATION (to present)
June 2020
O utside Director (Audit and Supervisory Committee Member)of the Company (to present)

Kenryo Goto

Directors

Outside Director (Audit andSupervisory Committee Member)

April 2009 Joined the Company / Deputy-General Manager, Internal Audit Office
April 2011 Manager of Internal Audit Office
October 2016 G eneral Manager of Public Relations and Investor Relations Office /General Manager of Human Resources Department
June 2017 Director / Division Manager, Administration Division
April 2019 Director / Director in charge of Administration Division
June 2020 Director (to present)
April 2021 Chairman and Representative Director of Protosera Inc. (to present)

September 1981 Joined Asahi & Co. (currently KPMG AZSA LLC)
March 1984
Registered as a certified public accountant
May 2005
Partner of KPMG AZSA & Co. (currently KPMG AZSA LLC)
July 2010
Board member, Head of Division 3, Osaka Office, KPMG AZSA LLC
July 2013
Senior Executive Board member of KPMG AZSA LLC
July 2015
Osaka Office Managing Partner of KPMG AZSA LLC
Representative of Kenryo Goto Certified Public Accountant Office (to present)
July 2020
June 2021
Outside Director (Audit and Supervisory Committee Member) of
the Company (to present)

TOWA PHARMACEUTICAL Integrated Report 2021

Responsible Business Activities

Information Provision by DI Center
To ensure expeditious and accurate information
provision, the Company integrated multiple contacts
into Drug Information (DI) Center of Drug Information
Department, and use the call-center system
connected to customer information. This allows us topromote optimal information provision activities forproper uses of generics. We also offer contact offices
to receive inquiries even at night or on holidays on a24-7 basis.
Customer Service is offered for patients andthe general public. Toll-free services are available forvarious pharmaceutical inquiries about combinationsof multiple medications, side-effects, etc.

Information Provision via Websites
We provide necessary information about our ethicaldrugs through the corporate site and the site for
medical professionals. The corporate site offers
information about generics and materials that can beused by parents trying to help children takemedication, as well as other useful tips. The site for
medical professionals provides product information,
governmental actions on medical practices,and materials that can be used for medical
instructions for patients.

Information Provision to Promote
the Correct Uses of Medicines
To promote the correct uses of medicines, we
provide various explanatory materials for patients,
e.g., about how to take medicines, and conduct
studies, e.g., on combinations of medicines andother food/beverages other than water to alleviate
the bitterness for family caregivers trying to help theirchildren or those they are caring for to takemedication. The materials and results of thesestudies are provided to patients and their family
members through medical institutions.
People can access information about medicines byscanning a QR code* printed
on a product package with
their smartphone or cell phone.
For formulations for children,
QR codes provide information
to parents about the taste of
medication and how to help
patients (their children) takemedication smoothly.
* QR code is a registered trademark of
DENSO WAVE INCORPORATED.

Booklet to provide information

TOWA PHARMACEUTICAL Integrated Report 2021

40

Responsible Business Activities

Stable Supply System
Stable supply is one of our important missions to beaccomplished as an ethical drug manufacturer. We
produce products in our three plants in Osaka,
Okayama, and Yamagata under a two-shift operation
system in case any plant shuts down due to a natural
disaster, etc. A backup system of the three plants isbeing constructed in preparation for an emergency in
any one plant, so that the other two plants can adopt
a three-shift system.

Quality Assurance System
Products dispatched from the plants are stored in
the East Japan Distribution Center (in Yamagata)and West Japan Distribution Center (in Okayama).
This enables us to deliver our products nationwide
from either of the distribution centers in case one ofwhich is shut down due to a natural disaster, etc. We
realize stable supply through the two distribution
centers in East and West Japan.

Strict quality control standards established by
the national government apply to all processes of
ethical drug manufacturing operations. In order to be atrustworthy company, we carry out company-wide
quality control initiatives ranging from product R&D,
manufacturing, marketing, and after-sale operations,and establish the quality assurance system required
for ethical drugs.
In the 5th Mid-term Business Plan, Policy 1 is“Enhancing generics business as a core.” Under
the policy, one of the key themes is further

strengthening the quality assurance system in order tobe a more trusted and needed company as acomprehensive generics manufacturer. Under
the quality assurance system, we not only comply with
relevant regulations including the Good Manufacturing
Practice (GMP) Ministerial Ordinance, but also strive toassure the quality and safety of pharmaceuticalproducts through introducing international standards
and establishing our original system and training
programs from the perspective of “minimizing humanerror,” one of the GMP three principles.

Towa Group’s Initiatives

Risks in API
Procurement

Recording of store-in/-out data with
Manufacturing Execution System (MES)

In-house manufacturing of APIs Reduction of the risk of stable supply due to external factors
by developing synthesis processes and manufacturing at Daichi
Kasei or partnering companies

Manufacturing Process A

Recording in manufacturing
instructions at each process

Quality Assurance Department(plants of Osaka, Okayama and Yamagata)

Process Control A
Manufacturing Process B

Audit system for manufacturing sites
Discontinuation of API shipment and manufacturing(Risks of environment pollution, natural disasters, infectious diseases, accidents, etc.)

GMP violations by API manufacturers(Differences of quality and manufacturing controls related to pharmaceutical regulations)Occurrences of mutagenic impurities(Conforming to ICH-M7 guideline)

Process Control B

 Audits in accordance with international standards as well as domestic ordinances Audits by technical experts (synthetic and physicochemical analyses)

Promotion of multiple sourcing of starting materials and intermediates

Acceptance Maintaining a multiple sourcing rate of 60% or more for stablesupply even in case of emergency
 Selection of suppliers avoiding duplication of starting materials
and intermediate suppliers

Manufacturing

Testing ofIntermediate
products

Testing offinishedproducts

Product
shipment
decisionby plants

Product
shipment
decisionby HQ QA Dept

Dealing with mutagenic impurities
Procurement of starting materials and intermediates(Overlapping of API upstream suppliers) Taking appropriate measures with highly accurate measurement
and identification of generation mechanisms
 Forecast of risks based on the latest knowledge
Confirmation of compliance withagreements and quality standards

Management of analysis data with Laboratory
Information Management System (LIMS)

Check of records and data forerrors or mistakes

Pharmacovigilance
and Quality Assurance Division

Production System
We currently have a production system capable ofannual generics production of 11.5 billion tablets* atthe three plants. To respond to a further increase indemand, we plan to increase production volume to
14.0 billion tablets by the end of FY2022, build the
3rd solid formulation building in Yamagata Plant by
the end of FY2023, and achieve the production
capacity of 17.5 billion tablets from FY2024 onward.
To ensure stable product supply, production of oral
dosage forms is dispersed to the three plants; andthe production of injections is integrated into
Yamagata Plant built with the seismically isolated
structures to minimize natural disaster risks. The
three plants take pride in the advanced facilities toensure high quality and stable supplies, supporting
our confidence in the future.

Osaka Plant

Okayama Plant

Yamagata Plant

Yamagata Plant

20.0

Yamagata Plant

17.5

Capacity expansion at 2nd solid
formulation building

15.0

14.0
11.5

GMP Three Principles

Construction of 3rd solid formulationbuilding and 2nd sterile formulationbuilding (currently planned)(Unit: billion Tab/Cap)

3.5

12.0
6.5

6.5

5.0

5.0

5.0

2.5

2.5

2.5

2.5

FY2020

FY2021

FY2022

FY2023

10.0

4.0

4.5

5.0

5.0

0

Targeting production capacity of 17.5 billion tablets/capsules per year by the end of FY2023

Pharmaceuticals production is based on Good Manufacturing Practice(GMP), the standards for manufacturing control and quality control for
drugs laid down by the nation.
The following three principles are stipulated in the GMP:
(1) minimizing human error,(2) preventing contamination and quality degradation of medicinal
products, and(3) establishing high-degree system for quality assurance.
The Company has put in place procedures compliant with the GMP
three principles in all of our plants in Yamagata, Osaka, and Okayama,and strives to manufacture reliable-quality pharmaceuticals always
required at a higher level.

Minimizehuman error

GMP
three
principles
Prevent contamination
Establish
and quality degradation ofhigh-degree
medicinal products
system for quality
assurance*Production capacity of tablets and capsules

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TOWA PHARMACEUTICAL Integrated Report 2021

TOWA PHARMACEUTICAL Integrated Report 2021

42

Making job satisfaction and fostering talented human resources

Job satisfaction for each employee
motivated by individual talent improvement
and career enrichment

Enrichment ofcareer paths

Enhancement ofCorporate Fundamentals
Job satisfaction for strengthening
corporate fundamentals

Growth corresponding to changes
through employee’s growth and resulting
strength of corporate fundamentals

Job satisfaction
Growth ofemployees

Respect for diversity in work
styles and motivation foreach and every employee

Continuation of
Towa Spirits
Towa Group exists
and prospers forever as it isFostering of talented
human resources

Special attachment
to making things

Encouraging employees togrow as important assets
for the company

Medical Representatives

Health and Productivity Management

The Company places priority on developing medical
representatives (MRs) and strengthening theirorganization, and strives to foster talented humanresources. In accordance with the MR Education
Training Guidelines, we develop our original
education programs and provide ongoing training,which covers expert knowledge about products, highethical standards required for MRs handling liferelated products, and skills in explaining products
and communication. In this way, we aim to develop
highly qualified medical representatives who can gain
the trust of healthcare professionals.

We promote health and productivity management and havean organization responsible for company-wide safety
and health management. We perform various activities forcreating a worker-friendly environment, promoting
employees’ mental health, and enhancing employees’ health.
In March 2021, we were recognized as one of theCertified Health and Productivity Management
Outstanding Organizations for four consecutive years. We
will continue to perform various activities for promoting
employees’ and their family members’ health.

Continuation of Towa spirits by passing
down its commitment and desire to
make products to its employees

Career Development Support
Under the belief that talented human resources are
the foundation of a trusted company, we work to makejob satisfaction, foster talented human resources,
and strengthen our organization. Accordingly, one ofthe policies in the 5th Mid-term Business Plan is“Making Job Satisfaction and Fostering Talented
Human Resources.” To this end, we started “Towawork style reforms” in October 2020.
As one of the work style reforms, we put more
effort into helping each employee develop theircareer path. Starting from April 2021, the Human

Resources Division staff have career development
meetings with employees to enhance more
personalized support. Going forward, we willencourage employees to understand the importanceand necessity of developing their career paths
and support them in developing their mid- to longterm career vision. To help employees achieve theircareer visions, we will aim to become a company thatencourages employees to grow in a proactive andplanned manner.

Our Commitments (T-SMILE)
We have established a new course of action named T-SMILE. This is ourphilosophy created when we marked the 70th anniversary of our foundation toaccommodate our growth and increasing employees and further disseminate
our vision to employees.
T-SMILE is an acronym of six words: Truthful that means sincerity, honesty
and fairness; Speed that represents swift decision-making, action
and information sharing; Mission that expresses missions and passion to beof service to help people maintain their good health in communities aroundthe world; Idea that represents creativity and imagination to challenge forunprecedented transformation; Linkage that gives the impressions ofconnections between people and information, coexistence, and co-prosperity;and Excellence that represents the mind to choose the most appropriatetechnologies that fit with the times and highest quality. These words serve asa course of action and criteria based on which employees help realize
the Group’s vision “We contribute to people’s health” and “We are dedicatedto people’s genuine smiles” through corporate activities.

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TOWA PHARMACEUTICAL Integrated Report 2021

Our new
commitmentsfor people’s
genuine smiles

Original Qualification Systems
From the perspective of ensuring reliable quality
and safety, we develop employees with highawareness through our educational training programs
and original qualification system. Specific examples
include an MR qualification specialized in cancer, a
GMP auditor certification, and an expert certification
system. The expert certification system is a system
whereby we certify our employees who have a higher
degree of technical skills and greater knowledge inmanufacturing, packaging, testing, and quality
assurance units. By promoting these certification
systems, we help employees in each area develop
into specialists in manufacturing control and quality
control. Meanwhile, we aim to develop employees
who are highly aware of ensuring quality and safety.

Our Efforts for Diverse Work Styles
We perform various activities to help employees who raise
their children or take care of their family members in need ofnursing care. In 2010, we were awarded the next-generation
certification mark called Kurumin. The logo features aswaddled baby. The Ministry of Health, Labour and Welfare
grants the certification logo if it certifies companies aschildrearing-friendly businesses.
We have various parental and nursing care systems for our
employees. For example, they can take parental leave until
their children turn three years old for the maximum length,
they can extend using the shorter working hour system forparenting until their children finish the sixth grade atelementary school, and we provide family support leave towhich employees are entitled when they need to take care of
their sick family members requiring nursing care.
TOPICS

I was able to take satisfying
parental leave thanks tocooperation by people
around me
Shuhei Yamamoto
Deputy General Manager, Purchasing
Planning Department, Purchasing Division

When my wife gave birth to our third child, I took parental
leave of four weeks to help reduce my wife’s burden
because our first and second children are twins still at age offour. I started consulting with my boss and co-workers
and made preparations four months before taking parental
leave. My boss, team members and other employees aroundme were cooperative, so I smoothly handed over my work.
During parental leave, I struggled with raising our children at
first, but when I got used to it, I was able to do it naturally.
I feel that it was worth taking parental leave because during
the four-week period, I was given an irreplaceable
opportunity of spending time with our newborn and I wasable to support my wife having a hard time after childbirth.
I hope that more employees are aware of parental leaveand that childrearing employees can have more options.

TOWA PHARMACEUTICAL Integrated Report 2021

44

Foundation Supporting Business:

Environment

Social Contribution Activities
Basic approach

Company-sponsored
Daycare Centers

We act based on the principles in “The Charter ofCorporate Behaviors in Towa Group” with high ethicalstandards and social good sense to promote proper
corporate activities enabling us to gain trustand support from society. In our action, we strive to
reduce global environmental load as part of oursocial responsibility as a good corporate citizen.
Concretely, we are dedicated not only to proper
management of chemical substances and preventionof pollution, but also to actions for alleviating
environmental concerns through plant drainage
and emission systems and taking energy-savingand decarbonization measures through effective usesof mega solar systems. Furthermore, we are
aggressively working to achieve an eco-friendly
manufacturing method of APIs.

High School Student Business
ContestWe held a “High School Student Business Contest for
the Future and People’s Health” for the second time in
FY2020. As a part of our efforts to widely disseminate
the Group’s vision “We contribute to people’s health”
and contribute to a wide variety of health-relatedindustries, the contest is aimed at seeking fresh ideas
from high school
students who willlead the future ofJapan and creatinga social contribution
opportunity forthem.

Company-sponsored daycare centers are childcare
facilities established by companies to provide theiremployees with flexible childcare services according to
the employees’ different ways of working. We
established our company-sponsored daycare centersnear Okayama and Yamagata Plants in 2018 to realize awork environment where childrearing employees canwork for the Company without any concerns and tocontribute to local communities by reducing the numberof children on waiting lists at daycare centers. We also
conclude joint use contracts for company-sponsored
daycare centers of other companies to provide
additional options. In this way, we are committed tocreating an environment where employees find it easier
to be reinstated after parental leave.

On-demand Lectures

Introduction of Music Therapy
VideosIn January 2021, we released music therapy videos
titled “Music and Mind—For Everyone’s Smiles—” on
our homepage. Music therapy is psychotherapy
using the nature of music and one of the nonpharmacological therapies for diseases including
developmental disabilities, dementia, and mental
illness. We released
the videos as partof our efforts toprovide useful
information to help
people prevent
disease andmaintain their good
health.

Reducing CO2 through warm
water generation by using waste
heat from large refrigerators
Dehumidification with cold water is essential forcontrolling air conditions in clean rooms. Yamagata
Plant has introduced a double-bundled centrifugal
refrigerator, a type of large chiller to produce cold
water. This equipment can generate warm water bycollecting and using heat that is normally discarded.
This enables us to reduce CO2 emissions by about
24% compared to the conventional method ofgenerating warm water using steam from boilers.

Photovoltaic power generation facilities in the West Japan Distribution Center

Realizing an eco-friendly
manufacturing method of APIs

Well-care Exercise Programs

We deliver on-demand lectures using our technicalskills and content for children through an event called“After-school Educational Program for Kids” held in
elementary school districts of Osaka Prefecture so thatchildren can have an enriching learning experience. We
so far delivered lectures including the one themed“Let’s do an experiment and explore the secrets ofmedicine! —Generics are full of ingenious ideas—”

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TOWA PHARMACEUTICAL Integrated Report 2021

We released a website called “Well-care Exercise
Programs” on our homepage to introduce exercise
programs, which are designed to support people’s
mental health. The website introduces several exercise
programs with different intensity levels developed
under the supervision of the Japanese Association ofSports Psychiatrywith the slogan“Anybody can easily
enjoy at anytime
and anywhere,”
allowing people to
do exercise
according to their
physical strength.

on its premises. Together, the Center is now able togenerate about 3.16 million kilowatts of electricity
annually. This is about 1,000 households worth ofelectricity demand.

Double-bundled centrifugal refrigerator

Installing photovoltaic power
generation facilities covering
about 1,000 households
West Japan Distribution Center in Okayama
Prefecture has installed photovoltaic power
generation facilities on the roofs of the facilities
and produced electricity since 2012. In 2014, theCenter added another photovoltaic installation withgenerating capacity of up to 1.5 MW using idle land

New Energy and Industrial Technology Development
Organization (NEDO) selected our initiative tomanufacture APIs eco-friendly as a publicly solicited
subcontractor for the Development of Continuous
Production and Process Technologies of Fine
Chemicals. As an eco-friendly manufacturingmethod, this is aiming to develop the flow precisionsynthesis for producing fine chemicals as part of
NEDO’s Feasibility Study Program on Energy
and New Environmental Technology. We are pursuingan eco-friendly, green and sustainable chemistry by
replacing the batch method generating large
quantities of waste and CO2 emissions withthe manufacturing process with the continuous flow
method using energy-saving catalytic reactions withlow waste emissions as the key.

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