Philosophy

INDEX

Our History and Today
1 Philosophy
2 Contents and Editorial Policy
3 Social Issues Addressed by Towa Group 1
Helping Cut Medical Costs through Generics
5 Social Issues Addressed by Towa Group 2
Helping Extend Healthy Life Expectancy and Prevent Diseases
7 Our History
9 Financial and Non-Financial Highlights

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

Towa Group’s Value Creation

Genuine smiles

11 Top Message
17 Towa Group’s Strength
19 Feature Topic 1: Fulfilling Our Social Mission of Stably
Supplying Generics through Continuous
Production Capacity Expansion
21 Feature Topic 2: Making Job Satisfaction by Strengthening
Human Capital Management
22 Feature Topic 3: Working on Various Issues Related to the
Global Environment and Occupational
Health and Safety
23 Our Value Creation Process
25 External Environment Surrounding Towa Group
26 Towa Group’s Capital
27 Mid-term Business Plan
32 Towa Group’s Target Business

People’s healthFoundation Supporting Business
33
33
36
42
46
46
48
49
50

Supporting 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.

Towa Group’s Sustainability
Environment
Society
GovernanceRisk Management
Risk Information
Compliance
Message from the Outside Directors
Board Members

Financial and Corporate Data
51 11-Year Financial Summary
53 Management Discussion and Analysis of Financial
Position, Operating Results, and Cash Flows
55 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. In this issue, feature topics cover the Group’s initiatives to stably
supply generics, strengthen human capital management, and work on the global environment and occupational healthand safety. In addition, the sections titled “Our Value Creation Process” and “Message from the President” outline ourvalue creation story and 5th Mid-term Business Plan 2021–2023 PROACTIVE II. We strive to improve the content of ourreport 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]

FY2022 (From April 1, 2022 to March 31, 2023)
Note: The financial information is as of March 31, 2023. The report also covers some initiatives that were taken before April 1, 2022 or after March 31, 2023.

[Guidelines for Reference][Forward-looking Statements]

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TOWA PHARMACEUTICAL Integrated Report 2023

IFRS Foundation’s International Integrated Reporting Framework; and the Japanese Ministry of Economy, Trade andIndustry’s Guidance for Collaborative Value Creation 2.0.
In this report, statements other than historical facts are forward-looking statements that reflect our plans andexpectations. Because these statements contain risks and uncertainties, actual results and performance may differ fromthe expectations expressed herein.

TOWA PHARMACEUTICAL Integrated Report 2023

2Social Issues Addressedby Towa Group1

Helping Cut Medical Costs through Generics
Manufacturing pharmaceutical products that satisfy patients’ needs
We have the lineup consisting of more than 750
products to cover various therapeutic areas. Desiring to
be of service to as many patients as possible, we strive
to provide value-added generics through cumulative
improvements by responding to and satisfying requests
voiced by medical professionals. As part of such efforts,
we have developed better dosage forms and tastes sothat drugs can be easily taken by pediatric and elderly
patients, and enhanced visibility and stability against
light, temperature, and humidity so that drugs can beeasily handled at hospitals and pharmacies. We thus
exercise our ingenuity in various ways and work
constantly toward the manufacturing of better products.

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

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

1985 1990 1995 2000 2005 2010 2015 2025

(Forecast)

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”

Products
More than

770

Choosing generics cuts medical costs
Choosing generics enables us to cut the burden of
medical costs (drug costs). This will reduce both theburden of medical expenses on individuals andcontributions by the Japanese government andhealth insurance associations. For instance, we cansave approximately JPY 1.7 trillion in the annual costof drugs just by replacing as many drugs as possible
with generics.
*Page 7 in the “Outline of Revisions to the Drug Price Standard in FY2023” 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

R&D expenditure

Production
volumeR&D
expenditure129

billion tablets

JPY(up 14.2% year on year)
FY2022

14.1
billionFY2022

Capitalinvestment
JPY

14.8
billionFY2022

Towa Group’s technology innovations

R&D expenditure

Comparison of drug prices (conceptual chart)

RACTAB®
Technology

FINEST-Pow®
FINEST-Gran®
FINEST-Core®

ARTICRE®
Technology

These coating technologies add
various functions, such as
bitterness suppression andcontrolled release, to functional
particles. They effectively cover
the bitterness, making drugs less
bitter and easier to take. We
have developed three types of
coating technologies according
to the functions we intend toadd, such as API bitterness
suppression, controlled release,enteric coating, and improved
dispersibility.

ARTICRE is a technology that
improves drugs’ solubility bydispersing systematicallyarranged API atoms or disrupting
their order. When an API with low
stability or solubility is dispersed
in a water-soluble polymer thatserves as a carrier, the carrier
captures the API, improving thestability. In addition, the state of
crystallization of the API changes
or the crystals become
dispersed, which facilitatesdisintegration.

To restore confidence in generics
We consider it highly deplorable that somepharmaceutical companies significantly undermined
confidence in pharmaceutical products, especiallygenerics, by engaging in misconduct. Being acompany that prioritizes confidence above all, we aretaking the series of events seriously.
As a member of the generics industry, we are firmly
determined to ensure thorough manufacturingcontrol, quality control, compliance, and governance,in order to restore confidence in generics. We will
make sure to successfully restore confidence, andachieve market distribution of generics that all
patients can feel comfortable using.

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TOWA PHARMACEUTICAL Integrated Report 2023

I.	Strengthen compliance,
governance, and risk management
II.	Strengthen the system that gives
utmost priority to quality
III.	Take action to ensure stablesupplies
IV.	Provide and disclose information
actively
V.	Enhance association activities,
cooperate with the government,
etc., and take other measures

RACTAB is our proprietary technology
for manufacturing orally disintegrating(OD) tablets that can be taken withoutwater. The technology pursues thecoexistence of two contradictory
properties: easy disintegration andsufficient hardness. We developed thistechnology in the hope of deliveringeasy-to-take tablets to patients who
have difficulty swallowing due to oldage, etc. or limit water intake, as wellas producing drugs that can be taken
without water whenever necessary,
including when patients are not at
home.

TOWA PHARMACEUTICAL Integrated Report 2023

4Social Issues Addressedby Towa Group2

Helping Extend Healthy Life Expectancy
and Prevent Diseases

Products and services of health-related businesses

Extension of healthy life expectancy and disease prevention
Extending the healthy life expectancy toward the eraof 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 a child 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 and active are key toprolonging the healthy life expectancy. Moreover,extending the healthy life expectancy is essentialfrom the viewpoint of curbing medical costs.

Healthcare Passport

Hana Support

Information sharing for coordinated regional medical careaims to provide appropriate medical care and promotehealth through information sharing on medical care andhealth between medical professionals and ordinary citizens
and their families. Our Healthcare Passport supports theinformation sharing in a safe manner.

Hana Support is a service that assists users
with taking their medicines. It records andmanages medication data based on theinformation of medicines registered with theapp. It also has a function that allows patients
to communicate with their usual pharmacies.

Cognitive Function Self Checker

comuoonThe service checks users’ cognitive functions
by analyzing eye movements and answers toquestions while they are looking at images invirtual reality.

Interactive support device comuoon is a systemborn from a concept that is the reverse of thenotion that people who are hard of hearing shouldfind ways to hear better. Instead, it is about
making the person speaking more easily heard.

Muscle Suit

Sabrosa Curry

Muscle Suit eases the burden on the lower
back for frontline workers, as well as assists
people with small physical work in daily life. It isan assisting suit developed to realize a healthy
lifestyle.

Sabrosa Curry contains Maekawajiro
persimmon, a specialty of Taki Town, Mie
Prefecture, which adds a touch of mildness andsweetness to the spicy curry. The product is low
in sodium and rich in DHA, EPA, and protein.

Providing optimal solutions to extend healthy life expectancy
We aim to contribute to the extension of healthy life
expectancy as a comprehensive healthcare company
for the era of the 100-year life. We will not only
manufacture and sell generics but provide optimal
solutions through all types of products and services
related to healthcare.

Furthermore, we have classified the state of health into
four categories: “good health,” “pre-symptomatic disease,”“disease,” and “rehabilitation and nursing care.” We seek
to resolve challenges for each category, and provide a wide
range of products and services by combining the four
categories with the nine focus areas we are committed to.

Knowledge

ExerciseGood healthPre-symptomatic
disease
DiseaseRehabilitation andnursing care

Measurement

Sleep

Towa Group’s
products
and services
Treatment
supportNursing careproducts
and services

Rehabilitation andnursing care
DiseasePre-symptomatic
diseaseCommunicationand monitoring

Good health
Diet

Comfort, learning, and leisure5

TOWA PHARMACEUTICAL Integrated Report 2023

TOWA PHARMACEUTICAL Integrated Report 2023

6

Our History

Production capacity

14.0

Consolidated Sales
for FY2022

billion tablets

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.

History of Towa

Overseas sales

2010

200.0

Production capacity

12.0

billion tablets

Acquired Daichi Kasei Co., Ltd.
as a subsidiary

180.0

Acquired Sunsho PharmaceuticalCo., Ltd. as a subsidiary*The years shown are fiscal years.

1996

Established2000

Launched value-added
products

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

2022

Production capacity

Production capacity

billion tablets

billion tablets

11.0

160.0

11.5

140.0

Production system

14.0

Established Greencaps
Pharmaceutical Co., Ltd.

billion tablets
Production capacity

1957

1965

208.8
billion

2021

2016
1951

JPY

Itsuro YOSHIDA was appointed
President and Representative Director

Started selling OTC drugs

2003

2018

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

1997

Shifted to manufacturing
and selling ethical drugs
from OTC drugs

2004

2019

Established RACTABTechnology

10.5

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

120.0

billion tablets

Production capacity

100.0

8.5

billion tablets

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

80.0

Production capacity

Constructed new corporate headquarters

7.5

billion tablets

2004

1998

60.0

Listed on the first section of
the Tokyo Stock Exchange

40.0
Constructed Osaka Research Center[Trends in Consolidated Sales]

1951 1970

20.0

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

2022

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

1977

Constructed
Osaka Plant

1981

2007

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

60% or moreby the end of FY2018
Constructed New Osaka Plant(current Osaka Plant)

2005

Constructed Osaka 2nd Plant

2015

2013

30% or more
by FY2012

2013

2017

Actual volume share
in FY2022
80.7%

80% or moreby September 2020

Expanded the warehouse andtesting area in the Osaka Plant(Production capacity: 2.5 billion tablets)

Production
systemOkayama

Yamagata

1983

ConstructedOkayama Plant 1995

Constructed
the packaging 1996
building

1998

Expanded
the formulationbuilding

Purchased Mect Co., Ltd.’s
Tohoku Plant

2012

2008

Started the plan
to construct
Yamagata Plant

2012

2016

Constructed Yamagata
Plant and East Japan
Distribution Center

2017

Expanded the 2nd solid
formulation building

Towa Direct Sales System

2017(Production capacity: 2.5 billion
tablets » 3.5 billion tablets)

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

Constructed (relocated) East Japan Distribution Center
Renovated the solid formulation building andconstructed the 2nd solid formulation building(Production capacity:
2.5 billion tablets)

2011

Sales system

Constructed the 2nd solid
formulation building in WestJapan Distribution Center

Rebuilt the solid formulation building (Production
capacity: 2.5 billion tablets » 3.0 billion tablets)

2018~2022
The 2nd solid formulation building was
sequentially equipped with facilities.
(Production capacity: 3.0 billion tablets» 6.5 billion tablets)

Sales offices (as of October 2023): 71 offices
Agents (as of October 2023): 31 agents at 62 sites

Shifted to Towa Sales System

Started collaboration with two wide-area wholesalers in 2017
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8

Financial Highlights

Net sales
million

208,859(JPY million)
200,000

154,900

100,000

Profit attributable toowners of parent

Operating profit

208,859

JPY

Non-Financial Highlights

JPY(JPY million)
20,000165,615

5,514

19,923

million

JPY(JPY million)
16,00019,205

105,104 110,384

10,0002,201

14,503

Water usage77,609million(t-CO 2)80,00015,914

13,475

15,968 16,143

CO2 emissions

743,944

t-CO2

77,609Energy usage

1.0

(m 3)
800,000

0.5

400,000 382,207 382,943 391,644

743,944 10

13,95840,0008,000

38,450 38,718 39,082 39,417
0.375

0.360

0.339

3.732

0.320

3.557

(kl)
35,00032,86019,108 20,203
17,448 18,361

428,123
5

0.372

5,514

32,860

m3

3.472

3.395

17,500

0.170

3.562

0.171

0.166

kl

0.4

0.2

0.157

0.164

2,201
0

2019

2020

2021

2022

2023

0

2019

2021

2020

2022

(FYE March)

Net assets
JPY

Total assets

136,894(JPY million)
150,000

JPY

million132,169 136,894
104,665

2023

2019

2020

2021

2022

1.6

million371,347

2020

2021

2022

2023

12.6

2019

2021

0

0

2019

2020

2021

2022

2023

2019

2020

2021

2022

2023
(FYE March)(FYE March)

Ratio of women in
new graduate hires

5,977

12.8

t

0.10

2020

2021

2022

1,887

0.016
0

2023

2019

1,937

0.018

2020

10.6

12.8

11.1

JPY

Net assets per share

2022

10

30

2023

0

44.72

JPY
(JPY)
3,000

(JPY)
400

294.74 283.62
273.852,685.18 2,781.17

323.36

(%)
140

2021

(%)
100

2022

2023
(FYE March)

0

53.7

2020

2021

2022

2023
(FYE March)

0

61.8

64.4

2020

2021

2022

0

2023

2019

2020

2022

- Towa (non-consolidated)

Employee turnover rate
within the first three years

2.95

%

Medical expense reduced%

JPY

211,265(JPY million)
300,000

13.1

14.9

15.5

2019

2020

2021

1.04
2023

0

2019

2020

2021

2022

2023
(FYE March)(FYE March)- Towa (non-consolidated)

0

2019

211,265

206,356

150,000

8.62

18.6

2022

million

261,010

185,580
102023(FYE March)- Towa (non-consolidated)- As of April 1 for 2019 to 2021

66.3

50

70

2019

2019

(%)
20

63.8

1,864.92

44.72
2020

2021

38.50

22.41

228,434

1,500

2019

134.2

2,369.21
2,126.72

200

0

66.3

%

38.06

(FYE March)

Ratio of paid leave taken

134.2

2,781.17

0(FYE March)(FYE March)

Dividend payout ratio

37.38
31.25

0.018

Waste generated
Waste generation intensity- Three Towa plants for 2019 to 2022; Group companies in Japan for 2023
- Per sales of JPY 1 million (non-consolidated)

Earnings per share

%

2,221

0.017

2021

0

(%)
60

13.5
0.05

38.50

%

(%)
20

5,977

12.8
4,000

2019

2023

Ratio of women in
management positions

1.6
0

2022

Waste generated

1,621
0

2021

(FYE March)

0.040

0

2020

2019

Energy usage
Energy use intensity- Three Towa plants for 2019 to 2022
- Per sales of JPY 1 million (non-consolidated)

%

10

2023

2022

(FYE March)

10.3

200,000 188,803

2020

Water usage
Water use intensity- Three Towa plants for 2019 to 2022
- Per sales of JPY 1 million (non-consolidated)

14.8

245,668

0CO2 emissions
CO2 emissions intensity- Three Towa plants for 2019 to 2022
- Per sales of JPY 1 million (non-consolidated)

(t)
8,000

15.7

0

(FYE March)(%)
20

332,097230,0162019(FYE March)

371,347(JPY million)
400,000

91,771

0

2023

ROE

116,599

75,0000(FYE March)

2020

2.80

2.55

2021

2022

2.95

2023

0

2019

2020

2021

- Towa (non-consolidated), new graduates only

2022

2023
(FYE March)(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, 2019.
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 from January 1, 2022–March 31, 2023.
During the fiscal year ended March 31, 2023, the Company finalized provisional accounting treatments for the business combination. Accordingly, the figures for the fiscal year ended March 31, 2022 reflect
contents of the finalization of provisional accounting treatments.

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