11-Year Financial Summary
2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021 (FYE March)

Net sales (JPY million)

46,14548,71955,241

61,351

71,47082,11584,94993,430105,104

110,384

154,900

Operating profit (JPY million)

9,654

9,107

7,723

7,706

11,105

11,134

6,869

11,643

15,96816,14319,923

Ordinary profit (JPY million)

9,396

9,841

9,544

8,834

15,437

10,157

7,417

11,717

18,86520,99018,677

Profit attributable to owners of parent (JPY million)

5,846

5,737

6,201

5,992

11,118

7,684

5,576

6,49513,475

14,503

13,958Comprehensive income (JPY million)

5,791

5,745

6,348

5,999

11,175

7,313

5,858

6,533

13,40914,948

14,469Net assets (JPY million)

46,66450,49455,61060,14770,04870,60574,94579,92091,771

104,665

116,599

Total assets (JPY million)

72,964

81,24489,705

103,318

121,187

156,851

165,247

177,181

188,803

230,016

245,668

Net assets per share (JPY)

906.08990.36

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

Earnings per share (JPY)113.53111.49121.62117.54218.07154.19113.32132.00273.85294.74283.62-----436.29314.23122.03253.32272.62271.93Equity ratio (%)

64.0

62.2

62.0

58.2

57.8

45.0

45.4

45.1

48.6

45.5

47.5

ROE (Return on equity) (%)

13.2

11.8

11.7

10.4

17.1

10.9

7.7

8.4

15.7

14.8

12.6

Price-earnings ratio (%)

12.35

12.26

13.68

12.63

10.50

9.98

16.56

16.79

10.64

7.69

8.61

Cash flows from operating activities (JPY million)

5,739

3,379

8,6458,144

8,037

3,732

10,195

19,23019,002

19,16412,008Cash flows from investing activities (JPY million)(7,854)(8,482)(11,298)(11,300)(8,230)(19,032)(22,206)(20,093)(3,994)(39,541)(9,100)Cash flows from financing activities (JPY million)

4,220

879

2,793

3,529

238

27,970

(92)

4,670

(809)

11,748184

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

8,031

3,798

3,985

4,675

5,208

18,526

7,112

11,511

26,652

18,713

22,915

Number of employees

1,454

1,567

1,696

1,879

2,060

2,203

2,408

2,449

2,472

3,325

3,456

R&D expenditure (JPY million)

3,260

4,076

4,478

5,296

6,144

8,924

9,352

7,725

7,916

8,566

10,642

Capital investment (JPY million)

9,234

11,251

7,855

9,727

13,816

15,79225,026

12,166

6,011

6,236

10,353

Depreciation (JPY million)

1,873

2,637

4,909

5,407

5,724

7,329

7,980

8,173

8,340

8,285

9,674

Dividend per share (JPY)

65.0

75.0

75.0

75.0

95.0

95.0

95.0

95.0

107.5

44.0

44.0

Dividend payout ratio (%)

19.1

22.4

20.6

21.3

14.5

20.5

27.9

24.0

13.1

14.9

15.5

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 the said stock split was conducted at the beginning of the fiscal year ended March 31, 2011.

47

TOWA PHARMACEUTICAL Integrated Report 2021

TOWA PHARMACEUTICAL Integrated Report 2021

48

Management Discussion and Analysis of FinancialPosition, Operating Results, and Cash FlowsThe details of the financial reports are excerpts from Annual Securities Report (from April 1, 2020 to March 31, 2021).

Overview of Performance[1] Business environment
In the consolidated fiscal year ended March 31, 2021,
the Japanese economy remained in a severe situation due
to the COVID-19 pandemic. After lifting the state ofemergency in May last year, the level of social andeconomic activities was gradually raised. Under suchcircumstances, we saw signs of a recovery from theextremely difficult situation. However, the outlook forthe situation remains uncertain, as the number of cases of
the COVID-19 has been increasing again, and some areas
have reinstated the state of emergency. During the period,starting vaccination brought recovery from the economic
slowdown caused by the spread of the COVID-19 aroundthe world and the blockade of cities. However, risks such as
the future resurgence of infection remain.
In the generics industry, the Cabinet decided the “Basic
Policy on Economic and Fiscal Management and Reform
2017” in June 2017. It stated that the volume share ofgenerics would reach 80% by September 2020, and that
the Cabinet would consider further measures to promote
the use of generics to achieve this target as soon aspossible. As a result of this decision, the Japanese
government has implemented various measures since
the revision of medical fees in April 2018. Furthermore, inrevising medical fees in April 2020, the government decided“Further Promotion of Generic Medicine and Biosimilars
Use” policy, and generics have become more popular.
Consequently, the volume share in December 2020 reached79.4%, which almost achieved the target (according tothe survey by Japan Generic Medicines Association inOctober-December 2020).
On the other hand, the government revised drug prices in
October 2019 and April 2020. Also, it revised them in April
2021 based on the “Basic Policy on Economic and Fiscal
Management and Reform 2020” approved by the Cabinet in
July 2020. As described above, the government will revise
the drug prices every year, beginning in 2021.
The government decided a policy to revise the drug prices inintermediate years in addition to the regular revisions once
every two years. Therefore, we expect that extremely toughconditions for the pharmaceutical industry will continue.
We announced the 4th Mid-term Business Plan 20182020 PROACTIVE in May 2018 against this backdrop ofsuch dramatic changes in the environment surrounding
the industry. Based on the plan, we took on challenges suchas entering new markets and creating new businesses aswell as maintaining the foundation of the domestic generics
business to become a company needed by society andlocal communities at any time.
[2] Initiatives for sales growth
Last June, we launched new products including 22 items of
10 APIs with a sales plan of JPY 3,200 million for the firstyear. In December, we began selling another 10 items of two49

TOWA PHARMACEUTICAL Integrated Report 2021

derivatives, and profit attributable to owners of parent was
JPY 13,958 million (down 3.8% YoY).
Domestic net sales were JPY 118,685 million (up 7.5%YoY), reflecting steady sales of recently launched products,
despite the effects of NHI price revisions in October 2019and April 2020 and some impacts of the spread ofCOVID-19. The COGS ratio improved 0.5 percent points
YoY to 53.6%, and gross profit was JPY 55,109 million (up8.8% YoY). SGA expenses was JPY 35,612 million (up 3.2%YoY) due to increases in personnel and R&D costs.
Consequently, operating income came in at JPY 19,497
million (up 20.8% YoY).
Overseas net sales were JPY 36,214 million, COGS ratio
was 71.4%, and gross profit was JPY 10,341 million. SGA
expenses amounted to JPY 9,915 million. Consequently,operating income was JPY 425 million.

Financial position
APIs with the plan of JPY 770 million for the first year. Inaddition, the number of our generics has reached 770 itemsof 343 APIs as a result of selling new drugs to improve
the quality of life.
[3] Initiatives for entering overseas markets
As part of entering new markets, we acquired Pensa
Investments, S.L. (Headquarters location, Catalonia, Spain;
current trade name, Towa Pharma International Holdings,S.L.; hereinafter, “Towa HD”) in the preceding period, andachieved business expansion in the European and U.S.
markets. Going forward, we aim to further expand ourbusiness by utilizing Towa HD’s sales network in several
European countries and the United States as well as
the production bases in Europe compliant to European
and the United States standards.
[4] Creation of new businesses
With the hope of becoming a company needed by society
and local communities at all times, we are researching
and commercializing new health related businesses,
centering on extension of healthy life expectancy;
maintenance of healthy conditions; restoration of health at
pre-symptomatic stage; and response to the local
comprehensive community care system. As part of theseefforts, we began a joint research project in April 2020 with
National Cerebral and Cardiovascular Center to establish
medical evidence for the efficacy of taxifolin, a plant-derived
ingredient, in preventing dementia. We also signed a joint
research contract with Osaka Psychiatric Medical Center onbiomarkers for Alzheimer’s dementia. Besides, we acquired
shares of Protosera Inc. through third-party allotment inMarch 2021 to launch a testing service business. Protosera
has been certified as a sanitation testing laboratory and isengaged in disease risk testing services using its proprietary
basic technology for protein analysis.
Additionally, we established an organization to planand implement marketing strategies for new businesses,
support frontline sales staff and promote activities,
and work to strengthen our sales capabilities.
In the previous year, we started selling “comuoon,” aninteractive assistive device to convert the voice of speakers
into sound that is easy to hear, offered by Universal Sound
Design Inc. Sales of “comuoon” also developed well.
[5] Operating results
For the consolidated fiscal year under review, the Group
recorded net sales of JPY 154,900 million (up 40.3% YoY).
While the COGS ratio was 57.7%, up 3.6 percent pointsYoY, gross profit was JPY 65,451 million (up 29.2% YoY).
SGA expenses was JPY 45,527 million (up 32.0% YoY).
Consequently, operating income was JPY 19,923 million (up23.4% YoY), but ordinary income was JPY 18,677 million(down 11.0%) due to the recording of loss on valuation ofThe financial condition for the consolidated fiscal year under review is as follows.
[1] Assets
Total assets at the end of the consolidated fiscal year underreview amounted to JPY 245,668 million, up JPY 15,651
million YoY. This was mainly due to an increase ininventories of JPY 9,902 million, an increase in cash
and deposits of JPY 4,201 million, and an increase in tradenotes and accounts receivable of JPY 2,930 million, despitea decrease of JPY 3,811 million in investments and otherassets.
[2] Liabilities
Liabilities amounted to JPY 129,069 million, up JPY 3,717
million YoY. This was mainly due to an increase in long-term
debt of JPY 33,305 million, despite decreases in short-term
debt of JPY 20,257 million and convertible bond of JPY
10,870 million.

[3] Net assets
Net assets amounted to JPY 116,599 million, up JPY
11,934 million YoY. This was mainly due to an increase inretained earnings of JPY 11,458 million. Consequently,
capital-to-asset ratio was 47.5% at the end of
the consolidated fiscal year under review.
*We had applied a provisional accounting treatment forthe business combination with Towa HD in the previous
consolidated fiscal year. However, since it was finalized in
the consolidated fiscal year under review, the amounts
reflecting the provisional accounting treatment are used in
the comparison and analysis with the previous
consolidated fiscal year.

Cash flows
Cash and cash equivalents at the end of the consolidated fiscal year under review amounted to JPY 22,915 million, up JPY
4,201 million YoY. Each cash flow for the consolidated 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 amounted to JPY
12,008 million (down JPY 7,155 million in the inflow YoY).
This was mainly due to profit before income taxes of JPY
18,728 million (down JPY 1,981 million YoY), partially offset
by an increase in inventories of JPY 9,707 million (up JPY
5,406 million YoY).
[2] Net cash provided by (used in) investing activities
Net cash used in investing activities was JPY 9,100 million(down JPY 30,441 million in the outflow YoY). This was
mainly attributable to purchase of property, plant andequipment of JPY 9,137 million (up JPY 4,588 million YoY).

[3] Net cash provided by (used in) financing activitiesNet cash provided by financing activities amounted to JPY
184 million (down JPY 11,564 million in the inflow YoY). Thiswas mainly due to a net decrease in short-term debt of JPY
20,251 million (net increase of JPY 20,200 million in
the previous consolidated fiscal year), repayments of longterm borrowings of JPY 6,895 million (up JPY 499 million
YoY), and payments for redemption of bonds with shareacquisition rights of JPY 10,850 million yen (up JPY 10,850
million YoY), partially offset by proceeds from long-termborrowings of JPY 40,500 million (up JPY 40,500 million YoY).

Dividend policy
We have a basic policy of paying dividends continuously andsteadily in accordance with our performance, while enhancing
internal reserves to prepare for future business development,such as strengthening research and development capabilities
and securing capital expenditure funds.
Based on this policy, we paid a dividend of JPY 44 pershare for the current fiscal year (including an interim
dividend of JPY 22 per share and a year-end dividend of
JPY 22 per share). Our basic policy is to pay dividends ofsurplus twice a year for the interim dividend and the yearend dividend. The decision-making bodies for thesedividends of surplus are the General Meeting ofShareholders for the year-end dividend and the Board ofDirectors for the interim dividend.
We have stipulated in the Articles of Incorporation that
the Company, by resolution of the Board of Directors, may
pay an interim dividend as of September 30 of each year,
which is set to be the record date for the interim dividend.

TOWA PHARMACEUTICAL Integrated Report 202150

Corporate Data

Corporate Data

Business LocationsCompany Outline

Kyoto Analytical Science Center
KENTO Healthcare Science Center
East Japan Distribution Center

Shares authorized ................................................ 147,000,000 sharesCompany name TOWA PHARMACEUTICAL CO., LTD.

Shares issued ......................................................... 51,516,000 shares

Headquarters

Number of shares constituting one unit ................................. 100 shares

2-11, Shinbashi-cho, Kadoma-shi, Osaka 571-8580
Main phone: +81(0)6-6900-9100

Established

June 1951

IncorporatedApril 1957

Listing

The first section of the Tokyo Stock Exchange (TSE)(Securities code :4553)

Capital stock

JPY 4,717.70 million

Business operations Manufacturing and selling of ethical drugs

Amagasaki Research CenterTokyo Office
Headquarters

Osaka Research Center

Okayama Plant

Osaka Plant

West Japan Distribution Center

Number of shareholders ....................................... 5,819 shareholders

Major shareholders (Top 10)(Thousand)Yoshida Office Co., Ltd.

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

2,201

4.47

Itsuro YOSHIDA

1,455

2.95
2.93

1,445

TOWA PHARMACEUTICAL Kyoeikai

1,440

2.92

Headquarters

Headquarters Moriguchi Annex Tokyo Office

Custody Bank of Japan, Ltd. (Trust Account)

1,213

2.46

Research &Development
Laboratories

Osaka Research Center
Kadoma Laboratory
Kyoto Analytical Science Center
KENTO Healthcare Science Center
Amagasaki Research Center
Himeji Research Center

TOWA PHARMACEUTICAL Employee Stock Ownership Group

890

1.80

State Street Bank and Trust Company

726

1.47

Yoshida Estate Ltd.

648

1.31

The Bank of New York Mellon Corporation

516

1.05

PlantsOsaka Plant Okayama Plant Yamagata Plant

Distribution
centers

West Japan Distribution Center
East Japan Distribution Center

Sales offices
and sales sites

71 sales offices
60 sites of agents

Note: The Company holds 2,301,475 shares of treasury stock but is excluded
from the above major shareholders. The Company calculated theownership by deducting the number of treasury shares.

Share breakdown by shareholder type
Financial institutions
0.57%

Consolidated subsidiaries

Securities
companies
0.48%

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

J-DOLPH PharmaceuticalCo., Ltd.

Greencaps Pharmaceutical
Co. Ltd.

Manufacturing and selling of ethicaldrugs

Producing soft capsules forpharmaceutical products.

Headquarters: Koka, Shiga

Headquarters: Fujinomiya, Shizuoka

Daichi Kasei Co., Ltd.

Towa Pharma International
Holdings, S.L.

(JPY) 3,500

Manufacturing and selling of ethicaland OTC drugs

3,000

Headquarters: Barcelona, Spain

2,500

Headquarters: Fukusaki, Kanzaki,
Hyogo

T Square Solutions Co., Ltd.

Protosera Inc.

Providing healthcare related IT services

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

Headquarters: Moriguchi, Osaka

Headquarters: Osaka, Osaka

TOWA PHARMACEUTICAL Integrated Report 2021

Individuals
and others
93.78%

Individuals
and others
21.02%

Non-Japanese
corporations
20.99%

Financial institutions 14.53%
Securities companies
0.66%

Number ofshares ratioJapanesecorporations
42.80%

Stock price2,000

Non-consolidated subsidiaries

51

Japanese corporations 1.48%
Non-Japanese
corporations
3.69%

Number ofshareholders ratio

J-DOLPH Pharmaceutical Co., Ltd.

R&D and manufacturing of APIs andintermediates

40.84

BNYM AS AGT⁄CLTS 10 PERCENT

KadomaLaboratory

Major Group Companies

Number Ownershipof shares(%)

Shareholder nameBusiness locations and sales outlets

Moriguchi Annex
Himeji ResearchCenter

As of March 31, 2021

Overview of Company

Representative President and Representative Director Itsuro YOSHIDA

Yamagata Plant

Stock Data

As of March 31, 2021

1,5001,000

11.9 12.3 12.9 13.3 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

TOWA PHARMACEUTICAL Integrated Report 202152