TOWA
PHARMACEUTICALINTEGRATED REPORT

2023

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]

1

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.

3

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
7

TOWA PHARMACEUTICAL Integrated Report 2023

TOWA PHARMACEUTICAL Integrated Report 2023

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.

9

TOWA PHARMACEUTICAL Integrated Report 2023

TOWA PHARMACEUTICAL Integrated Report 2023

10

TOP MESSAGE

To keep on realizing
genuine smiles
Toward a production system of 17.5
billion tablets a year, to uphold our
mission of stable supply
When the government decided on its policy of transitioning
COVID-19 to a Class 5 infectious disease, the way out fromthe pandemic finally came into sight. The COVID-19
pandemic brought about major changes in society. The
penetration of digitalization in society, growth in healthconsciousness, and efforts to resolve global challenges, as
represented by the SDGs, have all accelerated as a result of
the pandemic. In Japan, a super graying society, establishinga social security structure that will address the demographic
challenge and extending healthy life expectancy are urgent
issues.
Japan’s social security benefits expenses, which continue
to rise year by year, are expected to reach about JPY 140
trillion by 2025. As one measure to address this, theJapanese government has promoted the use of genericdrugs since the early 2000s. The switch to generic drugs is
now helping to reduce healthcare costs by about JPY 1.7
trillion annually, thereby lightening the load on the national
government, health insurance societies, and patients.
With the business model of manufacturing and selling
generic drugs as its core business, the Towa Group has been
striving to contribute to the suppression of healthcare costs.
Along with enhancement of the quality and performance ofour products, a stable product supply is an importantmission. However, stable product supply has become amajor challenge, sparked by quality-related scandals in theindustry, and people’s trust in generics, which has been
nurtured for many years, has fallen apart as a result.
Consequently, the industry as a whole remains unable tofulfill its responsibility.
We have steadily proceeded with capital investments
toward the national government’s target of generics
accounting for an 80% volume share of drugs sold in Japan.
In 2018, we put the 2nd solid formulation building into
operation at our Yamagata Plant. Together with our Osakaand Okayama Plants, we secured a total annual production
capacity of 12.0 billion tablets in FY2021 as initially planned.

11

TOWA PHARMACEUTICAL Integrated Report 2023

However, we are now in the extraordinary situation in which,because those manufacturers that caused the quality
problems cannot make their products, the industry as awhole is unable to deliver stable product supply. For thisreason, we brought forward our plans for additional
investments in the 2nd solid formulation building at
Yamagata Plant, adding 2.0 billion tablets to achieve a
production system of 14.0 billion tables. Further,
construction is underway of a 3rd solid formulation buildingthat will be capable of producing 3.5 billion tablets (due forcompletion in October 2023), and we expect to achieve a
production system of 17.5 billion tablets in FY2024 andbeyond. We will also proceed with the construction of a 2ndsterile formulation building and a warehouse building at the
Yamagata Plant to expand the production capacity of liquid
formulations and freeze-dried formulations, in our efforts to
expand our tangible facilities.
On the intangible front, this abnormal situation has alreadybeen ongoing for about three years, and to ensure that theburden on the employees working in our plants does notincrease even further, we are strengthening our structure ofincreased headcount. We are also working to install
automation and unmanned facilities and systems forenhancing production efficiency. We will continually sharethe latest market trends and future outlooks across theGroup. We have a great sense of mission that we must be at
the center of fulfilling the industry’s important roles in society,including stable product supply and quality control. In
addition to such production enhancement measures, if theentire industry proceeds with increases in production to acertain degree, we believe we can ease the shortage inproduction volume within the next several years.
In the quality assurance system, our products are
manufactured at all of our plants through procedures that arein compliance with the three GMP principles. Ongoingeducation and training for employees have ensured thateach employee works with a high awareness of quality. To
build a stricter quality assurance system, we also proactively
incorporate international standards such as PIC/S GMP and
ICH Guidelines, and we are building a structure that willthoroughly eliminate human error. What is more, to maintainand strengthen the system for stable product supply, we will

Itsuro Yoshida
President andRepresentative Director

push forward with efforts such as purchasing APIs frommultiple suppliers and audits of manufacturing sites. We arealso continually engaging in initiatives aimed at thestrengthening of governance and penetration of complianceacross the Group, from the manufacturing of APIs to the
manufacturing of formulations, logistics, and distribution. On
November 24, 2021, we announced the Towa
Pharmaceutical Declaration of Legal Compliance.
Meanwhile, in the face of profit-squeezing factors such as
the annual revision of drug prices and soaring raw material
and utilities costs, as an industry, we hope to propose asustainable drug price system in which capital investments
and other efforts toward the maintenance of appropriatequality and a stable supply system are properly recognizedand drugs can be sold at appropriate prices, as well as areview of the industry’s structure to position it as animportant form of social infrastructure.

Leveraging synergies in Japanand abroad to guide the creationof innovation
The changes in society that began with the pandemic
are about to pick up pace. We need to paint a long-term
vision by optimizing the entire Group and leverage ourorganizational strengths to execute that vision. To thisend, we must solidify the Group’s governance towardachieving its Philosophy, “We contribute to people’s
health; We are dedicated to people’s genuine smiles,”and transition to a structure in which we can exhibit
synergy. Each of the Group companies, as autonomous
organizations, will identify new social issues; and theGroup will aim to resolve such issues by leveraging its
combined strengths.

TOWA PHARMACEUTICAL Integrated Report 2023

12

TOP MESSAGE

improvement of product quality and the creation of added
value. To implement these initiatives, we are strengthening
and streamlining our research and development functions by
upgrading and expanding our R&D facilities and equipment.
To enhance the consideration for the global environmentand society, we newly established Environment, Health and
Safety Management Department in April 2022. The
department controls and manages the environment andsafety throughout the Towa Group in a unified manner andaims to further improve the environment and safety for Towa
employees and regional communities. In regard to the impact
of climate change on our business activities, profits, etc., wewill strive to disclose information based on the TCFD
recommendations while carrying out the scenario analyses ofour own business activities and taking stock of greenhousegas emission reduction measures. We will connect these
initiatives to the launch of a green sustainable chemistryindustry, hoping to further contribute to raising thecompetitiveness of the Japanese industry.

One area in which we can expect synergy effects is theleading-edge formulation and capsule technologies heldby Group companies, Sunsho Pharmaceutical Co., Ltd.
and Greencaps Pharmaceutical Co. Ltd. By combining
these technologies with Towa’s formulation technologies,
we aim to develop new technologies.
In overseas markets, through Towa Pharma International
Holdings, S.L. (“Towa HD”), which is based in Spain, we
supply generic drugs with over 210 ingredients in morethan 20 countries and regions across the globe, with afocus on Europe and the United States. As a foothold forsynergy creation, we are actively promoting tours of Towa
Pharmaceutical’s and Towa HD’s local plants, exchangesof opinions among executive managers, personnel
exchanges among researchers, and joint development of
new products, in our efforts to cultivate a corporate culture
and enhance our organizational strengths as a Group. Evenin this extraordinary situation of supply instability that wecurrently face, we are discussing the use of the Towa HD
Spanish plant’s production capacity and the introduction of
manufacturing technologies in Japan and considering thefurther strengthening of our stable supply system.
In June 2022, we standardized the trading names of thethree sales subsidiaries in Spain, Italy, and Portugal under
the Towa HD umbrella as “Towa Pharmaceutical.” We will
foster a sense of unity as the Towa Pharmaceutical Group,
promote collaboration in operations, and deliver valueadded products. By doing so, we will create a Towa brandimage that is clear for stakeholders, and promote thefurther expansion of our business.
The objective of globalization is to deliver Towa
Pharmaceutical’s highly value-added products widely
throughout the world. Individual countries and regions
have different laws concerning factors such as the quality,
efficacy, and safety of pharmaceuticals, and theirstandards and approaches are constantly being updated.
The ability to share these global circumstances is one of
the effects of synergy, and there are expansive
opportunities to contribute to new markets, such as thosein Southeast Asia, where increased demand is expected,
with the creation of innovation.

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TOWA PHARMACEUTICAL Integrated Report 2023

Contributing in part to thecompetitive edge of industries inJapan, with pride in Towa Quality
The Towa Group is working to provide Towa Quality products
and services and create technology innovation and productvalue through the manufacture of sophisticated products with
No. 1 total product performance. The ideal of the Group’s
manufacture is local production and local consumption. We
source APIs and intermediates both domestically and from allover the world. With the addition to the Group of Daichi Kasei
Co., Ltd., which researches, develops, and manufactures
APIs and intermediates, in 2010, alongside our research anddevelopment of continuous flow precision synthesis
technology, which offers a high level of safety, we are drawing
closer, step by step, to our ideal of local production and local
consumption of our products. By cultivating a high standardof technological capabilities in Japan and developing thehuman resources to support those capabilities, we believethat we will be able to contribute to the Japanese
government’s policy of making the supply chain more resilientand increasing national capacity.
Towa Quality means product quality that society wants andneeds and that has been upgraded to the latest and the bestof the times through continuous modifications andimprovements using all the latest technologies in the Towa
Group’s possession. Examples include orally disintegrating(OD) tablets, which disintegrate in the mouth without waterand are thus easy to take, techniques for masking a bitter
taste, and drug imprinting that makes it easy for doctors andpharmacists to distinguish tablets. A representative exampleof the Towa Group’s value-added formulation technology is
RACTAB, our proprietary technology combining thedisintegrating feature that makes a tablet easy to take, andthe hardness that enables a tablet to be handled like anordinary tablet. We are confident that the fine-tuned added
value thus generated will better address the concerns ofpeople and healthcare-related issues around the world.
Manufacture of sophisticated products with No. 1 total
product performance refers to our initiatives for the

Establishing an unwavering
position in the healthcare
industry
The Towa Group has entered the final year of the 5th Mid-term
Business Plan 2021–2023 PROACTIVE II, which started in
FY2021. Under the plan, we have been pursuing ourbusinesses with the basic policies of (1) Enhancing generics
business as a core, (2) Expanding and growing business inoverseas market, (3) Entering new health-related businesses,(4) Creating technology innovations and product values, and(5) Making job satisfaction and fostering talented humanresources.
With “Dawn of the 3rd growth period” as the sub-title of the
5th Mid-term Business Plan, all companies in the Group haverolled out businesses extensively, from “establishing an
unwavering position in the generic drugs industry” tobecoming “a comprehensive healthcare company for the era of
the 100-year life.” As one of our challenges, the Group aims tocreate a future that provides full coverage, from medical careto the care and prevention of pre-symptomatic diseases,
catering to a society with a long and healthy life expectancy.
Based on our vision of contributing to people’s health, we areproactively working to create health-related businesses thatare adapted to the medical system for the future, while
acquiring new techniques and integrating them withcompletely new knowledge and technologies.
The Japanese government is proceeding with thedevelopment of the Comprehensive Community Care System,with completion scheduled for around 2025, when Japanese
baby boomers turn 75 years of age (the age of eligibility for thelate-stage elderly medical care insurance system). Local
communities in which Society 5.0 has been implemented isbased on the development of a platform that will enable
Medical professionals to easily share information with ordinary
citizens by utilizing cutting-edge technologies, such as IoT, inwhich everything is connected via the Internet, artificial
intelligence (AI), and big data, to enable appropriate, efficient

treatment and care-giving by Medical professionals and thepromotion of the health of ordinary citizens (a platform forcoordinating and sharing data from facilities such as hospitals,
pharmacies, and those for nursing care).
The key to achieving this is a platform that utilizes personal
health records (PHR) and electronic health records (EHR). As
well as curbing medical costs, such a platform will also enableapproaches at all stages, from the healthy to symptomaticstages. Furthermore, we also hope to make a major
contribution to the realization of the Comprehensive
Community Care System, which will help the elderly tocontinue living in their own fashion, as much as possible, in
communities that are familiar to them.
In partnership with TIS Co., Ltd., Towa sells Healthcare
Passport, a cloud-based regional healthcare information
coordination service offered by TIS. It is predicted that medical
institutions in the future will have clearly defined roles
according to their location and functions, and that thehealthcare system will transform into one that is centered on
primary care physicians. Healthcare support will enable
Medical professionals and ordinary citizens to share medical
records, the content of prescriptions, and health information
on a bi-directional basis, making possible the efficient andeffective utilization of medical and healthcare information,
which was previously scattered between ordinary citizens,
hospitals, clinics, pharmacies, and so on. Multiple healthcare
facilities and prefectural governments are already considering
the introduction of this platform, and the development ofadditional functions to meet user needs is also underway. The
expansion of these products, services, and partnerships willlead to the development of the kind of health information
platform that the Towa Group envisages as the foundation of
the Comprehensive Community Care System.
Further, in September 2022, we launched Hana Support, asmartphone-based service that provides support for taking
medications. The service features an app for patients withfunctions for alerting the user when it is time to takemedication and recording when medications are taken, as well
as a function that allows for communication with pharmacies
and pharmacists. There is also a web-based service forpharmacies to record such interactions. Development of
coordination between this service and the Healthcare Passport
is ongoing. By giving both patients and pharmacies anaccurate picture of the status of the patient’s medication
regimes, our aim is to support effective medication by
preventing patients from forgetting to taking their medicine or
taking the same dose twice.
A major challenge for the super graying society is the early
detection of abnormalities in the pre-symptomatic diseasestage. We have converted Protosera, Inc., a company thatpossesses an original disease risk screening service (ProtoKey
test), into a subsidiary, and rolled out two types of tests for thedetection of colorectal cancer risk and pancreatic cancer
markers. We are also proceeding with research into taxifolin, aplant-derived substance that is expected to help prevent the
progression of dementia, jointly with the National Cerebral andCardiovascular Center. We will also start handling Cognitive
function Self checker, which tracks eye movement using virtual
reality to assess cognitive function. Various cutting-edge
technologies envisioning Society 5.0 will be incorporated sothat we may approach the extension of healthy life expectancy
from many different fields.

TOWA PHARMACEUTICAL Integrated Report 2023

14

TOP MESSAGE

Creating an environment in which
employees can design their own career
paths and experience a variety of roles
Regarding “Making job satisfaction and fostering
talented human resources,” which is one of the basic
policies of the 5th Mid-term Business Plan, we areaiming to create workplaces where there is respect fordiversity in work styles and motivation for each andevery employee. We see talented human resources as
the source of the Group’s sustainable management. By
carrying out operations under the Towa’s vision whilefeeling satisfied with their jobs, each employee will beable to sense changes in society and create new values.
As DX and AI further penetrate society and work, manytasks will be replaced by digital technologies. In the
belief that having each employee mull over their careergoals, take the initiative, and act systematically towardachieving the goals will lead to job satisfaction, we haveestablished a new Personnel Development Department.
The new department conducts interviews with individual
employees to focus on their career plans from when theyfirst join the Company until they retire and to support
their career development. It is also clarifying therequirements for appointment to certain posts within the
Company and developing systems to help employees toobtain the experience, knowledge, and abilities
demanded by the positions they aspire to.
Discussions are currently underway for thedevelopment of the 6th Mid-term Business Plan, which
will start in FY2024. In that process, envisaging whatsociety should look like in 2040, we are attempting topaint a picture of the future of the healthcare industry
and social security system, with a focus on our corebusiness of the development, manufacture, and sales ofgenerics, and to design a business plan by backcastingfrom that vision. We will become increasingly active inentering new markets and new businesses, which will
give our employees more opportunities to demonstrate awide variety of skills.

The 100-Year Plan, our regional
revitalization challenge to deliver genuine
smiles to people all over the world
On the occasion of 2021’s 70th anniversary of Towa’s
founding, we announced internally the Towa Group’s
fundamental way of thinking and what it should be like inthe future so that each of our employees can confront
various social issues. The basis of this thinking is theGroup’s vision, “We are dedicated to people’s genuine
smiles.” The “genuine smile” refers to a state in whichhappiness wells up from within when the body is healthy
and the spirit is fulfilled, and brings a smile to a person’sface. What we should be like in the future represents acompany that continues to be needed by people living in
the region and to deliver products and services that theyneed, at any age and in any region.
To share this vision as a Group and turn it into
something unfaltering will require symbolic initiatives
that will be promoted based on the long-term vision. As

part of the Towa Pharmaceutical Group 100-Year Plan,
we have embarked on the challenge of growing licoricein Mongolia. Our association with Mongolia began in2009 when I was part of a delegation from a Rotary Clubin the city of Kadoma, of which I was a member in mycapacity of President and Representative Director of
Towa, that visited a Mongolian orphanage to which theclub had donated funds. This vast land, which had apopulation of less than 2.6 million people who looked sosimilar to us, was facing significant challenges as themining of finite underground resources caused
desertification and, consequently, climate change.
However, mining was a key industry that underpinned
the nation’s economy.
Towa considered what kind of sustainable support it
could provide, instead of one-off donations, and focusedon the fact that licorice, which is used in APIs, grew wildin Mongolia. Licorice is also used in traditional Chinese
medicine, and, besides its medicinal uses, licorice
extract has a wide range of applications, including as asweetener and in food products and cosmetics. We felt
that, if we could make a success of this cultivation, it
could grow into an industry for sustainable development,
which would help raise the standard of living of theMongolian people and bring more genuine smiles totheir faces. We also believe that the cultivation of licorice
will prevent the desertification of the land and suppress
the dispersion of yellow sand into the atmosphere.
We began in 2014 by ascertaining the situation in
Mongolia, including visiting areas where the plant grew
wild. In 2017, we secured about 1,000 hectares of land
in Kherlen, a district in the Khentii province of Eastern
Mongolia. Although the project stagnated due to the

COVID-19 pandemic, in September 2021, we were able
to plant 600 licorice seedlings on a trial basis. With theapproval of the chief of Kherlen, in 2023, we obtained
the community’s cooperation, and local residents
participated enthusiastically in raising seedlings andgrowing the licorice plants. Full-scale cultivation isscheduled to start in 2026. Because licorice has a
growing cycle of about seven years from fertilization of
the soil to harvest, we will divide the land into sevenzones so that we can obtain a harvest every year. The
plan is to harvest volumes of up to 500 tons a year
(assuming that the whole 100 hectares is planted at thesame time).
It is a grand plan, but the first thing we will do isprovide support so that the business can be managed
autonomously in Mongolia. If, in future, it leads to the
expansion of the business into domains such asprocessing into APIs and exports, we believe that it will
have tremendous significance for the revitalization of theregional community and economy. While it may take 100
years to become firmly established as an industry, forthe sake of people’s genuine smiles, we want to keep up
this activity, to symbolize the fact that, as a company
that continues to be needed by people living in theregion and to deliver products and services that theyneed, at any age and in any region, the entire Group will
advance business without hesitation.
With a view to realizing people’s genuine smiles
through its health-related business, the Towa Group willcontinue in its efforts to roll out all kinds of health-related
businesses both in Japan and around the world. We
would like to ask for your continued support in theseendeavors.

Cultivation of licorice in Mongolia (August 2023)

The root and stolon of the licorice plant contain glycyrrhizic acid, an invaluable raw material of pharmaceuticals.

15

TOWA PHARMACEUTICAL Integrated Report 2023

TOWA PHARMACEUTICAL Integrated Report 2023

16

Towa Group’s Strength

Development of APIs

Product development

Quality control

Stable product supply

Information provision

Fostering of talented human resources

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

Development of APIs
Shigenobu Nishiguchi

Developing and selecting the best APIs for
manufacturing productsManager,
API Process Research Department,
API Business Unit,
R&D Division

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

Relatedinformation
See page

37.

Without being bound by conventional
manufacturing methods, we aim to establish
revolutionary and efficient API manufacturingmethods to overcome various challenges,
including those in quality, environmentalload, and productivity. We thus work on the
R&D of APIs to let patients take their
medicines with peace of mind.

Stable product supply
Tetsuya Yamamoto

Established production capacity with threeplants to ensure stable supply at any time

Manager,
Production Planning
Department,
Production Division

By adopting a back-up system supported by three sites, we ensure that any
production disruption at one plant can be compensated by efforts at the otherplants. Furthermore, by dividing the physical distribution bases in East Japanand West Japan, we have established an efficient arrangement and a reliable
back-up system even in a worst-case scenario. At present, the three plants can
produce a total of 14.0 billion tablets* annually. In response to a further increasein demand, the construction of the 3rd solid formulation building in Yamagata
Plant will be complete in fall 2023. Shipment will commence sequentially fromFY2024, and we will proceed toward an annual production of 17.5 billion tablets.

Relatedinformation
See page37.

To fulfill the responsibility for stableproduct supply, the Production
Division actively prepares efficient
production plans and improves
productivity. We also attach
importance to cooperation between
plants and information sharing withother divisions.

*Production capacity of tablets/capsules

Relatedinformation
See page

Product development
Yasunobu Okamoto

Based on our technologies and experiences, developing
products that can be more easily taken and handled

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

We work day and night to develop highquality and high added value
pharmaceuticals that patients andmedical professionals are comfortableusing. To establish a stable supply
system, we strive to design reproducible
manufacturing methods, with an eye tomanufacturing at multiple sites.

Relatedinformation
See page

Quality control
Tomoko Katsuragi

Working diligently to ensure reliable quality
and safety

TOWA PHARMACEUTICAL Integrated Report 2023

38.

General Manager,
Quality Assurance Department,
Pharmacovigilance andQuality Assurance Division

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

17

29.

Deputy Unit Manager,
Pharmaceutical Research
and Technology Unit,
R&D Division

Delivering trusted Towa Quality to the world
We take on challenges every day todeliver trusted pharmaceuticals not only inJapan but overseas. We will improvepharmaceutical quality systems, ensure
thorough manufacturing control and quality
control, and move forward with close
attention paid to what patients are thinking.

Relatedinformation
See page

Information provision
Active provision of relevant information to
enable patients and medical professionals tofeel comfortable while using ethical medicines

Keisuke Watanabe

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

We plan and create sales and marketing
tools to advertise our company andincrease sales, with the Company’s
aspiration in mind and in cooperation withother divisions and departments. The task
is rewarding as it aims to strengthen sales
and marketing capabilities of the entire
Sales and Marketing Division.

Relatedinformation
See page

Fostering of talented human resources
Focusing on making job satisfaction andfostering talented human resources,
aiming for being a reliable company

36.

Manager,
Medical Communication
Department,
Sales and Marketing Division

Masakazu Kawashima

39.

Manager,
Personnel Development
Department,
Human Resources Division

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

Human Resources Division staff havecareer development meetings with morethan 2,000 employees a year tounderstand what each and every
employee is thinking and help themdevelop the careers they want.
We will continue to plan and implement
policies that enrich employees’ careers.

TOWA PHARMACEUTICAL Integrated Report 2023

18

Feature Topic

01

Stable Product Supply

Fulfilling Our Social Mission of Stably
Supplying Generics through Continuous
Production Capacity Expansion
We will further strengthen production capacity and improve production efficiency
under the circumstances in which concerns over stable product supply remain.

We will continue to take on challenges toenable stable product supply.
The volume share of generics in Japan has exceeded
80%, and generics have become an important part ofthe social infrastructure. The responsibility of generics
manufacturers like us for stable product supply is evenheavier. Regrettably, however, unstable product supply
has been continuing due to recent quality issues ofgenerics companies.
As a leading company among generics manufacturers,
Towa has worked to install new equipment and increase
workforce with the aim of increasing production, so that
we can fulfill our responsibility for stable product supply.
Our annual production capacity reached 14.0 billion
tablets in the second half of FY2022. Furthermore, inorder to establish a structure for more stable productsupply, we plan to build the 3rd solid formulationbuilding in Yamagata Plant by October 2023 and toachieve the annual production capacity of 17.5 billion
tablets from FY2024 onward.
At the same time, we plan to construct the 2nd sterile
formulation building in Yamagata Plant and thereby
double the annual production capacity of vials from 5
million vials to 10 million vials.

For the new building under construction, we intend to
introduce automated and unmanned equipment
proactively and reduce the number of personnel
significantly, as part of measures to improve efficiency
and cope with the progress of aging population coupledwith declining birthrates.
We are also proactively promoting establishment of a
backup system and production efficiency improvement(scaling-up, series production, etc.).
Towa is committed to continuing to take on challenges
proactively to fulfill its social mission of stable supply ofgenerics.

Efficiency improvement through scaling-up(Conceptual images)

Example of manufacturing equipment:
Fluidized-bed granulation and drying machine

Equipment for small-scale production

Equipment for large-scale production

Equivalent to 0.5 million tablets/lot

Equivalent to 2 million tablets/lot

Scaling-up

Production volume per minute*:

Production volume per minute*:
Approx.

460 tablets

Approx.

1,580 tablets• By scaling up, man-hour can be reduced.
• The production volume per hour can be increased, which results in efficiency improvement.

Key points*Calculated using the average process hours for multiple items produced in the same scale and processes (including preparation and assembly as well as switching and cleaning)

Efficiency improvement through a continuous manufacturing method (Conceptual images)
Example of Product T:
Production lot scale of 2 million tablets [in Process B]
Process A

Process B

Process C

Process D

Basic manufacturing
steps for one-lot
production

Process E

Final Process

TT

Process hours

Preparation
Switching
Manufacturing
and
and
of
T
assemblycleaning
450

1,020

minutes

720

minutesminutes

2,190
minutes
in total

Batch manufacturing method [in case of six-lot production]

Takayuki Kanno
Senior Operating Officer in charge of
Production Division and Senior Plant Manager,
Yamagata Plant

Promoting production efficiency by, for example,
scaling up the manufacturing equipment
The Company has been striving to ensure quality andstable supply of generics for many years, and therefore
earned the unwavering trust of the market. On the other
hand, some of our competitors have received orders
such as an order to suspend their operations due toviolation of Good Manufacturing Practice (GMP; thestandard for manufacturing control and quality control ofpharmaceutical products), which resulted in continued
disruption of product supply. Given this situation, thedemanded volume of products of the Company has
continuously been exceeding the production capacity,
and we have no choice but to adjust the shipment
volume of some of our products in FY2023 as well.
In response to the circumstances, the Company has
been continuously working to strengthen its production

19

TOWA PHARMACEUTICAL Integrated Report 2023

system and striving to meet the volume of demand forgenerics. At the same time, our production sites
dedicate themselves to improve production efficiency
and thereby increase the production volume per hour.
Such efforts to improve efficiency include the scaling-up
of manufacturing equipment for tablets. In addition,
while we previously used a batch manufacturing method
in which a wide range of products are produced in asmall quantity, we now use a continuous manufacturingmethod in which the number of production lots per run
is increased and which enables mass production withless hours. We will continue to fully fulfill our social
mission regarding stable supply of generics.

Cumulative
manufacturing hours

13,140 minutes (2,190 minutes/lot)T

Continuous manufacturing method [in case of six-lot production]
Cumulative
manufacturing hours

7,290 minutes (1,215 minutes/lot)

T

T

T

T

T

T

T

T

T

Hours shortened by the use of the continuous
manufacturing method

5,850 minutes• The fixed man-hour can be reduced by increasing the number of lots (number of batches) per run.
• The six-lot batch manufacturing method was changed to the continuous manufacturing method. » Man-hour: Reduced by approx. 45%

Key points

Production capacity expansion with the three-plant production system
Establishing a production system with an annual production capacity of 17.5 billion tablets by the end of FY2023(Unit: billion Tab/Cap)

Osaka
Plant

20.0

Okayama
Plant

15.0

Yamagata
Plant

T

17.5
14.0

3.5

6.5

6.5

5.0

5.0

5.0

2.5

2.5

2.5

2.5

FY2020

FY2021

FY2022

FY2023

11.5

12.0

10.0

4.0

4.5

5.0

5.0

0

Yamagata Plant
Capacity expansion at 2nd solid
formulation building
Yamagata Plant
Construction of 3rd solid formulationbuilding and 2nd sterile formulationbuilding (currently planned)*Production capacity of tablets/capsules
Production capacity: Actual number oftablets that can be produced
Production system: Number of tablets thatcan be produced after installing the facilities

Making steady strides toward
increasing the production
Construction of a new building at Yamagata
Plant was completed in October 2023, andoperations will commence sequentiallystarting from April 2024. We will proceed
toward shipment. Through these and otherefforts, as set forth in the Mid-term Business
Plan, in FY2025, we will realize theproduction system capable of producing
17.5 billion tablets.

TOWA PHARMACEUTICAL Integrated Report 2023

20

Feature Topic

02

Human Capital

Making Job Satisfaction by Strengthening
Human Capital Management
We will develop talents who will contribute to business diversification by,
for example, supporting career development.

Developing human resources whoare capable of responding tochanges in the business environment
Strengthening the linkage between management strategy andpersonnel strategy has become an important issue to achievesustainable growth of corporate value while responding tochanges in the business environment.
Since the establishment of a new Personnel Development
Department under the Human Resources Division, the Company
has been working on initiatives to support career development of
every employee so that they can create their own career plan. We
have been pushing forward with formulation of requirements for
managerial positions to encourage ability development,
visualization of requirements for necessary skills, presentation ofrequirements for career paths and promotion, among other efforts.
We are also focusing on creating an environment that supports
the autonomous career development of individuals by enhancing
ability development programs and training for those who are inmanagerial positions.
By promoting such diverse personnel measures, we aim tocreate a working environment with a sense of job satisfaction anddevelop human resources whoare capable of proactively taking
on challenges to address avariety of business issues.

Feature Topic

Working on Various Issues Related to the Global
Environment and Occupational Health and Safety

Environmental
Initiatives

From a mid- to long-term perspective, we will make steady strides toward groupwide efforts such as to reduce CO2 emissions.

03

Contributing to sustainablegrowth of the Group as a whole

A scene from a career interview

Importance of creating a career vision

Create a futureideal visionat Towa

Do what you can
do to realize theideal vision

Enrich a career pathand live a fulfilling life
(work and life)

Development of Towa career
Career vision

The mission of the Environment, Health and Safety
Management Department is to promote group-wide
activities by establishing targets of the Group related topreservation of the global environment and safety of
employees. In FY2022, we conducted energy-saving
diagnosis and formulated mid- to long-term targets aswell as a medium-term road map for reducing
greenhouse gas emissions. Since FY2023, we have beenpromoting reduction measures to realize the road map.
As for safety of employees, we undertake activities
related mainly to follow-ups on individual occupational
accidents, internal audit, and risk assessment. In
addition, we also focus on prevention of exposure ofchemical substances to workers, and have created avisual version of SDSs for active pharmaceuticalingredients (APIs), which is used on site.
In the future, we will also work on measures for the
global environment in our entire supply chain. We aimthat these group-wide
activities contribute tosustainable society andgrowth of the Group.

Realizing more

Own career envisioned
by individual employees

fulfilling careerof each employee

Toshikazu Kokubun
Division Manager,
Corporate Strategy Division
Operating Officer in charge of
Human Resources Division

Discussions for
optimization

Assignment
and transfer

Achievements
and experience

Career plan
Career plan of individuals
that is envisionedby the Company

Promoting creation of a working environment that enables employees
to feel a sense of job satisfaction
Strengthening human capital-oriented management is an
important issue to achieve future sustainable growth. In
FY2021, the Company reorganized the Human Resources
Department into the Human Resources Division, and newly
established the Personnel Development Department. By sodoing, the Company is working to create an environment inwhich employees can envision their own career and theCompany can create a career plan for each employee, with theaim of “creating an environment with a sense of job satisfaction
and developing talents who can respond to changes.”
As part of specific initiatives, we have formulated
requirements for managerial positions, visualized requirements
for skills that are necessary for operations of each department,

21

TOWA PHARMACEUTICAL Integrated Report 2023

created a rotation model, and presented requirements forcareer paths and promotion. In addition, we have established arotation scheme so that each of our employees candemonstrate their abilities, and are working to improve our
on-boarding and training systems so that employees candemonstrate their abilities at an earlier stage.
By promoting development of abilities of our employees andcontinuously supporting their growth through such initiatives,
we aim to develop talents who are capable of proactively taking
on challenges to address various issues, such as clinicaldevelopment efforts that we will be newly working on,
advances in formulation technology, entry into new healthcare
industries, and globalization.

Kaoru Makino
General Manager of the Environment,
Health and Safety
Management Department
Administration Division

Towa Group
Environmental,Healthand Safety Policy

Formulation of a road map that contributes to decarbonized society
Efforts to counter problems related to the global environment andsafety and health of our employees are part of our importantmanagement issues. Therefore, the Company has been
undertaking group-wide activities taking issues into consideration.
In April 2022, an Environment, Health and Safety Management
Department was newly established to reinforce our activities topreserve the environment and realize occupational health andsafety. This department is an organization dedicated tosupervision of the entire Group in three areas, namely,environmental management and the global environment; chemical
substance management; and occupational health and safety.
In the area of environmental management and the global
environment, the department plays a central role in TCFD-related
projects, and discloses information related to climate changerelated risks and profit-making opportunities associated with

global warming. In addition, it creates a road map toward
decarbonization of the Group and will commence efforts to realize
the road map.
In the area of chemical substance management, it has
formulated company-wide rules related to issues such as
appropriate management and legal compliance of chemical
substances used in plants and laboratories, and prevention of
exposure to highly potent compounds.
Furthermore, in the area of occupational health and safety, it
promotes establishment of a framework and education to prevent
recurrence of occupational accidents.
Starting from FY2023, in accordance with the newly formulated“Towa Group Environmental Safety Policy,” it also pushes forwardwith activities even further that take into consideration the global
environment and the safety of workplaces.
TOWA PHARMACEUTICAL Integrated Report 2023

22

Our Value Creation Process
To address social issues, Towa Group has created value by allocating its business capital to every business that
contributes to people’s health. We will contribute to the health of all people and help them achieve a genuine smile
based on the “5th Mid-term Business Plan 2021–2023 PROACTIVE II.”INPUT Business Capital

Towa
Quality

Financial capital

Towa Group’s
value proposition• Total assets: JPY 371.3 billion (consolidated)• Net assets: JPY 136.8 billion (consolidated)

Social Issues

Manufactured capital• Production sites: 12

Extension ofhealthy life
expectancy anddisease prevention
Production ofhigh-quality
pharmaceuticalproducts(11 in Japan [including Towa’s 3 plants], 1 in Europe)• Production capacity (Towa’s 3 plants):
14 billion tablets (tablets and capsules)• Production facilities for various dosage forms

Better accessibility
to primary
healthcare
services
Application ofadvanced
technology tohealthcare services
Improvement ofworkingenvironment

Manufacture of sophisticated productswith No. 1 total product performance

Extending healthy life
expectancy ofmore than
7 billion people
around the world• R&D offices: 9 (8 in Japan, 1 in Europe)• R&D expenditure: JPY 35 billion or more
• API synthesis process knowhow

Human capital• Employees: 4,298 (consolidated)• Consolidated subsidiaries: 12

5th Mid-term
Business Plan
2021–2023
PROACTIVE II(4 in Japan, 8 in overseas countries)• Qualified pharmacists: 254 (consolidated in Japan)• MRs: 773 (consolidated in Japan)

Social and relationship capital• Collaborate with business partners including
raw material manufacturers,
medical products distributors, and agents• Medical institutions coverage ratio (Towa):
Hospitals 91.9%
Dispensing pharmacies 96.3%

Natural capital• Energy input: 32,860 kl

Corporate Governance(Compliance and Risk Management)

Our Commitments (T-SMILE)• Water usage: 743,944 m (Towa’s 3 plants)
3

TOWA PHARMACEUTICAL Integrated Report 2023

Enhancing generics
business as a core
Expanding andgrowing business inoverseas markets
Entering newhealth-related businesses

GenuinesmilesControlling healthcare
costs ofthe government,
administrative
agencies, and local
communities

Maintaining
sustainable
healthcare system

People’shealthCreating technology
innovations
and product value

Vision(crude oil equivalent, Towa’s 3 plants)

23

We will support everyone
who cares about good
health to live a healthy
lifestyle by making it easier
to be and stay healthy aspart of everyday life.

SocialImpactIntellectual capital(accumulative) (FY2021–FY2023)

Quality assurance
and stable supplyof pharmaceuticalproducts

OUTCOME

Foundations supporting
value creation

Making job satisfaction
and fostering talented
human resources

TOWA PHARMACEUTICAL Integrated Report 2023

24

External Environment Surrounding Towa GroupEntering the era where measures for new challenges
are required despite having achieved the government’s
generics volume share target

Towa focuses on creating value across its Group by working sincerely to solve social issues while leveraging various
capitals gained in the past business operations. By solving issues including the extension of healthy life expectancy,
we will contribute to the health of people around the world.

a full speed revolution at a stroke that would take 10
years under normal circumstances. Achieving ahigh-quality economic society in the “New Normal
Lifestyle” is set as a goal for the New Future in the
post-pandemic.
Meanwhile, under the “Future Social Security
Reform – Looking to 2040” issued by the Ministry of
Health, Labour and Welfare, the government aims torealize a society where everyone can work longer andmore energetically by solving issues such as “diverse
employment and social participation,” “extension ofhealthy life expectancy” and “medical and welfare
service reforms.” Generics are playing a greater role
under these government policies and we are
expected to contribute to extending healthy life
expectancy by forming an infrastructure to create
ideal local communities and providing necessary
health promotion services to people in need of them.

In recent years, generics have come to play anincreasingly vital role in the society. Under the Basic
Policy on Economic and Fiscal Management andReform 2017 approved by the Cabinet in 2017, thegovernment has set a target to increase the generics
volume share to 80% by September 2020.
In response to this, the generics industry including
Towa has focused on enhancing production capacityand ensuring stable supply. The results of analysis
issued by the Japan Generic Medicines Association
show the volume share reached 81.2% in the third
quarter of fiscal 2022 (October to December 2022),
achieving the target of 80%.
Furthermore, in the Basic Policy on Economic andFiscal Management and Reform 2020, thegovernment says it will “protect people’s lives,
livelihoods, jobs, and businesses” to achieve the“New Future in the post-pandemic.” The government
also envisions achieving a “New Normal Lifestyle” by

Financial capital

371.3 billion (consolidated)• Net assets: JPY 136.8 billion (consolidated)• Total assets: JPY

Total assets at the end of FY2022 increased JPY 39,250
million YoY to JPY 371,347 million. Net assets at the end of
FY2022 increased JPY 4,725 million YoY to JPY 136,894
million. Consequently, capital-to-asset ratio was 36.9% at
the end of the consolidated fiscal year under review.

Generics volume share

Turmoil

85%

75%

81.6%

70%
65%

TOWA PHARMACEUTICAL Integrated Report 2023

FY2020

4Q

2Q

3Q

1Q

3Q

FY2021

4Q

2Q

1Q

4Q

2Q

3Q

1Q

3Q

FY2019

4Q

2Q

1Q

4Q

3Q

1Q

2Q

3Q

4Q

2Q

1Q

4Q

3Q

1Q

2Q

60%
FY2018• Production capacity (Towa’s 3 plants):

14billion tablets (tablets and capsules)• Production facilities for various dosage forms
Towa Group has 12 production sites in total, comprising of
11 in Japan and 1 in Catalonia, Spain. Production capacity
stands at 14.0 billion tablets for tablets and capsules
produced at Towa’s 3 main plants. Our subsidiaries produce
ointment, soft capsules, etc. and the Group is distinguishedby its capacity to produce diverse dosage forms.

Human capital

4,298 (consolidated)• Consolidated subsidiaries: 12• API synthesis process knowhow• Qualified pharmacists:(accumulative) (FY2021–FY2023)(4 in Japan, 8 in overseas countries)• MRs:
R&D is conducted in 9 offices in total, comprising 8 in
Japan and 1 in Europe. Target R&D expenditure fromFY2021 to FY2023 is JPY 35.0 billion or more(accumulative). This covers the leading-edge research on
API synthesis including molecular control technology.

• Medical institutions coverage ratio (Towa):

91.9

96.3%

We engage in nationwide marketing activities through 71
sales offices, 31 agents at 62 sites, and medical products
distributors, among others, in Japan. Towa has a highcoverage ratio of medical institutions: 91.9% for hospitals
and 96.3% for dispensing pharmacies.

254 (consolidated in Japan)

773 (consolidated in Japan)

Towa Group hires 773 MRs and 254 qualified pharmacists(both consolidated in Japan). In addition, we haveintroduced an internal qualification system for business
operations (experts, etc.) to nurture professionals.

Social and relationship capital

Hospitals%
Dispensing pharmacies

80%

12

(11 in Japan [including Towa’s 3 plants], 1 in Europe)• Employees:• Collaborate with business partners including raw
material manufacturers, medical products
distributors, and agents

FY2017• Production sites:

9 (8 in Japan, 1 in Europe)• R&D expenditure: JPY 35 billion or more
• R&D offices:confidence in generics, the entire industry shall
implement measures for ensuring a stable supply
based on thorough manufacturing and quality
management.
While still pursuing Towa Quality, we will make theutmost efforts to restore public confidence in theindustry by enhancing the product lineup needed andmaintaining and strengthening the system for stablesupply/quality assurance as well as for information
provision.
Our activities on health-related businesses conformto this direction and we will strive to become a valued
company that contributes to the society.

While the generics volume share has steadily risen,
the recent quality problems in the generics industry
have affected the entire industry. Public confidence ingenerics built by the industry so far is declining. As
the drug companies involved in quality problems
suspended their operations, the industry as a wholehas failed to fulfill its responsibilities for stable supply.
As a result, the generics market is still in turmoil andthe future of generics companies is worrisome.
Under such circumstances, the Ministry of Health,Labour and Welfare mentioned that the industry
would never gain understanding from patients andmedical professionals only by setting new numericaltargets for generics. In order to regain public

FY2016

Manufactured capitalIntellectual capital

There is a pressing need for industry-wide initiative torestore confidence in generics which has been eroded25

Towa Group’s Capital

Natural capital

32,860 kl• Energy input:(crude oil equivalent, Towa’s 3 plants)• Water usage:743,944 m

3(Towa’s 3 plants)

We use good quality water and energy resources to
produce high-quality pharmaceutical products. In thisregard, from an environmental perspective, we manage
chemical substances properly, enhance the plants’ water
discharge and air emission systems, take energy-saving
measures, and make other efforts.

FY2022

TOWA PHARMACEUTICAL Integrated Report 2023

26

Mid-term Business Plan
Mid-term Business Plan
2021–2023

PROACTIVE
which we offer the Group’s products. Furthermore, in
the realm of new health-related businesses, we areembarking on a new era, so will be steadily doing
what’s necessary as we look ahead to the future.
To implement these policies, it will be important tocontinuously deliver technological innovation andproduct value, and we will therefore be continuously
working to enhance job satisfaction and foster
talented human resources.

Under our 5th Mid-term Business Plan 2021–2023
PROACTIVE II (the “Mid-term Plan”), the Group will
be developing health-related businesses in line withfive policies as shown in the diagram below. With ourdomestic and overseas generics business, which is
our core business, we will be aiming to make an evengreater contribution as we move forward into the
future. And as for overseas markets, we will be
expanding the number of countries and territories in

Towa Group’s
Health-Related
Businesses

Progress with implementation of Mid-term Business Plan
In our performance in the fiscal year ended March 31,
2023 while net sales increased with the consolidationof Sunsho Pharmaceutical, profit attributable to ownersof parent fell significantly, primarily due to a decreasein gross profit caused by the impact of the rising costof living, and a decrease in operating profit caused byan increase in SGA expenses.
Regarding the progress of the Mid-term Business
Plan, with no changes to the challenges, policies, andkey theme, we will continue to work toward the further

enhancement of corporate value in line with the Plan.
In terms of the numerical targets for major items, while
there is no change to our net sales target, in May 2023,
we announced a revision of our accumulative target for
operating profit. The reasons for this revision include a
decline in sales volumes caused by limited shipments
resulting from problems with supply stability, soaring
raw material and utilities costs, and depreciation of
goodwill. Accordingly, the target has been revised fromthe initial target of JPY 57.0 billion to JPY 36.5 billion.

Policy 3Entering new health-related
businesses

FuturePolicy 2

Expanding and growing businessin overseas markets

Net sales

Operating profit

Targets

Target (cumulative)

JPY 200.0 billion

JPY 150.0 billion

JPY 36.5 billion or more(consolidated)(non-consolidated)(revised)

Results for FY2021

Results for FY2021

Policy 1

Enhancing generics
business as a core

Present

Policy 4

Creating technology innovations and product value

Policy 5

Making job satisfaction and fostering talented human resources

165.6

JPY
billion(consolidated)

208.8

Securing stable supply and providing appropriate
information based on thorough manufacturing control
and quality control to restore trust in generics
Being a more trusted and needed company as acomprehensive generics manufacturer

27

Policy[Policy 1]
Enhancing generics
business as a core

19.2 billion

Results for FY2022

124.0

JPY
billion(non-consolidated)

JPY

5.5 billion

Key Theme• Stable product supply- Stable API procurement- Enhanced production capacity- Optimized Towa Sales System• Quality assurance• Broad product lineup• Manufacture of sophisticatedproducts with No. 1 total
product performance

R&D expenditure

Capital investment

Dividend policy

Target (accumulative)

Target (accumulative)

TargetJPY 35.0 billion or more

JPY 75.0 billion or more

Stable dividends

Results for FY2021

Results for FY2021

Results for FY2021

Delivering high-quality, value-added generics tocontribute to the health of people around the world[Policy 2]
Expanding and growing businessin overseas markets

Contributing to the realization of healthcare and nursing
care for society with long and healthy life expectancy
and also to society that shifts from medical care to careof pre-symptomatic disease care and prevention[Policy 3]Entering new health-related
businesses

Contributing to society by constantly supplying the Towa
Quality products and achieving sustainable growth[Policy 4]
Creating technology innovations
and product value

Results for FY2022

Continuing to be an ever-growing company thatprovides job satisfaction to each and every employee
through growth of both the company and its employees[Policy 5]
Making job satisfaction andfostering talented human resources

JPY

TOWA PHARMACEUTICAL Integrated Report 2023

JPY

Results for FY2022

JPY
billion(consolidated)
Challenges

123.3

JPY
billion(non-consolidated)• Entry to Disease risk testing
service business

JPY

11.5 billion

15.3 billion

JPY

14.8 billion

Results for FY2022

JPY

39.6 billion

Annual dividend of JPY

60

Results for FY2022

Annual dividend of JPY

60

TOWA PHARMACEUTICAL Integrated Report 2023

28

Mid-term Business Plan

Policy1

PolicyEnhancing generics business as a core2

generics manufacturer and also to accommodate
future expansion of our market share. Going forward,
we will emphasize the perspective of supply chain
management and strive to maintain and strengthen
the stable supply system through risk-adapted
initiatives.

To improve our stable supply system, we will further
strengthen our efforts made to date in the areas of“API procurement,” “enhanced production capacity,”and “optimization of the Towa Sales System.” We aremaking capital investments in our Yamagata Plant tofulfill our responsibility for stable product supply as a

We will strive for the sustainable growth ofour business by introducing new products in
Europe and the United States, mainly throughTowa HD, which we acquired in 2020. At thesame time, we will develop Towa Quality
products that meet patients’ needs overseas.
Furthermore, we will explore market
opportunities in new countries/regions.

Business scale

Stable product supply

Expanding and growing business in overseas markets

GrowthDevelopment of Towa Quality products meeting
existing and potential patients’ needs overseas

Exploration of market opportunities
in new countries/regions

Overseas
markets with
Towa HD
as a hubQuality assurance system

Market / Area

Policy3

Broad product lineup
FY2020 Product Composition
by Therapeutic Area

Other

Bio-pharmaceuticals

Medicaleffects andmechanisms

Anti-allergic

Antibiotics andchemotherapeutic

Oncology

Respiratory
Vitamin120

Gastrointestinal

Bio-pharmaceuticals
New TA
Cardiovascular

Other

Cardiovascular

Oncology
Respiratory
Vitamin

FY2030 Product Composition
by Therapeutic Area (Forecast)

130

Medicaleffects andmechanisms

Gastrointestinal
Anti-allergic
Antibiotics andchemotherapeutic

Neurological
Metabolic, etc.

Neurological
Metabolic, etc.

Entering new health-related businessesKeymeasures• Building a foundation for extending healthy life expectancy by utilizing data
• Contributing to Contributing to the Comprehensive Community Care System• Further enhancing lineup of products and services to maintain and improve health• Entering the disease risk testing service business• Creating synergies between and with existing businesses

Manufacture of sophisticated productswith No. 1 total product performance

29

TOWA PHARMACEUTICAL Integrated Report 2023

Development andlaunch of
new products

Application oftechnologies
Improvement
and modification

Towa
Quality

Information provision

Feedback
Information collection
Ideas for improvements

Analysis and evaluation

In-house manufacturing of APIs / innovative technology development and application researchStrengthening and streamlining of research and development functions

Public health nurses

Ideal
products
Community
Comprehensive
Support Center, etc.

Nursing
supportCertifiedsocial workers

Frai
l
Care
d

Prevention

Treatment
tic
ptoma
m
y
s
Pre diseasee

Pharmacists•OTC drugs•Medication support tools

s
isea

D

Doctors

Nursing homes, etc.

City offices and community centers

Local residents, etc.

Caregivers

In dGenerics
Researchers

Care managers•Communication
support•Nursing support

Core businessCompanies anduniversities

Good
HealthTrainers

Public health centers

Pursuit of
Towa Quality

them with completely new knowledge and technologies.
In addition, regarding Sunsho Pharmaceutical Co., Ltd.,
which became a wholly owned subsidiary in March 2022,
we concentrated on the promotion of PMI and the creationof Group synergy. Going forward, by leveraging Sunsho
Pharmaceutical’s strong technological capabilities,
extensive customer base, and knowhow on health foods
that it has cultivated to date, we will aim to develop adiversified portfolio of health-related businesses.

As part of our challenges, the Company aims to contributeto the realization of healthcare and nursing care for society
with a long and healthy life expectancy and also to societythat shifts from medical care to pre-symptomatic diseasecare and prevention. Recognizing this as a task toaccomplish, and in line with our vision of contributing topeople’s health, we are working to create new healthrelated businesses that are suited to the new medical
system, while acquiring new techniques and integratingSports facilities, etc.

Manufacture of sophisticated products with No.
1 total product performance refers to our
initiatives in providing the market with products
characterized by “Towa Quality” that are desired
and needed by customers. This guarantees thequality of the products that we supply underthorough quality control. We are constantly
using the latest technologies to improve andmodify the quality of the products, and we areconstantly upgrading the products to the latest
and best. We are strengthening and streamlining
research and development functions throughinvestment in facilities and equipment.

Expansion

products, the testing of finished products, productshipment decision-making by plants, and productshipment decision-making by the HQ QA Dept, we will
strengthen our management systems and schemes, andcontinue to work to ensure reliable quality and safety.

Throughout manufacturing and quality control processes,
we will comply with GMP, GQP, and GVP ministerial
ordinances and the GDP guidelines to maintain andstrengthen our quality assurance system. In every processfrom the acceptance of APIs to the testing of intermediate

We will put together a generic-drug productlineup with a focus on medicines deemednecessary for future medicinal treatment. With
joint sales of Infliximab BS as a steppingstone, we have entered the biosimilar market,
and in December 2021, we started
manufacturing and sales of our first authorized
generic, Eldecalcitol Capsules 0.5 μg/0.75 μg
Towa. Subsequently, we launched sales of thebrand-name drug, Edirol 0.5μg/0.75μg, in
December 2022. In addition, we will be taking
on challenges in diversified areas such as drug
re-positioning with iPS drug discovery,
development of Rivastigmine transdermal
system twice-a-week medicine, etc.

Sustainable business growth with Towa HD as a
hub through new product launches in Europe
and the United States

Dispensing
pharmacies

NursesMedical institutions

ividrm
ual Heatfo
alth Information Pl•Health foods•Supplements•Health promoting tools

Contributing to forming of infrastructure for the creation of ideal local communities
Providing necessary health promotion services to people who need them and contributing to the extension of healthy life expectancy

TOWA PHARMACEUTICAL Integrated Report 2023

30

Mid-term Business Plan

Towa Group’s Target Business
Policy4Creating technology innovations and product value

To contribute to society by constantly supplying Towa
Quality products and achieving sustainable growth as acompany, we will continue to work on creating
technology innovation and product value.
In particular, we will pursue technological innovationin API technologies such as molecular control
technology, chiral synthesis technology, andcontinuous-flow precision synthesis, in formulation
technologies such as ones that allow the production of
OD tablets that are easy to take, and in manufacturing
technologies for continuous production.
Sunsho Pharmaceutical, which is now a Group
company, constructed an Innovation Center to serve asa R&D base for enabling the development of state-ofthe-art pharmaceutical formulation technologies. The
company also possesses advanced drug formulation

API Technology
Establishment of molecular control technology
Freely controlling crystal form and particle size of APIs
Contribution to the development of value-added products
Establishment of chiral synthesis technology
Enabling efficient API synthesis
Development of continuous flow precision synthesis
Pursuing green sustainable chemistry with wastes reductions
and low CO2 emissions as key initiatives

Manufacturing Technology

and capsule technologies such as Uni ORV®
technology, and we are aiming for innovation by
integrating them with our own RACTAB® technology.
We are also stepping up efforts to create new productvalue. Regarding joint research aimed at obtaining a
new indication for Bromocriptine the results ofphysician-led trials suggest potential for formulation
development based on iPS drug discovery. Goingforward, Towa Pharmaceutical and Time Therapeutics,
Inc., in cooperation with Kyoto University, plan toconsult with the regulatory authorities and determine adevelopment policy with a view to obtaining approval.
As for our formulation of Rivastigmine a drug used by
Alzheimer’s disease patients, we are conducting clinical
trials (Phase III trial) with a view to obtaining approval
for manufacturing and sale of the formulation.

Formulation Technology

manufacturer. In addition, we will maintain andstrengthen our system to provide a stable supplyof products that meet quality standards and todeliver information on safety and quality in atimely and accurate manner.
Furthermore, the Group will pursue corporate
activities to contribute to the creation of newhealth-related businesses. Through thesebusinesses, we will help form an infrastructure tocreate ideal local communities, and contribute toextending healthy life expectancy by providing
necessary health promotion services to people inneed of them.
And with regard to the Sustainable
Development Goals (SDGs), international
objectives to be achieved by 2030, we aim tocontribute mainly to the attainment of Goal 3(Good Health and Wellbeing), while also working
to achieve the other goals.

Restoration of healthat pre-symptomatic
stage

Maintenance of
healthy conditions

Extension of healthy
life expectancy

Pursuing OD tablets that are easy to take
Further improvement of RACTAB
Masking technology to reduce bitterness, miniaturization of tablets,and better oral disintegration

Lineup ofessential products

Realization of stable formulations
Development of formulations applying technologies to suppress
the decomposition of active ingredients
Assurance of expiration period of formulation for three years or more

Creation of New Product Value

Establishment of technology to monitor products in real time
(PAT: Process Analytical Technology)

Joint research aimed at obtaining a new indication for Bromocriptine

Application to integrated continuous manufacturing system

Development of new Rivastigmine formulation

Production carried out under an integrated flow leading to labor saving
Smaller manufacturing facilities and occupation area

Based on our vision “We contribute to people’s
health; we are dedicated to people’s genuine
smiles,” Towa Group contributes to people’s
health by creating superior products andservices. Through our corporate activities, we
aim to be a company that is valued and neededby patients, Medical professionals, local
communities, and others.
Under the 5th Mid-term Business Plan, we will
maintain our vision while expanding the scope ofour business to include health-related
businesses. Nevertheless, our core genericbusiness in Japan and overseas will maintain its
central role in our operations.
In this core business, we will further strengthen
and utilize the results of all the efforts we havemade so far. Based on the premise of “pursuit of
Towa Quality,” we will strengthen our“Assortment of needed products” to meet thedemands of society as a comprehensive generics

Clinical trials for familial Alzheimer’s disease started

Pursuit of
Towa Quality

Generic
business

Build up basics onhealth related
infrastructure

Maintenance andstrengthening of stablesupply and quality
assurance systems
Response to local
Comprehensive
Community Care System

Grasping healthconditions

Maintenance andstrengthening of
information provision

Health-related
businesses

OthersDevelopment of transdermal system twice-a-week medicine
Hope for reducing the burdens on patients, their families, and caregivers

With generics business set as our core, expansion of
all health-related businesses contributing to people’s health

Policy5

In response to the international initiatives of SDGs to beachieved by 2030, we will focus on Goal 3 (Good Health andWell-being), while also working to achieve the other goals.

Making job satisfaction and fostering talented human resources

As the growth of employees leads to the strengtheningof corporate fundamentals and facilitates growthcorresponding to change, we are working to establish
an environment for the enhancement of corporate
fundamentals. In connection with this, we are aiming
to create workplaces where there is respect for

31

TOWA PHARMACEUTICAL Integrated Report 2023

diversity in work styles and motivation for each andevery employee. We also view our employees as vital
investment resources and assets for the Company,
and are stepping up fostering talented humanresources who can make an impact as we pursue
growth.

TOWA PHARMACEUTICAL Integrated Report 2023

32

Towa Group’s Sustainability
Approach toward sustainability
Now that the volume share of generics has reached about 80%, we believe that it is our social responsibility to strive for a morestable product supply and to further improve the quality of our products. Accordingly, we will thoroughly implement productmanagement and quality control. At the same time, we are committed to contributing to building a foundation for the creation of an
ideal local society through new businesses and regions, providing necessary services to promote health to those who need suchservices, and thereby contributing to extension of healthy life expectancy.
Under such policies, in order to develop a long-term vision for major changes in the future while integrating all of the strengths of
the Group, it is necessary for each business or company to define the goals that they should aim for, for each company to become anautonomous organization to discover new social issues, and for us to use the collective strengths of the Group to solve such issues,
so that we can realize the Company’s vision, “We contribute to people’s health. We are dedicated to people’s genuine smiles.”As a group governance system to realize the foregoing, the Risk Management Committee (chief risk officer: Itsuro Yoshida,
President and Representative Director), which is consulted by the Board of Directors regarding risks including climate change,
collects and analyzes information in collaboration with departments and affiliate companies and examines expected risks (including
opportunities related to climate change) and initiatives related thereto. The Board of Directors receives reports from the Risk
Management Committee on the status of examination twice a year, determines the policies, and supervises the Committee.
In addition, the Executive Strategy Meeting chaired by President and Representative Director, Itsuro Yoshida, meets once a week inprinciple and deliberates on important items related to management issues. The Meeting deliberates on our management policies andthe Mid-term Business Plan including personnel measures and clearly defines the basic strategies and management targets.

Sustainability

Environment

33

TOWA PHARMACEUTICAL Integrated Report 2023

Governance
Organizational structure and processes
The TCFD Subcommittee was established as a
subcommittee under the Risk Management Committee
and responds to climate change-related issues. The Boardof Directors consults the Risk Management Committee,
determines their policies, and supervises the Committee.
The Risk Management Committee deliberates on thestatus of initiatives undertaken by the TCFD
Subcommittee, and reports to the Board of Directors on
the status twice a year.
The TCFD Subcommittee collects and analyzes
information in collaboration with departments andaffiliate companies, identifies and assesses expectedrisks and opportunities related to climate change, andreviews the assessment. In addition, the Subcommittee
formulates the action plans, countermeasures, etc.,
checks and follow ups the status of implementation ona periodic basis, and reports the status of
implementation to the Executive Strategy Meeting as
appropriate. Furthermore, it reports each importantmatter to Risk Management Committee members.
Departments and affiliate companies implement
various measures that are formulated in collaboration
with the TCFD Subcommittee, and provide data related
to climate change.

The Executive Strategy Meeting receives reports
from the TCFD Subcommittee as appropriate andissues instructions and approvals when necessary.
The Audit and Supervisory Committee and theInternal Audit Office conduct audits on these initiatives.

Decision-making and supervising function
Board of Directors
Directors(excluding those who are
Audit and Supervisory
Committee Members)
Consultation/supervising

Supervising

Audit/supervising

Audit and Supervisory
Committee

Directors
who are Audit and Supervisory
Committee Members

Reporting

Supervising

Cooperation

Reporting
Supervising

Business
executionfunction

Appointment/
removalPresident andRepresentative Director

Risk Management
Committee
TCFD
Subcommittee

Executing organizations/
meetings
Instructions andapprovals
Executive Strategy
Meeting
Reporting

Cooperation

Reporting

ReportingExecutive Monitoring
Meeting

Operating
Officers
Departments
Affiliate
companies

Supervising

Strategies
Assumptions for scenario analysis

Information disclosure based on the TCFD recommendations
The Group recognizes that global warming is a worldwide
issue, and thus has long been working on initiatives suchas installation of solar power generation systems andenergy saving at its plants, laboratories, offices, etc. In
addition, in the recognition that climate change is amanagement risk of the Group, we launched a TCFD (Task
Force on Climate-related Financial Disclosures) project andcommenced company-wide initiatives in FY2022.

The scope of examination will be expanded to theentire Towa Group from FY2023, and we will promotefurther information disclosure.

Internal Audit Office[Basic approach]
We act based on the principles in “the Charter of Corporate
Behaviors in Towa Group” with high ethical standards andsocial good sense to promote proper corporate activities
enabling us to gain trust and support from society. In ouraction, we strive to reduce global environmental load aspart of our social responsibility as a good corporate citizen.
Concretely, we are dedicated not only to proper
management of chemical substances and prevention ofpollution, but also to actions for alleviating environmental
concerns through plant drainage and emission systems andtaking energy-saving and decarbonization measuresthrough effective uses of mega solar systems. Furthermore,
we are aggressively working to achieve an eco-friendly
manufacturing method of APIs.

creation of a sustainable society by reflecting specificcountermeasures against risks and opportunities that havebeen materialized to our strategies, and aim to achieve
continuous growth of the Company’s businesses.

The Towa Group announced in December 2022 its
support for the TCFD recommendations established by the
Financial Stability Board (FSB). In FY2022, examination
was conducted with a single entity of Towa as the scope ofthe examination. We assessed and identified risks andopportunities posed by climate change issues on society
and corporations, and estimated the level of impact on
Towa’s businesses. In the future, we will contribute to

The Company conducted scenario analysis for
manufacturing, selling, businesses, etc. of its ethicaldrugs, assuming the world as of 2030. In the scenario
analysis, we have formulated three scenarios, namely
1.5°C, 2°C, and 4°C scenarios, in reference to various
reports issued by IPCC, IEA, etc. In the 1.5°C scenario,
it is assumed that various regulations, including acarbon tax, will be introduced to realize a decarbonizedsociety and there will be increasing demands fromvarious stakeholders to respond to climate change,
while new needs may arise due to changes in society
and lifestyles. In the 4°C scenario, it is assumed thatthe progress of global warming will increase the risk ofdisasters such as extreme heavy rainfall and healthrisks such as heat stroke, while new needs may also
arise for adaptation to climate change.

Results of scenario analysis
We identified risks and opportunities based on eachscenario, assessed the criticality on the businesses
depending on the likelihood of occurrence and thelevel of impact of each risk and opportunity, andconsidered countermeasures. As a result, there were

no serious business risks associated with climatechange on the subject businesses that have been
identified. Risks and opportunities expected in the
1.5°C scenario and the 4°C scenario are as listed in
the following page.

IPCC: Intergovernmental Panel on Climate Change
IEA: International Energy Agency

TOWA PHARMACEUTICAL Integrated Report 2023

34

Environment
Sustainability

Scenario analysis
Item

Event
Introduction ofa carbon tax

Transition

PolicyRisk andopportunity
1.5°C
scenario

Tightening of
regulations for CO2
emissions/energy
savingTechnology
Promotion of
decarbonization ofentire society
MarketAcuteIncreases in frequency
and magnitude ofmeteorological disasters

PhysicalRisk andopportunity
4°C
scenario

Chronic

An increase in extreme
weather (extremely hot
days, etc.)

Business impact

Level ofimpactCountermeasure[Risk]
An increase in business operating costs due to higher
carbon tax burden[Risk]
An increase in energy procurement costs associatedwith a shift to energy with less environmental load
[Opportunity]
Promotion of energy saving, reduction of business costs byreviewing supply chains, and promotion of decarbonization

Medium• Implementation of evaluation, factor analysis,
measures to control frequency of CO2 emissions• Introduction of low-carbon facilities and energy-saving
equipment

Medium• Collection of information and introduction of various
decarbonization technologies (while investment costs are
incurred, subsequent business operating costs are reduced)[Risk]
An increase in costs for procuring raw material due
to promotion of decarbonization at suppliers• Risk hedge by securing multiple suppliers[Risk]
Suspension of operations due to damage tocompany-owned locations and/or supply chainsLow• Establishment of manufacturing methods with low
environmental load

[Risk]
An increase in capital investment costs to promotedecarbonization

Low• Establishment of a backup system among business sites
Low[Risk]
An increase in air conditioning costs, etc. for quality
control• Introduction of energy-saving facilities

Low[Opportunity]
An increase in demand for drugs for diseases
increasing with climate change• Development and launch of products with an eye on
trends in demand for pharmaceutical products

Low

Responsible Business Activities• Strengthening of information disclosure
Low• Diversification of sales channels and user contact
pointsRisk management
The TCFD Subcommittee conducts an annual reviewof the risk and opportunity assessment to manage
climate change-related risks and opportunities.
Risks and opportunities are assessed from such
perspectives as the likelihood of occurrence, level ofimpact, presence or absence of countermeasures,
respectively, to determine the criticality.
In addition, we also subdivide them into value
chains* to assess them and consider countermeasures.
When assessing risks and opportunities, we conduct
interviews with relevant business departments asnecessary.

Those with high criticality are reviewed by the Risk
Management Committee and reported to the Board of
Directors through the Risk Management Committee asnecessary.
In addition, the TCFD Subcommittee formulates
countermeasures against climate change-related risks
and opportunities and manages the progress of suchcountermeasures based on preset indicators.
*Value chains:
Value chains are a classification of businesses by function, and the Company
categorizes businesses into “R&D; Purchase/Procurement; Manufacturing;
Distribution; Sales/Marketing; and Administration Management.”

Indicators and targets
The Group has calculated greenhouse gases emissions
as an indicator to manage climate change-related risks
and opportunities and set mid- to long-term reduction
targets. For Scopes 1 and 2, we will aim for emissions
reduction by 30% in FY2030 as compared withFY2021, and for the carbon neutrality by FY2050.

Emissions in Scopes 1, 2 and 3 (CO2 emissions (t-CO2))
FY2021
Scope 130,098FY2022
29,948

Scope 2

43,18047,661

Scope 3

947,466

1,045,925

Scope of calculation: TOWA PHARMACEUTICAL CO., LTD., J-Dolph Co., Ltd., Daichi Kasei Co., Ltd., Greencaps Pharmaceutical Co., Ltd., Towa
Pharma International Holdings, S.L., Sunsho Pharmaceutical Co., Ltd., etc.
Period of calculation: From April 2021 to March 2022 and from April 2022 to March 2023, including Sunsho Pharmaceutical Co., Ltd. and Towa
Pharma International Holdings, S.L. which changed the fiscal year end to March 31 starting from the fiscal year ended March 31, 2023

TOWA PHARMACEUTICAL Integrated Report 2023

[Basic approach]To fulfill our responsibilities as a company providing
ethical drugs, the Company strives to provide
information to patients and medical professionals inmany different ways, which include providing andcollecting pharmaceutical information through our
medical representatives. We also focus on our
responsible business activities ranging from stablesupply to quality assurance.

Low•C onducting risk assessment related to raw material
procurement• Operation of a crisis management system inpreparation for meteorological disasters[Opportunity]
Establishment of competitive advantage by leveraging proprietary
technologies and an increase in demand for value-added products

35

Society

Scope of analysis: TOWA PHARMACEUTICAL CO., LTD. (single entity) Period subject to analysis: FY2021-FY2030

Information Provision by Medical
Representatives
Our medical representatives, whose number is proudly
reported to be the largest among the domestic
manufacturers of generics, work on the provision,collection, and transmission of pharmaceuticalinformation. We are also enhancing the network of
medical representatives to be able to respond 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 to recognize and enhancetheir specialized capabilities in cancer, immunology,
CNS areas, etc., so that we can provide information
requiring more specialized expertise.

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 uses 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 a
24/7 basis.
Customer Service is offered for patients and thegeneral 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 be used byparents trying to help children take medication, as wellas 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 and other food/beverages
other than water to alleviate the bitterness for family
caregivers trying to help their children or those they
are caring for to take medication. The materials andresults of these studies are provided to patients andtheir family members through medical institutions.
People can access information about medicines byscanning a QR code* printed on a
product package with theirsmartphone or cell phone. For
formulations for children, QR codes
provide information to parents
about the taste of medication andhow to help patients (their children)
take medication smoothly.
*QR code is a registered trademark of
DENSO WAVE INCORPORATED.

Booklet to provide
information

TOWA PHARMACEUTICAL Integrated Report 2023

36

Society

Responsible Business Activities

Stable Supply System

Quality Assurance System

Stable supply is one of our important missions to beaccomplished as an ethical drug manufacturer. We
have production sites in Osaka, Okayama, andYamagata. To ensure stable product supply,
production of oral dosage forms is dispersed to thethree plants; and the production of injections is
integrated into Yamagata Plant built with theseismically isolated structures to minimize natural
disaster risks.

Osaka Plant

Okayama Plant

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

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 Company has put in place procedures
compliant with the GMP three principles in all ofour plants in Yamagata, Osaka, and Okayama,and strives to manufacture reliable-quality
pharmaceuticals.

Minimizehuman error

GMP
three
principles
Prevent contamination
Establish
and quality degradation ofhigh-degree
medicinal products
system for quality
assurance

Yamagata Plant

Our Efforts for Stable API Procurement
We regularly inquire and confirm API manufacturers
whether they manufacture APIs in accordance withvarious standards, laws, and regulations to enable
the stable procurement of the APIs. In addition, toenable stable API procurement even if some suppliesof APIs are suspended, we promote a procurement

GMP Three Principles

Strict quality control standards established by the national
government apply to all processes of ethical drug
manufacturing operations. In order to be a trustworthy
company, we carry out company-wide quality control
initiatives ranging from product R&D, manufacturing, andmarketing to after-sales 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 to be 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 to assure the quality andsafety of pharmaceutical products through introducing
international standards and establishing our original systems
and training programs from the perspective of “minimizing
human error,” one of the GMP three principles.

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

system in which a single API can be procured frommultiple manufacturers (multiple-sourcing system).
Another attempt to enhance stable supplies is madeby establishing methods of manufacturing APIs atinternal sites and actually manufacturing them at ourgroup company.

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
Process Control B

Towa Group’s Initiatives

Risks in API
Procurement

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)
Procurement of starting materials and intermediates(Overlapping of API upstream suppliers)

37

TOWA PHARMACEUTICAL Integrated Report 2023

In-house manufacturing of APIs

Acceptance

Reduction of the risk of stable supply due to external factors bydeveloping synthesis processes and manufacturing at Daichi Kasei
or partnering companies

Manufacturing

Testing ofintermediate
products

Testing offinishedproducts

Product
shipment
decision byplants

Product
shipment
decision by
HQ QA Dept

Audit system for manufacturing sites
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
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

Dealing with mutagenic impurities

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

Taking appropriate measures with highly accurate measurement
and identification of generation mechanisms
Forecast of risks based on the latest knowledge

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38

Society

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
for ever as it isFostering of talented
human resources

Special attachment
to making things

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

Encouraging employees togrow as important assets
for the company

Career Development Support
The Company is committed to “career development
support” for employees as part of our human resources
strategy, and strives to realize the continuous personal
growth of employees and create opportunities for
employees to demonstrate their abilities to the maximum
extent. By so doing, we aim to create an organization
where employees can work vibrantly, and thereby
become an organization and a company where all
employees feel a sense of job satisfaction.
More specifically, the Company holds interviews
between individuals and the Human Resources Division

staff and conducts career development training for thosein managerial positions based on internal questionnaire
surveys, so that the Company can support their
independent career development. In addition, we
conduct career development training every year for
those who are newly appointed to managerial positions
and those who are in the fourth year since their hiring
upon graduation. Meanwhile, the Career Development
Department proactively discusses initiatives toward
career development support and reports the results of
their discussions to the Executive Monitoring Meeting.

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 ourvision to employees.
T-SMILE is an acronym of six words: Truthful that means sincerity, honesty andfairness; Speed that represents swift decision-making, action and information
sharing; Mission that expresses missions and passion to be of service to help
people maintain their good health in communities around the world; Idea that
represents creativity and imagination to challenge for unprecedented
transformation; Linkage that gives the impressions of connections between people
and information, coexistence, and co-prosperity; and Excellence that represents
the mind to choose the most appropriate technologies that fit with the times andhighest quality. These words serve as a course of action and criteria based on
which employees help realize the Group’s vision “We contribute to people’s health.
We are dedicated to people’s genuine smiles” through corporate activities.

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TOWA PHARMACEUTICAL Integrated Report 2023

Our new
commitmentsfor people’s
genuine smiles

Original Qualification Systems

Our Efforts for Diverse Work Styles

From the perspective of ensuring reliable quality andsafety, we develop employees with high awarenessthrough our educational training programs and original
qualification systems. Specific examples include 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. In addition, we have introduced a“specialist MR system” as an internal qualification. We
aim to develop MRs who can contribute to team
medical services as specialists with knowledge in
specific fields such as cancer, psychiatric disorder, andprimary care, providing more appropriate information
to healthcare professionals. In addition to theforegoing, in FY2021, we established a new “inventory
observer qualification” as an internal qualification.
Going forward, by promoting various certification
systems, the Company will help employees in eacharea develop into specialists in manufacturing control
and quality control. Meanwhile, we aim to develop
employees who are highly aware of ensuring quality
and safety.

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.
Indicator
TargetRate of holding interviews
100%with the Human Resources (October 2022 to the end of
Division staff
September 2023)
Ratio of women in
management positions

Achieve 13%

Ratio of paid leave taken

Achieve 65%

Result97.4%(Result for June 2021 toMarch 2022)

12.8%(As of March 2023)

66.3%(Result for FY2022)

Towa Health Challenge 2023
2023 Certified Health & Productivity
Management Outstanding Organizations
Recognition Program (White 500)
We were recognized as one of White 500 enterprises(large enterprise category) under the 2023 CertifiedHealth & Productivity Management Outstanding
Organizations Recognition Program selected jointly by
the Ministry of Economy, Trade and Industry and the
Nippon Kenko Kaigi (organization that takes practicalcommunity- and workplace-based actions, throughcollaboration among private organizations and with full
administrative support, in order to extend the healthy
lifespan of and provide appropriate medical care foreach individual in Japan.).
The program started in FY2017 to recognize
companies that care about employees’ healthmanagement from a business-management perspective
and strategically implement relevant initiatives. We havebeen recognized as one of the enterprises for six
consecutive years. This year, we were recognized as
one of White 500 enterprises, the top 500 implementing
a higher level of health and productivity management.

In June 2023, we had a health measurement event called “Towa
Health Challenge 2023.” This event was aimed to encourage
our employees to think about their own health. This event is a
substantial one, in which seven items, namely, vascular age andstress, body composition, cognitive ability, muscle strength andbalance, joint range of motion, walking posture, and generalendurance, are measured and “training movies” are delivered
on a continuous basis based on the measurement results.
Awards were also presented to employees who had achieved
particularly outstanding results in “Towa Health Challenge2022” conducted in the previous fiscal year. To help our
employees improve their lifestyle habits, we will continue tohold the event as an annual company-wide event.

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40

Society
Sustainability

GovernanceSocial Contribution Activities

Company-sponsored Daycare Centers

High School Student Business Contest
We held a “High School Student Business Contest
for the Future and People’s Health” for the fourth timein FY2022. As a part of our efforts to widely
disseminate the Group’s vision “We contribute topeople’s health” and contribute to a wide variety ofhealth-relatedindustries, the contest
is aimed at seeking
fresh ideas from highschool students whowill lead the future ofJapan and creating asocial contribution
opportunity for them.

[Basic approach]
We consider enhancing corporate governance to be an
important managerial task. By ensuring compliance-oriented
management and raising management efficiency andtransparency, we will continue to increase our corporate value.
To achieve this, we endeavor to respect and protect
shareholders’ rights as well as establish and maintain 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 byfocusing on maintaining and improving corporate ethics andethical standards of officers and employees.
This policy also applies to the Towa Group companies. Eachof the Group companies fulfills required roles and obligations
to increase the corporate value of the Towa Group as a whole.

Overview of the corporate governance structure
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

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—”

41

TOWA PHARMACEUTICAL Integrated Report 2023

General Meeting of Shareholders

Cultivation of Pharmaceutical
Product Raw Materials in Mongolia
As an example of social contribution activities in overseas
countries, the Company has been implementing a projectin Mongolia for more than 10 years to cultivate licorice
and other plants used as herbal medicine. Mongolia’s
industries to support its economy that are unique to itself
are limited, and in addition, the country is facing a serious
issue of desertification of land. Accordingly, as theCompany had a relationship with the country throughtrading of pharmaceutical products, we have pushedforward with support to Mongolia.
We have been working to encourage the cultivation oflicorice in this country in the recognition of the large
number of licorice plants growing wild in the vast
grasslands. Licorice is heavily used as a natural foodadditive, and also used for herbal medicine. It is avaluable plant that can be used as a pharmaceuticalingredient because glycyrrhizic acid can be extracted.
However, licorice requires at least five years fromplanting to harvest to be used as raw materials for herbal
medicine. Therefore, the Company has initiated a “100Year Plan” in which we support activities ranging fromsecuring cultivation land to planting, managing, andharvesting licorice, which are followed by drying,chipping and sales. Going forward, we are committed tocontributing todevelopment ofindustries in Mongolia
through cooperation withlocal people by making
the local licorice
extraction and salespossible to make theplant into pharmaceuticalproducts.

Appointment/dismissal

Decision-making andsupervising function

Appointment/dismissal

Board of Directors
Directors

Recommendation
Nominating
andCompensation
Committee Consultation

Directors
who are Audit and Supervisory Committee Members

Basic policy for developing the internal control system

Supervising

Business execution function

Appointment/
removalSupervising

President and Representative Director

Audit andSupervisory Committee

Audit/
supervising(excluding those who are Audit andSupervisory Committee Members)

Appointment/dismissal

Reporting Reporting

Audit

Cooperation

Cooperation

ReportingExecuting organizations/meetings

Risk Management
Committee(TCFD Subcommittee)

Executive Strategy
Meeting
Executive Monitoring
Meeting

Accounting
AuditorOperating Officers
Departments

Audit

Internal
Audit Office

Affiliate companies

Investigation/correction

Accounting
audit

Cooperation

Compliance Committee (Whistle-blowing helpline)

Enhancement of the corporate governance structure
Towa continuously makes efforts to enhance its
corporate governance structure. Towa is a company
with an audit and supervisory committee. 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. Its important roles
also include resolving the basic policy of the internal
control system and supervising Directors’ businessexecution. To ensure the effectiveness of such decisionmaking and supervision, we need to reduce the number
of Directors, separate Directors and Operating Officers

TOWA PHARMACEUTICAL Integrated Report 2023

42

Governanceand clarify their roles, and build an environment thatencourages Outside Directors to express their opinions.
Under these policies, Towa has made several efforts.
These include the transition to a company with an audit
and supervisory committee, introduction of a mid- tolong-term performance-based stock compensation
system, establishment of the Nominating andCompensation Committee, enhancement of functions of
Outside Directors, and stimulation of the Board of
Directors. Going forward, Towa will continue to focus on
enhancing the corporate governance structure.

major offices. In addition, the Audit and Supervisory
Committee has established its own whistle-blowing
helpline, which accepts whistle-blowing on matters
involving officers as a highly independent contact.

Roles and independence of Outside Directors

Nominating and Compensation
Committee
The Nominating and Compensation Committee of theCompany is chaired by the Representative Director
and more than half of whose members are
Independent Outside Directors. The purpose of theNominating 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.

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

Analysis and evaluation of
the effectiveness of the Board of
Directors as a whole
In February to March 2023, the Company conducted aself-evaluation survey for Directors to analyze and evaluate
the effectiveness of the Board of Directors. The survey used
a questionnaire consisting of 21 questions including thoseon the structure, operations, and discussions of the Boardof Directors. Results of the survey were reported at themeeting of the Board of Directors held on April 17, 2023.
Although the survey showed no significant issues on theeffectiveness as a whole, it reminded us that we need tofurther discuss the discovery and development of humanresources from a mid- to long-term perspective as well as
mid- to long-term management challenges. Based on thoseresults of the evaluation, the Company will further endeavor
to enhance the effectiveness of the Board of Directors.

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 andSupervisory Committee Members conduct effective audits
according to audit plans formulated by the Audit andSupervisory 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

The Company formulated the basic policy for thedetermination of Directors’ compensation as detailed on
the next page. 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 advanceby the General Affairs Department, the administrative officeof the Board of Directors, so that the Members canconsider matters to be discussed thoughtfully. In addition,
they are provided with necessary support by the assistantstaff of the Audit and Supervisory Committee as well asreports and explanations on important matters by thefull-time Audit and Supervisory Committee Member.

The Company believes that fair and efficient corporate
management can be achieved through Outside Directors’
advice and opinions on the promotion of sound andefficient management at Board of Directors meetings. The
Company has established the Nominating andCompensation Committee as an advisory body to theBoard of Directors in order to further enhance andstrengthen 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 decision-making process on thematters such as the appointment or dismissal of andcompensation for Directors and other officers.

Reasons for nomination of Outside Directors
Name and
position
Outside Director(Audit and Supervisory
Committee Member)

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

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

Kenryo Goto
Assumed the officein June 2021

Reasons for nomination

Attendance

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

Board of Directors
meetings(held 14 times)
100%

Audit andSupervisory
Committee meetings(held 13 times)
100%

Kaori Oishi is well versed in corporate legal affairs as an attorney-at-law. The Company
expects that she will provide advice and opinions based on her wealth of experience andexpertise as well as from a female perspective, for which reason it has nominated her as
an Outside Director.

Board of Directors
meetings(held 14 times)
100%

Audit andSupervisory
Committee meetings(held 13 times)
100%

Kenryo Goto has expertise in fields including finance and accounting as a certified public
accountant and extensive experience as a corporate manager of an audit firm. The Company
expects that his advice and opinions based on such a background will improve the transparency
and objectivity of management, for which reason it has nominated him as an Outside Director.

Board of Directors
meetings(held 14 times)
100%

Audit andSupervisory
Committee meetings(held 13 times)
100%

History of Towa’s corporate governance
Skill matrix
Corporate
management

Itsuro Yoshida
InsideDirectors

Masao Tanaka
Osamu Uchikawa

Management
strategy
Businessstrategy

Finance/
Accounting

Legal affairs/
Riskmanagement

Personnel

Purchasing

R&D

Production

Quality control/
Reliability
assurance

GlobalJune 2019
Towa transitioned to a company with an audit andsupervisory committee
The mid- to long-term performance-based stockcompensation system was introduced

2020

October 2019
The Nominating and Compensation
Committee was established

2019
2018

Norikazu Inoue
Norikazu Eiki
OutsideDirectors

2017
2016

Kaori Oishi
Kenryo Goto

43

June 2015
An Outside Director assumed the position

TOWA PHARMACEUTICAL Integrated Report 2023

June 2020
A woman assumed the positionof Outside Director

2015

June 2018
The number of Outside Directors increased to two

TOWA PHARMACEUTICAL Integrated Report 2023

44

GovernanceRisk Management
Basic approach to risk management

Compensation for officers
The Company formulated the basic policy for thedetermination of Directors’ compensation. Under thepolicy, 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, in 2019 the Company
introduced the mid- to long-term performance-based stockcompensation system for Directors (excluding Outside
Directors and Directors who are Audit and Supervisory
Committee Members). This introduction was made tofurther clarify the link between compensation and theCompany’s mid- to long-term performance and shareholder
value, as well as to improve corporate value over the
medium to long term by granting incentives while raising
Directors’ awareness of contribution to the improvement ofcorporate value and shareholder-centered management.
In addition, the Company has established the Nominating
and Compensation Committee as an advisory body to theBoard of Directors with the aim of increasing the objectivity
and transparency of the decision-making process ofcompensation for Directors or other matters as well as
further enhancing and strengthening the corporate
governance structure.

Total amount of compensation for Directors
Amount of compensation by type (JPY million)

Position

Total amount ofcompensation(JPY million)

Basic
compensation

Annual bonuses(based on individual
performance)

Monetary
compensation

Non-monetarycompensation

Directors (excluding those who are Audit andSupervisory Committee Members)

156

107

16

25

7

3

Directors who are Audit and Supervisory Committee
Members (of which Outside Directors)

49
(26)

49
(26)

(-)

(-)

(-)

-

4
(3)

Total (of which Outside Directors)

206
(26)

157
(26)

16
(-)

25
(-)

7
(-)

7
(3)

-

Performance-based compensation-

Number of eligible
officers

Cross-shareholdings
The Company may hold cross-shareholdings upon request from abusiness partner as a means to build, maintain, and strengthen longterm and stable transactional relationships with the business partner.
In that case, however, the Company holds cross-shareholdings only
when it is deemed that holding of such shares will contribute to theenhancement 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 enhancement of shareholder value. The
Company does not make an affirmative 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, theCompany does not hinder the sale or other acts. When conducting
transactions with cross-shareholders, the Company will thoughtfully
examine the economic rationality of those transactions, just as withthose with other business partners.

Dialogues with stakeholders
The Company discloses the information on its management
strategies, finance/performance status, among other matters, toshareholders, 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.

45

TOWA PHARMACEUTICAL Integrated Report 2023

The Company recognizes the importance of appropriate
collaboration with not only shareholders and investors but also
other stakeholders including patients, medical professionals,
business partners, local communities, and employees. For creating
corporate value, we are committed to disclosing information in an
appropriate and timely manner to all of our stakeholders in order tomaintain good and smooth relationships with them.

To ensure company-wide risk management, theCompany has formulated the “Basic Regulations for
Risk Management,” which shall be complied with by
all the departments, officers, and employees of the
Towa Group. It is critical for the Group’s continuationand growth to respond to the risks surrounding theGroup promptly and appropriately. We aim to prevent
risks as well as to minimize the loss of stakeholders’profits and impacts on corporate management whena risk occurs. The Group’s risk management isadministered by the Risk Management Committee,
established under President and Representative
Director, who is the chief risk officer.

Risk Management Committee
The Risk Management Committee addresses the risks
surrounding the Group promptly and appropriately
with the aim to minimize the loss of stakeholders’interests and impacts on corporate management
when a risk occurs while preventing risks.
The Committee consists of 17 members including
Representative Director Itsuro Yoshida, who serves as
the chief risk officer. In addition, Director (Audit andSupervisory Committee Member) Norikazu Inoueattends meetings of the committee as an observer.
In terms of the impact of climate change on the
Company’s business activities and earnings, etc., asubordinate organization of the committee, beginningin FY2022, works to implement scenario analysis andconsider GHG emissions reduction measures, basedon the recommendations of Task Force on Climaterelated Financial Disclosures (TCFD). We strive todisclose the information, upon report to the Board of
Directors, as appropriate.

Information security
To increase the Company’s trustworthiness andcompetitiveness, the Company has formulated its
information security regulations. The regulations
consist of basic rules for appropriate use,maintenance, 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.

Fire evacuation drill

Risk 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 period

Control in accordance with
the Pharmaceutical andMedical Device Act, etc.

of time. Thus, the Group faces specific risks as a
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 manufacturing and marketing prescription products in accordance with the Pharmaceutical and 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 address risks
related to various regulations, the Group collects information on the laws and regulations to conduct business in accordance with them. In addition, we have developed acompany-wide plan and system for compliance promotion.

TOWA PHARMACEUTICAL Integrated Report 2023

46

GovernanceCompliance
Patent andre-examination periods

The active ingredients of branded drugs are usually protected by patent rights, and the period is 20 years from the 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). The Group collects information on patents and re-examination periods as well as facilitates collaboration among related departments. We strive toresolve discrepancies in indications by obtaining approval for partial changes, such as additional indications as soon as possible, after the patent period on a branded drug
expires, or by applying for partial changes after the re-examination period.

Re-evaluation based on
the Pharmaceutical andMedical Device Act

Re-evaluation of drugs is a system in which the quality, efficacy, and safety of approved drugs are reviewed from the current academic standards. If the drug efficacy
re-evaluation shows no usefulness, the product is recalled and disposed of. If the quality re-valuation shows that the drug is not equivalent to that of a branded drug,
subsequent marketing may be discontinued. These situations may affect our group’s financial position and operating results. The Group collects information on scientific andtechnological progress to appropriately evaluate drugs.

Adverse drug reactions

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 riskof serious adverse reactions is minimal. However, if they occur, it may affect the Group’s financial position and operating results. The Group collects information on drugs
including that on the occurrence of adverse drug reactions in compliance with each country’s regulations. This allows us to determine and conduct necessary measures basedon the results obtained through assessment and consideration.

Drug price system andmedical cost
containment policy

To sell ethical drugs, which are our mainstay products, the products have to be listed in the NHI price list specified by the Minister of Health, Labour and Welfare. The Group’s
financial position and operating results could be affected if the medical insurance system is reviewed, the drug price system is significantly changed, or the medical cost
containment policy is reinforced. The Group aims to sell products at fair prices that match the value of the products while engaging in cost reduction activities by reducing
procurement costs of raw materials and increasing production efficiency.

Compliance policy
In order to be committed to ethical and law-abiding
corporate behavior in accordance with the “Towa Group
Code of Conduct,” the Group promotes measures aswell as training and education to raise complianceawareness of the officers and employees. Furthermore,
we develop and appropriately utilize a whistle-blowing
helpline 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 and reports the results directly
to the top management. In the case where the Internal
Audit Office finds anything that needs improvements, it
conducts a follow-up audit to check the improvements.

Compliance structure
Patent litigation

Mark-to-market
valuation of derivatives

Risks in the competitiveenvironment

The Group imports certain semi-finished products and raw materials from overseas manufacturers in foreign currencies. If the costs increase due to a weak yen, it is extremely
difficult to shift the increase onto the sales price under the drug price system in Japan. To avoid the risk of cost increase due to depreciation of yen and to provide a stablesupply of our products, we conduct long-term derivative transactions. Such transactions are subject to mark-to-market valuation at the time of financial closing, and valuation
losses may occur if the yen is stronger, or the long-term interest rate spread between Japan and the US is larger, than at the end of the previous fiscal year. Therefore,
valuation loss may occur depending on the exchange rate and the interest rate trend in Japan and the US. In the opposite case, valuation gains may occur. 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 competitive market for generic drugs is composed mainly of a switch from brand-name drugs and is greatly affected by the number of sales promotion companies. In
recent years, companies have been planning strategies, such as introducing authorized generic products. Our actual sales revenue may differ from planned revenues,
depending on their trends. In addition, competitors’ supply status impacts demand for our products, which could risk a stable supply. The Group responds to such risks byincreasing production capacity through capital investment, improving the backup system for manufacturing sites, and ensuring a stable supply of products from the production
and sales aspects by monitoring the volume of demand and inventory daily. We are also making efforts to ensure reliability through transparent disclosure of information.

Stagnation and delay of
production owing todisasters and other causes

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 supply of products. Besides,
if natural disasters and other causes force us to halt purchasing raw materials from some specific supplier(s) and these halted raw materials are challenging to substitute, ourbusiness performance could be affected. 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.

Global risks

We completed the acquisition of Towa Pharma International Holdings, S.L. (“Towa HD”) in January 2020. We expect that the acquisition of Towa HD will contribute to building a
global structure and providing our value-added products to the market in Europe and the United States. However, the Group’s financial position and business performance could be
affected if the acquisition of Towa HD fails to produce the expected effects owing to changes in business environments and business operations of Towa HD, effects of local
systems and regulations, possible delay in the progress of the integration process between Towa HD and us, or events unrevealed during due diligence. The Group strives tostrengthen a global management structure through the integration process between Towa HD and us.

Risks of corporate
acquisition

Protosera Inc. became our subsidiary in March 2021. We also completed the acquisition of Sunsho Pharmaceutical Co., Ltd. by acquiring all of its shares in March 2022. If we failto achieve the expected effects of the acquisition of these companies due to changes in the management environment and business operations, possible delay in progress of theintegration process, and events unrevealed during due diligence, the financial position and operating results of the Group may be affected. The Group is in the process ofdeveloping a business plan and creating synergies through the integration process between the Company and its subsidiaries, as well as strengthening a management structureby, for example, dispatching directors.

Others47

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. Such cases may affect the Group’s financial position and operating results. The Group responds to such risks by collecting patent information and strengthening
collaboration among related departments, such as engineering and development departments. This enables us to develop drug formulations that have not been covered bypatents held by other companies.

The legal status of COVID-19 under the Act on the Prevention of Infectious Diseases and Medical Care for Patients with Infectious Diseases has changed from Class II Infectious
Disease to Class V Infectious Disease on May 8, 2023. As of the date of issuance of this Integrated Report (on November 30th, 2023), the Group expects that the impact of theinfection becomes even less severe. However, if the infection situation were to worsen in the future, it may cause an impact on the Group’s sales and production.
Meanwhile, the dire Russia-Ukraine situation is affecting the global economy, causing soaring prices of energy and raw materials, thus affecting the management of the Group.

TOWA PHARMACEUTICAL Integrated Report 2023

We have established the Compliance Committee
consisting of inside and outside committee members
under the officer in charge of compliance to promotecompliance activities. Under the Group’s compliancepolicy, the officers and employees shall promptly report to
Directors and the Compliance Committee when they finda problem that may cause damage to the Group’sbusiness and financial condition.
The Compliance Committee is in charge of the whistleblowing helpline (group helpline). It regularly reports theinformation from the officers and employees of the entire
Group collected through the helpline to the Board of
Directors. The Audit and Supervisory Committee sharesinformation with the Internal Audit Office and theCompliance Committee on a regular basis. It has a right torequest report submission.
In addition, because each organization needs to carryout activities such as promotion of and corrective actions
for compliance autonomously, we have designatedDivision Managers and Plant Managers as Departmental
Compliance Promotion Supervisors, and Department
Managers as
Departmental
Overview ofCompliance Promoters.
the compliance structure
The Compliance
Board of Directors
Committee works
Audit/appointment/
removaltogether with
President and
Departmental
Representative Director
ReportingCompliance Promotion
Executing organizations/Supervisors to planmeetings
Investigation/correction
and implement
Compliance Committee
Helplinemeasures such as
identification, analysis,
Compliance Committee
Officeand correction of
Departmental
Compliance Promotion Supervisorscompliance risks for
Departmental
Compliance Promoters
the Group as a whole.

Compliance activities/education
The Company conducts awareness-raising activities
for the officers and employees on a daily basis under
the leadership of the officer in charge of complianceand the Compliance Committee. In addition, we set
specific periods to promote compliance to take various
measures across the Group. Specifically, we conveyed
a President’s message and displayed a poster to raiseawareness of compliance. We also conducted anawareness survey for all officers and employees of theGroup, officer training, and workplace meetings related
to compliance at each department.
In addition, we provided e-learning on such themes
as how to use the whistle-blowing system and handle
privacy information. For overseas subsidiaries as well,legal affairs and compliance departments at theregional headquarters undertook measures such asprovision of training.

Delivered easy-to-understand complianceexample cases through group newsletters

Whistle-blowing helpline
The Company’s whistle-blowing system appropriately
deals with problems while protecting whistle-blowers.
Together with the monitoring by the Internal Audit
Office, the system has contributed to prompt
detection and correction of problems. The Group has
two contacts to deal with issues under the
Whistleblower Protection Act: a group helpline and awhistle-blowing helpline of the Audit and Supervisory
Committee. The group helpline is used as a helpline
shared within the Group companies in Japan. The
whistle-blowing helpline of the Audit and Supervisory
Committee addresses only cases involved with theofficers of the Group companies in Japan as acontact point independent from execution. As foroverseas, we have established whistle-blowing
helplines in Towa Pharma International Holdings,
S.L., the EU/US Regional Headquarters, for theofficers and employees of our subsidiaries overseas.
We regularly receive their reports on the status ofwhistle-blowing received and investigation.

TOWA PHARMACEUTICAL Integrated Report 2023

48

Governance

Board Members

Message from the Outside Directors

Norikazu Inoue
Director (Full-time Audit andSupervisory Committee Member)

Providing genuine smiles through Towa Quality
Itsuro Yoshida

Norikazu Eiki

The pharmaceutical industry currently faces three major, unprecedented issues. They are (1)the stable supply of generics, (2) a drug discovery capability decline, drug lag and drug loss,and (3) distribution and pharmaceutical pricing systems. In response to these issues, at Towa
Pharmaceutical, we conduct free and serious debate in the monthly meetings of the Audit andSupervisory Committee Members and Board of Directors. Further, to deepen our
understanding of specific themes, we hold separate meetings between the senior managers
and the Outside Directors. Towa will launch its 6th Mid-term Business Plan next fiscal year
(from April 2024). I hope to contribute to the Company’s efforts to demonstrate its strength,
namely Towa Quality, to the full in all situations so that it may offer many smiles to people inJapan and throughout the world.

Outside Director (Audit andSupervisory Committee Member)President andRepresentative 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 of 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.

Efforts to fulfill a social mission and deepen discussions in the Board of Directors
Masao Tanaka
Although the role expected of generics manufacturers is growing in importance, quality
problems by certain manufacturers in the generics industry have caused concerns aboutstability of supply and product quality, and the situation has yet to be resolved. Even under suchsevere circumstances, viewing its vision of contributing to people’s health as its social mission,
Towa is working steadfastly to expand its production capacity, as well as to unite across theCompany as a whole to realize the manufacture of sophisticated products with No. 1 total
product performance under thorough quality control. The enthusiasm with which the Company
is working toward these goals is conveyed deeply even to me as Outside Director. In the Boardof Directors, lively discussion takes place about issues such as the fostering of talented humanresources and the environment, with the social mission that Towa should fulfill in mind. I hope to
see even more in-depth debate aimed at the further promotion of sustainability management.

Director

April 2009 	Joined the Company / Deputy-General Manager of Internal Audit Office
April 2011
General Manager of Internal Audit Office
October 2016 	General Manager of Public Relations and Investor Relations Office /General Manager of Human Resources Department
June 2017
Director / Division Manager of 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)
July 2021 	President and Representative Director of Protosera Inc. (to present)

Kaori Oishi

Osamu Uchikawa

Kenryo Goto
Outside Director (Audit andSupervisory Committee Member)

49

The problem of insufficient supply of generics has, unfortunately, not been eliminated since it
first emerged in 2020. In light of structural challenges, a panel of experts convened to consider
this problem has recommended the development of a scheme for the market to commend
companies that are able to provide stable supply of generics of assured quality. Deliberations
are still ongoing.
In its desire to play a part in returning the industry to normal, Towa is working to expand its
production capacity and is in the process of formulating its new Mid-term Business Plan tostart in FY2024. I hope to support those efforts from the perspective of corporate governance.
In accordance with our vision of supporting “genuine smiles” by contributing to people’s
health, I hope that, with my outsider’s perspective, I can help the Company ensure a stablesupply of products that can be used with peace of mind in Japan and the rest of the world.

TOWA PHARMACEUTICAL Integrated Report 2023

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 of Bayer Yakuhin, Ltd.
January 2007 Chairman and Representative Director of Bayer Yakuhin, Ltd.
April 2010
Chairman and Director of Bayer Yakuhin, Ltd.
May 2014
Outside Director of AnGes MG, Inc. (currently AnGes, Inc.) (to present)
April 2015
Director of the Board of 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
Outside Director of Kidswell Bio Corporation (to present)
June 2019 	Outside Director (Audit and Supervisory Committee Member) of theCompany (to present)

Kaori Oishi
Outside Director (Audit andSupervisory Committee Member)

Outside Director (Audit andSupervisory Committee Member)

We want to help the industry to return to normal

October 2011 	Joined the Company / Deputy-General Manager of General Affairs
Department, Administration Division
April 2014
General Manager of General Affairs Department, Administration Division
April 2015
General Manager of General Affairs Department, General Affairs Division
October 2016 	General Manager of General Affairs Department, Administration Division
April 2017 	Operating Officer / General Manager of General Affairs Department,
Administration Division
April 2019 	Senior Operating Officer / Division Manager of Administration Division /General Manager of General Affairs Department
April 2020
Senior Operating Officer / Division Manager of Administration Division
April 2023
Senior Operating Officer / In charge of Administration Division
June 2023 Director (Audit and Supervisory Committee Member) (to present)

Director

August 2017 Joined the Company / Senior Advisor, API Business Division
April 2018 Operating Officer / Division Manager of API Business Division
April 2019 	Senior Operating Officer / Division Manager of API Business Division /In charge of Product Strategy Division and Innovative Technology
Research Division
April 2021 	Senior Operating Officer / Division Manager of API Business Division /In charge of Product Planning Division, Innovative Technology
Research Division, Pharmaceutical Research and Technology
Division, Pharmaceutical CDMO Management Division, andPharmaceutical Development Division
June 2021 	Chairman and Representative Director of Daichi Kasei Co., Ltd. (to present)
April 2022 	Senior Operating Officer / Division Manager of API Business Division /In charge of Pharmacovigilance and Quality Assurance Division,
Product Planning Division, Innovative Technology Research Division,
Pharmaceutical Research and Technology Division, Analytical
Technology Center, Pharmaceutical CDMO Management Division, andPharmaceutical Development Division
April 2023 	Senior Operating Officer / In charge of R&D Division,
Pharmacovigilance and Quality Assurance Division, andPharmaceutical CDMO Management Division
June 2023 Director (to present)

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 	Outside Director (Audit and Supervisory Committee Member) of theCompany (to present)
June 2022
Outside Director of FUJITEC CO., LTD.

Kenryo Goto
Outside Director (Audit andSupervisory Committee Member)

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
July 2020 	Representative of Kenryo Goto Certified Public Accountant Office (to present)
April 2021
Auditor of Hyogo Medical University (to present)
June 2021 	Outside Director (Audit and Supervisory Committee Member) of theCompany (to present)
June 2022
External Director of West Japan Railway Company (to present)

TOWA PHARMACEUTICAL Integrated Report 2023

50

11-Year Financial Summary
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023 (FYE March)

Net sales (JPY million)

55,241

61,351

71,47082,11584,94993,430105,104

110,384

154,900

165,615

208,859

Operating profit (JPY million)

7,723

7,706

11,105

11,134

6,869

11,643

15,96816,14319,923

19,205

5,514

Ordinary profit (JPY million)

9,544

8,834

15,437

10,157

7,417

11,717

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

6,201

5,992

11,118

7,684

5,576

6,495

13,475

14,503

13,95815,9142,201

Comprehensive income (JPY million)

6,348

5,999

11,175

7,313

5,858

6,533

13,40914,948

14,46917,9607,825

Net assets (JPY million)

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

104,665

116,599

132,169

136,894

Total assets (JPY million)

89,705

103,318

121,187

156,851

165,247

177,181

188,803

230,016

245,668

332,097371,347

Net assets per share (JPY)1,090.70

1,179.69

1,373.89

1,434.79

1,522.99

1,624.09

1,864.92

2,126.72

2,369.21

2,685.18

2,781.17

Earnings per share (JPY)121.62117.54218.07154.19113.32132.00273.85294.74283.62323.36

44.72

-

-

-

436.29314.23122.03253.32272.62271.93316.19-

Capital-to-asset ratio (%)

62.0

58.2

57.8

45.0

45.4

45.1

48.6

45.5

47.5

39.8

36.9

ROE (Return on equity) (%)

11.7

10.4

17.1

10.9

7.7

8.4

15.7

14.8

12.6

12.8

1.6

Price-earnings ratio (%)

13.68

12.63

10.50

9.98

16.56

16.79

10.64

7.69

8.61

8.50

42.37

Cash flows from operating activities (JPY million)

8,645

8,144

8,037

3,732

10,195

19,23019,002

19,16412,00822,1292,544

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

Cash flows from financing activities (JPY million)

2,793

3,529

238

27,970

(92)

4,670

(809)

11,748

184

46,54017,481

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

3,985

4,675

5,208

18,526

7,112

11,511

26,652

18,713

22,91532,83024,257

Number of employees

1,696

1,879

2,060

2,203

2,408

2,449

2,472

3,325

3,456

4,078

4,298

R&D expenditure (JPY million)

4,478

5,296

6,144

8,924

9,352

7,725

7,916

8,566

10,642

11,48815,265

Capital investment (JPY million)

7,855

9,727

13,816

15,79225,026

12,166

6,011

6,236

10,353

14,84839,645

Depreciation (JPY million)

4,909

5,407

5,724

7,329

7,980

8,173

8,340

8,285

9,674

10,153

14,261Dividend per share (JPY)

75.0

75.0

95.0

95.0

95.0

95.0

107.5

44.0

44.0

60.0

60.0

Dividend payout ratio (%)

20.6

21.3

14.5

20.5

27.9

24.0

13.1

14.9

15.5

18.6

134.2

Diluted earnings per share (JPY)

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

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TOWA PHARMACEUTICAL Integrated Report 2023

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

TOWA PHARMACEUTICAL Integrated Report 2023

52

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

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

Overview of Performance[1] Business environment
Under the “Basic Policy on Economic and Fiscal
Management and Reform 2017” approved by the
Cabinet in 2017, the Japanese government set thetarget of increasing the volume share of generics to
80% by September 2020. To meet the target, thegenerics industry including Towa strived to enhance
production systems and ensure a stable supply of
products. The resultant wider use of generics led to
an 81.2% volume share in December 2022
(according to the survey by the Japan Generic
Medicines Association in October–December 2022).
On the other hand, pursuant to the “Basic Policy on
Economic and Fiscal Management and Reform 2020”
approved by the Cabinet in July 2020, thegovernment has since FY2021 revised the drug
prices every year—namely, adding revisions inintermediate years to regular biennial revisions. Thishas made the business environment for thepharmaceutical industry extremely difficult.
Amid such drastic changes in the industry, we
announced the 5th Mid-term Business Plan 2021–
2023 PROACTIVE II in May 2021 in keeping with our
vision, “We contribute to people’s health, and we arededicated to people’s genuine smiles.” Based on the
Mid-term Business Plan, we implemented various
initiatives with the aim of developing health-related
businesses that contribute to the realization ofhealthcare and nursing care for society with a longand healthy life expectancy and also to society thatshifts from medical care to care of pre-symptomatic
disease and prevention, while positioning thegenerics business at home and abroad as our core.
[2] Initiatives for sales growth
In 2022, we launched 13 new items of seven APIs in
June and 14 new items of seven APIs in December.
As a result, the number of our generics reached 768
items of 345 APIs.
[3] Initiatives for entering overseas markets
To expand and grow our business in overseas
markets, we develop our generics business in theEuropean and U.S. markets through Towa Pharma
International Holdings, S.L. In the fiscal year underreview, we worked at harnessing this change tofoster a sense of unity and encourage collaborationin the Group, and deliver value-added products
under the unified brand, with a view to

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TOWA PHARMACEUTICAL Integrated Report 2023

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

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

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

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

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

TOWA PHARMACEUTICAL Integrated Report 2023

54

Corporate Data

Corporate Data

Business Locations

Company Outline

As of March 31, 2023

Overview of Company
Yamagata Plant

Kyoto Analytical Science Center

East Japan Distribution Center

KENTO Healthcare Science Center
KENTO Life Innovation Center

Business locations and sales outlets
Headquarters
Research &Development
Laboratories

Amagasaki Research CenterTokyo Office

Headquarters

Osaka Research Center

PlantsDistribution
centers
Sales offices
and sales sites

Moriguchi Annex
Himeji ResearchCenterOkayama Plant

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

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

Consolidated subsidiaries
Osaka Plant

West Japan Distribution Center
KadomaLaboratory

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

Stock Data

As of March 31, 2023

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

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

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

3,895

40.84
7.91

BNYM AS AGT⁄CLTS NON TREATY JASDEC

2,448

4.98

TOWA PHARMACEUTICAL Kyoeikai

1,494

3.04

Itsuro Yoshida

1,455

2.96

Custody Bank of Japan, Ltd. (Trust Account)

1,407

2.86

TOWA PHARMACEUTICAL Employee Stock Ownership Group

966

1.96

State Street Bank and Trust Company

751

1.53

Yoshida Estate Ltd.

648

1.32

Nippon Life Insurance Company

438

0.89

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

Share breakdown by shareholder type
Financial institutions
0.26%

Japanese corporations
1.16%
Non-Japanese
corporations
2.23%

Securities
companies
0.40%

Number ofshareholders ratio
Individuals
and others
95.95%

Financial institutions
14.49%

Individuals
and others
22.76%

Non-Japanese
corporations
18.67%

Securities
companies
1.03%

Number ofshares ratio
Japanese
corporations
43.05%

Stock Price(JPY) 3,500

Major Group Companies

3,000
2,500
2,000
1,500
1,000

J-DOLPH
PharmaceuticalCo., Ltd.

Daichi Kasei Co.,
Ltd.

Greencaps
Pharmaceutical
Co. Ltd.

SunshoPharmaceuticalCo., Ltd.

Towa Pharma
International
Holdings, S.L.

Manufacturing and selling of
ethical drugs

R&D and manufacturing of APIs
and intermediates

Producing soft capsules forpharmaceutical products

Manufacturing and selling of
ethical and OTC drugs

Headquarters: Koka, Shiga

Headquarters: Fukusaki,
Kanzaki, Hyogo

Headquarters: Fujinomiya,
Shizuoka

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

Headquarters: Barcelona, Spain

Headquarters: Fuji, Shizuoka

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

Protosera Inc.

Provision of healthcare related IT services

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

Headquarters: Moriguchi, Osaka

Headquarters: Settsu, Osaka

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

(Year and month)

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

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TOWA PHARMACEUTICAL Integrated Report 2023

TOWA PHARMACEUTICAL Integrated Report 2023

56