Foundation Supporting Business:

Governance
Basic approach
As an important issue, we focus on implementing abetter corporate governance. By conducting businessstrictly in compliance with the ethical standard andimproving the efficiency and transparency of the
management, we continuously raise the corporate value
for the shareholders. To achieve this, we endeavor torespect 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 by focusing on
maintaining and improving corporate ethics and ethicalstandards of officers and employees.
This policy also applies to the Towa Group companies.
Each of the Group companies fulfills required roles andobligations to increase the corporate value of the Towa
Group as a whole.

Overview of the corporate governance structure
General Meeting of Shareholders
Decision-making and supervising function

Appointment/dismissal

Appointment/dismissal

Board of Directors
Recommendation

Audit/
supervising

Directors

Nominating andCompensation
Committee
Consultation(Excluding Audit and Supervisory
Committee Members)
Basic policy for developing the internal control system

Supervising

Business operating function

Appointment/
removalSupervising

President and Representative Director

Appointment/dismissal
Audit and Supervisory
Committee

Reporting

Audit

Cooperation

Cooperation

ReportingExecuting organization/meeting

Risk
Management
Committee

Executive Strategy
Meeting

Departments
Executive Monitoring
Meeting

Accounting
AuditorOperating Officers
Audit

Affiliate companies

Investigation/correction

Internal
Audit
OfficeBoard 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
to business execution, the Company has introduced
an operating officer system and built a governancestructure to clarify the Directors’ responsibilities. With
the structure, Operating Officers bear the
responsibility for business execution while the Boardof Directors focuses on decision making andsupervision of management issues.

Accounting
audit

Cooperation

The Audit and Supervisory Committee of theCompany consists of four members including three
Outside Audit and Supervisory Committee Members.
Audit and Supervisory Committee Members conduct
effective audits according to audit plans formulatedby the Audit and Supervisory Committee. Specifically,
they attend important meetings such as the Board of
Directors meetings; receive reports from Directors,
Operating Officers, employees, and the Accounting
Auditor; and conduct on-site audits of major offices.
In addition, the Audit and Supervisory Committee has
established its own whistle-blowing helpline, which

Corporate
management

TOWA PHARMACEUTICAL Integrated Report 2022

The Company conducted a self-evaluate survey for
Directors from February to March 2022 to analyze andevaluate the effectiveness of the Board of Directors.
The survey used a questionnaire consisting of 21questions including those on the structure,operations, and discussions of the Board of Directors.
Results of the survey were reported at the meeting of
the Board of Directors held on April 18, 2022.
Although the survey showed no significant issues
on the effectiveness as a whole, it reminded us that
we need to further discuss the discovery anddevelopment of human resources from a mid- tolong-term perspective as well as mid- to long-term
management challenges. Based on those results ofthe evaluation, the Company will further endeavor toenhance the effectiveness of the Board of Directors.

Management
strategy
Businessstrategy

Finance/
Accounting

Legal affairs/
Riskmanagement

Personnel

Purchasing

R&D

Production

Quality control/
Sales/
Reliability
Marketinggovernance

GlobalKazuhiko Konno
Masao Tanaka
Toshio Shirakawa

Outside Directors

31

policies and important operations. Their importantroles also include resolving the basic policy of theinternal control system and supervising Directors’
business execution. To ensure the effectiveness ofsuch decision making and supervision, we need toreduce the number of Directors, separate Directors
and Operating Officers and clarify their roles, andbuild an environment that encourages Outside
Directors to express their opinions.
Under these policies, Towa has made several

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.

Itsuro Yoshida

Inside Directors

Towa continuously makes efforts to enhance its
corporate governance structure. Towa is a company
with an audit and supervisory committee system. The
Company is governed mainly by the Board of
Directors consisting of seven Directors and the Audit
and Supervisory Committee consisting of four
Directors who are Audit and Supervisory Committee
Members (including three Outside Directors).
One of the main roles of the Board of Directors is tomake decisions on mid- to long-term management

Nominating and Compensation
Committee

Skill matrix

Compliance Committee (Whistle-blowing helpline)

Enhancement of the corporate governance structure

accepts whistle-blowing on matters involving officers
as a highly independent contact.

Analysis and evaluation of theeffectiveness of the Board of
Directors as a whole

Audit and Supervisory Committee

Directors
Audit and Supervisory Committee Members

Reportingefforts. This includes the transition to audit andsupervisory committee system, introduction of mid- tolong-term performance-based stock compensation
system, establishment of the Nominating andCompensation Committee, enhancement of functionsof Outside Directors, and stimulation of the Board of
Directors. Going forward, Towa will continue to focus
on enhancing the corporate governance structure.

Norikazu Eiki
Kaori Oishi
Kenryo Goto

TOWA PHARMACEUTICAL Integrated Report 2022

32

Roles and independence of Outside Directors

Compensation for officers

Currently, all of the Outside Directors are Audit andSupervisory 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 tothem in advance by the General Affairs Department,
the administrative office of the Board of Directors, sothat the Members can consider matters to be
discussed thoughtfully. In addition, they are provided
necessary support by the assistant staff of the Audit
and Supervisory Committee as well as reports andexplanations on important matters by the full-time
Audit and Supervisory Committee Member.

The Company believes that fair and efficient
corporate management can be achieved throughOutside Directors’ advice and opinions on sound andefficient management. The Company has establishedthe Nominating and Compensation Committee as anadvisory body to the Board of Directors in order tofurther enhance and strengthen the corporate
governance structure. In particular, the committee
contributes to appropriately providing the Outside
Directors with opportunities for involvement andadvice so as to increase the objectivity andtransparency of the decision-making process on thematters such as appointment/ dismissal andcompensation for Directors and other officers.

Reasons for nomination of Outside Directors
Position Name

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

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

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

system for Directors (excluding Outside Directors and Directors
who are Audit and Supervisory Committee Members). This
introduction was made to further clarify the link between
compensation and the Company’s mid- to long-term performanceand shareholder value, as well as to improve corporate value overthe 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 andCompensation Committee as an advisory body to the Board of
Directors with the aim of increasing the objectivity andtransparency of the decision-making process of compensation for
Directors or other matters as well as further enhancing andstrengthening the corporate governance structure.

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

Total amount of compensation for Directors

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 promotesound, efficient and objective management, for which reason it has appointed
him as an Outside Director.

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

Board of Directors
meetings(held 15 times)
100%

Board of Directors
meetings(held 15 times)
100%

Audit and Supervisory
Committee(held 13 times)
100%

Audit and Supervisory
Committee(held 13 times)
100%

Amount of compensation by type (in millions of yen)

Position

Total amount ofcompensation(in millions of yen)

Basic compensation

Annual bonuses(based on individual
performance)

Monetary
compensation

Non-monetarycompensation

Directors(Excluding Audit and Supervisory
Committee Members)

173

105

16

43

7

3

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

49
(26)

49
(26)

(-)

(-)

(-)

5
(4)

Total
(of which Outside Directors)

223
(26)

155
(26)

16

43

7

(-)

(-)

(-)

8
(4)

Performance-based compensation

Number of eligible
officers

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

Board of Directors
meetings(held 12 times)
100%

Audit and Supervisory
Committee(held 10 times)
100%

History of Towa’s corporate governance
June 2015
An Outside Director
assumed the position

June 2019
Towa transitioned to a company with an audit and supervisory committee system
The mid- to long-term performance-based stock compensation system was introduced

October 2019
The Nominating and Compensation
Committee was established

The Company may hold cross-shareholdings upon requestfrom a business partner as a means to build, maintain, andstrengthen long-term and stable transactional relationships
with the business partner. In that case, however, the Company
holds cross-shareholdings only when it is deemed that holdingof such shares will contribute to the enhancement of its
corporate value over the medium to long term.
Whether to hold cross-shareholdings is determined yearly by
the Board of Directors with consideration of mid- to long-term
economic rationality and future outlook. The Company
exercises its voting rights of cross-shareholdings appropriately
after closely examining the proposals and determining whether

the holding of such shares will contribute to the enhancementof shareholder value. The Company does not make anaffirmative determination on proposals that may damage
shareholder value. In addition, the Company will be against
proposals of appointment of Directors and other officers who
committed any antisocial act or violation of legal obligations.
If a cross-shareholder expresses an intention to sell theshares, the Company does not hinder the sale or other acts.
When conducting transactions with cross-shareholders, theCompany will thoughtfully examine the economic rationality of
those transactions, just as with those with other business
partners.

Dialogues with stakeholders
2015

2016

2017

2018
June 2018
The number of Outside
Directors increased to two

33

TOWA PHARMACEUTICAL Integrated Report 2022

2019

2020
June 2020
A woman assumed the positionof Outside Director

The Company discloses the information on its management
strategies and finance/performance status, among othermatters, to shareholders, investors, and other stakeholders
through investor relations activities in an appropriate andtimely 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 to theBoard of Directors for the improvement of corporate value.

The Company recognizes the importance of appropriate
collaboration with not only shareholders and investors but also
other stakeholders including patients, 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 to maintain good and smooth
relationships with them.

TOWA PHARMACEUTICAL Integrated Report 2022

34

Risk Management

Basic approach to risk
management
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 21 members including
Representative Director Itsuro Yoshida, who serves as
the chief risk officer. In addition, Director (Audit andSupervisory Committee Member) Toshio Shirakawa
attends 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 to

Risk Information

disclose the information, upon report to the Board of
Directors, as appropriate.
Related information on page 46

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 thecourse of their duties. Based on the regulations, theCompany works to secure information security as partof daily management activities, business promotion,and organizational operation.

Towa Group mainly handles prescription products, andamong 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 andsafety have been confirmed for a certain period ofControl in accordance with
the Pharmaceutical andMedical Device Act, etc.

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

Patent and re-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 toaffect the Group’s launch of new products (new generics). The Group collects information on patents and re-examination periods as well as facilitatescollaboration among related departments. We strive to resolve 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 abranded drug, subsequent marketing may be discontinued. These situations may affect our group’s financial position and operating results. The Group collects
information on scientific and technological 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 risk of 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 todetermine and conduct necessary measures based on the results obtained through assessment and consideration.

Drug price system andmedical cost containment
policyTo 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.

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.

Patent litigation

Mark-to-market valuationof derivatives

Fire evacuation drill
Risks in the competitiveenvironment

Risks in the competitive environment, etc.
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 genericproducts. Our actual sales revenue may differ fromplanned revenues, depending on their trends. In
addition, competitors’ supply status impacts demand forour products, which could risk a stable supply.
The Group responds to such risks by increasing
production capacity through capital investment,
improving the backup system for manufacturing sites,and ensuring a stable supply of products from theproduction and sales aspects by monitoring the volume

35

TOWA PHARMACEUTICAL Integrated Report 2022

of demand and inventory daily. We are also making
efforts to ensure reliability through transparent
disclosure of information.
At present (as of the date of submission of theIntegrated Report), the effects of the COVID-19
pandemic are minor within our group. However, should
the effects prolong or worsen in the future, effects ofpatients’ reluctance to visit hospitals and clinics onsales, and effects of the spread of COVID-19 outside
Japan on supply chains for raw materials and APIsmight spill over into production. In addition, 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.

time. Thus, the Group faces specific risks as a genericbusiness in addition to risks as a holder of marketing
authorization for drugs. After recognizing these risks,
the Group makes every effort to avoid their occurrence
and set up a system for unexpected events.

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 amanufacturer 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 by patents held by other companies.
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 stable supply of our products, we conduct long-term derivative transactions. Such transactions are subject to mark-to-market valuation at thetime 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 fromplanned 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 by increasing production capacity through capital investment, improving the backup system for manufacturing sites, and ensuring astable 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 ofthese production sites could be forced to cease business operations owing to the occurrence of natural disasters or technical/regulatory issues to affect thestable 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, our business performance could be affected. The Group strives to organize a mutual backup system among ourdomestic 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 contributeto building a global structure and providing our value-added products to the market in Europe and the United States. However, the Group’s financial condition andbusiness performance could be affected if the acquisition of Towa HD fails to produce the expected effects owing to changes in business environments andbusiness operations of Towa HD, effects of local systems and regulations, possible delay in the progress of the integration process between Towa HD and us, or
events unrevealed during due diligence. The Group strives to strengthen 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 fail to 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 the integration process, and events unrevealed during due diligence, the financial position and operating results of the Group may beaffected. The Group is in the process of developing a business plan and creating synergies through the integration process between the Company and its
subsidiaries, as well as strengthening a management structure by, for example, dispatching directors.

OthersAt present (as of the date of submission of the Integrated Report), the effects of the COVID-19 pandemic are minor within the Group. However, should the effects
prolong or worsen in the future, closure or shutdown of a particular business facility of the Group owing to a cluster of COVID-19 cases identified therein, effectsof patients’ reluctance to visit hospitals and clinics on sales, and effects of the spread of COVID-19 outside Japan on supply chains for raw materials and APIsmight spill over into production. In addition, 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. To address the ramifications of COVID-19, the Group has implemented various countermeasures. The Group willcontinue to implement appropriate countermeasures to ensure business continuity.

TOWA PHARMACEUTICAL Integrated Report 2022

36

Compliance

Message from the Outside Directors

Compliance policy

Compliance activities/education

The Group is committed to ethical and law-abiding
corporate behavior in accordance with the “TowaGroup Code of Conduct.” We promote 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 for all the
departments 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 how the
improvements.

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 conducted an awarenesssurvey for all officers and employees of Towa Group,
officer training, education and training on the revised
Towa Group Code of Conduct, and workplacemeetings on the theme of harassment at eachdepartment.
In addition, we conducted e-learning programs on
the revised Pharmaceutical and Medical Device Act
and information security. We have continuously
developed compliance policy and rules. For our
subsidiaries overseas, we conducted compliancepromotion campaigns and measures including thetraining on the Code of Ethics at regional headquarters.

Implementing the Towa Philosophy and Mid-term Business Plan
precisely because we are in an age of confusion

Norikazu Eiki

The end of the COVID-19 pandemic, which began more than two years ago, still remains unclear. Harsh conditions continue for thehealthcare and pharmaceutical industries amid such circumstances. They include the issue of procuring APIs from overseas thatbegan in the wake of the pandemic, the need to return to the domestic manufacturing of essential drugs, the shortage in drug
supply resulting from the spate of scandals by generic drug manufacturers, and the annual revision of NHI listed drug prices.
Under such circumstances, Towa Pharmaceutical formulated its 5th Mid-term Business Plan 2021–2023 PROACTIVE II in May
2021 on the basis of its vision, “We contribute to people’s health; we are dedicated to people’s genuine smiles.” Among the fivebasic policies under the plan, we saw significant progress in enhancing generics business as a core, expanding and growing
business in overseas markets, and entering new health-related businesses. In particular, the Company acquired Sunsho
Pharmaceutical as a subsidiary in March this year, setting the groundwork for Towa’s future diversification.
Towa Pharmaceutical’s strength is in its Board of Directors which engages in sincere and serious discussions. It is because weare in an age of confusion that I would like to participate actively in such discussions and contribute to the development of a bright
future for the healthcare and pharmaceutical industries.

Outside Director (Audit andSupervisory Committee
Member)Compliance structure
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 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 whistle-blowing
helpline (group helpline). It regularly reports theinformation from the officers and employees of theGroup collected through the helpline to the Board of
Directors. The Audit and Supervisory Committee
shares information with the Internal Audit Office andthe Compliance Committee on a regular basis. It has
a right to request report submission.

Overview of the compliance structure
Board of Directors
Audit/appointment/removal
President and Representative Director
Executing organization/meeting

Reporting

Investigation/correction
Compliance Committee

Helpline

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

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TOWA PHARMACEUTICAL Integrated Report 2022

Kaori Oishi
Outside Director (Audit andSupervisory Committee
Member)Unwavering conviction and the desire to take on new challenges
make a company grow

Delivered easy-to-understand compliance example cases throughgroup newsletters

I believe that a company needs to fearlessly take on challenges to transform while staying steadfast to its
convictions, if it is to remain a company that is needed by society even as the environment surrounding thatsociety and the industry changes at a dizzying pace. The Company’s vision is to “contribute to people’s health.”
While thoroughly ensuring the quality and stable supply of its products, the Company is also actively advancing into
overseas markets and new health-related businesses as well as engaging in ESG and human resources
development measures. Based on a full understanding of such vision and management policies of the Company, I
believe my role is to leverage my professional knowledge as a lawyer from an independent standpoint to offer mycandid opinions from diversified perspectives.

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 a contact
point independent from execution. As for overseas, wehave established whistle-blowing helplines in Towa
HD, the EU/US Regional Headquarters, for the officers
and employees of our subsidiaries overseas. We
regularly receive their reports on the status of whistleblowing received and investigation.

Supporting genuine smiles and people’s health through honest andsound management

Kenryo Goto
Outside Director (Audit andSupervisory Committee
Member)I understand the concept of Towa Quality is to provide the world with products that actually offer the levels of
quality and added value that are truly needed rather than just meeting the quality standards required by law, and tokeep updating the products so that they are the best and state-of-the-art at any given time. This is similar to thelesson ingrained in my mind during my days at an audit firm to which I belonged: You must have a sense of ethics
that is a step higher than the rest of the world. I therefore have a sense of affinity with this sort of honest culture.
Abiding by this concept is not an easy task in the generics industry, which has long been waiting to recover fromsupply shortage in the wake of its quality problems, but one of the things that support this is corporate governance.
In accordance with our vision of supporting “genuine smiles” by contributing to people’s health, I hope that withmy perspective as an outsider, I can help the Company ensure a stable supply of products that can be used withpeace of mind in Japan and the rest of the world as well.

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38

Foundation Supporting Business:

Board Members

Society
Basic approach

Toshio Shirakawa
Itsuro Yoshida
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.

Director (Full-time Audit andSupervisory Committee Member)

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

Norikazu Eiki
Outside Director (Audit andSupervisory Committee Member)

Kazuhiko Konno
Senior Managing Director

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

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)

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. (to present)

Kenryo Goto
Masao Tanaka

Outside Director (Audit andSupervisory Committee Member)

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)

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TOWA PHARMACEUTICAL Integrated Report 2022

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.

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)

Responsible Business Activities

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

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 beused by parents trying to help children takemedication, as well as other useful tips. The site for
medical professionals provides product information,
governmental actions on medical practices, andmaterials that can be used for medical instructions
for patients.

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

Booklet to provide information

TOWA PHARMACEUTICAL Integrated Report 2022

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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

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.

Okayama Plant

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.

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

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

Manufacturing Process A

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

Recording in manufacturing
instructions at each process

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

Process Control A

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 B
Process Control B

Acceptance

Manufacturing

Testing ofintermediate
products

Testing offinishedproducts

Product
shipment
decisionby plants

Product
shipment
decisionby HQ QA Dept

Towa Group’s Initiatives

Risks in API
Procurement

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

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

GMP violations by API manufacturers(Differences of quality and manufacturing controls related to pharmaceutical regulations)Occurrences of mutagenic impurities(Conforming to ICH-M7 guideline) Audits in accordance with international standards as well as domestic ordinances Audits by technical experts (synthetic and physicochemical analyses)(Overlapping of API upstream suppliers)

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TOWA PHARMACEUTICAL Integrated Report 2022

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

Check of records and data forerrors or mistakes

Pharmacovigilance
and Quality Assurance Division

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
Procurement of starting materials and intermediates

Confirmation of compliance withagreements and quality standards

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

Product Taste Research Office
In the April 2022 organizational restructuring, weestablished Pharmaceutical Taste Laboratory under
the Product Planning Division to specialize in producttaste research. The office develops bitterness
evaluation methods using bitter taste receptors,
evaluates bitterness using taste sensors and sensory

testing, and plans easy-to-take products from theperspective of taste. Through these efforts, weleverage our taste research for Towa Quality and
Manufacture of sophisticated products with No. 1 total
product performance, aiming to develop easy-to-takeproducts for patients.

TOWA PHARMACEUTICAL Integrated Report 2022

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Making Job Satisfaction and Fostering Talented Human Resources

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

Enrichment ofcareer paths

Enhancement ofCorporate Fundamentals
Job satisfaction for strengthening
corporate fundamentals

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

Job satisfaction
Growth ofemployees

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

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

Special attachment
to making things

Encouraging employees togrow as important assets
for the company

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

Career Development Support
Under the belief that talented human resources are thefoundation of a trusted company, we work to make job
satisfaction, foster talented human resources, andstrengthen our organization. Accordingly, one of thepolicies in the 5th Mid-term Business Plan is “Making
Job Satisfaction and Fostering Talented Human
Resources.” To this end, we started “Towa work stylereforms” in October 2020.
As one of the work style reforms, we put more effort
into helping each employee develop their career path.

Starting from April 2021, the Human Resources
Division staff have career development meetings with
employees to enhance more personalized support.
Going forward, we will encourage employees tounderstand the importance and necessity ofdeveloping their career paths and support them indeveloping their medium- to long-term career vision.
To help employees achieve their career visions, we will
aim to become a company that encourages employees
to grow in a proactive and planned manner.

Our Commitments (T-SMILE)
We have established a new course of action named T-SMILE. This is ourphilosophy created when we marked the 70th anniversary of our foundation toaccommodate our growth and increasing employees and further disseminate 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”
and “We are dedicated to people’s genuine smiles” through corporate activities.

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TOWA PHARMACEUTICAL Integrated Report 2022

Our new
commitmentsfor people’s
genuine smiles

Medical Representatives

Our Efforts for Diverse Work Styles

The Company places priority on developing medical
representatives (MRs) and strengthening their organization,and strives to foster talented human resources. In accordancewith the MR Education Training Guidelines, we develop our
original education programs and provide ongoing training,which covers expert knowledge about products, high ethicalstandards required for MRs handling life-related products, andskills in explaining products and communication. In this way,
we aim to develop highly qualified medical representatives
who can gain the trust of Medical professionals.

We perform various activities to help employees who raise theirchildren or take care of their family members in need of nursing
care. In 2010, we were awarded the next-generation certification
mark called Kurumin. The logo features a swaddled baby. The
Ministry of Health, Labour and Welfare grants the certification
logo if it certifies companies as childrearing-friendly businesses.
We have various parental and nursing care systems for our
employees. For example, they can take parental leave until theirchildren turn three years old for the maximum length, they can
extend using the shorter working hour system for parenting until
their children finish the sixth grade at elementary school, and we
provide family support leave to which employees are entitledwhen they need to take care of their sick family members
requiring nursing care.

Original Qualification Systems
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 an MR
qualification specialized in cancer, a GMP auditor
certification, and an expert certification system. The
expert certification system is a system whereby we certify
our employees who have a higher degree of technicalskills and greater knowledge in manufacturing, packaging,testing, and quality assurance units. By promoting thesecertification systems, we help employees in each area
develop into specialists in manufacturing control andquality control. Meanwhile, we aim to develop employees
who are highly aware of ensuring quality and safety.

2022 Certified Health &Productivity Management
Outstanding Organizations
Recognition Program (White 500)
We were recognized as one of White 500 enterprises (large
enterprise category) under the 2022 Certified Health &Productivity Management Outstanding Organizations
Recognition Program selected jointly by the Ministry of
Economy, Trade and Industry and the Nippon Kenko Kaigi(organization that takes practical community- and workplacebased actions, through collaboration among privateorganizations and with full administrative support, in order toextend the healthy lifespan of and provide appropriate
medical care for each individual in Japan.).
The program started in FY2017 to recognize companies thatcare about employees’ health management from a businessmanagement perspective and strategically implement relevant
initiatives. We have been recognized as one of the enterprises
for five consecutive years. This year, we were recognized as
one of White 500 enterprises, the top 500 implementing ahigher level of health and productivity management.

Towa Health Challenge 2021
In June 2021, we had a health measurement event called “Towa
Health Challenge 2021” at the headquarters, Moriguchi Annex,
Osaka Plant, Okayama Plant, Yamagata Plant, and Osaka
Research Center. This event was aimed to encourage our
employees to think about their own health. Approximately 80% of
the targets, including management members, joined the event andunderwent six types of tests: body constituent, bone density,
walking posture, blood vessel, brain age, and physical fitness. The
event venues had exhibits that were designed to help participants
improve their health and lifestyle habits, offering the employees anopportunity to rethink about their health. In a post-event survey,
approximately 90% of the respondents said they became more
conscious about their health and wanted to improve their lifestyle.
To help our employees improve their lifestyle habits, we willcontinue to hold the event as an annual company-wide event.
TOPICSMy vision became clear
after having a careerdevelopment meeting
Yuki Takaira
Sales and Marketing Planning Department,
Sales and Marketing Division

After having a career development meeting, I felt confident inmyself and excited to imagine my future. My career vision wasvague when I was new to here. From my fourth year, I becameaware of an importance of experience and started to proactively
try various things with the aspiration to seize every opportunity
for my personal and professional development. Based on theseexperiences I can now envision my fitting career path specifically.
Since this career development meeting was held right after theCompany had accepted my department transfer request, I
approached the meeting, hoping to dispel my concerns about thenext step. The Company offered me many options besides thesteps I had in mind and how each was worth doing. The meetinggave me much insight and relieved my worries. The careerdevelopment meeting was fruitful since I approached the meeting
after thinking about what kind of mindset I wanted to work withand what I wanted to address.

TOWA PHARMACEUTICAL Integrated Report 2022

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Foundation Supporting Business:

Environment

Social Contribution Activities
Basic approach

Company-sponsored Daycare Centers

High School Student Business Contest

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 as partof 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 measures througheffective uses of mega solar systems. Furthermore, we are
aggressively working to achieve an eco-friendly manufacturingmethod of APIs. In April 2022, we established Environment,
Health and Safety Management Department to manage andcontrol environment and safety across the Towa Group in an
integrated way, aiming to improve the environment and safetyof our employees and local communities.

We held a “High School Student Business Contest
for the Future and People’s Health” for the third timein FY2021. 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-related industries, the contest is aimed atseeking fresh ideas
from high school
students who willlead the future ofJapan and creating asocial contribution
opportunity for them.
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

Positive Fitness
In January 2022, we launched a website, “Positive
Fitness,” to introduce exercise programs for
postoperative breast cancer patients. This website
introduces exercise programs in three levels ofintensity (introductory, intermediate, and advanced)
according to the patient’s physical strength andfitness habits. In addition to the exercise programs,
the website provides information about therelationship between
breast cancer andexercise and otheruseful information,
aiming to help eachpatient develop
positive andcontinuous fitness
habits with anadequate amount foreach of them.

Towa Mini Clinic Series

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

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TOWA PHARMACEUTICAL Integrated Report 2022

In December 2021, we launched “Towa Mini Clinic
Series” on our corporate website. This web pageaims to further disseminate the information containedin Towa Mini Clinic Series, booklets that we have
distributed at medical institutions and healthcarerelated events. It
compiles informationin an easy-tounderstand way
about diseases andself-care for patients,
their family members,
and people who
support them.

Climate Change-related Information Disclosure(based on the TCFD Recommendations)
As climate change significantly affects social systems and economies, the Towa Group is aware of the importance ofaddressing climate change by taking energy-saving and decarbonization measures and making other efforts. Against thisbackdrop, we set up the TCFD Subcommittee under the Risk Management Committee chaired by the Division Manager of the
Administration Division in FY2022 to help address climate change-related issues. The TCFD Subcommittee is comprised ofmembers from related departments.
The TCFD Subcommittee conducts a scenario analysis of our business activities to identify climate change-related risks andopportunities and considers measures to reduce greenhouse gas emissions.
The Company plans to declare its support for the Task Force on Climate-related Financial Disclosures (TCFD)
recommendations by the end of FY2022. We will expand and improve climate change-related information disclosure based on
the framework of TCFD recommendations. We plan to disclose such information covering only Towa Pharmaceutical Co., Ltd.
for the first fiscal year of disclosure (FY2022) and plan to include its Group companies from the following year (FY2023) onward.

Changing boiler fuel at Okayama
Plant to LNG
In January 2022, we changed boiler fuel at Okayama
Plant from Bunker A to liquefied natural gas (LNG),
which is considered as eco-friendly energy.
The amount of CO2 reduction calculated from thetotal LNG use of the five participating companies in
the Sho-o Hub Industrial Park was approximately
5,500 t-CO2, a 27% reduction compared to Bunker A.

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

LNG fueling station set up in the Sho-o Hub Industrial Park

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