Message from Management

Striving to Create New Value

Akira UeharaChief Executive Officer

Technological innovations in such areas as information, transportation, logistics and medicine are a key feature of the times. Alongside this, global investment of surplus funds in emerging countries has driven advancements there that have lessened the disparity with other nations. In addition, the idea that the "consumer is king" and has the final decision on selection and purchase has become increasingly prevalent, while Japan's society is aging and people have longer life expectancies, putting further pressure on social security expenses. Expectations also exist for the creation of new markets based on new technology from the Fourth Industrial Revolution.

The business environment surrounding our operations is changing drastically amid these trends. In the Self-Medication Operation Group domain, certain retailers have grown through mergers and acquisitions, thereby strengthening the power of the buyer and transforming business relationships. We are also witnessing a significant increase in Foods for Specified Health Use and Foods with Function Claims, with the scale of the market closing in on ¥2 trillion. On the other hand, the self-medication market has stagnated in recent years and ethical drug compounds for switch OTC drugs have not been approved at the rate we anticipated. In the Prescription Pharmaceutical Operation Group domain, methods of research, examination and treatment have changed with new objectives for pharmaceutical development and advancements in new medical technology. In addition, generic drugs are becoming increasingly popular as a means to decrease medical expenses while reforms continue to be made in the NHI drug price system. Overseas, Asian countries east of Pakistan now account for 54% of the world's population, with this region fast becoming a center of global economic growth together with countries in Africa, where populations are skyrocketing.

Taisho Pharmaceutical Holdings perceives these changes as business opportunities and to this end is striving to create new value. In the Self-Medication Operation Group, we are taking steps to further expand the choices available to consumers made possible under Japan's self-medication tax system in order to turn the idea ""one is responsible for protecting one's own health"" into action. At the same time, we are developing products and overhauling our operating system from the consumer's perspective and entering new domains that include health foods, test agents and information services, while responding to changes in the distribution channel, notably for mail order system and online shopping. In the Prescription Pharmaceutical Operation Group, we terminated the business alliance with FUJIFILM Holdings and Toyama Chemical, and we are striving to increase efficiency in our sales system through Taisho Pharmaceutical and Taisho Pharma, and reform our R&D system. In overseas business, we will further strengthen business development in the Southeast Asia region by bolstering our capital and business alliance with Duoc Hau Giang Pharmaceutical (DHG) in Vietnam. We also aim to cultivate new markets based on France-based UPSA, which has been made a consolidated subsidiary.

In the increasingly challenging business environment of the pharmaceutical industry, growth is not possible without actively responding to these changes. Taisho Pharmaceutical Holdings will work to strengthen corporate governance as we create a framework that enables agile management decision-making in response to any change in the environment, and thus enhance our ability to create value throughout the Taisho Pharmaceutical Group.

In closing, I would like to express our sincere thanks to everyone and ask for your continued understanding and support.

September, 2019