Nippon Chemiphar : Corporate Report 2021 (Annual Report FY2020) (pdf, 4.3MB)

CORPORATE REPORT 2021

Business Philosophy

The goal of the Nippon Chemiphar Group is to make a difference in society by providing pharmaceutical drugs and health-related services to help people become and remain healthy.

Nippon Chemiphar has been operated as a pharmaceutical company since its founding in 1950. Throughout those years, we have consistently developed, manufactured, and sold distinctive and original pharmaceutical formulations. Since the year 2000, we have made generics a pillar of our business and have endeavored to safely and conveniently supply these drugs by conducting related development, manufacturing, and sales operations in-house.

We support patients with illnesses for which there is as yet no adequate medication. This we do by implementing initiatives associated with drug discovery themes that target the development of innovative drugs. Further, we are trying to reposition drugs, using the alkalization therapy expertise we have cultivated over many years.

Nippon Chemiphar's Three Plus 1 Principal Goals

Since 2000, Nippon Chemiphar has promoted a basic management strategy based on three goals: establishing a strong presence in the generics business; becoming a leader in the field of alkalization therapy; and pursuing in-house drug discovery and development.

As initiatives designed to attain these three goals, first, we are currently striving to increase our earnings capacity by the generic drugs business. Second, we continue to conduct clinical research and pursue educational activities to become a frontrunner in the field of alkalization therapy, a remedial treatment we hope to convert into a core business in addition to the generics business.

Further, for in-house drug discovery and development, we are conducting medium- to long-term initiatives, so that we might find revolutionary candidate compounds.

By simultaneously pursuing the above initiatives, we believe the Company can achieve sustainable growth.

To this end, we intend to strengthen our overseas activities with a focus on Asia, so that we can improve the results even in those areas where achievements have already been attained.

Goal 1

Goal 2

Develop a distinctive generics business by making differentiation, using superior information delivery capabilities and inventive products; heighten cost competitiveness; and relentlessly pursue quality.

Fully utilize the results generated by clinical research into alkalization therapy.

Goal 3

Plus 1

Reduce risk, improve development efficiency, and roll out new drugs on a global scale by focusing on exploratory research and the early out-licensing of our compounds.

Apply our three goals to overseas markets centered on Asia.

NIPPON CHEMIPHAR CORPORATE REPORT 2021

◆ Contents

Value Creation Model	2
Business Overview	4
Financial Highlights	5
Message to Our Stakeholders	6
Pharmaceutical Products	11
Overseas Development	17
CSR: Maintaining Society's Trust	18
Financial Section	28
Corporate Data	36

Cover painting

Provided by Paralym Art, an association that assists people with disabilities to achieve economic independence.

• Scope of This Report

This report contains information regarding the Nippon Chemiphar Group's business strategy, financial situation, and corporate social responsibility- related activities.

• Reporting period: FY2020 (April 1, 2020-March 31, 2021)
• Reporting companies: Nippon Chemiphar Co., Ltd. and its Group companies

Note Regarding Forward-looking Statements

Statements made in this corporate report with respect to current plans, estimates, strategies and beliefs, and other statements of Nippon Chemiphar are forecasts about the future performance of Nippon Chemiphar. These forecasts are based on information currently available to management. Consequently, these forecasts are subject to known and unknown risks and uncertainties and may differ significantly from actual results. Items that may influence forward-looking statements and forecasts include changes in the economy, changes in the business and competitive environment for Nippon Chemiphar's business, revisions to the Pharmaceutical Affairs Law and other related legislation, and other items not limited to the above.

Title: Yume Ressha (Dream Train)

About the artist: Yukibo

Yukibo began to show symptoms of schizophrenia at the age of 26. Believing in the importance of valuing one's own abilities, he continues to create works that bring people together, even now amid the spread of the COVID-19 pandemic.

Many companies have incorporated Yume Ressha into their advertising designs.

Nippon Chemiphar Corporate Report 2021 1

Nippon Chemiphar Group's Value Creation Model

Business Model

Fullling our goals will contribute to society

Market demands

Generic drugs that

lead to lightened burdens on patients and public nance

Creation of breakthrough drugs

Manufacture and stable supply of high-quality pharmaceutical drugs

Greater safety and convenience in pharmaceutical drugs

Input*

Financial capital

Consolidated net assets: ¥47 billion

Intellectual capital

R&D expenses: ¥2 billion

Human capital

Employees: 760 people (consolidated)

Manufacturing capital

Factories: Japan, Vietnam

Social and relationship capital

Collaboration with business partners

Natural capital

Energy usage (crude oil equivalent) 5,903 kl

Strengths

Integrated system including the development, manufacture, and sale of generic drugs, based on technologies from manufacturers of new drugs

Accumulation of knowledge in the hyperuricemia market and market value of our alkalinizing agent

Advanced manufacturing technology and cost competitiveness at our factories in Japan and abroad.

Search-centered,venture-typedrug-discovery research, in pursuit of efficiency and development precision

Business activities

Pharmaceutical Products	・Pharmaceuticals (Page 11)
	・Drug discovery（Page 14）
	・Overseas business（Page 17）
Others	・Contracted testing（Page 4）
・Diagnostics（Page 16）

Basic strategy

Three Plus 1 Principal Goals

Plus 1

Overseas development

Goal 3

In-house drug discovery and development

Goal 2

Alkalizer

Goal 1

Generic drugs

Present

Future

Management vision

Target

New drugs and	Generic
other products	drugs

New drugs surpass generic drugs in terms of sales, and we broaden our overseas expansion

• Rollout new drugs in Japan and overseas using advanced technologies, including AI
• Increase business and earnings overseas

FY2020

New drugs and other products

Generic drugs

Offered value

Increase in patient QOL

Reduction of burdens on patients and public nance

Improvement in lives and abilities of our employees

Stable, sustainable shareholder returns

Safeguarding of global environment

・Quality assurance and stable supply (Page 12) ・Alliances (Pages 13)

・Corporate Governance (Page 18) ・Compliance and risk management (Page 20)

Our corporate philosophy and principles of conduct, support for employee abilities, and training system (Page 26)

• Formulated based on the IIRC framework for the FY2020 results.

Sustainable growth incorporate value through our value creation cycle

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Nippon Chemiphar Corporate Report 2021 3

Business Overview

I Pharmaceutical Products

1. Pharmaceuticals

(1) Generic Products

To lessen the burden on patients and improve the financial situation of the nation's health insurance system, Japan's Ministry of Health, Labour and Welfare is promoting the use of generic drugs. To this end, its new target is to raise the ratio of prescriptions for generics to 80% or more of all drug prescriptions in all prefectures by the end of FY2023 (ending in March 2024). With the target have come efforts to restore societal trust in generics, following quality-related issues.

The Nippon Chemiphar Group is applying its integrated capabilities to the development, manufacture, and marketing of new drugs and generics. Regarding the latter, we are pursuing the development of those generics that fulfill the needs of patients and healthcare professionals.

At the same time, we are redoubling our efforts to maintain product quality and ensure stable supplies.

• Please refer to page 11 for details.

1. Proprietary Products, Drug Discovery, Marketing Rights Nippon Chemiphar categorizes as proprietary products new drugs that it has developed, as well as new drugs and long-listeddrugs in-licensedfrom other companies.
   Among its proprietary products are three formulations that the Company developed in-house: alkalization therapeutic drug Uralyt-U, analgesic and anti-inflammatory drug Soleton, and hypertension therapeutic drug Calvan. Currently, we are collaborating with institutions in conducting clinical research into the possible use of these formulations in new areas of therapy.
   Included among the new and long-listed drugs we have in-licensed from other companies are new oral intestinal cleansing agent PICOPREP (manufacturing and sales rights acquired in February 2019) and macrolide antibiotic agent Klaricid (exclusive sales launched in July 2020; manufacturing and sales rights acquired in April 2021). We expect these products to strengthen our product portfolio and anticipate utilizing them to generate synergies that will elevate our generics business.
   At the same time, we are continuing to aggressively pursue drug discovery themes with the potential to lead to groundbreaking new drugs. Currently, these efforts are focused on our development pipeline, where we are
   cultivating new treatments with support from public funding. ☞ Please refer to page 14 for details.

2. Diagnostics

Nippon Chemiphar provides measuring equipment and reagents used to fight allergies and lifestyle-related diseases. In terms of measuring equipment and reagents related to allergies, in 2020 we began selling DropScreenTM,

a groundbreaking new product that enables quick allergy screenings using minimal blood samples. Currently, besides rolling out the product in Japan, we are proceeding with efforts to market it in China, where we have begun selling it through a local company with which we have concluded a technology alliance.

• Please refer to page 16 for details.

1. Others

1. Contracted Testing

The Nippon Chemiphar Group facilitates the creation of safe, high-quality products by providing support for non- clinical and clinical trials performed when developing pharmaceutical products and medical equipment.

The Safety Research Institute for Chemical Compounds Co., Ltd., a Group company, remains focused on the development of testing methods not involving live animals.

It supports the use of the Bovine Corneal Opacity and Permeability test-that uses excised bovine corneas, normally discarded as waste in the production of beef-as well as test systems for regenerative medicine. Moreover, since the end of 2017, the Group has been applying Good Laboratory Practice-approved safety testing methods when using pigs to test medical equipment. It is the first company to do so in Japan.

Using the Bovine Corneal Opacity	A good laboratory practice
and Permeability test.	compliance certificate for a
	regenerative medication

2. Healthcare-related Products

The Nippon Chemiphar Group handles a diverse array of healthcare products, including nutrients, health foods, cosmetics, and various types of creams, classified as quasi-drugs because they contain a certain concentration of particular active ingredients.

Amid the rising needs surrounding consumer self- medication, we are leveraging trustworthiness and the development expertise we have gained as a pharmaceutical product manufacturer to make a difference in people's lives and provide a high level of added value.

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