Nippon Chemiphar : Corporate report 2022 (Annual report FY2021) (pdf, 1.8MB)

CORPORATE REPORT 2022

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 operated as a pharmaceutical company since its founding in 1950.

Throughout the years, we have consistently developed, manufactured, and sold distinctive, 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.

To attain these three goals, we are working to increase our earnings capacity through the generic drugs

business; deploying multilaterally the additional business foundation we are building by leveraging our alkalization therapy expertise, cultivated through Uralyt; and striving to secure further growth, over the medium to long term, through in-house drug discovery and in-licensing of new drugs.

We believe that these efforts will enable us to maximize the value of our corporate Group and achieve sustainable growth as we combine businesses that are advancing on different time horizons, as well as duplicate overseas the results that these businesses generate in Japan.

Goal 1: Generic drugs	Goal 2: Alkalizer
Strengthen profit structures	Apply multilaterally expertise
while pursuing added value and	related to alkalization therapy
efficiency using a quality-based
approach
Goal 3: New drug	Plus 1: Overseas Business
development

Launch internally developed, as well as in-licensed new and unique drugs on a global scale

Generate sustainable growth by duplicating results of goal-related efforts overseas

NIPPON CHEMIPHAR CORPORATE REPORT 2022

◆ Contents

Value Creation Strategy	2
Financial Highlights	4
Message to Our Stakeholders	5
Plan to Meet TSE's New Market Segments Continued
Listing Criteria	8
Business Overview	9
Pharmaceutical Products	10
Overseas Business	16
ESG Initiatives for a Sustainable Society	17
Financial Section	27
Corporate Data	36

• Scope of Report

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

• Reporting period: FY2021 (April 1, 2021-March 31, 2022)
• 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 for the Company's forecasts about the future performance. These forecasts are based on information currently available to management. Consequently, they 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 related legislation, and other items not limited to the above.

Cover painting

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

Title: Kibo He To (Toward Hope)

About the artist: Yuki of Kobo Hand

Kobo Hand is an Osaka-based company that operates a type B continuous employment support* business. All the art created through Kobo Hand is infused with the dream of producing warm pictures that will gently linger in the hearts of viewers.

• Welfare services for people with disabilities or intractable diseases who, due to reasons associated with age or physical strength, have difficulty working at companies or other conventional places of business. Through this support, individuals can receive training involving light work or other forms of employment.

Nippon Chemiphar Corporate Report 2022 1

Nippon Chemiphar Group's Value Creation Strategy

Business Model

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*

Human capital

Employees: 809 people (consolidated)

Financial capital

Consolidated net assets: ¥47 billion

Intellectual capital

R&D: ¥2 billion

Manufactured capital

Factories: Japan, abroad

Social and relationship

capital

Work with business partners

Natural capital

Pharmaceutical Products Segment

Others Segment

Pharmaceutical products

Generic drugs (pp. 9, 10)

• Develop value-added formulations that reect medical needs
• Improve quality assurance and our stable supply system

Proprietary products and new drugs (p. 9)

• Expand product lineup by in-licensing items from other companies

Alkalizer (p. 11)

• Utilize cultivated technologies and expertise to expand application to conditions other than hyperuricemia

In-house drug discovery and development (p. 12)

• Develop and out-license items in our internal development pipeline
• Improve development accuracy through use of new technologies and collaboration with external partners
• Expand into new elds by in-licensing promising pipeline products

Diagnostics (p. 15)

• Expand the use of DropScreen, create additional reagents

Overseas expansion of pharmaceutical products business (p. 16)

• Reduce manufacturing costs by using our Vietnam factory
• Market abroad products made at the Vietnam factory and preempt overseas developments
• Develop pharmaceutical products and clinical diagnostics abroad

Contracted testing (p. 9)

• Use a comprehensive one-stop system to provide total support for non-clinical and clinical trials

Strengths

Integrated system for development, manufacture, and marketing of generic drugs

Factories in Japan and abroad attain advanced manufacturing technology, cost competitiveness

Broader information delivery, data gathering resulting from marketing new drugs

Expertise regarding alkalizers and citrate preparations

Venture-based drug discovery research targeting early out-licensing to domestic and overseas companies

Adoption of new technologies, collaboration with specialists in various disciplines and elds

Offered value

Increased patient QOL

Extended healthy life spans

Reduced patient burdens, limited healthcare expenses

Employees nd

fulllment in personal growth through work

Stable, sustainable shareholder returns

Safeguarding of global environment

Community

Energy use (crude oil equivalent) 6,218 kl

• Quality assurance and stable supply (p. 10) • Corporate governance (p. 23)
• Compliance and risk management (p. 25) • Initiatives to reduce environmental impact (p. 17)
• Contribution to local communities (p. 20)
  Our corporate philosophy, principles of conduct, support for employee abilities, and training system (p. 21)

involvement

* Formulated based on the IIRC	Sustainable growth in corporate value through value creation cycle
framework for the FY2021 results.

2 Nippon Chemiphar Corporate Report 2022

Nippon Chemiphar Corporate Report 2022 3

Financial Highlights

┃Net Sales

(¥mn)
40,000
35,331 34,182		31,541 32,506
30,000		31,756
20,000
10,000
0
FY2017	2018	2019	2020	2021

┃Total Assets, Net Assets, Equity Ratio
(¥mn)							(%)
50,000						49,453	50
46,698	46,926 45,862	47,124
40,000							40
37.4	38.0	37.9	38.2	37.4
30,000							30
20,000	17,863 17,392	18,014 18,501	20
17,487
10,000							10
0							0
FY2017	2018	2019		2020	2021
■ Operating profit	Operating ratio

┃Amounts per Share

(¥)			(¥)
6,000			300
	4,963.24	5,119.99
5,000	4,830.92 5,006.49	250
4,859.86
4,000			200
3,000

┃Operating Prot
(¥mn)					（%）
2,000					10.0
	1,848
1,500		1,464			7.5
1,000	5.2				5.0
		4.3			825
500				564	2.5
			364	1.8	2.5
			1.1
0
	FY2017	2018	2019	2020	2021

• Operating profit Operating ratio

┃Cash Flows

(¥mn)	3,188
3,000
	2,196	1,720	1,801
1,500	1,582		1,837
	1,503
		1,394
	1,235
0		326	479	35
(1,500)	(960)		(1,024)
	(1,606)
(3,000)

FY2017 2018 2019 2020 2021

• Operating cash flow ■ Investment cash flow Free cash flow

┃ROE, ROA

(%)

8

6.7

6

5.0

┃R&D Expenses

(¥mn)
2,500						2,392
		2,280			2,173
2,000	2,066	1,998

1,500

1,000

500

0

FY2017 2018 2019 2020 2021

┃Capital Expenditure,

Depreciation Expense

(¥mn)
2,000
			1,812
1,645				1,586
1,500
	1,345		1,393
	1,272
1,192
		1,131
1,000
	784
		660
500
0
FY2017	2018	2019	2020	2021
■ Depreciation expense ■ Capital expenditure

┃Composition of Shareholders (As of March 31, 2022)

Financial instruments business operators

0.8%

Treasury stock	Financial
14.3%	institutions
	18.0%

											150
2,000	100.0	100.0	194.33	100

4
3.6	3.2	3.8
	2.8

Other

Foreign investors 5.8%

1,000																	50.0						50
		315.28									50.0					50.0
0		245.11	121.42			137.75			0
		FY2017	2018	2019	2020	2021
■ Book value per share	■ Dividend per share
		Earnings per share

2.5

2

2.1

1.3

0.7

0

FY2017 2018 2019 2020 2021

Return on equity Return on assets

Japanese

companies

30.2%Individuals

30.9%

4 Nippon Chemiphar Corporate Report 2022