Interview with the President

Transcription

1 Interview with the President s a company that is part of the social infrastructure supporting Japan s public health insurance system and medical administration, the lfresa Group aims for quality growth and the achievement of its Healthcare Consortium vision through continued proactive capital and business investment. Denroku Ishiguro Representative Director & President 8 lfresa Holdings Corporation

2 For the lfresa Group, the fiscal year ending March 31, 2016 is the final year of the Medium-term Management Plan The Challenge of Reform ~Uniting to Climb New Peaks~. s president, tell us about your outlook as you work toward the goal of achieving the Healthcare Consortium vision, as well as your medium- to long-term vision. By expanding our business domains, we will strengthen our earnings base, with the aim of fulfilling our mission as a company that is part of the social infrastructure. The lfresa Group conducts its business activities in areas distribution and making every effort to foster high-addedvalue business domains. In this way, the Group will related to medicine, life and health. In particular, our Ethical Pharmaceuticals Wholesaling Business is part of the social strengthen its earnings base to maintain the reliable, safe infrastructure supporting medicine and people s health. I and sincere distribution of ethical pharmaceuticals, etc., believe the market for ethical pharmaceuticals will see and to continue growing as a corporate group responsible stable growth for the time being due to the aging of the for supporting the social infrastructure. Under our current population and the release of new drugs. t the same time, medium-term management plan, we are validating our however, Japan s working-age population has continued to efforts by achieving several track records in gaining new fall, and is expected to fall further, and thus in the long business capabilities in new business areas, for example, in term, any dramatic growth in the market may be difficult. In the manufacturing of active pharmaceutical ingredients addition, because Japan s National Health Insurance (NHI) (PIs) and in our business overseas. system is financed by the people of Japan via their taxes, Through these efforts to strengthen our earnings base, the need to maintain the nation s social security system in we intend to provide society with products and services in robust condition makes it difficult to allow ethical pharmaceutical wholesalers supporting the social infrastructure to care Consortium, thus achieving Our Philosophy which every medical-, life- and health-related field as a Health- excessively pursue profit. states, We create and deliver a fresh life for all. To fulfill its Given those conditions, the lfresa Group must move social mission, the lfresa Group will continue moving forward toward becoming a social infrastructure company forward to further evolve and streamline its pharmaceutical distribution operation while seeking out new business backed by a strong earnings base. opportunities beyond domestic ethical pharmaceutical Rapid Changes in the Future Population Structure Total population (left scale) and percentage of elderly (right scale) in Japan (Million people) (%) 45 ged 65 or above ged 15~64 ged 14 and below Percentage of elderly (aged 65 or above) Decrease: million Rapid decrease: million Source: Population Estimates by the Ministry of Internal ffairs and Communications; Population Projections for Japan (January 2012) by the National Institute of Population and Social Security Research; Vital Statistics by the Ministry of Health, Labour and Welfare nnual Report

3 Interview with the President What kind of year was the fiscal year ended March 31, 2015 for your company as a leader of the ethical pharmaceutical wholesale industry? While market conditions were challenging, our efforts at implementing distribution reforms delivered results. Capital and business investment toward achieving our Healthcare Consortium vision also continued unabated. Conditions in the ethical pharmaceutical market surrounding the lfresa Group grew even more challenging in the fiscal year ended March 31, The Group saw some impact from the lowering of NHI drug prices in the spring of 2014, and from the rapid spread of measures to encourage the use of generic drugs. Constraints on hospital visits were also seen, in part due to a reaction to the surge in demand prior to the pril hike in the consumption tax, and poor weather in the first half of the fiscal year. Due to these factors, the market for ethical pharmaceuticals contracted for the first time in 17 years, with negative growth of 2.7%. The lfresa Group continued to strengthen its efforts to achieve the management targets, and thereby increase corporate value, set forth in Medium-term Management Plan The Challenge of Reform ~Uniting to Climb New Peaks~, which concludes with the fiscal year ending March 31, For the fiscal year ended March 31, 2015, consolidated net sales were 2,421,162 million, down 3.3% year on year, while operating income fell by 16.4% year on year to 29,229 million and net income was down 10.3% year on year to 22,923 million. t the same time, we did see progress in the industry s most important issue, distribution reforms, including economically rational transactions, separate pricing for each product, and reform of the practice of deliveries prior to price agreements. By carefully explaining these issues to our customers and gaining their understanding, efforts in these areas have become considerably more widespread. We intend to work hard to ensure they become even more firmly established. To achieve the Healthcare Consortium vision, the lfresa Group needs to provide products and services across all health-related fields through forming strategic partnerships with other firms and expanding its business domains in addition to providing stable distribution of pharmaceuticals. I believe we were successful in ensuring that capital and business investments toward that goal continued unabated. What are some of the specific efforts you ve made toward achieving the Healthcare Consortium vision? In each of our areas of business, we have accelerated our efforts to expand our business and geographic scope. In order to achieve future growth, in the fiscal year ended has changed its name to TS lfresa Corporation. The new March 31, 2015, our efforts focused on expanding our company will work with a wide range of manufacturers to business and geographic scope. provide ethical pharmaceuticals as well as medical devices, In the Ethical Pharmaceuticals Wholesaling Business providing its customers with total support while also working segment, SEIW SNGYO CO., LTD. and Tokiwa Yakuhin to streamline distribution and strengthen marketing operations with even closer ties to the local community. Further, Co., Ltd., both consolidated subsidiaries, were merged, with an effective date of pril 1, 2015, and the new company on October 1, 2014, the diagnostic reagents wholesaling 10 lfresa Holdings Corporation

4 business of Shikoku lfresa Corporation was transferred to lfresa Shinohara Chemicals Corporation, streamlining the marketing operations of that business. The lfresa Group is also moving ahead with efforts to restructure distribution. By rebuilding distribution functions and marketing operations in the Kansai area, the Group will work to strengthen customer service and achieve lowcost operations. In Okinawa Prefecture, the dual-purpose complex with the head office and distribution center of RYUYKU CO., LTD. started operations in January 2015, achieving the safe and reliable supply of pharmaceuticals by introducing an earthquake-resistant structure and power outage countermeasures and improved productivity through more efficient distribution operations. The new facility also enables enhancement of low-cost operations by utilizing energysaving equipment. In ugust 2014, lfresa Corporation began offering a vaccination schedule management system targeting medical institutions and the guardians of infants, in order to contribute to improvements in infant vaccination safety. In the Self-medication Products Wholesaling Business segment, in October 2014, lfresa Healthcare Corporation acquired all of the shares of Mogi Pharmaceutical Co., Ltd., a group company of Matsumotokiyoshi Holdings Co., Ltd. The goal of the acquisition is to utilize Mogi Pharmaceutical Co., Ltd. s business assets and expertise regarding the healthcare wholesaling business in the drug store field to further strengthen the foundations of the Self-medication Products Wholesaling Business. In the Manufacturing Business segment, in January 2015 a new Delivery Center was completed and began operation at lfresa Pharma Corporation s Okayama Pharmaceutical Plant. This completes the rebuilding of the plant s drug formulation, packaging and delivery center facilities, giving it a consistent line from production through distribution, and ensuring a more sophisticated ability to supply high-quality products. In addition, lfresa Fine Chemical Corporation, which began business in pril 2015, was turned into a wholly owned subsidiary when lfresa Pharma Corporation took over Daiichi Sankyo Propharma Co., Ltd. s kita Plant. This represents the lfresa Group s first site for the manufacturing of PIs for ethical pharmaceuticals. With advanced manufacturing and quality control systems in place, the Group will continue to provide a stable supply of products, and work to strengthen the PI business into a new core component of the Manufacturing Business. s part of the expansion of our business scope through progress in our development as a Healthcare Consortium, in the fiscal year ending March 31, 2016, we have established a new Medical-related Business segment. In this segment, the Group will strengthen the business bases of pollo Medical Holdings Inc. and Nihon poch CO., LTD., both of which are engaged in the dispensing pharmacy business, and realize increases in corporate value. Self-medication Cure Diagnosis, Treatment Manufacture Wholesale Retail Food products, Daily necessities Selfmedication Self-medication Drugstores, etc. Ethical pharmaceuticals Ethical pharmaceuticals Dispensing pharmacies, Medical services, etc. Diagnostic reagents Diagnostic reagents Medical devices Medical devices SPD nnual Report

5 Interview with the President How exactly are these efforts to expand your business and geographic scope useful in strengthening the business base of the lfresa Group? Through expansion of the business and geographic scope, the Group achieves quality growth, enabling it to balance, at a high level, strengthening of its business base and execution of its social responsibilities the twin drivers of its management. The lfresa Group conducts business across a wide range of health- and medical-related fields, and is part of the social infrastructure supporting Japan s public health insurance system and medical administration. It is extremely important that we ensure the solid execution of our social responsibilities through the stable supply of pharmaceuticals. While one goal of our efforts to expand our business and geographic scope is the achievement of the Healthcare Consortium vision, at the same time these efforts are not just a matter of growing in scale. Our aim is to achieve quality growth, thereby strengthening the Group s business base and financial standing. To that end, we not only look at organic growth, but proactively engage in efforts to take advantage of M& and other measures. By acquiring the foundations for growth, maintaining quality growth into the future and building a more robust structure, we can take our ability to provide a stable supply of pharmaceuticals to an even higher level and enrich the Healthcare Consortium even further. By achieving quality growth, the lfresa Group will balance, at a high level, the strengthening of its business base and execution of its social responsibilities. Speaking of social responsibilities, your medium-term management plan also includes the promotion of CSR. Tell us about the purpose of CSR activities at the lfresa Group. t the lfresa Group, which is involved in business directly related to human lives, we believe that our business activities themselves partly entail CSR elements. Businesses related to health and medicine are characterized by their direct involvement in human life. This is why stable supply of pharmaceuticals, and contributed to affected, but the Group worked together to ensure the we believe that our business activities themselves partly medical care in the disaster-stricken region. Each of the entail CSR elements. Group companies has established its own business Since the founding of the lfresa Group, we have continuity plan, and worked to share information infrastructure and improve the distribution system regularly worked to fulfill our social mission by continuing to provide the safe and reliable distribution of pharmaceuticals, in preparation for unforeseen events. By establishing this sincerely and with stability. The true value of the Group s robust business base, we believe the Group is better infrastructure for providing a stable supply of pharmaceuticals will be particularly tested in the case of events that safe and reliable distribution of pharmaceuticals under prepared to fulfill its own social responsibility to provide have a significant impact on the social infrastructure, any circumstances. The Group creates value through its including major natural disasters or the outbreak of health- and medical-related business activities, and infectious diseases. t the time of the 2011 Great East endeavors to contribute in some way to enhancing Japan Earthquake, the entire distribution network was Japan s social welfare. 12 lfresa Holdings Corporation

6 I also hope that our people carry out their assignments with a strong awareness of the social significance of the Group s business. If all of our people are able to naturally share in this awareness, I think it will enhance even further the Group s readiness in terms of CSR and compliance. To conclude, please tell shareholders and investors in the lfresa Group about your stance on shareholder returns and dividends. We consider returning profits to shareholders to be one of the most important priorities of management. We implemented a four-for-one stock split, thereby increasing the liquidity of our shares. New investments are necessary for the further development of the Healthcare Consortium vision. The stable basic policy, the Company plans to pay an interim dividend Regarding dividends for the coming fiscal year, under its procurement of funds for these investments requires the of 16 yen per share, followed by a year-end dividend of 16 understanding of our shareholders and investors. In addition yen per share, for a full-year dividend of 32 yen per share, to carefully explaining the Group s corporate value, we an increase over the previous fiscal year. would also like to be proactive in communicating our capital We ask for the continued support of our shareholders and and dividend policies. investors, and will do our utmost to meet your expectations. The Company determines dividends based on consolidated financial results, with a target of a dividend * fter consideration of the stock split on equity (DOE) ratio of 2%, comprehensively considering the enhancement of its financial standing, the stability of its management base and future business development. In the fiscal year ended March 31, 2015, the Company conducted a four-for-one stock split with an effective date of September 30, 2014, lowering the amount per unit of investment with the goal of making it easier for shareholders and investors to invest. year-end dividend of 16 yen per share was decided upon, and combined with an interim dividend of yen per share*, this resulted in a full-year dividend of yen per share*. nnual Report