News Releases

February 6, 2004

Revised Phase II 5-Year Management Plan

February 6, 2004---Dainippon Pharmaceutical Co., Ltd. (Head Office: Osaka, President: Kenjiro Miyatake) announced today that it has completed a review of its Phase II 5-Year Management Plan (April 1, 2002-March 31, 2007), which was released in May 2002, and also announced the release of a Revised Phase II 5-Year Management Plan, which will guide corporate focus until fiscal year 2007.

The primary corporate objective of implementing the original Phase II 5-Year Management Plan in fiscal 2002 was the "realization of qualitative operations" that would encourage Dainippon Pharmaceutical's further growth by adaptation to a rapidly changing management environment. However, in 2003, it became necessary to revise the forecasted net sales and profits in the Phase II Plan for both the domestic (Japanese) and overseas markets due to changes in the domestic marketability of Gatiflo (gatifloxacin)-a synthetic antibacterial agent, which was forecast as a primary source of revenue flow in the Phase II 5-Year Management Plan-and suspension of the international development of a promising diabetic agent. A Management Reform Committee and Product Strategy Committee were promptly established to review key operational issues, and the subsequent findings and solutions have been incorporated into this revised plan.

Although the numerical values of our operational objectives have been reconsidered in the Revised Phase II 5-Year Management Plan, the primary corporate objective of the "realization of qualitative operations" remains unchanged as Dainippon Pharmaceutical now progresses with the rapid and purposeful implementation of the following operational goals.

1. Goals under the Revised Phase II 5-Year Management Plan for Fiscal Year 2007

  Consolidated Operations Non-Consolidated Operations
Original Plan Revised Plan Original Plan Revised Plan
Net sales (100 million yen) 1,650 1,450 1,500 1,300
Operating income ratio (%) 17.0 11.0 18.0 11.5
Return on equity, ROE (%) 10.0 6.8 10.0 6.6
Earnings per share, EPS (yen) 96.0 55.0 95.0 53.0
Export sales ratio (%) 7.0 5.0 7.6 5.4
Number of employees 2,350 2,330 2,200 2,200

NB: The current joint venture agreement with Abbott Laboratories will terminate at the end of March 2006. Since there is currently no agreement beyond the fiscal year of 2007, Abbott products are not included in the sales figures above.

2. Key Operational Objectives

  1. (1) Strengthening domestic pharmaceutical operations
    Through strategic positioning of managerial resources, it is aimed to maximize the profit-earning potential for the company's core products, such as the gastroprokinetic drug Gasmotin (mosapride citrate), and the vasodilator Prorenal (limaprost alfadex). It is also aimed to effectively invest in and plan for rapid development of new products, such as the antipsychotic drug Lonasen (blonanserin), and the calcium channel blocker Zanidip (lercanidipine hydrochloride).
  2. (2) Active investment in research and development
    As in the original Phase II plan, the focus of research and development is the investment in the creation of compounds that add new value to society and-by further increasing the efficiency of research and development-to ensure that such products are quickly developed and marketed.
  3. (3) Consolidation of the efforts of overseas operations
    The efforts of overseas operations will be consolidated through proactive strategies for out-licensing products that promote the global development of the company's international strategic products, such as the antidementia drug AC-3933, the antianxiety/antidepressant drug AC-5216, and the aldose reductase inhibitor AS-3201.
  4. (4) Implementation of further cost reduction measures
    Continuing the "Project CR 30" of the Phase I 5-Year Management Plan, which aimed to reduce the total cost of operations, the revised plan aims to reduce fixed costs by reviewing the functions of departments providing support services, and to reduce other costs by strong management of procurement, further streamlining of operations and improving overall operating efficiency.
  5. (5) Introduction of a new personnel system
    For the "realization of qualitative operations", it was recognized that personnel should be encouraged to continually improve their capabilities. Therefore the soon to be implemented revisions to the personnel system will promote business competitiveness and personal motivation within the workforce by establishing an in-depth result-oriented system for periodic review of the remuneration structure.