Founded in Japan in 1921 as a manufacturer of chemical compounds in Naruto in Tokushima prefecture, which is known for its whirlpools and Awa Odori Festival, the Otsuka Group has marked its 90th anniversary last year. We recognize that this achievement would not have been possible without your cooperation. We sincerely appreciate your support and look forward to continued collaboration.

Looking back over the past 90 years, the Otsuka Group has experienced a history of challenges and growth that fall into four broad stages. The first stage, the Foundation Phase when the company was first established in Tokushima, was marked by our entry into the pharmaceutical business with the manufacture and sales of intravenous solutions and our subsequent diversification into over-the-counter drugs and nutritional food and beverages. The second stage, the Growth Phase, began in the 1970s and continued through the 1980s. During this phase, Otsuka focused on developing new, original drugs, establishing a research institute in 1971 and entering a period in which we expanded into the functional beverage and food business with Pocari Sweat and Calorie Mate. This line leverages Otsuka’s scientific expertise to create products that could only come from a pharmaceutical company. The third phase, the International Business Development Phase, dates from the second half of the 1980s through the year 2000 and was marked by our decisive entry into the international market. As we move into the 21st century, the Otsuka Group is currently in an Expansion Phase, our fourth stage of development, aimed at positioning Otsuka as a global leader. We see our public listing at the end of last year as an opportunity to take the first step toward our next stage of growth by taking hold of the reins and taking on the challenges of the international market.

Based on the Otsuka Group’s corporate philosophy of "Otsuka – people creating new products for better health worldwide," we have built a global healthcare company that operates in a wide spectrum of health-related businesses. Focusing on total health, our operations are based on two pillars — the Pharmaceutical Business, which provides comprehensive support from diagnosis through medical treatment, and the Nutraceutical* Business, which helps maintain and improve day-to-day health. We have created synergy among our various ventures by focusing our businesses on the theme of healthcare, and over the course of our 90-years history, we have produced a large number of innovative products for the markets. Utilizing transfusion sterilization techniques, we produced Bon Curry (1968), the world's first curry packaged in a sealed plastic pouch. We also used our expertise in intravenous solutions to develop Pocari Sweat (1980), a beverage for rehydration and replenishing electrolytes lost through sweat. Inspired by the concentrated liquid diet given to hospital patients, we invented Calorie Mate (1983). In addition, our antipsychotic drug ABILIFY (2002) functions under an entirely new mechanism to help patients around the world to recover and return to a fulfilling life in society. ABILIFY is a partial dopamine agonist that is completely different from conventional drugs. At the Otsuka Group, we are working to position ourselves as a big venture company that creates innovative and unprecedented products for the world market.

In the second quarter of the current year, the Otsuka Group overall continued to perform well, absorbing the impact of difficult external factors such as the devastating March 11 earthquake and the stubbornly strong yen. The Pharmaceutical Business contributed to our strong performance. We saw continued growth in global sales for our flagship product ABILIFY, as well as strong sales in Japan for new drugs such as Aloxi, Abraxane, E Keppra, and SAMSCA. Steady growth in sales for ELNEOPA also boosted sales for our clinical nutritional product line. Although sales of Pocari Sweat in Japan this year did not reach the heights of last year, when sales benefited from an extremely hot summer, Pocari Sweat continued to perform well outside Japan with growth of more than 20% on a volume basis over the same period in the previous year. We have also achieved results with initiatives to improve profitability, including a continuous review of our cost structure. Thanks to these and other measures we have increased both sales and income.

Today, the Otsuka Group is focused on a unified effort to execute our first medium-term management plan. Under this management plan, which concludes in fiscal 2013, we focus on maximizing revenue from ABILIFY and the oncology business, and on increasing sales of new drugs in the Japanese market as the two main drivers of growth in our Pharmaceutical Business. In our Nutraceutical Business, we will focus our resources on accelerating development outside Japan, mainly in Asian countries, and on improving profitability by reviewing our cost structure. In addition, the Otsuka Group will set the stage for further growth by developing our medical device business as a next-generation core business and by focusing on the common and nutritionally rich soybean for product development and global expansion.

We appreciate your continued support, as the Otsuka Group takes the first steps toward realizing the next stage of growth.

Tatsuo Higuchi
President and Representative Director, CEO
Otsuka Holdings Co., Ltd.