The Otsuka group of companies will contribute to society while achieving sustained growth by doing what only Otsuka can do.
Under our enduring corporate philosophy “Otsuka-people creating new products for better health worldwide,” the Otsuka group of companies creates innovative products that fulfill a universal human desire to be healthy.
The core of our management approach is to leverage our strengths and capabilities described on the following pages that enable us to do what only Otsuka can do. In doing so, we are also contributing to, and advancing, a sustainable society. As we stand at a juncture of ever-larger social change, our philosophy serves as a solid foundation, guiding us amidst the trends and tides of the times, and from which we take on new challenges and opportunities.
We create and provide a comprehensive portfolio of products and services that meet the specific healthcare needs of the times in each community. Factors that influence these needs include the emergence of new disease trends, and demographic trends such as aging populations and rates of population growth that are uneven around the world. Simultaneously, factors that influence the ability to address these needs include the evolution of gene therapies, an area that Otsuka is investing in; artificial intelligence; and other technologies. Becoming an indispensable contributor to people’s health worldwide requires us to anticipate society’s expectations in 10 and 20 years’ time.
What kind of contributions can our Pharmaceutical Business make? As populations continue to age, treatments, or better yet, preventions are needed for diseases such as Alzheimer’s disease and various forms of cancer. At the same time, infectious diseases such as tuberculosis will become even more pressing global challenges. At the other extreme, many hereditary, orphan diseases lack any treatments. Otsuka is contributing through research in many of these disease areas.
For COVID-19, contributions by our group companies around the world have mainly taken the form of philanthropy.
Simultaneously, maintaining and improving health is an integral part of our Nutraceutical Business. Otsuka continues to invest in research that clarifies how people can maintain a healthy lifestyle and thereby avoid illness. A fundamental demand driver for nutraceutical products is people’s greater proactivity in managing their heath across their entire lifespans. This includes, for example, women who balance professional and family demands, athletically minded people aiming to improve their overall fitness and stamina, and older people seeking extended quality-of-life benefits. Our contribution in nutraceuticals also takes a research-based approach. Here the aim is to create products that offer tangible, health-supportive benefits in areas such as immune function, quality of sleep, and special dietary needs, and even intangible benefits that support individual lifestyles and work styles. Given the time required for product development, we must construct hypotheses that look 10 and 20 years into the future, and start developing products now.
Changes in human needs, and in business and other landscapes are the largest sources of risk and opportunity. Risks that our management factors into decision making include macroeconomic and geopolitical climates; the physical climate, with increasingly frequent natural disasters caused in part by global warming; and demographic changes. In order to devise optimal responses or solutions, we must identify root causes. On the opportunity side, this involves evolution of product development and technologies, expansion of our presence in new regions, and the forging of new research and commercial collaborations.
Focusing our energies on opportunities, while managing but not being overwhelmed by risks, is the right approach for Otsuka.
As a total healthcare company, our operations encompass products and services for the diagnosis and treatment of diseases, as well as for the maintenance and improvement of health. Medical cost inflation due to aging populations and the increasing sophistication of medical treatment is a serious global issue. As a provider of total healthcare solutions, we recognize these developments as responsibilities and opportunities. Our diverse portfolio enables us to turn risks into opportunities.
In keeping with our corporate philosophy and our longstanding ESG-informed commitment to contributing to human health, we set forth our CSR Mission when we
announced the Third Medium-Term Management Plan in May 2019. The CSR Mission defines material issues in three categories: Society (Health, People, Quality in All We Do), Environment (Climate Change, Resource Recycling and Conservation, Water Conservation), and Governance. Within each category, we carry out initiatives under related themes.
For Society, we focus on human resources. In order to achieve sustainable growth, continuous improvement of capabilities as individuals, teams, and organizations is required in addition to management principles and corporate culture. We recognize employee growth as an important management issue. To that end, Otsuka Holdings launched the executive human resource development programs of the Otsuka Global Academy in 2016 to foster human resources capable of driving future growth. Three programs are offered to group employees.
The Senior Leadership Program and Middle Leadership Program are designed to nurture management candidates, while the Global Leadership Program, launched in 2019, is fostering a global managerial cadre comprised of employees from around the world.
Each group company is also actively involved in human resource development. For instance, Otsuka Pharmaceutical has operated WING, a voluntary leadership study group, since 2009. Participants identify internal and external issues, and work in teams to discuss potential solutions before formulating a proposal for consideration. At Taiho Pharmaceutical, “Global One Academy” was established in 2016. In addition to individual growth, we believe that diversity is vital. The variety of innate qualities that individuals bring to our teams is important to us, and we actively welcome people of all nationalities, races, ages, genders, and abilities, in the belief that breaking down barriers to inclusion is the key to sparking innovation and furthering our globalization.
For Environment, our initiatives focus on sustainability throughout the supply chain. We have been steadily implementing various measures, which in 2019 included the introduction of CO2-free electricity and co-generation systems. Moreover, in response to the pressing issue of plastic usage and subsequent pollution, we issued the Otsuka Group Plastic Policy, which defines goals for achievement by 2030, and are undertaking group-wide initiatives.
For Governance, we have built a framework in which four of 13 directors are outside directors, and three of four Audit & Supervisory Board members are outside auditors (as of April 2020). Our outside directors are: Yukio Matsutani, who has extensive experience in, and deep insights into, the medical welfare field; Ko Sekiguchi, who has extensive management experience and high-level expertise in the pharmaceutical industry; Yoshihisa Aoki, who has extensive management experience and deep expertise in the food industry; and, starting this year, Mayo Mita, who is highly knowledgeable regarding finance and markets. The diverse experience and expertise of these outside directors complements the knowledge and skills of the nine inside directors, and together they form an effective governance body, capable of vigorous discussion.
The sheer number of companies in the Otsuka group means that effectively managing our subsidiaries in Japan and around the world necessitates a different approach from a single-purpose company.
Such management requires oversight with detailed knowledge of each company’s business. We are also working to solidify the management platform underpinning our global operations through standardization and better efficiencies, including expansion of shared services and optimization of procurement. In addition, we are strengthening internal control functions to ensure disciplined management. Enhancing management functions can have an impact that amplifies across the organization to boost corporate value.
Guided by our corporate philosophy “Otsuka-people creating new products for better health worldwide,” and our essence of management—Ryukan-godo, Jissho and Sozosei—we seek to demonstrate our unique capabilities and achieve our unique potential, thereby contributing to the realization of a sustainable society and stable growth.
Six strengths underlie our success: 1) An enduring corporate philosophy and a managerial essence, passed down and practiced throughout the group; 2) a business model centered on total healthcare; 3) an unwavering quest for originality; 4) a global reach incorporating solutions to social issues with our core business processes; 5) an ability to nurture enduring brands; and 6) a solid financial foundation and strong earnings power, which drive sustainable growth.
Also, our value creation process enables Otsuka to do things that other companies cannot. First, we seek to anticipate emerging needs from the broad consumer and patient populations who use our products, as well as needs arising from the evolving environments around the world where we do business.
We leverage these together with other advantages of our wide-ranging businesses—such as a diverse wealth of technological and scientific assets—to create novel ideas and ultimately new value.
In this way, the Otsuka group is able to help society achieve sustainable growth, increase corporate value over the medium to long term, and ultimately make its vision a reality—to become an indispensable contributor to people’s health worldwide.
In order to better recognize where we stand and what we strive for, we must continually question ourselves from the perspectives of Strategy, Culture, and Capabilities.
Strategy is closely tied to our corporate philosophy, which guides our thinking because it is the very foundation of our business strategy, and is an expression of our determination to constantly take on new challenges and generate innovation.
Culture is best defined by the words of our founders, Ryukan-godo, Jissho and Sozosei.
Companies with a solid philosophical foundation are the strongest in turbulent times. Our ability to embrace change and continually take on new challenges is not down to individual leaders acting alone, but to generations of employees who have been inspired by our founders.
Upholding this strategy and culture takes formidable Capabilities, and each individual must constantly review what he or she is capable of and swiftly address deficiencies.
We believe that an effective way to instill our philosophy is to share stories of our successes, and failures along the way. Stories, in other words, through communication grounded in experience and fact. Philosophies and approaches cannot be shared properly in the abstract alone; they must be accompanied by concrete examples. Take, for instance, the development of Samsca/JINARC1/JYNARQUE,2 the first-in-the world therapy for ADPKD.3 It took more than ten years to conduct phase III trials in the U.S., but it has since grown into our next blockbuster product following ABILIFY, with overall global brand sales exceeding one billion U.S. dollars in 2019. A concrete example like this inspires a better understanding of how Otsuka’s innovation contributes to people’s health. Generating engagement with Otsuka’s philosophy and culture through our successes
has brought us to where we are today, and will build the Otsuka of tomorrow.
Otsuka will celebrate its 100th anniversary in 2021.
This is an ideal opportunity for group companies in Japan and around the world to deepen employee understanding of Otsuka’s philosophy and approach as we prepare to embark on another century of success.