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Messages from Outside Directors

Enhancement and Expansion of Businesses Critical to Life through Stronger Governance

Yukio Matsutani
Outside Director

Yukio Matsutani Outside Director
What do you think about the evaluation of the Board’s effectiveness, which is an effort undertaken since 2016?

This system has been in place since I became an outside director four years ago. Each year, members of the Board of Directors are asked, in the form of a questionnaire, to evaluate the Board’s effectiveness and give a detailed account of the roles of the Board and each of its members. It is a robust assessment. The Board has wide-ranging discussions every month, and I think it is important for us to check on each other once a year to ensure proper functioning. The results are also verified by an attorney. I think it is a good initiative.

Please tell us about your role as an outside director.

As a medical doctor, I was involved for many years in clinical medicine, public health, and healthcare administration. I especially have years of experience in administrative agencies, and my familiarity with the examination of pharmaceuticals and medical devices as well as the medical system is closely related to the operation of Otsuka’s businesses. I feel that I am expected to contribute opinions based on this broad expertise, and I have strived to live up to those expectations.
Also, in the course of conducting business for a long time, gaps may appear in the balance of systems across the organization as a whole. As an outside director, I will use my independent viewpoint to point these out to the company. I believe that this will help to improve the quality of the company’s governance, ensure transparency, and fulfill the function of confirming whether anything is going wrong.

As the structure of the healthcare industry changes, what do you think is required of Otsuka Holdings (Otsuka HD)?

Healthcare is an essential aspect of social infrastructure. In Japan, it falls within the large framework of social security, but resources are limited. Everybody needs healthcare, and given that healthcare is critical to life, the level of quality must be paramount, while other requirements and demands are also significant. This causes healthcare costs to rise year after year.
It is therefore essential to make the most effective use of finite resources. This is why Otsuka HD’s first aim is the efficient creation of drugs, medical devices, and diagnostic agents, and then to support their efficient provision to patients. This is in line with current trends. In the Nutraceutical Business, the focus is on creating products that help people to maintain or improve their well-being, before getting sick. However, this has two aspects: it translates into healthcare and it broadens people’s lives through the pleasures of food. The fact that it has provided value to society in both of these areas is what makes the Otsuka Group’s history so terrific. I think that continuing to move forward with this approach is the right direction.

Meeting the Expectations of Stakeholders Worldwide Based on Sincerity

Ko Sekiguchi
Outside Director

Ko Sekiguchi Outside Director
Please tell us what you think about the information provided to outside directors.

The provision of information prior to Board meetings has been enhanced, including its timing. Important information is shared at individual briefings, and explanations are provided regarding the management status and other operational data of group companies and subsidiaries. However, I think that the provision of information and the system of discussion need further improvement, since we need to scrutinize a wide range of information in a limited time. After all, Otsuka HD and its subsidiaries and affiliates are more than 190 companies, and their businesses operate across a variety of industries and categories. It is difficult to grasp all of them.

What do you think about Otsuka’s strengths?

I feel that one of the strengths of Otsuka’s corporate culture is its embodiment of integrity and humility. This goes a long way to earning the trust of customers and business partners. In terms of management policy, rather than thinking primarily about increasing profits and raising stock prices, the company feels that it is important to provide solid value to consumers and patients, believing that doing so will result in sales and profits. Something else that sets Otsuka apart is that it does not make decisions based on whether it can get a return on short-term outcomes; rather, it will persevere for quite a long time until the results are seen. This is quite unique to Otsuka. That was the case with POCARI SWEAT, and also with Samsca. I think this is a real strength of Otsuka’s.

What are your thoughts on the challenges for medium- to long-term growth in Otsuka’s Pharmaceutical Business?

With Samsca/JINARC and other drugs discovered in-house driving sales at present, results in the Pharmaceutical Business have been excellent. However, from a medium- to-long-term perspective, a look at the drug pipeline indicates there is no room for complacency. Dramatic changes are occurring in the business environment, with innovative science and technology, information technology, and the creation of new markets. It is important to be able to turn out corresponding innovation with a medium- to long-term perspective. In that respect, Otsuka HD is still like a collection of companies. I think that structural reform needs to be taken a step further by creating a common platform as a holding company so that each company can create innovations that take advantage of their respective strengths and capture synergies that compensate for each other’s weaknesses.
It is also vital that Otsuka becomes a truly global company. Today, Otsuka HD is clearly engaged in large-scale management as a global company, in view of its size and activities. However, I feel that the speed of business development is getting ahead of the development of the management system as an organization. From here on, Otsuka will need the management structure and management processes of a truly global company. It must evolve to the next stage rather than simply operating as a collection of companies. Only by adopting this approach can Otsuka develop a clear roadmap for the future.

High Expectations for Otsuka’s Contributions
to a 100-Year Lifespan through Preventive Medicine

Yoshihisa Aoki
Outside Director

Yoshihisa Aoki Outside Director
Please tell us your honest thoughts about Otsuka Holdings’ Board of Directors.

The chairman has ensured that Board meetings are a forum where members can discuss matters freely. The meetings themselves are really well managed, since the information needed for deliberation is made available in advance through the distribution of materials and the holding of briefings. There is always an opportunity to ask outside directors for their opinions, and everyone says something, which fosters meaningful discussions. I think that there is also good balance, including outside officers and group companies. I believe that the appointment of a new president at Otsuka Pharmaceutical has strengthened the governance framework.

What is the future potential of the Nutraceutical Business?

In China, it has been a long-held belief that herbal medicines and a proper diet share similar principles, and today it is widely accepted everywhere that a balanced diet is the basis of good health. The Otsuka group’s strong footing in foods and nutrition may be attributable to its belief in this philosophy. The group develops products based on scientific evidence and provides foods that meet various health needs. Otsuka is doing good work with respect to safety and security, and consumers appreciate that.
In its foods business, in addition to pursuing functionality, broadening dietary habits is one course that Otsuka HD will take in the future. I hope that it will expand those efforts further.

What do you think Otsuka HD can contribute to the creation of a sustainable society?

We are approaching an age when it will be common for people to live to 100, and preventive medicine will play a vital role in that. We have drugs in case people get sick, but preventing illness in the first place is a very important issue. Not many companies are able to offer solutions in both treatment (i.e., drug manufacturing) and prevention. Sometimes, food-related companies enter the pharmaceutical field, but since Otsuka HD is originally a company whose expertise is pharmaceuticals, the inclusion of a foods business makes for really good balance.
At the recent general meeting of shareholders, I was asked about my impression of Otsuka HD. First of all, I answered that it is a company that is serious and keeps making steady efforts. Many businesses give up if they are unable to make a quick profit, but Otsuka HD is in it for the long haul; even if a product does not sell well initially, Otsuka has the patience and determination to go the distance. That was the case with Bon Curry, CalorieMate, and POCARI SWEAT. I hope that Otsuka will continue in this vein, because it will benefit society.

Sharing Otsuka’s Unique Corporate Story
Will Build Broad Stakeholder Loyalty

Mayo Mita
Outside Director

Mayo Mita Outside Director
Please tell us about your impression of Otsuka Holdings.

My first impression of the Otsuka group was its uniqueness. Operating for many years in pharmaceuticals and healthcare, as well as foods and nutrition, I expect it to sustain its operations long into the future. Indeed, with its centenary approaching in 2021, I look forward to seeing how Otsuka advances into its second century.

What role would you like to play on the Board of Directors?

I built a long career as a stock analyst but was never involved in the management of an operating company. So, I see this position as an outside director as a challenge for me, as well. Outside directors are in a position to see things from outside and inside a company. Until now, I was looking at Otsuka HD from the outside, and I imagine that seeing the company from the inside will lead to new discoveries. The advance of selection and concentration has meant that there are few companies now, either inside or outside Japan, that are operating in both the pharmaceutical and foods fields. Otsuka has the advantage of possessing strengths and insights in both, enabling it to achieve “what only Otsuka can do.”  And it does so by nurturing products and developing businesses over very long timeframes. This was very interesting when I saw it as an analyst, and I wanted to give the company my full support.
On the other hand, some aspects are difficult to understand because the group is involved in such a wide variety of businesses, and analysts, shareholders, and investors often look at different time scales than company management does. I see my role as a bridge when these viewpoints do not match or when messages seem to be at cross-purposes. I am not directly involved in business operations, but as an outside director, I hope to support Otsuka’s development by pointing out opportunities to management and diligently raising concerns as necessary.
While being involved in many segments can be taken as meaning there is diversity, when an enterprise comprises such a broad range of businesses as Otsuka, I believe it is important to identify the common threads that unite them all. When it comes to how the message is conveyed, the key is how to tell the story effectively not only to shareholders and the investment market, but also to customers, consumers, and, especially critical right now, employees. If Otsuka is able to convey the story of its passion—why and what it is so committed to—it is sure to acquire many more long-term fans.