racing major new drugs to market - astellas pharma · infergen® (interferon alfacon-1) and the 2 a...
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3-11, Nihonbashi-Honcho 2-chome,Chuo-ku, Tokyo 103-8411, Japanhttp://www.yamanouchi.com
Printed in Japan on recycled paper
Annual Report 1999
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T1999
Racing Major
New Drugs
to Market
Yamanouchi cover 99.8.6 7:07 PM ページ 1 (1,1)
Yamanouchi’s Medium-Term Vision
1To develop a continuing stream of big-selling new drugs. Backed by a formidable R&D
pipeline both domestically and overseas, Yamanouchi Pharmaceutical Co., Ltd., is poised
to enter a new era of growth.
2To ensure the long-term strength of our R&D pipeline. We have strengthened our
capabilities for in-house drug discovery while proactively encouraging strategic alliances
with other research organizations.
3To commence operations through an independent sales network in the United States. This
is Yamanouchi’s top priority over the medium term. Yamanouchi will become a truly global
enterprise once this sales network is fully established and joins the Company’s growing
networks in Asia and Europe.
4To further develop and commercialize such drug delivery technologies as WOWTAB® and
OCAS™. Another pillar of its pharmaceutical operations, Yamanouchi’s drug delivery
technology business is set to take off in the United States.
5To further develop the nutritional products and food and roses businesses. Yamanouchi will
expand these operations in tandem with its pharmaceutical business to continue
advancing toward its goal of being a comprehensive health care enterprise.
Financial Highlights 1A Report to Our Shareholders and Friends 2Racing Major New Drugs to Market 4Review of Operations 14
Pharmaceuticals 14Nutritional Products 18Food and Roses 20
Corporate Citizenship 21Environmental Protection 22
Financial Section 23Board of Directors 45Principal Subsidiaries and Affiliates 46Corporate Data 47Corporate Information 47
CONTENTS
47
Corporate Data
HEAD OFFICE3-11, Nihonbashi-Honcho 2-chome,Chuo-ku, Tokyo 103-8411, Japan
Seoul OfficeDuckmyung Bldg., 3rd Floor, #170-9, Samsung-dong, Kangnam-ku, Seoul, Republic of Korea
Beijing Office20/F, A-7-10, East Wing, HANWEI PLAZA,No. 7, Guanghua Road,Chaoyang District, Beijing 100004,People’s Republic of China
Jakarta Office17th Floor, #1701, Jakarta Stock Exchange Tower 2, Jl. Jend. Sudirman Kav. 52-53,Jakarta 12190, Indonesia
Taipei BranchShin Kong World Commercial Bldg., 6th Floor, No. 287, Sec. 3, Nanking East Road, Taipei, Taiwan
Domestic BranchesSapporo, Sendai, Tokyo 1, Tokyo 2, Tokyo 3,Yokohama, Nagoya, Osaka, Kyoto, Kobe,Hiroshima, Takamatsu, Fukuoka
PlantsAzusawa, Yaizu, Takahagi, Nishine
Research LaboratoriesTsukuba, Azusawa, Takahagi, Yaizu
Annual MeetingThe annual meeting of shareholders was heldat 10 a.m. on Tuesday, June 29, 1999, at: Royal Park Hotel 1-1, Nihonbashi-Kakigaracho 2-chome, Chuo-ku, Tokyo, Japan
Stock Trading InformationYamanouchi stock is listed on: Tokyo Stock Exchange (code number 4503)Osaka Stock Exchange Nagoya Stock Exchange Sapporo Stock Exchange Paris Stock Exchange
Independent Certified Public AccountantsShowa Ota & Co.Osaka Kokusai Bldg., 3-13, Azuchi-machi 2-chome, Chuo-ku, Osaka 541-0052, Japan
Shareholders’ ServiceShareholders with questions on such stock-related matters as proxy voting should write to:Finance & Accounting Dept.Yamanouchi Pharmaceutical Co., Ltd.3-11, Nihonbashi-Honcho 2-chome, Chuo-ku, Tokyo 103-8411, Japan
Investor RelationsSecurities analysts and investors with business-related questions should write to: Investor RelationsCorporate Communications Dept.Yamanouchi Pharmaceutical Co., Ltd.3-11, Nihonbashi-Honcho 2-chome, Chuo-ku, Tokyo 103-8411, Japan
Yamanouchi on the InternetOur home page is: http://www.yamanouchi.com
(As of August 1999)
Corporate Information
Yamanouchi cover 99.8.6 7:07 PM ページ 2 (1,1)
YAMANOUCHI PHARMACEUTICAL CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Financial HighlightsYears ended March 31, 1999, 1998 and 1997
1
Thousands ofMillions of yen U.S. dollars
1999 1998 1997 1999
Net sales ................................................................................................. ¥423,217 ¥477,356 ¥454,740 $3,526,808Operating income*.................................................................................. 89,445 102,845 101,229 745,375Net income** .......................................................................................... 48,002 6,092 41,866 400,017Total assets............................................................................................. 789,362 806,641 839,475 6,578,017Shareholders’ equity, net ........................................................................ 563,303 511,441 480,775 4,694,192
Research and development expenses ................................................... 54,299 43,639 42,309 452,492Capital expenditures ............................................................................... 51,405 57,575 36,112 428,375Depreciation............................................................................................ 29,338 18,454 12,748 244,483
Yen U.S. Dollars
Per share:Net income**:
Basic ............................................................................................... ¥ 140.79 ¥ 18.18 ¥ 129.12 $ 1.17Diluted ............................................................................................. 129.21 17.51 116.56 1.08
Shareholders’ equity ........................................................................... 1,635.35 1,510.45 1,482.51 13.63Cash dividends applicable to the year................................................ 23.00 25.00 25.00 0.19
Note: Yen figures have been translated into U.S. dollars at the rate of ¥120=US$1, the approximate exchange rate on March 31, 1999.
384.
3 414.
2
454.
7 477.
4
423.
2
95.3 96.3 97.3 98.3 99.3
108.
84
111.
65 116.
56
17.5
1
129.
21
95.3 96.3 97.3 98.3 99.3
39.7 40
.5 41.9
6.1
48.0
95.3 96.3 97.3 98.3 99.3
Net Sales (billion ¥)
Net Income**(billion ¥)
Net Income per Share**(diluted) (¥)
*Due to a change effective the year ended March 31, 1999, in the Japanese regulations relating to the presentation of amortization of excess of cost over net assetsacquired in the consolidated statements of income, the corresponding amounts in the prior years’ consolidated financial statements have been reclassified to conformto the presentation for the fiscal year under review.
**Effective April 1, 1997, the Company changed its methods of accounting for the amortization period of excess of cost over net assets acquired and for income taxesto adopting tax effect accounting. As a result of these changes, the effect of the change in the amortization period was to increase the amortization of excess of costover net assets acquired by ¥72.7 billion and to decrease net income by the same amount for the year ended March 31, 1998. Also, the effect of adopting tax effectaccounting was to decrease income tax expense by ¥24.5 billion and to increase net income by the same amount for the year ended March 31, 1998.
yamanouchi AR '99前半 99.8.18 1:36 PM ページ 1
The fiscal year ended March 31,
1999, was challenging for
Yamanouchi Pharmaceutical Co., Ltd.
The Yamanouchi Group posted net
sales of ¥423.2 billion (US$3,527 mil-
lion, at ¥120=US$1, the approximate
exchange rate on March 31, 1999), a
drop of 11.3%, and operating income
of ¥89.4 billion (US$745 million), a
decrease of 13.0%. In contrast, net
income rose to ¥48.0 billion (US$400
million), the highest such figure in our
corporate history.
The key factor contributing to the
decreases was a decline in domestic
sales that was mainly attributable to
special circumstances. Specifically, in
March 1998 the Company terminated
domestic marketing agreements with
Novo Nordisk A/S, of Denmark, and
Schering–Plough K.K., of Japan, which
in the previous fiscal year accounted for
sales worth ¥49.3 billion for Yama-
nouchi, and discontinued sales of Elen®
(indeloxazine), a treatment for symp-
toms of mental dysfunction that in the
previous fiscal year yielded sales of
¥9.2 billion, following the May 1998
reevaluation of the drug by Japan’s
Central Pharmaceutical Affairs Council.
Coupled with these was a downward
revision in National Health Insurance
drug prices for the third successive
year in April 1998.
Amid this harsh business climate, the
H2 antagonist Gaster® (famotidine)
continued to register growth in domes-
tic sales and Harnal® (tamsulosin), a
treatment for the functional symptoms
of benign prostatic hyperplasia, saw
substantial sales rises in Japan and
Europe. Since its September 1997 U.S.
launch through licensee Boehringer
Ingelheim Pharmaceuticals, Inc.,
Harnal® has recorded rapidly expanding
sales and is securing a strong repu-
tation within the U.S. medical com-
munity. Overseas sales—encompassing
results from the pharmaceuticals, nutri-
tional products, and food and roses
businesses—accounted for 41.0% of
net sales as Yamanouchi moved toward
full-fledged globalization during the
year under review.
Looking at the operating environment
in the medium term, Yamanouchi is
facing some factors that may negatively
affect results. Chief among these are
anticipated contractions in the
Japanese pharmaceutical market due
to impending reforms to the health care
system and the effect on sales of the
forthcoming expiration of Yamanouchi’s
patents on Gaster®. However, to
counter these adverse factors, we have
worked to ensure a strong R&D pipeline
that contains a number of exciting new
drug candidates that are expected to
be strong sellers. Backed by this
pipeline, we believe that we will be able
to quickly recover from the aforemen-
tioned declines and achieve further
upturns in performance.
Our goal is to be a truly global
enterprise that is competitive with
major pharmaceutical manufacturers
throughout the world. To obtain suffi-
cient funds for achieving global expan-
sion, we are aiming to strengthen
business performance in Japan through
the continual introduction of new drugs
and the enhancement of our sales
force. Moreover, the planned domestic
release of a number of new drugs and
drug candidates over the next five
years is expected to have a great
impact on results. Starsis® (nateglin-
ide), an oral hypoglycemic agent,
received approval in June 1999, and in
July 1999 we launched CHOLEBINE®
(colestilan), a nonabsorbable anion-
exchange resin compound for the treat-
ment of hypercholesterolemia. In
August 1998, atorvastatin (YM548), an
HMG-CoA reductase inhibitor for the
treatment of hyperlipidemia and familial
hypercholesterolemia licensed from
Warner–Lambert Company, of the
United States, and incadronate
(YM175), an oral third-generation bis-
phosphonate compound for the treat-
ment of bone loss associated with
osteoporosis, were filed for approval in
Japan. Drug candidates currently
undergoing clinical development include
interferon alfacon-1 (YM643), a con-
sensus interferon for the treatment of
chronic hepatitis C virus infection now
in Phase III clinical studies, and cele-
coxib (YM177), an oral non-steroidal
anti-inflammatory drug (NSAID)
licensed from G.D. Searle & Co., of
the United States, that selectively
inhibits cyclooxygenase-2 activity and
is now in Phase II clinical studies. In the
long term, we are looking toward the
continuous domestic launch of drug
candidates that will emerge from a com-
prehensive R&D agreement signed with
Searle as well as of drug candidates
created through in-house drug discov-
ery research.
To achieve the quick market penetra-
tion and maximize the market potential
of these new drugs, we will enhance
our domestic sales capabilities. As a
result, although the domestic market for
pharmaceuticals is not expected to
show further growth in the medium term,
our presence in Japan—the world’s
second largest market for pharmaceuti-
cals—should see strong expansion.
In Europe, Yamanouchi has already
established operations that extend
the entire length of the value chain,
from R&D through production and mar-
keting. At present, we are expanding
operations centered on Harnal®
(Omnic® in Europe) and are planning to
launch several new drugs, including
Infergen® (interferon alfacon-1) and the
2
A Report to Our Shareholders and Friends
yamanouchi AR '99前半 99.8.18 1:36 PM ページ 2
long-acting calcium antagonist Hypoca®
(barnidipine, under the name Cyress® in
the Netherlands) by 2000. In addition, in
our pipeline we have nine drug candi-
dates currently undergoing clinical
development in Europe.
Yamanouchi’s most important task
in the medium term is the estab-
lishment of an independent sales net-
work in the United States, the world’s
largest pharmaceutical market. With
R&D and manufacturing operations now
under way in that country, the creation
of this sales network has become our
next and greatest challenge. The
Company now has five drug candidates
in Phase II clinical studies in the United
States. Among these candidates are
YM087, a total vasopressin antagonist
for the treatment of heart failure and
hyponatremia for which we have signed
a l icensing-out agreement with
Warner–Lambert, and YM872, an
injectable AMPA antagonist for the
treatment of acute ischemic stroke, as
well as the oral antidepressant YM992.
Once the Phase II clinical studies of two
of these candidates is completed, we will
set out our strategies for the U.S. market.
In Asia, the Company’s bases of
operations in Taiwan, China, Korea, and
the Philippines were joined by sales
networks in Thailand and Indonesia that
commenced operations in 1999. Once
the independent marketing network is
in place in the United States, Yama-
nouchi will have established the foun-
dations of a truly global enterprise.
The nutritional products businesses
of Shaklee Corporation, of the
United States, and Shaklee Japan K.K.
as well as the food and roses business
of Shaklee subsidiary Bear Creek
Corporation are expected to play
increasingly important roles in advancing
Yamanouchi toward its goal of being a
comprehensive health care enterprise.
By strengthening the multi level
marketing of nutritional products and
reinforcing mail-order and store opera-
tions for food and roses, we expect to
see growth in sales and earnings in
these segments in the medium term.
To ensure our competitiveness in
the fierce global business arena,
we must aggressively push forward
with R&D. To maximize the quality and
quantity of compounds in our pipeline,
we are not only bolstering our drug dis-
covery research capabil it ies, but
aggressively pursuing strategic R&D
alliances with other major pharmaceuti-
cal manufacturers as well as bioven-
tures, universit ies, and research
institutes. We are also focusing on
speeding up the clinical development
process by enhancing our global drug
development structure and ensuring the
precise and timely evaluation of the
potential of drug candidates.
We will continue to make strategic
investments in R&D in l ight of our
medium-to-long-term prospects. At the
same time, we will work to improve
upon and maintain a high level of prof-
itability. To this end, the Company is
working to achieve the most appropri-
ate level of costs and selling, general
and administrative expenses while
maximizing the expansion of sales.
In line with the philosophy “Creating
and Caring...for Life,” the Yamanouchi
Group will continue to contribute to the
advancement of medicine and the health
and happiness of people around the
world while endeavoring to satisfy the
expectations of shareholders and cus-
tomers. As always, we respectfully thank
you and ask for your continued support.
August 1999
Masayoshi Onoda
President and Chief Executive Officer
3
yamanouchi AR '99前半 99.8.18 1:36 PM ページ 3
Racing Major New DBacked by a Powerful R&D Pipeline
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Yamanouchi’s formidable R&D pipeline is its engine of future
growth. Now the challenge is to rapidly launch new products
and maximize market penetration. Achievements to date:
1. Starsis®and CHOLEBINE®
launched in Japan
in summer 1999
2. Atorvastatin and incadronate filed in Japan
in August 1998
3. Numerous drug candidates, including a BMP-2 and
celecoxib, under development in Japan
4. In Europe, Infergen®and Cyress®
approved in
1999 and nine other products under development
5. Five drug candidates, including YM087,YM872, and YM992, in Phase II clinical studies
in the United States
6.Harnal® (Omnic®, Flomax®) captures substantial mar-
ket shares worldwide, joining with new drug lineup to
accelerate growth
4
yamanouchi AR '99前半 99.8.18 1:36 PM ページ 4
Drugs to Market
YM337(High-risk PTCA)
YM992(Depression)
MinodronateYM529(Bone metastasis of breast cancer)
YM905(Urinary incontinence)
CHOLEBINE®
(Hypercholesterolemia)
1999DOMESTIC
YM087(Heart failure)
NMEs* from an R&Dalliance with G.D.Searle & Co.
Scheduled Launch of New Products
Celecoxib YM177(RA, OA,dental pain)
YM872(Acute ischemic stroke)
OVERSEAS
Libian®
(Oral contraceptive)
Starsis®
(Diabetes)
Infergen®
(Chronic hepatitis C)
Successor toGaster® ODapplyingWOWTAB®
AtorvastatinYM548(Hyperlipidemia)
IncadronateYM175(Loss of bone massassociated with osteoporosis)
Interferon alfacon-1YM643(Chronic hepatitis C)
OprelvekinYM294(Chemotherapy-induced thrombocytopenia)
Cyress®
(Hypertension)
)
*NMEs: New Molecular Entities
BMP-2YM484(Promotion of bone formation)
5
yamanouchi AR '99前半 99.8.18 1:36 PM ページ 5
STARSIS® (NATEGLINIDE)
Approved in June 1999 in Japan,
Starsis® (nateglinide) is a fast-acting
oral hypoglycemic agent for treating
patients suffering from non-insulin-
dependent diabetes mellitus (NIDDM).
NIDDM patients tend to either fail to
secrete sufficient quantities of insulin
after meals or have slower than normal
rates of insulin secretion, resulting in
hyperglycemia.
In Japan, there are currently 6.9 mil-
lion probable diabetics—95% of whom
have NIDDM—and this number is
expected to increase to 7.8 million by
2003. Consequently, the need for safe
and effective hypoglycemic agents is
expected to expand steadily.
Starsis® is a derivative of the amino
acid d-phenylalanine, which acts direct-
ly on pancreatic beta cells. A 90mg
dose of Starsis® three times a day
before each meal reduces the post-
prandial blood glucose level by enhanc-
ing the secretion of insulin in a rapid but
short-term manner. Compared with cur-
rently available sulfonylurea insulin sec-
retagogue medications, Starsis® is less
likely to cause hypoglycemia because
of its short-acting enhancement of
insulin secretion.
In clinical trials in Japan involving
patients with mild diabetes (defined as
a slight but significant elevation in
blood glucose levels), Starsis® showed
greater efficacy in reducing postprandi-
al blood glucose levels than placebo.
Starsis® and CHOLEBINE®
APPROVED
0
100
150
200
250
300
18012060300Time following meals (minutes)
Average ± Standard deviation
Source: Y. Shigeta et al.: Clinical Pharmacology and Therapy, 7:729-754, 1997
Before first administration At final administrationBefore first administration At final administration
Placebo (n=21)
Starsis® (n=14)
(mg/dl)
Bloo
d gl
ucos
e le
vels
Changes in Blood Glucose Level overa 180-Minute Period after a Meal(Eight-week administration study)
CHOLEBINE® (COLESTILAN)
Approved in March 1999,
CHOLEBINE® (colestilan) is a non-
absorbable anion-exchange resin
compound for the treatment of hyper-
cholesterolemia and familial hypercholes-
terolemia. CHOLEBINE® inhibits the
enterohepatic circulation of bile acid and
thus promotes the catabolism of choles-
terol to bile acid as well as an increase
in the number of LDL receptors. Due to
the resulting decrease in cholesterol in
the liver, the level of serum LDL choles-
terol is reduced. Because the drug is
not itself absorbed by the body but
excreted, it causes no severe adverse
side effects. Also, compliance is
expected to be vastly improved
because the drug can be administered
in a dose that is comparatively smaller
6
Starsis®
yamanouchi AR '99前半 99.8.18 1:36 PM ページ 6
ATORVASTATIN (YM548)
Atorvastatin (YM548) is an HMG-
CoA reductase inhibitor for the
treatment of hyperlipidemia and familial
hypercholesterolemia developed by
U.S.–based Warner–Lambert Company
that Yamanouchi filed for approval in
Japan in August 1998. Already on the
market throughout the world, atorva-
statin has earned high marks within the
medical community as the most effec-
tive HMG-CoA reductase inhibitor avail-
able. Clinical trials in Japan have
demonstrated this agent’s ability to
reduce not only total cholesterol and
LDL cholesterol levels but also triglyc-
eride levels. In addition, the effects of
the drug increase dose-dependently
without reaching a plateau.
Hyperlipidemia is thought to be a
major cause of coronary artery dis-
eases; consequently, treating it effec-
tively has become a major medical
issue. According to the “Guidelines for
the Diagnosis and Treatment of
Hyperlipidemia in Adults,” presented at
the Japan Atherosclerosis Society
Meeting in 1997, the desirable level of
total serum cholesterol is under 220
mg/dl and that of LDL cholesterol is
under 140 mg/dl in cases where coro-
nary artery diseases or other risk fac-
tors are absent. There are growing
expectations that drugs will be able to
control cholesterol levels effectively. As
shown in the chart, the prevalence of
patients in Japan with a total choles-
terol level of 240 mg/dl or higher is esti-
mated to be around 10 million people.
Under the new guidelines, this number
jumps to 20 million.
INCADRONATE (YM175)
Osteoporosis is the pathologic loss
of bone mass that often accompa-
nies aging. This loss of mass makes
bone fragile. Osteoporosis is particular-
ly prevalent among postmenopausal
women; in Japan it is estimated that
women lose an average of 20% of their
bone mass in the 8 to 10 years follow-
ing menopause. Moreover, about 50%
of Japanese women in their late 70s are
thought to have bone mass measuring
less than 70% of the average for a
healthy premenopausal woman. The
number of osteoporosis patients in
Japan is expected to reach 11 million
in 2000.
Created by Yamanouchi, incadronate
(YM175) is an oral third-generation bis-
phosphonate compound that was filed
for approval as a treatment for the loss
of bone mass associated with osteo-
porosis in August 1998 in Japan. Acting
on mature osteoclasts while not dis-
rupting the formation of new ones,
incadronate powerfully suppresses
bone resorption, which leads to steadily
increasing bone mass.
Atorvastatin and Incadronate
FILED FOR APPROVAL
The rising incidence of
lifestyle-related and geri-
atric diseases is a major tar-
get of Yamanouchi’s R&D. Our
goal is to enhance the quality
of life by continually launching
superior new drugs to address
these needs.
Total prevalence9,655
Total drug-treated population2,694
Source: Decision Resources, Inc.
7
than those needed for existing anion-
exchange resin compounds. Regarding
mechanism of action, CHOLEBINE®
and HMG-CoA reductase inhibitors are
completely different and therefore can
be used in combination.
With the introduction of CHOLEBINE®
and atorvastatin, Yamanouchi is aiming
to strengthen its presence in the antihy-
perlipidemia market through a full-
fledged push.
1997 Hyperlipidemia PatientPopulation in Japan(Total cholesterol level of 240 mg/dl or higher)(thousands)
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 7
INTERFERON ALFACON-1 (YM643)
Interferon alfacon-1 (YM643) is a
consensus interferon—a unique,
highly active, non-naturally occurring
interferon—for the treatment of chronic
hepatitis C virus infection. The drug
was approved in Europe in February
1999 and is currently in Phase III clini-
cal studies in Japan. Created by
Amgen Inc., of the United States, the drug
is a next-generation interferon designed
to have increased efficacy. It is manu-
factured using a synthesized composite
DNA sequence derived from the amino
acid sequences of several human inter-
feron alpha subtypes. In clinical trials
conducted in the United States and
Japan, the drug has shown high effi-
cacy in treating patients with high viral
titers and providing virological respons-
es in relapsing patients as well as
responding patients.
OPRELVEKIN (YM294)
Oprelvekin (YM294), a recombinant
human interleukin-11 (rhIL-11) agent
now in Phase III clinical studies in Japan,
is expected to prevent thrombocytope-
nia associated with cancer chemothera-
py and to stimulate platelet production,
thus reducing the need for frequent
transfusions to speed platelet recovery
in patients. This allows the next course
of chemotherapy treatment to be carried
out on schedule. In addition, the drug is
expected to reduce the incidence of
fervescence, a common adverse event
caused by interleukin agents.
YM484 (BMP-2)
YM484, a recombinant bone morpho-
genetic protein-2 (BMP-2) deriva-
tive, is currently in Phase III clinical
studies in Europe for orthopedic
surgery applications. Interim analysis of
data from current Phase III clinical stud-
ies shows that YM484 is effective in
promoting bone formation. In Japan,
Phase II/III clinical studies are in progress
for orthopedic surgery applications;
preparations for Phase II clinical study
for periodontal surgery applications are
under way.
MINODRONATE (YM529)
Minodronate (YM529) is a highly
promising third-generation bis-
phosphonate agent created by
Yamanouchi that powerfully suppresses
bone resorption activity. The injectable
formulation of minodronate is currently
in Phase II clinical studies on patients
with bone metastasis of breast cancer,
and its oral formulation is in Phase II
clinical studies on patients with multiple
myeloma.
In January 1999, Yamanouchi granted
Ono Pharmaceutical Co., Ltd., of Japan,
exclusive rights to develop and market
domestically minodronate for the treat-
ment of osteoporosis, hypercalcemia,
and indications other than those that
Yamanouchi is pursuing.
CELECOXIB (YM177)
Celecoxib (YM177) is an oral non-
steroidal anti-inflammatory drug
(NSAID) developed by G.D. Searle & Co.,
of the United States, that selectively
inhibits cyclooxygenase-2 (COX-2) activ-
ity induced in inflammation. Celecoxib
is currently undergoing late Phase II
clinical studies in Japan for the treat-
ment of chronic rheumatoid arthritis,
osteoarthritis, and postsurgical dental
pain.
Celecoxib’s mechanism of action is
designed to suppress inflammation
without triggering the side effects asso-
ciated with currently available NSAIDs.
In clinical trials conducted in the United
States, celecoxib exhibited superior
gastrointestinal and renal safety com-
pared with NSAIDs. The drug was
launched in the beginning of 1999 in the
United States, where it has been widely
accepted by physicians and patients.
Promising Drug Candidates in Japan, Europe, and the United States
PHASES III AND IITotal Drug-Treated Population in Japan(thousands)
Source: Decision Resources, Inc.* Estimates
Rheumatoid Arthritis
Osteoarthritis
2007*2002*1997
554630
717
2,3112,594
2,933
2007*2002*1997
8
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 8
Japan, Europe, and the United States.
Prepared in both oral and injectable for-
mulations, YM087 can display an
antagonistic action against both vaso-
pressin V1 and V2 receptors. The drug is
being evaluated to determine whether it
can improve cardiac dysfunction, car-
diac hypertrophy, and pulmonary con-
gestion while alleviating edema and
maintaining blood sodium levels.
Designed for oral administration, pre-
liminary studies suggest that YM087
has strong-acting, long-lasting effects,
and, while additional studies are need-
ed, the Company believes that the drug
has great potential as an effective treat-
ment for congestive heart failure.
In April 1998, Yamanouchi entered
into a licensing-out agreement with
Warner–Lambert for YM087 as part
of a cross-licensing agreement for
atorvastatin. This agreement gives
Warner–Lambert the right to market
YM087 in North America, South
America, Europe, and Africa, while
Yamanouchi retains copromotional
rights in these regions.
YM905
YM905 is being evaluated for the
treatment of urinary incontinence
and is now in Phase II clinical studies in
Europe and the United States. YM905
is a muscarinic M3 antagonist that acts
selectively on the smooth muscle of the
bladder. Although additional studies
are needed to determine the drug’s
safety and efficacy, because of its
selectivity, YM905 is expected to
reduce the frequency and intensity of
such adverse events as dry mouth and
blurred vision, which accompany the
use of existing drugs.
YM872
YM872, an injectable medication that
may improve various symptoms
associated with acute ischemic stroke, is
currently being evaluated in Phase II
clinical studies in the United States and
Europe. Acute ischemic stroke is thought
to cause excessive glutamate release
and the stimulation of glutamate recep-
tors, which increases the calcium ion
level inside neurons, causing cerebral
nerve cells to die. YM872 selectively
antagonizes the AMPA (a-amino-3-
h y d r o x y - 5 - m e t h y l i s o x a z o l e - 4 -
propionate) receptor, the glutamate
receptor subtype responsible for regu-
lating calcium flow into cerebral neurons.
YM087
YM087, a treatment for heart failure,
edema, and hyponatremia, is
currently in Phase II clinical studies in
The molecular structure of YM087
9
It is now evident that acute ischemic
stroke is a treatable disorder. Both
intravenous and intraarterial throm-
bolytic therapies are of proven benefit
in selected patient populations. Very
promising neuroprotective agents are
now entering the final stages of clinical
evaluation. Recent improvements in
clinical trial design will likely allow the
identification of safe and effective
neuroprotective agents within the
next few years.
Gregory W. Albers, MD
Director, Stanford Stroke Center
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 9
YM337
YM337, a Fab fragment of a human-
ized monoclonal antibody, inhibits
GPIIb/IIIa action in the final common
pathway of platelet aggregation. Although
additional investigation is necessary to
establish this antiplatelet drug’s efficacy,
it is expected to be useful for the preven-
tion of cardiac ischemic complications in
patients after they have undergone per-
cutaneous transluminal cardiac angio-
plasty (PTCA). YM337 is in Phase II
clinical studies. Because YM337 has a
short-action profile, it is being tested to
determine whether, as expected, it can
minimize bleeding risks during intra-
venous bolus dose administration fol-
lowed by infusion.
The Netherlands is another country
with a growing senior citizen popu-
lation where the need for such drugs
as Harnal® (Omnic®) is continuing to
rise. Yamanouchi’s MRs are thus work-
ing to provide health care professionals
with appropriate information on
Harnal® while gathering market intelli-
gence on the needs of Dutch patients.
Eric Mijnlieff
Account Manager,
Yamanouchi Pharma B.V.
10
Clinical Pharmacology Unit at Yamanouchi Europe
In December 1997, Yamanouchi
concluded a comprehensive
four-year R&D agreement
with G.D. Searle & Co. that
gives the Company the rights
to develop and market in
Japan any Searle compound
that reaches the preclinical
trial stage in Europe or the
United States. This agreement
covers more than 10 drug
candidates. These compounds
include novel hematopoietic
growth factors and both anti-
inflammatory agents and
anticancer drugs with novel
mechanisms.
Regarding future product
launches, Yamanouchi and
Searle’s Japanese branch
will copromote products
under the Yamanouchi brand
name or the two companies
will comarket products under
their respective brand names.
Searle’s research projects
take the lead in the world
among competitors in many
cases. Accordingly, in the
competition for rapid drug
development, the firm boasts
many compounds that are
first or second to market.
Comprehensive R&D Agreement with Searle
YM992
YM992, an oral antidepressant now
in Phase II clinical studies in the
United States and Europe, is a selective
serotonin (5-HT) reuptake inhibitor and
noradrenaline augmenting 5-HT2A
antagonist (SINAS). It is being investi-
gated to determine whether it is effec-
tive in treating symptoms of depression
by raising serotonin concentration
levels in the brain to stimulate 5-HT1A
receptors. Due to its 5-HT2A antagonistic
action, YM992 may further stimulate 5-
HT1A receptor-mediated neurotrans-
mission and have a noradrenaline
releasing property. Although additional
studies are needed to determine the
drug’s safety and efficacy, YM992 may
be able to deliver strong, fast, and
effective therapeutic action while trig-
gering low levels of 5-HT reuptake
inhibitor associated adverse events,
such as insomnia, anxiety, and sexual
dysfunction.
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 10
HARNAL® (TAMSULOSIN)
Harnal® is a treatment for the func-
tional symptoms of benign prostatic
hyperplasia (BPH). Launched in Japan
in 1993, Harnal® is currently marketed
in 46 countries around the world under
such names as Omnic® and Flomax®.
Generally occurring in older men,
BPH is a condition in which the
prostate gland enlarges, constricting
the urethra and gradually restricting the
flow of urine. BPH places a burden on
patients by making it difficult to urinate
while triggering a frequent urge to uri-
nate at night and hampering their free-
dom to enjoy an active l ifestyle.
Eliminating the symptoms of BPH thus
has a direct impact on a patient’s daily
life. According to a study undertaken in
Japan, an estimated 20% of men in
Japan 55 years of age and over suffer
from BPH to some degree. Since the
release of Harnal®, the number of peo-
ple receiving pharmaceutical treatment
has increased; however, there remains
a large latent market for BPH treat-
ments. Moreover, patient populations in
Japan, Europe, and the United States
are expected to grow as more citizens
enter their golden years.
As an alpha1-blocker that acts selec-
tively on the lower urinary tract, Harnal®
has the characteristic of improving the
functional symptoms of BPH while
exerting a minimal effect on blood pres-
sure. In addition, the drug can be
administered to the majority of patients
without the need for dose titration. In
recognition of the unique characteris-
tics of and excellent clinical results
yielded by Harnal®, in 1997 Yamanouchi
received Japan’s Prime Minister’s Prize
in the National Commendation for
Innovation. In Japan, the most common
BPH treatments used previously were
drugs derived from plants as well as
antiandrogens; however, since the intro-
duction of Harnal®, the market has
changed greatly. At present, Harnal®’s
share of the domestic market for BPH
treatments is estimated to exceed 55%.
Outside Japan, the number of pre-
scriptions written in Europe for Harnal®—
sales of which under such names as
Omnic® are handled through Yama-
nouchi Europe B.V. and l icensee
Boehringer Ingelheim International
GmbH of Germany—has surged since
the product’s European launch in 1995.
Harnal® has also become the number
Sales of Harnal® continue to climb worldwide
MAIN PRODUCTS
19981996199419921990
12%13%
17%
21%23%
3,290
3,1002,960
2,770
2,600
Source: In-house material
Percentage of drug- treated population
Estimated Number of BPHSufferers in Japan(thousands)
11
Harnal® (Omnic®) is shipped from ManufacturingMeppel to countries throughout Europe.
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 11
one selling alpha1-blocker in many
European markets for BPH treatments,
including the Netherlands, Germany, Italy,
and the United Kingdom. In the United
States, where it is sold through licensee
Boehringer Ingelheim Pharmaceuticals,
Inc., under the name Flomax®, the
drug’s market share has been growing
since its launch in 1997. Global sales of
Harnal® are expected to continue to
expand in light of the worldwide growth
of markets for BPH treatments.
GASTER® (FAMOTIDINE)
Gaster®, an H2 antagonist used as a
treatment for peptic ulcers, gastri-
tis, and reflux esophagitis, is Yama-
nouchi’s top-selling pharmaceutical.
Launched in Japan in 1985, the drug is
now the second largest selling drug in
Japan. Overseas, Gaster® is marketed
through licensee Merck & Co., Inc., of
the United States, under the name
Pepcid® and is now being sold in more
than 110 countries around the world.
In Japan, Gaster® has captured a
45% share of the market for H2 antago-
nists and proton pump inhibitors (PPIs).
Although sales of PPIs now outnumber
those of H2 antagonists in the United
States and Europe, sales of H2 antago-
nists still account for more than 85% of
the Japanese market. Within the
Japanese medical community, H2 antag-
onists have long been the first choice in
the treatment of acid-related gastroin-
testinal ailments, as they can be admin-
istered for a wide range of indications
and without imposing limitations on the
duration of treatment.
In 1997, Yamanouchi launched Gaster®
OD, an orally disintegrating tablet
applying WOWTAB® technology. In a
study conducted in Japan in 1997
through 1998, Gaster® OD was evaluated
as easy to take by approximately 75% of
patients surveyed. Yamanouchi has
filed for approval in Japan a successor
to Gaster® OD that incorporates next-
generation WOWTAB® technology. The
new formulation is smaller, harder, and
more cost-effective to manufacture.
Through the introduction of such new
formulations, Yamanouchi is working to
maintain its strong market position.
FAROM® (FAROPENEM)
Farom® is the first oral penem-type
antibiotic to be developed using
computer-generated molecular design.
With a penem ring structure, Farom®
boasts strong antibacterial strength
against a wide spectrum of bacteria
and represents a new option in the
treatment of infectious diseases.
Moreover, Farom® has been proven
effective against such antibiotic-
resistant bacteria as penicillin-resistant
Streptococcus pneumoniae (PRSP) and
ofloxacin-resistant Staphylococci.
Farom®’s share of the antibiotic market
has risen since its release in 1997 in
Japan, and Yamanouchi now plans to
introduce the drug in a new dry syrup for-
mulation, a move that should expand the
prescription of the drug for pediatric use.
DORNER® (BERAPROST)
The world’s first oral prostacycline
(PGI2) analogue, Dorner® is an
antiplatelet agent effective in both pro-
tecting endothelial cells and increasing
blood flow. Dorner® is effective in reliev-
ing the ulcers, rest pain, and the feeling
of coldness associated with chronic
arterial occlusion, a peripheral circulatory
disorder. Launched in 1992, Dorner®
has secured a more than 10% share of
the domestic market for antiplatelet
agents. Dorner® has also been filed for
the additional indication of primary pul-
monary hypertension, which would
make it the world’s first oral antiplatelet
agent intended for use in the treatment
of this disease.
HYPOCA® (BARNIDIPINE)
Hypoca® is a long-acting calcium
antagonist for the treatment of
hypertension that is administered just
once a day. From 1995 through 1998,
the Japanese Multicenter Study on
Barnidipine with Ambulatory Blood
Pressure Monitoring (J-MUBA) was
conducted to examine the long-term
effects of Hypoca® on circadian blood
pressure (BP) variations in hypertensive
patients. Data from the study showed
that, in the more than 600 cases exam-
ined, Hypoca® effectively controlled BP
throughout a 24-hour period. In patients
New drugs that are superior in
effectiveness and safety are com-
ing onto the market continually, and the
importance of ensuring proper usage
through instruction in drug administra-
tion is becoming greater than ever. As
professionals in the field of medicine,
pharmacists work to promote an
enhanced quality of life for patients.
Yuko Shimoyama, Pharmacist
Department of Pharmacy,
Juntendo University Hospital
Mainstay Yamanouchi products
12
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 12
whose BP was high at night (non-dipper),
Hypoca® decreased nighttime BP
as well as daytime BP; however, in
patients whose BP was low at night
(dipper), the hypotensive effect of
Hypoca® was minimal at night. In the
highly competitive market for hyperten-
sion agents, these results are expected
to bolster demand for Hypoca®.
Hypoca® received approval under
the name Cyress® in the Netherlands in
June 1999.
SOLINASE® (PAMITEPLASE)
Created by Yamanouchi using
recombinant gene technology and
launched in Japan in February 1999,
Solinase® is a modified tissue plasmino-
gen activator (t-PA) for the treatment of
coronary thrombolysis associated with
acute myocardial infarction. Available in
vials, Solinase® can be administered via
bolus intravenous injection in a one-
minute time frame. Thus, Solinase® is
expected to speed the time needed for
the reperfusion of infarcted arteries.
Solinase® is outstanding in terms of
convenience as an emergency treatment.
OTC PRODUCTS
In Japan, Yamanouchi offers a wide
variety of OTC products, including
gastrointestinal agents, cold remedies,
skin care products, and first-aid anti-
septic products. Gaster® 10, a switch-
OTC formulation of the H2 antagonist
Gaster® that was launched in 1997, is
expected to record steady growth in
sales as public interest in self-medication
increases.
40
60
80
100
120
140
160
180
200
(hours)
(mmHg)
Before administrationAfter administration
40
60
80
100
120
140
160
180
200
40
200
2015105040
60
80
100
120
140
160
180
200
(hours)
(mmHg)
Before administrationAfter administration
40
60
80
100
120
140
160
180
200
40
200
20151050
Effects of Hypoca® on Differential Patterns of Circadian BP VariationDipper (n=175) Non-dipper (n=130)
13
Source: I. Kuwajima. 1999. Multicenter Study on the effects of a calcium antagonist oncircadian blood pressure variation: J-MUBA. Japanese Circulation Journal Vol.63, Sup. I, 322
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 13
14
Review of Operations
P h a r m a c e u t i c a l s
R&D
As described in the preceding special feature,
Yamanouchi’s formidable R&D pipeline con-
tains a number of major drug candidates the
Company expects to launch during the forth-
coming medium-term period. Important issues
Yamanouchi now faces include how to speed-
ily achieve the successful launch of these drug
candidates onto world markets as well as the
need to create an extensive lineup of innova-
tive new drug candidates that will be ready for
marketing subsequent to this period. Key to
addressing these issues effectively is the
ability of Yamanouchi to increase the speed
and quality of its R&D activities.
In the year under review, R&D expenditures
reached ¥54.3 billion, or 12.8% of net sales. In
Japan and the United Kingdom, Yamanouchi
focuses on drug discovery research; in Japan,
the Netherlands, and the United States on
drug development research; and in Japan,
Europe, and the United States on clinical
development. At present, the Company
boasts a worldwide R&D staff of approximate-
ly 1,500 people and is continuing to aggres-
sively invest in forward-looking R&D. At the
same time, to ensure the most effective and
efficient use of its R&D resources Yamanouchi
is focusing on the crucial elements of speed
and quality.
When we talk about speed, we are referring
to the time it takes for a new molecular entity
(NME) to progress from discovery as a
substance with potential to global launch. One
of Yamanouchi’s aims is to launch drugs that
are at least among the first three to be intro-
duced in their respective classifications, there-
by securing an advantage that will help ensure
a foothold in the market. One means of
achieving this is to accelerate the clinical
development process through the expansion
of a global development structure that elimi-
nates the duplication of effort and thus short-
ens development time. To this end, for a
number of drug candidates Yamanouchi is
carrying out Phase I clinical studies in Europe
and Phase II clinical studies in Europe and/or
the United States. This approach has allowed
several new drug candidates to move from
Phase I clinical studies in Europe to Phase II
clinical studies in the United States during the
year under review. In Japan, Yamanouchi has
a strong development capacity and has readi-
ly adapted to the new Good Clinical Practice
(GCP) criteria. Because of progress made by
the International Conference on Harmonization,
we are now able to use data gathered in over-
seas clinical trials when applying for approval.
Thus, Yamanouchi expects to shorten the
time needed for clinical development by utiliz-
ing its global development structure.
Yamanouchi’s global clinical development
capabilities are supported in large part by
Yamanouchi Europe B.V. (YEU)’s Clinical
Pharmacology Unit (CPU) in the Netherlands.
The CPU, which is responsible for Phase I
clinical studies of Yamanouchi compounds,
was constructed according to the GCP guide-
lines of the U.S. Food and Drug Administration
and has a skilled staff of physicians, nurses,
and technical experts. In June 1999, we com-
pleted a second phase of expansion at the
CPU, further enhancing our readiness to handle
the expected increase in new drug candidates.
Quality in R&D refers to the capacity to cre-
ate innovative NMEs with world-class poten-
tial, and maintaining drug discovery research
capabilities—the upstream of the R&D pro-
cess—is essential to sustaining this capacity.
Yamanouchi’s drug discovery research is han-
dled by the Tsukuba Research Center in
The Yamanouchi Research Institute (U.K.) pursues molecular and
cell biology research.
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 14
R&D PIPELINE
Stage Product Name/ Generic Therapeutic Target ClassificationCode No. Name
Starsis® nateglinide Non-insulin-dependent diabetes mellitus (NIDDM) Rapid onset insulinotrophic agent
Approved Libian® Contraception Oral contraceptive
Cyress®(1) barnidipine Hypertension Calcium antagonist
YM548 atorvastatin Hyperlipidemia, familial hypercholesterolemia HMG-CoA reductase inhibitor
Filed YM175 incadronate Loss of bone mass associated with osteoporosis Bisphosphonate
YM152 finasteride Benign prostatic hyperplasia 5 alpha-reductase inhibitor
YM643(2) interferon Chronic hepatitis C virus infection Consensus interferon (CIFN)alfacon-1
P-III YM294 oprelvekin Prevention of chemotherapy-induced thrombocytopenia Thrombocytopoietic factor (rhIL-11)
YM484 Promotion of bone formation Bone morphogenetic protein-2 (rhBMP-2)
YM177 celecoxib Rheumatoid arthritis, osteoarthritis, dental pain Cyclooxygenase-2 (COX-2) inhibitor
YM529 minodronate Osteolytic bone metastasis of breast cancer and Bisphosphonateosteolytic lesions of multiple myeloma
YM087 Heart failure, edema, hyponatremia Total vasopressin antagonist
YM992 Depression Selective 5-HT reuptake inhibitor and noradrenaline augmenting 5-HT2A antagonist (SINAS)
YM872 Acute ischemic stroke AMPA antagonistP-II YM337 High-risk PTCA GPIlb/Illa antagonist (monoclonal antibody)
YM905 Urinary incontinence Muscarinic M3 antagonist
YM103 Acute myocardial infarction Na+/H+ antiporter inhibitor
YM511 Breast cancer, endometriosis, uterine myoma Aromatase inhibitor
YM440 Diabetes Insulin sensitivity enhancer
YM454 Contrast medium Ultrasound contrast agent
(1) Approved in the Netherlands. Launched in Japan under the name Hypoca®. (2) Approved in Europe under the name Infergen®. Phase III in Japan. (As of July 1999)
Japan and the Yamanouchi Research Institute
(U.K.) in Oxford.
Yamanouchi is now strengthening its human
genome research capabilities with the goal of
discovering revolutionary new compounds. In
addition to carrying out such research at the
Molecular Medicine Laboratories in Tsukuba,
Yamanouchi is striving to incorporate new
genome research technologies through strate-
gic alliances with other pharmaceutical enter-
prises and participation in a number of
public/private-sector human genome research
projects. For example, Yamanouchi is involved
in two cooperative research projects that began
in 1998 and 1999, respectively, organized by
the Japanese Ministry of International Trade and
Industry that focus on technologies that help
predict the functional expression of genes.
To expedite drug discovery research on
NMEs with world-class potential, Yamanouchi
utilizes the latest technologies, including com-
binatorial chemistry and high throughput
screening, technologies that have paved the
way for a number of focused research
projects. In the mid-1990s, Yamanouchi
became one of the first domestic pharmaceu-
tical makers to introduce these new technolo-
gies in earnest, and, in the fiscal year under
review the Company enhanced the range of
applications for these vanguard technologies.
Yamanouchi recognizes the crucial impor-
tance of forming strategic R&D alliances with
other major pharmaceutical makers and orga-
nizations if it is to boast a substantial number
of high-quality innovative NMEs with global
market potential. In recent years, the Company
has vigorously pursued strategic alliances
covering various R&D stages with universities
and bioventures as well as a number of lead-
ing pharmaceutical companies. These include a
comprehensive R&D agreement with
U.S.–based G.D. Searle & Co., licensing-in and
licensing-out activities with Warner–Lambert
Company, of the United States, and coopera-
tive R&D on two drug candidates with Merck
KGaA, of Germany. Yamanouchi will continue
to actively participate in strategic alliances.
15
Creating innovative NMEs with world-classpotential is the goal of Yamanouchi’sresearchers.
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 15
16
MARKETING
During the fiscal year under review, Yama-
nouchi saw substantial drops in sales of phar-
maceutical products. Key factors behind this
performance included the termination of
domestic marketing agreements with Novo
Nordisk A/S, of Denmark, and Schering–Plough
K.K., of Japan, in March 1998 as well as the
discontinuation of sales of Elen® (indelox-
azine), a treatment for symptoms of mental
dysfunction, following a reevaluation by
Japan’s Central Pharmaceutical Affairs
Council in May 1998. However, sales of
Harnal® (tamsulosin, Omnic®, Flomax®), a
treatment for the functional symptoms of
benign prostatic hyperplasia, continued to
surge worldwide, playing a prominent role in
supporting the Company’s performance.
In Japan during the year under review, the
environment surrounding the pharmaceutical
market remained severe, partly due to the
third year in succession of downward revi-
sions to National Health Insurance drug prices
in April 1998. In addition, in the wake of
increases in the out-of-pocket expenses
charged to patients as a result of the 1997
implementation of Health Insurance Law
reforms, calls to contain the number of drugs
prescribed by medical institutions strengthened.
In such an environment, the performances of
major pharmaceutical manufacturers hinge on
whether or not they market blockbuster drugs
as well as their ability to adapt effectively to
changes in the pharmaceutical market.
Domestic sales of Gaster® (famotidine) rose
steadily during the term, as the drug’s share of
the combined H2 antagonist and proton pump
inhibitor market held at 45%. At the same
time, Harnal® continued to record double-digit
growth while domestic sales of Farom®
(faropenem), an oral penem-type antibiotic in
its second year on the market, surged. As a
result, Yamanouchi captured a 4.4% share of
the domestic market and maintained its posi-
tion as the third largest pharmaceutical com-
pany in Japan. Moreover, the reputation of
Hypoca® (barnidipine), a once-a-day calcium
antagonist, was boosted by the results of the
Japanese Multicenter Study on Barnidipine
with Ambulatory Blood Pressure Monitoring
(J-MUBA), Japan’s first large-scale clinical
study of the effects of a calcium antagonist on
circadian blood pressure variations.
Yamanouchi is using these favorable results to
further invigorate the market for Hypoca®.
In Europe, YEU, which maintains marketing
operations in 13 countries—including the
Netherlands, Germany, Italy, France, the
United Kingdom, Spain, Eastern European
countries, and Russia—continued to record
strong sales of Harnal® during the year under
review in each of these countries. To ade-
quately meet surging demand for Harnal® and
handle the expected launch of other new
products, YEU plans to substantially increase
the number of its medical representatives over
the next five years. Moreover, in many major
European countries Yamanouchi has entered
into copromotion agreements, including an
agreement with Glaxo Wellcome UK Ltd. to
market Harnal® in the United Kingdom. In
addition, in 1999 YEU began to export such
mainstay products as Harnal® to Latin
American countries, including Argentina.
Meanwhile, sales of Harnal® by licensee
Boehringer Ingelheim International GmbH and
Boehringer Ingelheim Pharmaceuticals, Inc.,
continued to surge in Europe and the United
States, respectively. Thus Yamanouchi’s sales
to licensees, including royalties, rose.
Regarding Asian operations, in the year
under review the results of Shenyang Yama-
nouchi Pharmaceutical Co., Ltd., of China,
were newly included in Yamanouchi’s consoli-
dated financial statements. In Korea, Taiwan,
and the Philippines, the Company maintains
independent marketing networks. In addition,
the Company’s wholly owned subsidiary in
Thailand began operations in April 1999, and
Yamanouchi plans to commence operations in
Indonesia in summer 1999 as it works to bol-
ster its presence in Southeast Asia in light of
the region’s strong potential for market growth.
Yamanouchi U.S.A. providessupport for licensed sales of
Harnal® (Flomax®).
To meet surging demand for ourproducts, Yamanouchi Europe is
strengthening its medicalrepresentative force.
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 16
PRODUCTION
During the term, Yamanouchi increased the
capacity of its Harnal® production lines to
meet strong global demand. At Yamanouchi
Ireland Co., Ltd., a production base for bulk
pharmaceuticals for the European and U.S.
markets, the Company completed a new
Harnal® production line in March 1998 and
began shipments of the drug to Europe in
March 1999. In Japan, Yamanouchi completed
the construction of a new production line at the
Takahagi plant in May 1999, elevating that
facility’s bulk Harnal® production capacity. In
November 1998, the Harnal® formulation
capacity of YEU’s Manufacturing Meppel facil-
ity was also increased. Moreover, at the
Yamanouchi Shaklee Pharma Manufacturing
Center in the United States plans are under
way to begin the formulation of Harnal® for the
U.S. market beginning in 2000.
To adequately meet demand for new drugs
to be marketed both in Japan and overseas,
Yamanouchi is making substantial invest-
ments in new facilities. As part of these efforts,
in February 1999 the Company completed the
large-scale renovation of an injectable formu-
lation facility at the Yaizu plant and in May
1999 constructed a new building for produc-
ing investigational drugs at the Takahagi plant,
both of which are located in Japan.
DRUG DELIVERYTECHNOLOGY BUSINESS
During the year under review, Yamanouchi
took great strides toward setting up a drug
delivery technology business in the United
States. A division of Shaklee Corporation,
Yamanouchi Shaklee Pharma (YSP) is respon-
sible for Yamanouchi’s North American phar-
maceutical technology related operations.
Following the completion of the construction
of the YSP Research Center on the grounds of
the Stanford Research Park in Palo Alto,
California, in 1997, YSP opened the YSP
Manufacturing Center in Norman, Oklahoma,
in September 1998. With the completion of
these two facilities, Yamanouchi’s U.S. drug
delivery technology business now has the
infrastructure necessary for future growth.
Yamanouchi’s drug delivery technology
business involves applying the Company’s in-
house-developed drug delivery technologies
to the pharmaceutical products of other drug-
makers and encompasses all stages from the
early development of formulations through
production. Revenues from this business will
be generated through royalties paid by
licensees as well as manufacturing margins.
Among our drug delivery technologies are
WOWTAB®, an orally disintegrating tablet
designed to be taken without water, and
OCAS™, which enables a constant rate of drug
absorption throughout the digestive tract,
including the lower digestive tract (colon). YSP
has signed agreements with Glaxo Group
Limited to apply WOWTAB® technology to
Glaxo’s original prescription migraine drugs as
well as with Warner–Lambert and Johnson &
Johnson • Merck Consumer Pharmaceuticals
Co. In addition, negotiations are under way
with a number of other pharmaceutical manu-
facturers for licensing agreements involving
WOWTAB® and OCAS™.
Research on drug delivery technologies is
carried out through Yamanouchi’s tripolar R&D
network, consisting of the Yaizu Technology
Center in Japan, YEU’s Research Laboratories
in the Netherlands, and the YSP Research
Center in the United States. Unti l now,
Yamanouchi’s successes in this field have
come through the development and practical
application of such technologies as WOWTAB®
and OCAS™. The Company continues to focus
on creating new drug delivery technologies to
follow WOWTAB® and OCAS™. In January
1998, Yamanouchi began a research project
(UNYPHAR) in the Netherlands that focuses
on the latest drug delivery systems. Financed
partly by a grant provided by the Dutch gov-
ernment, UNYPHAR is being conducted with
three leading Dutch universities, namely,
Groningen, Leiden, and Utrecht, and is con-
centrating on research into the ultimate drug
delivery technology—drug targeting.
17
Yamanouchi Ireland enhanced its bulkHarnal® production line.
Members of UNYPHAR working tocreate new drug delivery systems
The Yamanouchi Shaklee PharmaManufacturing Center manages the formulationof Harnal® and WOWTAB® manufacturing.
yamanouchi AR '99前半 99.8.18 1:37 PM ページ 17
The Yamanouchi Group is a comprehensive
health care provider that contributes to the
prevention and treatment of disease as well as
the maintenance and enhancement of every-
day good health.
Yamanouchi’s nutritional products busi-
ness, another pillar of the Company’s business
structure, is conducted through Shaklee
Corporation, of the United States, and
Shaklee Japan K.K. These companies develop,
manufacture, and distribute a wide array of
nutritional products as well as personal care
items, household goods, and home water
treatment products through a multilevel mar-
keting system covering the United States,
Canada, Mexico, Malaysia, and Japan.
During the term, demand for Shaklee prod-
ucts in the United States was stimulated by
the introduction of Enfuselle®, a revolutionary
new skin care line. However, in Southeast Asia
sales fell, mainly due to the adverse effects of
the ongoing financial crisis. In Japan, despite
the introduction of such new nutritional prod-
ucts as Colestop® and Fusihelp, which made
solid contributions to sales, the harsh operating
environment resulting from lackluster consumer
spending and fierce competition led to a slight
drop in sales for the term under review.
In the United States, the seven drivers for
the successful multilevel marketing business
include a number of measures to invigorate
the field sales force as well as the introduction
of exciting, original products. The current field
sales force continues to focus on the Own
Your Life™ vision and to take advantage of
the benefits of a new sales compensation plan
introduced during the prior fiscal year. The
implementation of a duplicable process during
the year under review has created significant
activity. In addition, the Shaklee Web site was
expanded to include on-line ordering, and
member’s direct orders showed significant
monthly increases during the fiscal year.
Shaklee Corporation continues to build its
reputation as an industry leader with new and
improved products that help people lead
healthier lives. The introduction of the revolu-
tionary skin care line Enfuselle® was a spec-
tacular sales success, generating more than
three times the sales of any previous Shaklee
skin care l ine. Products that showcase
Shaklee Corporation’s expertise in nutrition
and wellness include the following:
Vita-Lea Multivitamin and
Multimineral Supplement
Vita-Lea is one of the most technically
advanced multivitamin and multimineral sup-
plements on the market. A long-term clinical
study found that taking Vita-Lea for one year
provides support for the immune systems of
healthy elderly adults. The highly significant
results were presented at the annual meeting
of the American College of Nutrition.
18
N u t r i t i o n a l P r o d u c t s
Shaklee provides health-promoting products as well asattractive lifestyle choices.
yamanouchi AR '99前半 99.8.18 1:38 PM ページ 18
Optiflora™ Prebiotic and
Probiotic Dietary Supplement
Developed by Shaklee scientists, Optiflora™
is the first product in North America that
guarantees the delivery of l iving micro-
organisms directly to the intestine. Its patent-
ed triple encapsulation technology enables
Optiflora™ to support a normal healthy bal-
ance of intestinal microflora. Shaklee
Corporation expects Optiflora™ to become a
best-selling product.
Enfuselle® Skin Care Products
Shaklee Corporation applied its expertise in
nutrition to launch Enfuselle®, a vitamin-based
skin care line that has seen sales significantly
exceed forecasts. Shaklee scientists have filed
four patent applications for the line. Enfuselle®
formulations have been clinically proven to
block and reverse the visible signs of aging.
Clinical studies to confirm safety and efficacy
also proved the line’s ability to impart significant
improvements in the look and feel of the skin.
Continued economic difficulties and a falloff
in consumer confidence negatively impacted
operations in both the Malaysian and
Philippine businesses. Following the closing of
the Shaklee operations in Taiwan and Argentina
in March 1998, Shaklee Corporation elected
to shut down its operations in the Philippines
in 1999.
During the fiscal year, Shaklee Japan intro-
duced the “Career Coordinator Bonus” as a
measure to invigorate sales leaders. Moreover,
the company launched two new publications:
the Business Builder Guide and the Shaklee
Difference Booklet. New products launched
included Colestop® and Fusihelp. These new
products have unique characteristics and are
expected to attract new customers for
Shaklee products.
Colestop® Cholesterol Control
Colestop® is an innovative natural nutritional
product that helps control cholesterol levels.
The supplement’s primary ingredient is benikoji,
or red malted rice, which has a long history in
Japan as an ingredient in fermented foods.
The benikoji used in Colestop® is BYS-114, a
special strain co-developed with Yamanouchi.
Fusihelp Joint Cartilage Builder
Fusihelp is a supplement designed to supply
glucosamine, an important constitutional nutri-
ent for the cartilage of the joints. Since glu-
cosamine in various joints is known to
decrease with aging, hard exercise, excess
weight, and many other causes, Fusihelp is
expected to become one of the ideal nutrition-
al products for people in modern society.
Shaklee Corporation and Shaklee Japan
continue to work together on the transfer of
technology to enable the local manufacturing
of both nutritional and personal care products.
For example, Fusihelp is the outgrowth of
research performed in the United States for its
Osteokinetics® product. In addition, collaboration
between Shaklee and Yamanouchi’s Institute
for Consumer Healthcare has resulted in valu-
able sports nutrition information that specifical-
ly targets male and female triathletes and
female athletes in general.
Shaklee Corporation plays a leadership role
in the industry through active participation in
the Direct Selling Association, the Council for
Responsible Nutrition, and the Consumer
Healthcare Products Association.
Shaklee Corporation supports Team Shaklee,
a bicycle racing team. Team Shaklee cyclists
earned more than 100 podium victories and an
incredible six National Championships during
the year’s racing season. Team Shaklee riders
also won gold medals at both the Goodwill
Games and the Commonwealth Games, pro-
viding international visibility for Shaklee at
these world-famous competitions.
19
The Enfuselle® lineup
Colestop®
Team Shaklee—symbolizing thebenefits of Shaklee Sports Nutrition—enjoyed a winning year.
yamanouchi AR '99前半 99.8.18 1:38 PM ページ 19
Supported by the robust U.S. economy, the
specialty retailer Bear Creek Corporation, a
Shaklee Corporation subsidiary responsible
for Yamanouchi’s food and roses business,
recorded the highest sales and earnings in its
history on a local currency basis during the
year under review. Bear Creek is engaged in
the mail-order, store, Internet, and wholesale
marketing of gourmet gift foods, horticultural
items, clothing, and other products. Bear
Creek businesses include Harry and David,
North America’s largest direct marketer of fruit
and food gifts; Jackson & Perkins, a leading
mail-order supplier of roses and other garden-
ing products; Northwest Express, a unique
catalog business that offers products show-
casing the l ifestyle of the U.S. Pacific
Northwest; Harry and David Stores; and Bear
Creek Gardens, a wholesale rose company.
Showing double-digit sales growth on a
local currency basis, Harry and David Stores
increased the number of store locations to 72.
In addition, sales over the Internet grew during
the year under review and made a solid contri-
bution to overall performance.
Among Bear Creek’s operational highlights
during the year were the implementation of a
Warehouse Management System, a Human
Resource Management System, and a new
management and financial reporting system for
Bear Creek Gardens and Bear Creek Production.
In addition, Bear Creek purchased a 3% inter-
est in Catalog City, an Internet company that
offers more than 600 catalogs at its Web site.
In the interest of reducing overall delivery
expenses while improving the quality of deliv-
ery, Bear Creek worked to position more
product at the Hopewell Distribution and
Customer Operations Center completed in
Hebron, Ohio, in September 1997. The com-
pany also strengthened its national partner-
ship with the U.S. postal service and
significantly increased its use of Priority Mail,
a cost-efficient alternative to overnight and
two-day service. These and other efforts
enabled Bear Creek to reduce delivery expens-
es while cutting down delivery-related com-
plaints more than 20%.
In addition, Bear Creek continued to actively
pursue expansion. Harry and David completed
a bakery remodeling project and upgraded its
public tour route. Jackson & Perkins opened a
Redi-Plant rose packing facility at its rose-
growing center in Wasco, California, and relo-
cated its preexisting Redi-Plant operation
from Medford, Oregon, to Wasco.
Notably during the year, Bear Creek contin-
ued to win awards, receiving Catalog Age gold
awards for Jackson & Perkins’ 1998 Rose cat-
alog and Harry and David’s Christmas catalog
as well as a si lver award for Jackson &
Perkins’ 1998 Rose Wholesale catalog. In
addition, Harry and David won a silver award
for their Web site. Moreover, Jackson &
Perkins won two All-America Rose Selection
awards for 1999.
Also, Bear Creek received the Oregon
Governor’s award for occupational safety and
was selected by Oregon Business Magazine
as one of the “Best Companies in Oregon to
Work For” in 1998.
20
F o o d a n d R o s e s
Harry and David fruit and food gifts
yamanouchi AR '99前半 99.8.18 1:38 PM ページ 20
21
Amid the rapid aging of Japanese society and
the growing recognition of the importance of
medicine and health care in everyday life,
Yamanouchi continues to carry out corporate
citizenship activities that concentrate on
health care in l ine with its philosophy
“Creating and Caring. . . for Life.”
The Company works to provide the public
with useful and understandable information on
medicine and health through a variety of chan-
nels that include a radio program that pro-
vides health care related information and a
health hot line that offers free medical advice
from experienced nurses and specialists in the
fields of gynecology and digestive and circula-
tory systems.
Yamanouchi also works to promote techni-
cal advances in health care, medicine, and
medical science through foundations set up
for this purpose in Japan, Europe, and the
United States. The foundation in Japan—
which has made available a total of more than
¥1.4 billion in research grants—celebrated its
30th year of existence during the period, while
the Company’s foundation in Europe con-
tributed to such institutions as the Czech
Republic’s Masaryk University. In the United
States, Yamanouchi’s foundation continued to
make donations to several universities.
In Japan, the Company’s efforts encompass
various charitable donations. For example, the
Company furnishes ambulances to communi-
ties nationwide and in the year under review
contributed 4 ambulances, bringing its total of
donated vehicles thus far to 172. Also, Yama-
nouchi provides vehicles equipped with
wheelchair lifting devices through the Three-
Nine Fund, a matching gift program within the
Company to which employees contribute.
In the United Kingdom, the Yamanouchi
Research Institute (U.K.) (YRI) works to benefit
the local community through donations to local
organizations, including a hospice for the ter-
minally ill, a shelter for the homeless, and a
hospital as well as the local police and fire ser-
vices. In addition, YRI is concerned about the
preservation of the environment and the cul-
tural heritage of the region in which it is situated,
sponsoring the annual “Walk for Wildlife”
organized by the Buckinghamshire, Berkshire
and Oxfordshire Naturalists Trust and helping
restore and maintain Edwardian architecture in
Oxford—an activity for which it has received
awards.
In the United States, Shaklee Corporation
strives to improve the quality of life for people
and communities. This is demonstrated by
such innovative programs as Shaklee Cares,
an organization that supports disaster relief,
and the Shaklee Community Caretakers
Awards, which honor outstanding community
volunteers. In addition, the Company main-
tains a matching gift program that encourages
employees to make individual contributions to
nonprofit organizations and makes regular
corporate contributions, including four-year
college scholarships through the Dr. Forrest
C. Shaklee Memorial Scholarship Program.
During the year under review, Shaklee
Cares provided much-needed help in 13
states to communities, families, and individu-
als struck by tornadoes, floods, hurricanes,
fires, and other natural disasters. Shaklee
Cares is a publicly supported charitable orga-
nization, the administrative costs for which are
donated by Shaklee Corporation, thus ensur-
ing that donations go directly to those in need.
Bear Creek continued its tradition of gener-
ously supporting the communities in which it
operates, with the company and employees
contributing to the United Way through a
matching gift program. Bear Creek also sup-
ports homeless children by contributing to the
Better Homes Foundation Kidstart Program
through Harry and David and Jackson &
Perkins. In addition, during the year under
review Bear Creek announced a multiyear
donation to support the construction of a
Center of the Visual Arts at Southern Oregon
University in Ashland, Oregon, and completed
a multiyear grant to provide classroom com-
puters to the Medford City School District,
also in Oregon.
C o r p o r a t e C i t i z e n s h i p
The Three-Nine Fund provides vehiclesequipped with wheelchair lifting devices.
The Yamanouchi EuropeanFoundation provides grants toCzech scientists.
Shaklee Cares helps people struck bynatural disasters.
yamanouchi AR '99前半 99.8.18 1:38 PM ページ 21
22
As an active global enterprise, the Yama-
nouchi Group continues to strengthen its envi-
ronmental auditing systems and implement
measures that promote energy conservation
as well as the reduction of waste and use of
chlorofluorocarbons (specifically, CFCs 11,
12, and 13).
Yamanouchi Lotus Garden, the parent com-
pany’s recently completed office building in
Tokyo, Japan, was awarded the 11th annual
Nikkei New Office prize. This prize is given in
recognition of a new office building’s energy-
saving design, such as the efficient use of natural
light, as well as the harmony of its architec-
tural design with the natural surroundings.
In July 1998, the Takahagi plant received
ISO 14001 certification. Also, the Yaizu plant
and Tohoku Yamanouchi Pharmaceutical
Co., Ltd., are now preparing for ISO 14001
certification.
Yamanouchi Ireland, which has already
received ISO 14001 certification, was one of
the first companies in Ireland to participate in
the Eco-management & Audit Scheme, which
is regarded as the leading EU program for
corporate transparency regarding environ-
mental issues. During the year, Yamanouchi
Ireland issued its second fully audited and val-
idated environmental statement. Moreover, the
company’s approach to environmental issues
was further demonstrated during the year
through the expansion of its sophisticated
system for recovering solvent from waste.
Yamanouchi Europe pushed forward with
measures to reduce the volume of packaging
used for commercial products and minimize
emissions from its plants.
The environmental protection efforts of the
YSP Research Center in Palo Alto, California,
include four major program areas: wastewater
treatment, air quality management, hazardous
waste management, and environmental
awareness training. The wastewater treatment
program was a major consideration in the
construction of the research center laboratory.
Laboratories were built with state-of-the-art
designs and preventive safeguards, which
regulators have adopted for use as a model
for all local industries. The air quality program
was another major consideration in the cen-
ter’s design. Air pollutant emissions have been
less than 50% of permitted allowances.
As part of ongoing efforts to conserve ener-
gy and reduce the production of greenhouse
gases, Shaklee Corporation’s Norman
Manufacturing Center invited a team of univer-
sity engineers to perform a comprehensive
energy audit at the facility. The audit team
reported that the facility was one of the clean-
est and most efficiently run manufacturing
operations in Oklahoma.
In March 1999, Shaklee Corporation’s
Director of Environmental Health and Safety
visited Nepal’s Sagamartha National Forest
near Mount Everest to view firsthand the
progress of several reforestation projects
Shaklee Corporation has supported since
1979. Working with Sir Edmund Hillary and the
American Himalayan Foundation, more than a
million trees have been planted thus far
through these projects. Forests provide impor-
tant habitats for wildlife, protect against soil
erosion, and help fight global warming by scrub-
bing greenhouse gases from the atmosphere.
As a large agricultural products based com-
pany, one of Bear Creek Corporation’s prima-
ry concerns is environmental preservation.
Accordingly, the company is converting heat-
ing at its orchards to an environment-friendly
propane gas system, a move that will result in
cleaner air for the people in the communities
in which it operates. In addition, Bear Creek
has played a leading role in local water con-
servation efforts over the years. An
Environmental Steering Committee made up
of employees from Medford, Hopewell, and
Wasco has worked with Shaklee Corporation
to develop policies and procedures to docu-
ment the company’s ongoing compliance with
environmental regulations as well as a mainte-
nance program. The committee continues to
meet monthly to evaluate new opportunities
for prudent and responsible environmental
improvements at the company’s three princi-
pal sites.
E n v i r o n m e n t a l P r o t e c t i o n
The Takahagi plant acquired ISO 14001 certification.
The Yamanouchi Ireland plant, which cele-brated its 10th anniversary during the year
under review, is renowned as a modelfacility for environmental protection.
Shaklee Corporation has supportedseveral reforestation projects in
the Himalayas.
yamanouchi AR '99前半 99.8.18 1:38 PM ページ 22
23
FINANCIAL SECTION
Selected Financial Highlights ...................... 24Financial Review ................................ 25Consolidated Balance Sheets .................... 30Consolidated Statements of Income................ 32Consolidated Statements of Shareholders’ Equity.... 33Consolidated Statements of Cash Flows ............ 34Notes to Consolidated Financial Statements ........ 35Report of Independent Certified Public Accountants 44
yamanouchi AR '99前半 99.8.18 1:38 PM ページ 23
24
YAMANOUCHI PHARMACEUTICAL CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Selected Financial HighlightsYears Ended March 31, 1999, 1998, 1997, 1996 and 1995
Millions of yen, except per share amounts1999 1998 1997 1996 1995
Results for the Year:Net sales .................................................................................... ¥ 423,217 ¥ 477,356 ¥ 454,740 ¥ 414,177 ¥ 384,324Cost of sales .............................................................................. 127,513 166,563 158,664 147,502 128,679Selling, general and administrative expenses* ......................... 206,259 207,948 194,847 178,460 168,908Operating income*..................................................................... 89,445 102,845 101,229 88,215 86,737Net income** ............................................................................. 48,002 6,092 41,866 40,542 39,719
Research and development expenses....................................... 54,299 43,639 42,309 40,920 38,225Capital expenditures .................................................................. 51,405 57,575 36,112 23,704 —Depreciation............................................................................... 29,338 18,454 12,748 12,720 —
Per Share:Net income** (basic).................................................................. ¥ 140.79 ¥ 18.18 ¥ 129.12 ¥ 125.38 ¥ 122.88Net income** (diluted) ............................................................... 129.21 17.51 116.56 111.65 108.84Shareholders’ equity .................................................................. 1,635.35 1,510.45 1,482.51 1,375.04 1,271.05Cash dividends applicable to the year....................................... 23.00 25.00 25.00 23.00 20.50
Financial Position at Year-End:Working capital .......................................................................... ¥ 273,475 ¥ 346,552 ¥ 362,557 ¥ 379,668 ¥ 362,705Property, plant and equipment, net ........................................... 185,587 176,739 128,936 115,602 109,066Total assets................................................................................ 789,362 806,641 839,475 786,706 795,343Total long-term liabilities ............................................................ 88,555 136,558 180,564 223,041 242,801Shareholders’ equity, net ........................................................... 563,303 511,441 480,775 444,599 410,973
Number of shares of common stock issued (in thousands) ...... 344,468 338,605 324,308 323,338 323,338
*Due to a change effective the year ended March 31, 1999 in the Japanese regulations relating to the presentation of amortization of excess of cost over net assets
acquired in the consolidated statements of income, the corresponding amounts in the prior years’ consolidated financial statements have been reclassified to conform to
the presentation for the fiscal year under review.
**Effective April 1, 1997, the Company changed its methods of accounting for the amortization period of excess of cost over net assets acquired and for income taxes
to adopting tax effect accounting. As a result of these changes, the effect of the change in the amortization period was to increase the amortization of excess of cost over
net assets acquired by ¥72.7 billion and to decrease net income by the same amount for the year ended March 31, 1998. Also, the effect of adopting tax effect account-
ing was to decrease income tax expense by ¥24.5 billion and to increase net income by the same amount for the year ended March 31, 1998.
yamanouchi AR '99前半 99.8.18 1:38 PM ページ 24
25
Financial Review
OPERATING OUTLOOKDuring the year ended March 31, 1999, business conditions
in the operating environment surrounding Yamanouchi
Pharmaceutical Co., Ltd.’s business were even more difficult.
In the Company’s mainstay pharmaceutical business, intensi-
fying efforts on the part of the Japanese government to contain
medical costs, the termination of the Company’s domestic
marketing agreements with Novo Nordisk A/S, of Denmark, and
Schering–Plough K.K., of Japan, and the discontinuation of
sales of Elen® (indeloxazine), a treatment for symptoms of men-
tal dysfunction, following a reevaluation of the drug by Japan’s
Central Pharmaceutical Affairs Council, resulted in a significant
drop in net sales for the fiscal year under review.
However, domestic sales of such mainstay products as the
H2 antagonist Gaster® (famotidine), a treatment for peptic ulcers
and gastritis, and Harnal® (tamsulosin), a treatment for the func-
tional symptoms of benign prostatic hyperplasia (BPH), contin-
ued to surge despite severe market conditions.
Harnal® (Omnic®, Flomax®) is now marketed in more than 40
countries and achieving strong sales growth. In light of this suc-
cess, Yamanouchi worked to increase its Harnal® production
capacity in Europe. In addition, the Company completed the
construction of formulation production facil it ies at the
Yamanouchi Shaklee Pharma (YSP) Manufacturing Center in
the United States in September 1998 to meet surging demand
for the drug in North America.
In Asian countries other than Japan, in addition to strength-
ening its marketing capacity in Taiwan, China, Korea, and the
Philippines, the Company is bolstering its presence in Asia in
anticipation of economic growth. To this end, Yamanouchi estab-
lished a subsidiary in Thailand during the year under review.
During the term, Yamanouchi made great strides in its R&D
activities that it expects to yield a number of new drugs.
Yamanouchi anticipates that the introduction of these drugs will
help speed the Company’s recovery from the aforementioned
declines. In August 1998, atorvastatin (YM548), an HMG-CoA
reductase inhibitor for the treatment of hyperlipidemia and
familial hypercholesterolemia, and incadronate (YM175), an oral
bone resorption inhibitor for the treatment of bone loss asso-
ciated with osteoporosis, were filed for approval in Japan.
Also in Japan, the oral hypoglycemic agent Starsis® was
approved in June 1999. Through such activities, Yamanouchi
continues to make great progress toward launching new prod-
ucts that are expected to be big sellers. In addition,
Yamanouchi has ensured the long-term stability of its R&D
pipeline with the reaching of a comprehensive R&D agreement
with U.S.–based G.D. Searle & Co. in December 1997 as well as
through the creation of new drugs through in-house drug dis-
covery research.
In Europe, Infergen® (interferon alfacon-1, YM643), a treatment
for chronic hepatitis C virus infection, was approved in February
1999; the antihypertensive drug barnidipine was approved in the
Netherlands, where it will be marketed under the name Cyress®;
and nine other drug candidates are now undergoing clinical devel-
opment. In the United States, Yamanouchi began clinical studies
of several new drug candidates during the term and expects
that the success of these studies will enable the establishment
of an independent sales network in that country.
Also, to ensure the quality of and quantity of drugs produced
by its R&D pipeline, the Company is aggressively pursuing
strategic alliances with pharmaceutical manufacturers, research
institutes, bioventures, and universities. During the term,
Yamanouchi entered into an agreement with Merck KGaA, of
Germany, for the worldwide development and marketing rights
to two jointly discovered drugs. Moreover, Yamanouchi has
entered into a licensing-out agreement with U.S.–based
Warner–Lambert Company for YM087, a total vasopressin
antagonist for the treatment of heart failure and hyponatremia
as part of a cross-licensing agreement for atorvastatin. In addi-
tion, Yamanouchi has concluded an agreement with Ono
Pharmaceutical Co., Ltd., of Japan, for the rights to develop and
market minodronate (YM529), a drug that has such indications
as osteoporosis and hypercalcemia. Furthermore, the Company
acquired the rights to market CHOLEBINE®, a treatment for
hypercholesterolemia developed by Mitsubishi Chemical
Corporation, of Japan. This agreement will help Yamanouchi to
quickly become a major player in the market for antihyperlipidemia
medications, which is seeing exponential growth in demand.
Yamanouchi is also aggressively pursuing business in the
area of drug delivery technologies. To this end, Yamanouchi
Shaklee Pharma, a division of the U.S. subsidiary Shaklee
Corporation that is responsible for pharmaceutical technology
related operations in the United States, has concluded agree-
ments with three major pharmaceutical companies in the United
States for applying Yamanouchi’s WOWTAB®—an orally disinte-
grating tablet designed to be taken without water—technology
to those companies’ products. Manufacturing facilities have
been installed within the YSP Manufacturing Center and prepa-
rations are now under way for the start of production on a con-
tract basis. Furthermore, in the Netherlands, Yamanouchi is
participating with three leading universities on a joint research
project (UNYPHAR) focused on developing new drug delivery
systems that is receiving funding from the Dutch government.
Yamanouchi’s goal is to be a comprehensive health care enter-
prise. The Company’s nutritional products businesses are handled
by Shaklee Corporation and Shaklee Japan K.K., while the food
and roses business is conducted by Bear Creek Corporation.
By strengthening the multilevel marketing of nutritional products
and reinforcing mail-order and store operations for food and
roses, these companies are demonstrating their commitment to
contributing to health and happiness through the development
of products and services that address evolving consumer needs.
yamanouchi AR '99後半/PDF 99.8.18 7:25 PM ページ 25
26
FINANCIAL RESULTSIn the fiscal year ended March 31, 1999, the Japanese govern-
ment implemented a downward revision in National Health
Insurance drug prices for the third consecutive year. In addition,
the Company terminated licensing agreements with Novo
Nordisk A/S and Schering–Plough K.K. that in the previous fiscal
year had accounted for sales of ¥49.3 billion and discontinued
sales of Elen®, which had yielded ¥9.2 billion in sales in the pre-
vious fiscal year, following the May 1998 reevaluation by
Japan’s Central Pharmaceutical Affairs Council. As a result of
these factors, the Company saw significant declines in net sales
and operating income. Despite these factors, net income in the
fiscal year under review rose to its highest level ever. During the
term, Yamanouchi estimates that exchange rate movements
had the net effect of causing declines in net sales, operating
income, and net income of ¥12.0 billion, ¥2.0 billion, and ¥1.8 bil-
lion, respectively, in comparison with the previous fiscal year.
SALES
Net Sales Breakdown
Net sales amounted to ¥423.2 billion, falling 11.3% on a
year-on-year basis.
Sales by Geographical AreaYears ended March 31, (billion ¥)
1999 1998
Japan ............................................................... ¥269.5 ¥326.8Europe ............................................................. 66.6 60.9America............................................................ 85.7 89.7Asia (except Japan) ......................................... 1.4 —
Consolidated.................................................... ¥423.2 ¥477.4
In Japan, sales plunged 17.5%, primarily as a result of a sub-
stantial drop in sales of pharmaceuticals. In Europe, sales grew
9.5%, thanks largely to the strong performance of Harnal®
(Omnic®). (Adjusting for the exchange rate effect, sales were up
16.3%.) In the United States, sales fell 4.4%. (Adjusting for the
exchange rate effect, sales grew 4.4% thanks to a favorable
performance in the food and roses business.) From this term,
because sales by Shenyang Yamanouchi Pharmaceutical Co.,
Ltd., of China, are newly included in the consolidated financial
statements, a new category—Asia (except Japan)—has been
added.
’95
’96
’97
’98
’99
21.83.6
47.2 311.7
28.0 46.0 336.4
35.8 54.5 359.6
44.2 54.3 373.1
43.9 49.9 323.7
3.7
4.8
5.7
5.7
Pharmaceuticals Nutritional Products Food and Roses Other
(billion ¥)
Overseas SalesYears ended March 31, (billion ¥)
1999 1998
America ......................................................... ¥115.6 ¥123.7Europe........................................................... 50.0 43.4Asia (except Japan) ...................................... 7.1 7.2
Consolidated ................................................. ¥173.4 ¥175.0
Percent of total sales..................................... 41.0% 36.7%
Overseas sales—which include export sales by the Company
and its domestic consolidated subsidiaries and sales (other
than exports to Japan) by its foreign consolidated subsidiaries—
as a percentage of total sales rose 4.3 percentage points, to
41.0%. During the term under review, approximately 67% of
overseas sales were recorded in U.S. dollars, and the exchange
rate on March 31, 1999, was ¥120.55 to US$1.00 (¥132.10 on
March 31, 1998).
Consolidated Overseas Sales and Overseas Sales to Net Sales
Sales by Business SegmentYears ended March 31, (billion ¥)
1999 1998
Pharmaceuticals .............................................. ¥323.7 ¥373.1Nutritional products.......................................... 49.9 54.3Food and roses................................................ 43.9 44.2Other................................................................ 5.7 5.7
Consolidated.................................................... ¥423.2 ¥477.4
Pharmaceuticals Sales of pharmaceutical products fell 13.2%, largely due to a
decline in the Company’s domestic pharmaceutical business.
However, sales of Yamanouchi’s core products continued to
expand, with demand for Harnal® remaining strong worldwide
and sales of both Gaster® and the oral penem-type antibiotic
Farom® showing growth in Japan.
SALES OF MAINSTAY PRODUCTS
Years ended March 31, (billion ¥)
1999 1998
Gaster® ............................................................ ¥106.9 ¥108.5Harnal® ............................................................ 56.1 42.3Calcium antagonists ........................................ 27.2 28.9Dorner® ............................................................ 11.3 11.6Farom®............................................................. 6.3 3.6
Sales of Harnal® (Omnic®, Flomax®) rose 32.6% during the
term under review. As an alpha1-blocker that acts selectively on
99.5
119.8
153.1
175.0
173.4
25.9%
28.9%
33.7%
36.7%
41.0%
’95
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’99
(billion ¥, %)
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the lower urinary tract, Harnal® has the characteristic of improv-
ing the symptoms of BPH while exerting a minimal effect on
blood pressure. Harnal® has received widespread praise from
the medical community, and its share of the domestic market
has risen to more than 55%. Moreover, the drug has been
launched in over 40 countries. In Europe under the name
Omnic®, Harnal® has become the number one alpha1-blocker in
many major markets for BPH treatments, including the
Netherlands, Germany, Italy, and the United Kingdom. Yama-
nouchi has enjoyed great success through its comarketing
activities with licensee Boehringer Ingelheim International GmbH,
of Germany. Since the close of the fiscal year under review, the
Company has begun copromotion activities for the drug in the
United Kingdom with Glaxo Wellcome UK Ltd. In the United
States, sales of Harnal® through licensee Boehringer Ingelheim
Pharmaceuticals, Inc., under the name Flomax®, continued
to surge.
Although overall sales of Gaster® fell 1.5% during the term,
domestically sales of the drug grew steadily amid strong com-
petition, increasing 5.1% compared with the previous fiscal
year. Sales to licensee Merck & Co., Inc., of the United States,
which is mainly in charge of the overseas marketing of Gaster®,
fell during the term due to the strong yen. In the domestic mar-
ket, Yamanouchi filed for the approval of the successor to
Gaster OD®, which applies in-house-developed, next-generation
WOWTAB® technology.
Sales of calcium antagonists, including Perdipine®, Perdipine®
LA, and Hypoca®, fell 5.8% during the term. From 1995 through
1998, Japan’s first large-scale clinical study on a calcium
antagonist, the Japanese Multicenter Study on Barnidipine with
Ambulatory Blood Pressure Monitoring (J-MUBA), was conduct-
ed to examine the long-term effects of Hypoca® on circadian
variations in blood pressure. Data from the study showed that
Hypoca® was effective in controlling blood pressure throughout
a 24-hour period. Amid fierce competition in the anti-hypertensive
drug market, Yamanouchi expects sales of Hypoca® to expand,
bolstered by this data. Hypoca® was approved under the name
Cyress® in the Netherlands in June 1999.
In the domestic market, sales of Dorner® (beraprost), for the
treatment of chronic arterial occlusion, shrank 2.6% compared
with the previous term. Dorner® has also been filed in Japan for
the additional indication of primary pulmonary hypertension.
In the domestic market, sales of Farom® (faropenem), an oral
penem-type antibiotic, shot up 75% from the previous term.
Farom® has been proven as being effective against such
antibiotic-resistant bacteria as penicil l in-resistant
Streptococcus pneumoniae (PRSP) and ofloxacin-resistant
Staphylococci. A new dry syrup formulation of Farom® has
been filed for approval in Japan.
Also, Solinase®, a modified tissue plasminogen activator
(t-PA) for the treatment of coronary thrombolysis, was launched
in February 1999 in Japan.
Nutritional Products Sales of nutritional products marketed through Shaklee
Corporation and Shaklee Japan fell 8.1%. (Adjusting for the
exchange rate effect, sales slipped 1.5%.) During the year under
review, Shaklee Corporation released Enfuselle®, a revolutionary
skin care line, and Shaklee Japan K.K. launched the choles-
terol control product Colestop®. Both of these newly launched
products showed steady sales growth in the United States and
Japan, respectively.
Food and Roses Sales of food and roses through Bear Creek Corporation
declined 0.7%. (Adjusting for the exchange-rate effect, sales
increased 8.9%, and the company recorded its highest sales
ever.) On a local currency basis, Bear Creek’s store business
showed double-digit sales growth and increased the number of
its store locations to 72. In addition, sales over the Internet
increased during the year under review and made a solid contri-
bution to overall performance.
COST, EXPENSES, AND EARNINGSThe cost of sales decreased 23.4% from the previous fiscal
year, resulting in an improvement in the cost of sales ratio, from
34.9% to 30.1%. A principal factor behind this decline was the
termination of the sales agreement with Novo Nordisk as of
April 1, 1998.
Selling, general and administrative (SG&A) expenses slipped
0.8%. Adjusting for the effects of a sharp increase in R&D
expenses, SG&A expenses fell 7.5% due largely to the success
of cost-cutting efforts. Labor costs, which accounted for 27% of
SG&A expenses during the fiscal year under review, remained
flat. The number of employees increased 6.6% in the fiscal year
under review, to 8,113. Advertising and sales promotion
expenses, which accounted for 26% of SG&A expenses, shrank
11.2%, principally due to large advertising and promotional
expenses associated with the launch of the OTC drug Gaster® 10
in the previous fiscal year.
R&D Expenses and R&D Expenses to Net Sales
R&D expenses, which accounted for 26% of SG&A expens-
es, grew 24.4%. As a percentage of net sales, R&D expenses
rose from 9.1% to 12.8%. The main reason for the increase
was a ¥6.1 billion front-loading, lump-sum amortization of
patent rights. Basically, Yamanouchi is aiming at spending pref-
erentially on R&D expenses as much as possible to create
38.2
40.9
42.3
43.6
54.3
9.9%
9.9%
9.3%
9.1%
12.8%
’95
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’99
(billion ¥, %)
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growth potential. The Company estimates that R&D expenses
will rise to ¥57 billion in the fiscal year ending March 31, 2000.
Operating income fell 13.0% and as a percentage of net
sales slipped 0.4 percentage point, to 21.1%.
Interest and dividend income reached ¥7.0 billion, an
increase of ¥0.5 billion from the previous fiscal year, and inter-
est expense declined ¥1.8 billion, to ¥2.7 billion, reflecting a
43.6% reduction in interest-bearing debt, to ¥68.1 billion, dur-
ing the fiscal year under review. As a result, financial profit rose
from ¥1.9 billion to ¥4.3 billion. Loss on devaluation of securities
improved from ¥6.1 billion to ¥2.1 billion. Due to exchange rate
movements, an appraised exchange loss of ¥2.9 billion was rec-
ognized in the financial assets of a subsidiary at the year-end.
An appraised exchange profit of ¥2.5 billion was registered in
the previous fiscal year. Other, net, was an expense of ¥1.7 bil-
lion, compared with income of ¥3.4 billion in the previous term.
This is mainly due to losses on the disposal of inventories
owing to the Company’s discontinuation of sales of Elen®.
Income taxes increased 62.4%. The effective tax rate was
44.4%, down from 78.8% in the previous fiscal year. (See Note
9 of the notes to consolidated financial statements.)
Net Income
Net income skyrocketed 688% in the fiscal year under
review, to ¥48.0 billion, the highest the Company has ever
recorded. Net income as a percentage of net sales was 11.3%,
compared with 1.3% in the previous fiscal year. The increase in
this ratio is principally attributable to accounting changes made
in the previous fiscal year. In line with Yamanouchi’s ongoing
objective of maintaining the accurate and transparent disclo-
sure of its financial situation and results of operations, effective
April 1, 1997, the Company changed its method of accounting
for excess of cost over net assets acquired to amortizing this
amount over a period of five years, which is considered a rea-
sonable amortization period under International Accounting
Standards. Yamanouchi, in prior years, amortized the excess of
cost over net assets acquired over a 40-year period. The
change in the amortization period was retroactively applied. The
effect of this change was to increase the amortization of excess
of cost over net assets acquired by ¥72.7 billion and to
decrease net income by the same amount in the previous fiscal
year. On the other hand, effective April 1, 1997, the Company
changed its method of accounting for income taxes to adopting
tax effect accounting using the liability method for the
Company and all its consolidated subsidiaries. The effect of this
39.7
40.5
41.9
6.1
48.0
’95
’96
’97
’98
’99
(billion ¥)
change was to decrease income tax expense by ¥24.5 billion
and to increase net income by the same amount for the previ-
ous fiscal year.
Net Income per Share (Diluted)
Earnings per share (basic) increased 674%, to ¥140.79, from
¥18.18, in the fiscal year under review. Diluted net income per
share is shown in the graph above.
CASH FLOWSCash provided by operating activities continued to be a primary
source of funds for the Company. For the year under review,
suspense payments of income taxes for the transfer price defi-
ciency assessment related to arm’s length transactions caused
cash provided by operating activities to decrease ¥35.9 billion.
(See Note 13 of the notes to consolidated financial statements.)
A total of ¥40.9 billion in cash provided by operating activities
and ¥100.4 billion in proceeds related to changes in marketable
securities and short-term investments were used to fund
¥29.1 billion in capital expenditures as well as to repay ¥39.0
billion in long-term debt. As of March 31, 1999, cumulative cash
and cash equivalents and marketable securities and short-term
investments were ¥252.9 billion, a decrease of ¥77.6 billion from
the previous fiscal year. Major shareholdings of ¥40.3 billion
transferred to investments in other securities were an additional
factor in the ¥134.6 billion reduction, from ¥184.3 billion to
¥49.7 billion, in overall marketable securities and short-term
investments. In the year under review, interest-bearing debt fell
¥52.6 billion, or 43.6%, to ¥68.1 billion, primarily due to the
¥30.0 billion redemption and a ¥12.7 billion conversion of con-
vertible bonds. Shareholders’ equity grew ¥51.9 billion.
KEY FINANCIAL INDICATORS
March 31, (%, times)
1999 1998 1997
Debt-to-equity ratio (%).............................. 12.1% 23.6% 38.6%Interest coverage (times) ........................... 35.8 24.2 22.2Shareholders’ equity ratio (%).................... 71.4% 63.4% 57.3%
When the financial position of a company is strengthened, it
is reflected as improvements in the capital structure ratio. Thus,
Yamanouchi’s debt-to-equity ratio fell to 12.1%, compared with
23.6% at the previous fiscal year-end. The interest coverage ratio
was 35.8 times, up from 24.2 times in the previous fiscal year. The
108.8
111.7
116.6
17.5
129.2
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shareholders’ equity ratio increased to 71.4%, up from 63.4%
at the previous fiscal year-end.
CAPITAL EXPENDITURESCapital expenditures decreased to ¥51.4 billion in the year
under review, from ¥57.6 billion in the previous fiscal year.
In the pharmaceutical business segment, capital expenditures
rose ¥1.2 billion, to ¥33.6 billion. Investments in tangible fixed
assets totaled ¥14.5 billion and included investment in research
facilities related to investigational drugs and injectable formula-
tion production facilities as well as the improvement of quality
assurance at a manufacturing facility. A ¥9.0 billion milestone
payment in connection with a comprehensive R&D agreement
with Searle was made in the fiscal year under review.
In the nutritional products business segment, capital expen-
ditures were ¥10.5 billion, a decrease of ¥1.2 billion. Investment
in tangible fixed assets included expenses connected with a
new head office for Shaklee Corporation and an increase in the
production capacity of the YSP Manufacturing Center, which
will produce Harnal® for the U.S. market and commercialize in-
house-developed drug delivery technologies.
In the food and roses business segment, capital expendi-
tures were ¥5.1 billion, a decrease from ¥6.3 billion in the previ-
ous fiscal year.
Depreciation rose from ¥18.5 billion to ¥29.3 billion in the fis-
cal year under review. This sharp increase was mainly due to
the aforementioned ¥6.1 billion front-loading lump-sum amorti-
zation expense related to patent rights.
CAPITAL EXPENDITURES AND DEPRECIATIONRELATED TO TANGIBLE FIXED ASSETSIn the fiscal year under review, capital expenditures related to
tangible fixed assets decreased from ¥39.5 billion to ¥31.2 bil-
lion, and depreciation rose from ¥15.1 billion to ¥16.6 billion.
For the year ending March 31, 2000, capital expenditures and
depreciation related to tangible fixed assets are expected to be
¥34.0 billion and ¥18.5 billion, respectively.
CONTINGENT LIABILITIESIn June 1998, the Company received a tax deficiency notice
from the Tokyo Regional Taxation Bureau (TRTB) adjusting tax-
able income upwards by ¥54.2 billion in the aggregate for the
six-year period ended March 31, 1997. This adjustment was
made because the TRTB concluded that royalties received
based on a licensing agreement with Yamanouchi Ireland Co.,
Ltd., (a subsidiary) for the drug Gaster® (famotidine) had been
understated as compared with that calculated based on prices
derived from arm’s length transactions. The Company paid
additional income taxes of ¥35.9 billion and has accounted for
this amount as suspense payments of income taxes under
investments and other assets in the accompanying consolidated
balance sheets at March 31, 1999. The Company filed an
appeal with the TRTB against this deficiency assessment of
additional income taxes in August 1998. In addition, in
November 1998, the Company requested competent authority
negotiations on this issue between the governments of Japan
and the Republic of Ireland. (See Note 13 to consolidated finan-
cial statements.)
YAMANOUCHI’S Y2K READINESSYamanouchi has given great consideration to the potential
impact of the Y2K issue on both corporate management and on
society as a whole. We have thus been proactive in protecting
our IT infrastructure against potential failure in recognition of the
severe consequences such effects could have on our opera-
tions.
Yamanouchi’s Y2K compliance efforts have occurred in par-
allel with computer system upgrades and migrations that have
been implemented since the early 1990s. In November 1998,
the Company introduced the Y2K Compliance Project, which
has directed Yamaouchi’s compliance efforts on a Groupwide
basis. Moreover, the status of Yamanouchi’s Y2K readiness is
reported to the executive committee. Yamanouchi has com-
pleted Y2K analyses and made necessary replacements to such
IT systems as host computers, networks, and production facili-
ties. Testing plans for these systems are now being finalized,
and tests on major systems and equipment are scheduled for
completion by September 1999.
In addition, Yamanouchi formulated a contingency plan at the
end of June 1999 to protect mission-critical systems in the unlike-
ly event that a Y2K problem might arise and has been preparing
for the execution of this plan. In addition, Yamanouchi is con-
firming the status of the Y2K readiness of its key business part-
ners, including suppliers of raw materials and finished products,
distributors, and comarketing agents, through information
exchange, questionnaires, and meetings. We believe that the
Y2K issue will not affect our business in a material way.
However, Yamanouchi cannot guarantee that its systems will
not be disrupted by unforeseeable Y2K-related problems.
CAUTIONARY FACTORS FOR FORWARD-LOOKING INFORMATIONThis annual report as well as other written reports and oral
statements made by the Company contain such forward-
looking statements as those regarding the Company’s results of
operations, financial position, and potential competition. These
forward-looking statements are based on current expectations.
Certain factors that could cause the Company’s actual results
to differ materially from expected and historical results have
been identified by the Company. The Company does not
assume the obligation to update any forward-looking statement.
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Thousands ofU.S. dollars
Millions of yen (Note 3)ASSETS 1999 1998 1999
Current Assets:Cash and cash equivalents ........................................................................................... ¥203,195 ¥146,134 $1,693,292Marketable securities and short-term investments ...................................................... 49,679 184,310 413,992Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates ............................................................... 936 1,168 7,800Trade ......................................................................................................................... 98,319 112,715 819,325
...................................................................................................................................... 99,255 113,883 827,125Allowance for doubtful receivables ........................................................................... (3,080) (2,780) (25,667)
...................................................................................................................................... 96,175 111,103 801,458Inventories (Note 5) ....................................................................................................... 39,500 41,126 329,167Deferred income taxes (Notes 4 (b) and 9) ................................................................... 8,869 9,021 73,908Other current assets ..................................................................................................... 8,548 8,258 71,233
Total current assets .............................................................................................. 405,966 499,952 3,383,050
Property, Plant and Equipment, at Cost:Land .............................................................................................................................. 29,447 27,966 245,392Buildings ....................................................................................................................... 141,263 141,318 1,177,192Machinery and equipment ............................................................................................ 122,377 118,291 1,019,808Other ............................................................................................................................. 7,477 8,079 62,308Construction in progress .............................................................................................. 23,224 10,041 193,533Accumulated depreciation ............................................................................................ (138,201) (128,956) (1,151,675)
Property, plant and equipment, net ...................................................................... 185,587 176,739 1,546,558
Investments and Other Assets:Investments in other securities ..................................................................................... 55,770 22,363 464,750Investments in and advances to unconsolidated subsidiaries and affiliates ................ 8,072 23,419 67,267Intangible assets ........................................................................................................... 38,347 31,557 319,558Prepaid expenses ......................................................................................................... 4,206 4,222 35,050Suspense payments of income taxes (Note 13)............................................................ 35,895 — 299,125Deferred income taxes (Notes 4 (b) and 9) ................................................................... 16,559 16,356 137,992Other assets .................................................................................................................. 25,629 28,127 213,575
Total investments and other assets ...................................................................... 184,478 126,044 1,537,317
Translation Adjustments ............................................................................................ 13,331 3,906 111,092
Total Assets ..................................................................................................... ¥789,362 ¥806,641 $6,578,017
See accompanying notes to consolidated financial statements.
YAMANOUCHI PHARMACEUTICAL CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance SheetsMarch 31, 1999 and 1998
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Thousands ofU.S. dollars
Millions of yen (Note 3)LIABILITIES AND SHAREHOLDERS’ EQUITY 1999 1998 1999
Current Liabilities:Short-term bank loans (Note 6) ..................................................................................... ¥ 542 ¥ 744 $ 4,517Current portion of long-term debt (Note 7) .................................................................. 27,344 30,447 227,867Notes and accounts payable:
Unconsolidated subsidiaries and affiliates ............................................................... 1,355 1,516 11,292Trade ......................................................................................................................... 43,297 59,087 360,808Construction.............................................................................................................. 7,224 5,146 60,200
Accrued expenses......................................................................................................... 25,068 21,977 208,900Accrued income taxes (Note 9) ..................................................................................... 18,396 24,440 153,300Deferred income taxes (Notes 4 (b) and 9)................................................................... 4,009 3,069 33,408Other current liabilities .................................................................................................. 5,256 6,974 43,800
Total current liabilities ........................................................................................... 132,491 153,400 1,104,092
Long-Term Liabilities:Long-term debt (Note 7) ............................................................................................... 40,239 89,549 335,325Retirement allowances (Note 10) .................................................................................. 33,901 32,771 282,508Deferred income taxes (Notes 4 (b) and 9) ................................................................... 2,695 2,023 22,458Other long-term liabilities .............................................................................................. 11,720 12,215 97,667
Total long-term liabilities ....................................................................................... 88,555 136,558 737,958
Minority Interests ........................................................................................................ 5,013 5,242 41,775
Shareholders’ Equity:Common stock, ¥50 par:
Authorized: 800,000,000 sharesIssued: 344,467,758 shares in 1999 and 338,605,140 shares in 1998..................... 80,072 73,740 667,267
Additional paid-in capital (Note 8) ................................................................................. 93,996 87,665 783,300Retained earnings (Notes 8 and 17) .............................................................................. 389,288 350,046 3,244,067
Total ...................................................................................................................... 563,356 511,451 4,694,634Treasury stock, at cost:
13,946 shares in 1999 and 3,447 shares in 1998 ..................................................... (53) (10) (442)
Shareholders’ equity, net ...................................................................................... 563,303 511,441 4,694,192
Contingent Liabilities (Note 13)Total Liabilities and Shareholders’ Equity .................................................... ¥789,362 ¥806,641 $6,578,017
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Thousands ofU.S. dollars
Millions of yen (Note 3)1999 1998 1997 1999
Net Sales .................................................................................................. ¥423,217 ¥477,356 ¥454,740 $3,526,808Cost of Sales ........................................................................................... 127,513 166,563 158,664 1,062,608
Gross profit ........................................................................................... 295,704 310,793 296,076 2,464,200Selling, General and Administrative Expenses (Note 11) ..................... 206,259 207,948 194,847 1,718,825
Operating income.................................................................................. 89,445 102,845 101,229 745,375
Other Income (Expenses):Interest and dividend income ................................................................ 6,966 6,425 6,202 58,050Interest expense .................................................................................... (2,694) (4,522) (4,846) (22,450)Amortization of excess of cost over net assets acquired (Note 4 (a))................................................... — (72,730) — —
Loss on devaluation of securities .......................................................... (2,075) (6,066) (1,268) (17,292)Exchange (loss) gain ............................................................................. (2,903) 2,474 (330) (24,192)Equity in loss of unconsolidated subsidiaries and affiliates .................................................................... (226) (1,765) (5,892) (1,883)
Other, net .............................................................................................. (1,674) 3,448 175 (13,950)
................................................................................................................... (2,606) (72,736) (5,959) (21,717)
Income before income taxes and minority interests ......................... 86,839 30,109 95,270 723,658Income Taxes (Notes 4 (b) and 9):
Current .................................................................................................. 37,294 47,660 53,556 310,783Deferred ................................................................................................ 1,236 (23,939) (447) 10,300
................................................................................................................... 38,530 23,721 53,109 321,083
Income before minority interests....................................................... 48,309 6,388 42,161 402,575
Minority Interests in Earnings of Consolidated Subsidiaries .............. (307) (296) (295) (2,558)
Net Income (Note 14) ................................................................... ¥ 48,002 ¥ 6,092 ¥ 41,866 $ 400,017
See accompanying notes to consolidated financial statements.
YAMANOUCHI PHARMACEUTICAL CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of IncomeYears Ended March 31, 1999, 1998 and 1997
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Thousands ofU.S. dollars
Millions of yen (Note 3)1999 1998 1997 1999
Common Stock:Balance at beginning of year
(1999 — 338,605,140 shares; 1998 — 324,308,013 shares;1997 — 323,337,553 shares) ........................................................... ¥ 73,740 ¥ 56,949 ¥ 55,989 $ 614,500
Add:Shares issued upon conversion
of convertible bonds and exercise of warrants(1999 — 5,862,618 shares; 1998 — 14,297,127 shares; 1997 — 970,460 shares) ................................................................. 6,332 16,791 960 52,767
Balance at end of year(1999 — 344,467,758 shares; 1998 — 338,605,140 shares;
1997 — 324,308,013 shares) .......................................................... ¥ 80,072 ¥ 73,740 ¥ 56,949 $ 667,267
Additional Paid-in Capital (Note 8):Balance at beginning of year..................................................................... ¥ 87,665 ¥ 70,877 ¥ 69,917 $ 730,542Add:
Conversion of convertible bonds and exercise of warrants .................. 6,331 16,788 960 52,758
Balance at end of year .............................................................................. ¥ 93,996 ¥ 87,665 ¥ 70,877 $ 783,300
Retained Earnings (Notes 8 and 17):Balance at beginning of year..................................................................... ¥350,046 ¥352,974 ¥318,698 $2,917,050Add:
Net income ............................................................................................ 48,002 6,092 41,866 400,017Deduct:
Adjustments to retained earnings at beginning of yearto reflect initial consolidation of subsidiaries ...................................... (148) (330) — (1,233)
Cash dividends paid ............................................................................. (8,469) (8,544) (7,445) (70,575)Bonuses to directors and corporate auditors ....................................... (142) (146) (145) (1,183)
Balance at end of year .............................................................................. ¥389,288 ¥350,046 ¥352,974 $3,244,067
See accompanying notes to consolidated financial statements.
YAMANOUCHI PHARMACEUTICAL CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Shareholders’ EquityYears Ended March 31, 1999, 1998 and 1997
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Thousands ofU.S. dollars
Millions of yen (Note 3)1999 1998 1997 1999
Operating Activities:Net income ................................................................................................ ¥ 48,002 ¥ 6,092 ¥ 41,866 $ 400,017Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization .............................................................. 30,243 93,678 17,662 252,025Deferred income taxes .......................................................................... 1,977 (23,939) (447) 16,475Provision for retirement allowances, net of payments .......................... 1,134 1,054 1,156 9,450Equity in loss of unconsolidated subsidiaries and affiliates .................. 226 1,765 5,892 1,883Other ..................................................................................................... (537) 2,146 2,775 (4,475)Changes in operating assets and liabilities:
Notes and accounts receivable......................................................... 13,920 400 5,936 116,000Inventories ......................................................................................... 696 (197) (4,224) 5,800Other current assets.......................................................................... (466) 8,755 (9,470) (3,883)Suspense payments of income taxes ............................................... (35,895) — — (299,125)Notes and accounts payable ............................................................ (14,979) (2,187) 7,025 (124,825)Accrued expenses ............................................................................ 3,777 (55) 2,185 31,475Accrued income taxes ...................................................................... (5,771) (6,481) 4,857 (48,092)Other current liabilities ...................................................................... (1,392) 1,246 1,141 (11,600)
Net cash provided by operating activities..................................... 40,935 82,277 76,354 341,125
Investing Activities:Additions to property, plant and equipment ............................................. (29,139) (36,841) (21,352) (242,825)Proceeds from sales of property, plant and equipment ........................... 2,352 648 470 19,600Decrease (increase) in investments in and advances to unconsolidated subsidiaries and affiliates .............................................. 3,297 (9,649) (4,369) 27,475
Decrease (increase) in marketable securities and short-term investments ........................................................................... 100,350 32,854 (36,662) 836,250
Decrease (increase) in investments in other securities ............................. 6,973 (7,107) (6,204) 58,108Increase in other assets ............................................................................ (18,750) (17,712) (6,616) (156,250)Other ......................................................................................................... (506) (1,057) 1,735 (4,217)
Net cash provided by (used in) investing activities ....................... 64,577 (38,864) (72,998) 538,141
Financing Activities:Proceeds from issuance of long-term debt .............................................. 100 2,972 10,891 833Proceeds from exercise of warrants ......................................................... — 14,750 — —Increase (decrease) in short-term bank loans .......................................... 388 (14,565) 11,715 3,233Payment of long-term debt ....................................................................... (39,019) (41,665) (25,160) (325,158)Cash dividends and bonuses to directors and corporate auditors .......... (8,611) (8,690) (7,590) (71,758)Other ......................................................................................................... (43) 15 (21) (358)
Net cash used in financing activities ............................................. (47,185) (47,183) (10,165) (393,208)
Effects of exchange rate changes on cash ............................... (1,266) (262) 554 (10,550)
Increase (decrease) in cash and cash equivalents ................... 57,061 (4,032) (6,255) 475,508Cash and cash equivalents at beginning of year ...................... 146,134 150,166 156,421 1,217,784
Cash and cash equivalents at end of year ................................ ¥203,195 ¥146,134 ¥150,166 $1,693,292
See accompanying notes to consolidated financial statements.
YAMANOUCHI PHARMACEUTICAL CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash FlowsYears Ended March 31, 1999, 1998 and 1997
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Yamanouchi Pharmaceutical Co., Ltd. (the “Company”) and its domestic subsidiaries maintaintheir accounting records and prepare their financial statements in accordance with accountingprinciples and practices generally accepted in Japan, and its foreign subsidiaries maintain theirbooks of account in conformity with those of the countries of their domicile. The accompanyingconsolidated financial statements have been prepared in accordance with accounting principlesand practices generally accepted in Japan and have been compiled from the consolidated financialstatements prepared by the Company as required under the Securities and Exchange Law ofJapan. Accordingly, the accompanying consolidated financial statements are not intended to pre-sent the consolidated financial position, results of operations and cash flows in accordance withaccounting principles and practices generally accepted in countries and jurisdictions other thanJapan. The Company has prepared consolidated statements of cash flows for the purpose ofinclusion in these consolidated financial statements, although such statements are not currentlyrequired in Japan.
Due to a change effective the year ended March 31, 1999 in the regulations relating to the pre-sentation of amortization of excess of cost over net assets acquired and equity in loss of unconsol-idated subsidiaries and affiliates in the consolidated statements of income, as well as certainaccounts including the legal reserve in the consolidated balance sheets and the consolidatedstatements of shareholders’ equity, the corresponding amounts in the prior years’ consolidatedfinancial statements have been reclassified to conform to the current year’s presentation.
(a) Basis of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include the accounts of the Company and itssignificant subsidiaries. All significant intercompany balances and transactions have been elimin-ated in consolidation.
Certain foreign subsidiaries are consolidated on the basis of fiscal periods ending December 31,January 31 or the end of February, which differ from that of the Company; however, the effect ofthe difference in fiscal periods is immaterial.
Investments in certain unconsolidated subsidiaries and significant affiliates (companies owned20% to 50%) are stated at cost plus equity in their undistributed earnings or losses. Consolidatednet income includes the Company’s equity in the current net income or loss of such companies,after the elimination of unrealized intercompany profits.
Investments in unconsolidated subsidiaries and affiliates not accounted for by the equitymethod are carried at cost.
The excess of cost over underlying net assets at the date of acquisition is amortized over a peri-od of five years on a straight-line basis. Such amortization is included in selling, general andadministrative expenses except for the cumulative effect of the accounting change described inNote 4 (a) which was presented as other expense in the consolidated statements of income for theyear ended March 31, 1998.(b) Foreign currency translationRevenue and expense accounts of the foreign consolidated subsidiaries are translated at the ratesof exchange in effect at the balance sheet date, and, except for the components of shareholders’equity, the balance sheet accounts are also translated into yen at the same exchange rates. Thecomponents of shareholders’ equity are translated at their historical exchange rates.
Translation differences are presented as “Translation Adjustments” in the accompanying consol-idated financial statements.(c) Cash equivalentsAll highly liquid investments with a maturity of three months or less when purchased are consid-ered cash equivalents.(d) InventoriesMerchandise is stated principally at the lower of cost or market, cost being determined by theaverage method. Finished goods are stated principally at cost determined by the average method.Work in process and semi-finished goods, and raw materials and supplies are stated principally atcost determined by the first-in, first-out method and the average method, respectively. However,inventories of the foreign consolidated subsidiaries are stated principally at the lower of cost ormarket, cost being determined by the first-in, first-out method.
2. SUMMARY OF SIGNIFICANTACCOUNTINGPOLICIES
1. BASIS OF PREPARATION
YAMANOUCHI PHARMACEUTICAL CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial StatementsMarch 31, 1999
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(e) Depreciation and amortizationDepreciation of property, plant and equipment is mainly computed by the declining-balancemethod at rates based on the estimated useful lives of the respective assets.
Intangible assets are amortized by the straight-line method over their estimated useful lives.(f) LeasesNoncancelable lease transactions of the Company and its domestic consolidated subsidiaries areaccounted for as operating leases (whether or not such leases are classified as operating orfinance leases) except that lease agreements which stipulate the transfer of ownership of theleased assets to the lessee are accounted for as finance leases. However, lease transactions of theforeign consolidated subsidiaries are generally classified and accounted for as either finance oroperating leases.(g) Marketable securities and investmentsMarketable equity and bond securities are stated principally at the lower of cost or market, costbeing determined by the moving average method. Investments in securities other than marketableequity and bond securities are stated at cost determined by the moving average method.(h) Stock and bond issuance expenses and discounts on bondsStock and bond issuance expenses are charged to income as incurred. Discounts on bonds areamortized by the straight-line method over the terms of the bonds.(i) Research and development expensesResearch and development expenses are charged to income as incurred.(j) Income taxesDeferred tax assets and liabilities are determined based on the differences between financialreporting and the tax bases of the assets and liabilities and are measured using the enacted taxrates and laws which will be in effect when the differences are expected to reverse. See Note 4 (b).(k) Retirement allowances and pension plansThe Company’s employees are covered by an employee retirement allowances plan and an employ-ee pension plan. The employee retirement allowances plan provides for a lump-sum payment,payable upon mandatory retirement or earlier termination of employment, based on the approx-imate rate of pay at the time of termination, years of service and certain other factors. The employeepension plan, which is noncontributory and funded, was instituted to replace one-half of the benefitsunder the retirement allowances plan for employees who retire at the mandatory retirement age.
Domestic consolidated subsidiaries have unfunded employee retirement allowances plansand/or pension plans which are noncontributory and funded and which cover substantially all theiremployees. These plans provide for lump-sum payments and/or annuity payments payable upontermination of employment. The majority of the Company’s foreign consolidated subsidiaries havenoncontributory funded pension plans which cover substantially all their employees.
The liability for retirement allowances is stated at the amount which would be required to bepaid if all eligible male and female employees terminated their employment involuntarily and volun-tarily, respectively, at March 31, 1999 and 1998, less the balance of the funds in the pension plan.
In addition, directors and corporate auditors of the Company and certain consolidated sub-sidiaries are customarily entitled to lump-sum payments under their respective unfunded retire-ment allowances plans. The provision for retirement allowances for these officers has been madeat an estimated amount.(l) Appropriation of retained earningsUnder the Commercial Code of Japan, the appropriation of retained earnings with respect to a givenfinancial period is made by resolution of the shareholders at a general meeting held subsequent tothe close of such financial period. The accounts for that period do not, therefore, reflect suchappropriation. See Note 17.
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as amatter of arithmetic computation only, at the rate of ¥120=US$1.00, the approximate rate ofexchange on March 31, 1999. The translation should not be construed as a representation thatyen have been, could have been, or could in the future be, converted into U.S. dollars at the aboveor any other rate.
3. U.S. DOLLARAMOUNTS
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(a) Effective April 1, 1997, the Company changed its method of accounting for excess of cost overnet assets acquired to amortizing this amount over a period of five years, which is considered areasonable amortization period under International Accounting Standards. The Company, in prioryears, amortized the excess of cost over net assets acquired over a 40-year period. This change,which has been retroactively applied, was made to achieve a further improvement in theCompany’s consolidated financial position in response to increasing competition in thepharmaceutical and nutritional products sectors as well as to an increasing need for global standard-ization of its accounting and finance areas resulting from the globalization of its business. The effectof this change was to increase amortization of excess of cost over net assets acquired by ¥72,730 mil-lion and to decrease net income by the same amount for the year ended March 31, 1998.(b) Effective April 1, 1997, the Company changed its method of accounting for income taxes toadopting tax effect accounting by the liability method for the Company and all its consolidatedsubsidiaries. Until the year ended March 31, 1997, tax effect accounting had been adopted only bythe foreign consolidated subsidiaries. This change was made in order for the consolidated financialstatements to reflect the Company’s consolidated financial position and operating results moreaccurately, considering that the amount of temporary differences recognized at the Company andits domestic consolidated subsidiaries has become material and that Japanese accounting stan-dards for consolidation, which were amended in June 1997 and will become effective the year end-ing March 31, 2000, require full adoption of tax effect accounting by the liability method. The effectof this change was to decrease income tax expense by ¥24,477 million and to increase net incomeby the same amount for the year ended March 31, 1998.
Inventories at March 31, 1999 and 1998 were as follows:
Thousands ofMillions of yen U.S. dollars
1999 1998 1999
Merchandise ............................................................................................... ¥ 6,421 ¥ 6,651 $ 53,509Finished goods ........................................................................................... 16,741 17,479 139,508Work in process and semi-finished goods ................................................. 9,792 9,645 81,600Raw materials and supplies........................................................................ 6,546 7,351 54,550
¥39,500 ¥41,126 $329,167
Short-term bank loans consisted mainly of unsecured loans at interest rates of 1.375% and1.625% per annum at March 31, 1999 and 1998, respectively.
Long-term debt at March 31, 1999 and 1998 consisted of the following:
Thousands ofMillions of yen U.S. dollars
1999 1998 1999
Yamanouchi Pharmaceutical Co., Ltd.:1.14% unsecured loans from banks, payable in yen, due through 2005 .. ¥ 100 ¥ 37 $ 8332.75% unsecured convertible bonds, payable in U.S. dollars, due 2000 .. 83 82 6921.50% unsecured convertible bonds, payable in yen, due 2002 ........... 14,921 14,938 124,3422.7% unsecured convertible bonds, payable in yen, due 2000 ............. 1,343 1,361 11,192Unsecured zero coupon convertible bonds, payable in yen, due 1999 ... — 29,990 —1.625% unsecured convertible bonds, payable in yen, due 2000 ......... 25,390 30,000 211,5831.25% unsecured convertible bonds, payable in yen, due 2014 ........... 19,040 27,040 158,667
60,877 103,448 507,309Consolidated subsidiaries:
Unsecured loans from banks and insurance companies, at rates from 1.5% to 4.8%, due through 2010 ......................................................... 2,970 3,460 24,750
Revolving credit debt.............................................................................. 361 2,576 3,008Unsecured loans from banks, payable in U.S. dollars,
at 6.4375%, due 2001 .......................................................................... 3,375 10,512 28,1256,706 16,548 55,883
67,583 119,996 563,192Less: current portion................................................................................... (27,344) (30,447) (227,867)
¥40,239 ¥ 89,549 $335,325
7. LONG-TERM DEBT
6. SHORT-TERM BANK LOANS
5. INVENTORIES
4. ACCOUNTINGCHANGES
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The conversion prices and periods of the convertible bonds are summarized as follows:
Conversion priceper share at Period
March 31, 1999 (up to and including)
2.75% convertible bonds due 2000 ............................................................ ¥2,635.20 December 21, 20001.50% convertible bonds due 2002 ............................................................ 3,620.60 December 30, 20022.7% convertible bonds due 2000 .............................................................. 3,091.70 March 30, 20001.625% convertible bonds due 2000 .......................................................... 2,555.70 March 24, 20001.25% convertible bonds due 2014 ............................................................ 1,979.00 March 24, 2014
At March 31, 1999, if all the outstanding convertible bonds had been converted and exercised atthe then current conversion prices, 24,142 thousand new shares would have been issuable.
Under the indentures and trust deeds of the convertible bonds, each conversion price is subjectto adjustment in certain cases which include stock splits. A sufficient number of shares of commonstock is reserved for the conversion of all outstanding convertible bonds.
The aggregate annual maturities of long-term debt subsequent to March 31, 1999 are summarizedas follows:
Thousands ofYears ending March 31 Millions of yen U.S. dollars
2000 .......................................................................................................................... ¥27,344 $227,8672001 .......................................................................................................................... 3,914 32,6172002 .......................................................................................................................... 560 4,6672003 .......................................................................................................................... 15,482 129,0162004 .......................................................................................................................... 803 6,6922005 and thereafter ................................................................................................... 19,480 162,333
¥67,583 $563,192
In accordance with the Commercial Code of Japan, the Company has provided a legal reserve,which is included in retained earnings. This reserve amounted to ¥8,154 million ($67,950 thousand)and ¥7,294 million as of March 31, 1999 and 1998, respectively, as appropriations of retainedearnings. The Code provides that neither additional paid-in capital nor the legal reserve is availablefor dividends, but both may be used to reduce or eliminate a deficit by resolution of the sharehold-ers or may be transferred to common stock by resolution of the Board of Directors.
Income taxes applicable to the Company and its domestic consolidated subsidiaries comprisecorporation tax, inhabitants’ taxes and enterprise tax which, in the aggregate, resulted in a statuto-ry tax rate of approximately 47% for 1999 and 51% for 1998 and 1997. Income taxes of foreignconsolidated subsidiaries are based generally on the tax rates applicable in their countries of incor-poration. The effective tax rates reflected in the accompanying consolidated statements of incomefor the year ended March 31, 1997 differ from the statutory tax rates primarily due to the effect oftiming differences in the recognition of certain income and expenses for tax and financial reportingpurposes and the effect of permanent nondeductible expenses.
The effective tax rates reflected in the consolidated statements of income for the years endedMarch 31, 1999 and 1998 differ from the statutory tax rates for the following reasons:
1999 1998
Statutory tax rates ....................................................................................................................... 47.4% 51.0%Effect of:
Cumulative effect of accounting change (Note 4 (b)) .............................................................. — (86.9)Different tax rates applied to income of foreign consolidated subsidiaries ............................ (5.2) (17.5)Expenses not deductible for income tax purposes ................................................................. 2.8 13.3Amortization of excess of cost over net assets acquired........................................................ — 123.2Dividend income deductible for income tax purposes............................................................ (0.6) (2.6)Net effect of tax rate changes on deferred taxes .................................................................... 3.6 6.7Other, net................................................................................................................................. (3.7) (8.4)
Effective tax rates ........................................................................................................................ 44.4% 78.8%
9. INCOME TAXES
8. ADDITIONAL PAID-IN CAPITALAND RETAINEDEARNINGS
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Net deferred income tax assets primarily consisted of deferred tax assets related to retirementallowances, depreciation and amortization, enterprise tax and inventories.
New legislation was enacted in 1998 which changed the aggregate statutory tax rate fromapproximately 51% to 47% effective the fiscal year beginning after March 31, 1998. The net effectof this tax rate change on deferred tax assets and liabilities was to increase income tax expense by¥2,027 million for the year ended March 31, 1998. Subsequently, new legislation was enacted in1999 which changed the aggregate statutory tax rate from approximately 47% to 42% effective thefiscal year beginning after March 31, 1999. The net effect of this tax rate change on deferred taxassets and liabilities was to increase income tax expense by ¥3,130 million ($26,083 thousand) forthe year ended March 31, 1999.
The charges to income for retirement allowances and pension costs for the years ended March 31,1999, 1998 and 1997 were as follows:
Thousands of Millions of yen U.S. dollars
1999 1998 1997 1999
Provision for retirement allowances ............................................... ¥3,866 ¥4,337 ¥3,237 $32,217Pension costs ................................................................................. 2,362 2,537 2,383 19,683
The assets of the pension plan of the Company at March 31, 1999 were ¥23,033 million ($191,942 thousand).
Past service cost in relation to the Company’s pension plan is being funded at an annual rate of 30%.
Research and development expenses included in selling, general and administrative expenses forthe years ended March 31, 1999, 1998 and 1997 were ¥54,299 million ($452,492 thousand),¥43,639 million and ¥42,309 million, respectively.
The following pro forma amounts represent the acquisition costs (including the interest portion),accumulated depreciation and net book value of leased assets as of March 31, 1999 which wouldhave been reflected in the balance sheets if finance lease accounting had been applied to thefinance lease transactions currently accounted for as operating leases:
March 31, 1999
Millions of yen
Acquisition Accumulated Net bookcosts depreciation value
Tools, furniture and fixtures............................................................................. ¥5,762 ¥3,737 ¥2,025
Thousands of U.S. dollars
Tools, furniture and fixtures........................................................................... $48,017 $31,142 $16,875
Lease payments relating to finance lease transactions accounted for as operating leasesamounted to ¥1,249 million ($10,408 thousand), ¥1,445 million and ¥1,420 million for the yearsended March 31, 1999, 1998 and 1997, respectively. Depreciation of the leased assets calculatedby the straight-line method over the respective lease terms amounted to ¥1,249 million ($10,408 thou-sand) for the year ended March 31, 1999.
Future minimum lease payments (including the interest portion thereon) subsequent to March 31,1999 for finance lease transactions accounted for as operating leases are summarized as follows:
Thousands of Years ending March 31 Millions of yen U.S. dollars
2000 ......................................................................................................................... ¥ 979 $ 8,1582001 and thereafter ................................................................................................. 1,046 8,717Total ......................................................................................................................... ¥2,025 $16,875
12. LEASES
11. RESEARCH ANDDEVELOPMENTEXPENSES
10. RETIREMENTALLOWANCES AND PENSIONPLANS
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At March 31, 1999, the Company and its consolidated subsidiaries were contingently liable asguarantors of indebtedness of the Company’s employees and an affiliate in the aggregate amountof ¥12,098 million ($100,817 thousand).
At June 29, 1998, the Company received a tax deficiency notice from the Tokyo RegionalTaxation Bureau (“TRTB”) adjusting taxable income upwards by ¥54,158 million ($451,317 thousand)in the aggregate for the six-year period ended March 31, 1997. This adjustment was made becausethe TRTB concluded that royalties received based on a licensing agreement with YamanouchiIreland Co., Ltd. (a subsidiary) for the drug famotidine had been understated as compared with thatcalculated based on prices derived from arm’s length transactions. The Company paid additionalincome taxes of ¥35,895 million ($299,125 thousand) and has accounted for this amount as sus-pense payments of income taxes in the accompanying consolidated balance sheets at March 31,1999. The Company filed an appeal with the TRTB against this deficiency assessment in August1998. In addition, in November 1998, the Company requested competent authority negotiations onthis issue between the governments of Japan and the Republic of Ireland.
Yen U.S. dollars
1999 1998 1997 1999
Net income:Basic ............................................................................. ¥ 140.79 ¥ 18.18 ¥ 129.12 $ 1.17Diluted .......................................................................... 129.21 17.51 116.56 1.08
Cash dividends ................................................................ 23.00 25.00 25.00 0.19Net assets ........................................................................ 1,635.35 1,510.45 1,482.51 13.63
The computation of basic net income per share is based on the weighted average number ofshares of common stock outstanding during each year. Diluted net income per share is computedbased on the weighted average number of shares of common stock outstanding each year aftergiving effect to the dilutive potential of common stock to be issued upon the exercise of warrantsand the conversion of convertible bonds.
Cash dividends per share represent the cash dividends declared as applicable to the respectiveyears together with the interim cash dividends paid.
Net assets per share are based on the number of shares outstanding at the respective balancesheet dates.
Cash payments for income taxes and interest expense, and the conversion of convertible bondsinto common stock and additional paid-in capital for the years ended March 31, 1999, 1998 and1997 were as follows:
Thousands ofMillions of yen U.S. dollars
1999 1998 1997 1999
Cash paid for:Income taxes ....................................................................... ¥43,338 ¥54,063 ¥47,034 $361,150Interest expense .................................................................. 1,875 3,432 3,769 15,625
Conversion of convertible bonds ............................................ 12,663 18,829 1,920 105,525
The Company and its consolidated subsidiaries are primarily engaged in the manufacture and saleof products in Japan and overseas, primarily in North America and Europe, in three major seg-ments: the pharmaceuticals segment conducted principally by the Company, the nutritional prod-ucts segment conducted principally by the Shaklee Group, and the food and roses segmentconducted principally by the Bear Creek Group.
16. SEGMENTINFORMATION
15. SUPPLEMENTARYCASH FLOWINFORMATION
14. AMOUNTS PERSHARE
13. CONTINGENT LIABILITIES
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The business and geographical segment information for the Company and its consolidated sub-sidiaries for the years ended March 31, 1999, 1998 and 1997 is outlined as follows:
Year ended March 31, 1999
Pharma- Nutritional Food andBusiness Segments ceuticals products roses Other Total Eliminations Consolidated
Millions of yen
I. Sales and operating income
Sales to third parties ........... ¥323,706 ¥49,892 ¥43,934 ¥ 5,685 ¥423,217 ¥ — ¥423,217Intergroup sales
and transfers ..................... 171 24 — 4,397 4,592 (4,592) —Total sales ........................... 323,877 49,916 43,934 10,082 427,809 (4,592) 423,217Operating expenses ............ 242,235 48,248 40,101 7,780 338,364 (4,592) 333,772Operating income ............... ¥ 81,642 ¥ 1,668 ¥ 3,833 ¥ 2,302 ¥ 89,445 ¥ — ¥ 89,445
II. Assets, depreciationand capital expenditures
Total assets ......................... ¥828,088 ¥63,131 ¥37,760 ¥64,532 ¥993,511 ¥(204,149) ¥789,362Depreciation ........................ 21,094 3,573 2,057 2,614 29,338 — 29,338Capital expenditures ........... 33,583 10,451 5,077 2,294 51,405 — 51,405
Thousands of U.S. dollars
I. Sales and operating income
Sales to third parties ........ $2,697,550 $415,767 $366,116 $47,375 $3,526,808 $ — $3,526,808Intergroup sales and transfers .................... 1,425 200 — 36,642 38,267 (38,267) —
Total sales........................ 2,698,975 415,967 366,116 84,017 3,565,075 (38,267) 3,526,808Operating expenses......... 2,018,625 402,067 334,175 64,833 2,819,700 (38,267) 2,781,433Operating income ............ $ 680,350 $ 13,900 $ 31,941 $19,184 $ 745,375 $ — $ 745,375
II. Assets, depreciation and capital expenditures
Total assets...................... $6,900,728 $526,090 $314,667 $537,769 $8,279,254 $(1,701,237) $6,578,017Depreciation..................... 175,786 29,778 17,144 21,775 244,483 — 244,483Capital expenditures ........ 279,854 87,094 42,309 19,118 428,375 — 428,375
Year ended March 31, 1998
Pharma- Nutritional Food andBusiness Segments ceuticals products roses Other Total Eliminations Consolidated
Millions of yen
I. Sales and operating income
Sales to third parties .................. ¥373,144 ¥54,261 ¥44,216 ¥5,735 ¥477,356 ¥ — ¥477,356Intergroup sales
and transfers ........................... 138 241 — 3,176 3,555 (3,555) —Total sales ................................. 373,282 54,502 44,216 8,911 480,911 (3,555) 477,356Operating expenses .................. 276,897 53,911 40,457 7,339 378,604 (4,093) 374,511Operating income ...................... ¥ 96,385 ¥ 591 ¥ 3,759 ¥1,572 ¥102,307 ¥ 538 ¥102,845
II. Assets, depreciationand capital expenditures
Total assets ............................... ¥848,493 ¥62,033 ¥35,240 ¥71,677 ¥1,017,443 ¥(210,802) ¥806,641Depreciation .............................. 11,539 2,942 2,197 1,776 18,454 — 18,454Capital expenditures ................. 32,377 11,642 6,326 7,230 57,575 — 57,575
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Year ended March 31, 1997
Pharma- Nutritional Food andBusiness Segments ceuticals products roses Other Total Eliminations Consolidated
Millions of yen
I. Sales and operating income
Sales to third parties .................. ¥359,586 ¥54,540 ¥35,828 ¥4,786 ¥454,740 ¥ — ¥454,740Intergroup sales
and transfers ............................ 135 75 — 2,873 3,083 (3,083) —Total sales .................................. 359,721 54,615 35,828 7,659 457,823 (3,083) 454,740Operating expenses................... 266,706 51,841 32,949 5,790 357,286 (3,775) 353,511Operating income ...................... ¥ 93,015 ¥ 2,774 ¥ 2,879 ¥1,869 ¥100,537 ¥ 692 ¥101,229
II. Assets, depreciationand capital expenditures
Total assets................................ ¥810,138 ¥102,818 ¥27,312 ¥46,342 ¥986,610 ¥(147,135) ¥839,475Depreciation............................... 8,973 1,310 1,244 1,221 12,748 — 12,748Capital expenditures .................. 22,929 5,516 4,816 2,851 36,112 — 36,112
Year ended March 31, 1999
Geographical Areas Japan Europe America Asia Total Eliminations Consolidated
Millions of yen
Sales to third parties ......... ¥269,469 ¥ 66,611 ¥85,725 ¥1,412 ¥423,217 ¥ — ¥423,217Intergroup sales
and transfers ................... 8,316 2,434 1,643 — 12,393 (12,393) —Total sales ......................... 277,785 69,045 87,368 1,412 435,610 (12,393) 423,217Operating expenses .......... 211,212 48,572 84,160 2,000 345,944 (12,172) 333,772Operating income (loss)..... ¥ 66,573 ¥ 20,473 ¥ 3,208 ¥ (588) ¥ 89,666 ¥ (221) ¥ 89,445Total assets ....................... ¥676,577 ¥144,254 ¥96,329 ¥5,438 ¥922,598 ¥(133,236) ¥789,362
Thousands of U.S. dollars
Sales to third parties ...... $2,245,578 $ 555,090 $714,377 $11,763 $3,526,808 $ — $3,526,808Intergroup sales
and transfers ................ 69,298 20,290 13,695 — 103,283 (103,283) —Total sales ...................... 2,314,876 575,380 728,072 11,763 3,630,091 (103,283) 3,526,808Operating expenses ....... 1,760,092 404,767 701,333 16,674 2,882,866 (101,433) 2,781,433Operating income (loss)... $ 554,784 $ 170,613 $ 26,739 $ (4,911) $ 747,225 $ (1,850) $ 745,375Total assets .................... $5,638,141 $1,202,117 $802,742 $45,317 $7,688,317 $(1,110,300) $6,578,017
Year ended March 31, 1998
Geographical Areas Japan Europe America Total Eliminations Consolidated
Millions of yen
Sales to third parties .................................... ¥326,809 ¥ 60,853 ¥89,694 ¥477,356 ¥ — ¥477,356Intergroup sales
and transfers .............................................. 5,351 3,903 2,123 11,377 (11,377) —Total sales .................................................... 332,160 64,756 91,817 488,733 (11,377) 477,356Operating expenses ..................................... 253,983 42,882 88,449 385,314 (10,803) 374,511Operating income ......................................... ¥ 78,177 ¥ 21,874 ¥ 3,368 ¥103,419 ¥ (574) ¥102,845Total assets .................................................. ¥701,786 ¥137,726 ¥94,402 ¥933,914 ¥(127,273) ¥806,641
Year ended March 31, 1997
Geographical Areas Japan Foreign Total Eliminations Consolidated
Millions of yen
Sales to third parties ............................................. ¥324,448 ¥130,292 ¥454,740 ¥ — ¥454,740Intergroup sales
and transfers ....................................................... 4,127 4,642 8,769 (8,769) —Total sales ............................................................. 328,575 134,934 463,509 (8,769) 454,740Operating expenses .............................................. 248,604 112,833 361,437 (7,926) 353,511Operating income ................................................. ¥ 79,971 ¥ 22,101 ¥102,072 ¥ (843) ¥101,229Total assets ........................................................... ¥716,368 ¥202,582 ¥918,950 ¥(79,475) ¥839,475
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Overseas salesOverseas sales, which include export sales of the Company and its domestic consolidated sub-sidiaries and sales (other than exports to Japan) of its foreign consolidated subsidiaries, for theyears ended March 31, 1999 and 1998 are summarized as follows:
Year ended March 31, 1999
America Europe Asia Other Total
Millions of yen
Overseas sales ..................................................... ¥115,551 ¥49,982 ¥7,119 ¥757 ¥173,409Consolidated net sales ......................................... 423,217
Thousands of U.S. dollars
Overseas sales ..................................................... $962,925 $416,517 $59,325 $6,308 $1,445,075Consolidated net sales ......................................... 3,526,808
Ratio of overseas sales to consolidated net sales.................................... 27.3% 11.8% 1.7% 0.2% 41.0%
Year ended March 31, 1998
America Europe Asia Other Total
Millions of yen
Overseas sales ..................................................... ¥123,678 ¥43,415 ¥7,214 ¥684 ¥174,991Consolidated net sales ......................................... 477,356
Ratio of overseas sales to consolidated net sales ................................... 25.9% 9.1% 1.5% 0.2% 36.7%
Overseas sales for the year ended March 31, 1997 totaled ¥153,109 million, or 33.7% of consoli-dated net sales.
The following appropriations of retained earnings of the Company, which have not been reflectedin the consolidated financial statements for the year ended March 31, 1999, were approved at ashareholders’ meeting held on June 29, 1999:
Thousands ofMillions of yen U.S. dollars
Cash dividends (¥13.00=$0.11 per share) ................................................................ ¥4,478 $37,317Bonuses to directors and corporate auditors .......................................................... 129 1,075
¥4,607 $38,392
17. SUBSEQUENTEVENT
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Report of Independent Certified Public Accountants
The Board of Directors and ShareholdersYamanouchi Pharmaceutical Co., Ltd.
We have examined the consolidated balance sheets of Yamanouchi Pharmaceutical Co., Ltd. and consolidated
subsidiaries as of March 31, 1999 and 1998, and the related consolidated statements of income, shareholders’
equity, and cash flows for each of the three years in the period ended March 31, 1999, all expressed in yen. Our
examinations were made in accordance with auditing standards, procedures and practices generally accepted
and applied in Japan and, accordingly, included such tests of the accounting records and such other auditing
procedures as we considered necessary in the circumstances.
In our opinion, the accompanying consolidated financial statements, expressed in yen, present fairly the con-
solidated financial position of Yamanouchi Pharmaceutical Co., Ltd. and consolidated subsidiaries at March 31,
1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years
in the period ended March 31, 1999 in conformity with accounting principles and practices generally accepted in
Japan consistently applied during the period except for the changes, with which we concur, in the methods of
accounting for excess of cost over net assets acquired and income taxes as described in Note 4 (a) and (b) to
the consolidated financial statements.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 1999 are presented solely for convenience. Our examination also included the translation of
yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 3 to the consolidated financial statements.
Osaka, JapanJune 29, 1999
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President and Chief Executive OfficerMasayoshi Onoda
Managing DirectorKiyoshi Kawaishi
Managing DirectorNoriyoshi Inukai
Managing DirectorKaoru Kimura
Managing DirectorHidehiko Ueda
President and Chief Executive OfficerMasayoshi Onoda
Senior ManagingDirectorsJiro IchinakaToichi Takenaka
Managing DirectorsKiyoshi KawaishiHidehiko UedaNoriyoshi InukaiKaoru Kimura
DirectorsTeruya KashiwagiYohshi KobayashiKiyoshi MuraseYoshio AkiyaHiroshi SuzukiYozo NouraMasakatsu InoueMunetoshi KakitaniNobuji TakayamaToshinari TamuraKunihide IchikawaShigekazu Takahashi
Corporate AuditorsYukio KikuchiYasuo NagamoriToshio SabaYoichi Okamatsu*Ichiro Isaka*
*Outside Corporate Auditor
(As of June 29, 1999)
Board of Directors
Senior Managing DirectorJiro Ichinaka
Senior Managing DirectorToichi Takenaka
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Principal Subsidiaries and Affiliates
PHARMACEUTICALS
Tohoku Yamanouchi Pharmaceutical Co., Ltd.154-13, Dai-2 Chiwari, Obuke, Nishinecho, Iwate-gun, Iwate 028-7111, Japan
Yamanouchi U.K. LimitedYamanouchi House, Pyrford Road, West Byfleet, Surrey KT14 6RA, U.K.
Yamanouchi Research Institute (U.K.)Littlemore Park, Oxford OX4 4SX, U.K.
Yamanouchi U.S.A. Inc.Mack Centre IV, 4th Floor, S.61 Paramus Road, Paramus, NJ 07652, U.S.A.
Yamanouchi Ireland Co., Ltd.Damastown, Mulhuddart, Dublin 15, Ireland
Yamanouchi Europe B.V.Elisabethhof 19, 2353 EW Leiderdorp, The Netherlands
Yamanouchi Europe B.V., Research Laboratories & Development FacilitiesElisabethhof 1, 2353 EW Leiderdorp, The Netherlands
Yamanouchi Europe B.V., Manufacturing MeppelHogemaat 2, 7942 JG Meppel, The Netherlands
Yamanouchi Europe B.V., International DepartmentElisabethhof 17, 2353 EW Leiderdorp,The Netherlands
Yamanouchi Pharma B.V.Elisabethhof 17, 2353 EW Leiderdorp, The Netherlands
Yamanouchi Pharma GmbHIm Breitspiel 19, 69126 Heidelberg,Germany
Yamanouchi Pharma S.A.10, Place de La Coupole, 94223Charenton-Le-Pont, Cedex, France
Yamanouchi Pharma Ltd.Yamanouchi House, Pyrford Road, West Byfleet, Surrey KT14 6RA, U.K.
Paines & Byrne, LimitedYamanouchi House, Pyrford Road, West Byfleet, Surrey KT14 6RA, U.K.
Yamanouchi Pharma S.p.A.Via delle Industrie, 2, 20061 Carugate (MI), Italy
Yamanouchi Pharma B.V.Riverside Business Park,Internationalelaan 55, 1070 Brussels, Belgium
Yamanouchi Pharma a/sNaverland 3, 2600 Glostrup, Denmark
Yamanouchi Pharma ABHans Michelsengatan 1B, 21120 Malmö, Sweden
Yamanouchi Pharma, S.A.Centro Empresarial, El Plantio, Calle Ochandiano 6, 28023 Madrid, Spain
Yamanouchi Pharma Lda.Avenida Ferreira Godinho, Cruz Quebrada, Apartado 2293, 1107 Lisboa Codex, Portugal
Yabrofarma LDAAvenida Ferreira Godinho, 1495-690Cruz Quebrada Oeiras, Portugal
Yamanouchi Europe B.V., Moscow Representative Office Marksistskaya Ulitsa 16, Moscow, Russia
Yamanouchi Pharma Sp. z o. o.ul. Poleczki 21, 02-822 Warsaw, Poland
Yamanouchi Europe B.V., Prague Branch OfficeRadimova 36/2257, 160-00 Praha 6, Czech Republic
Shenyang Yamanouchi Pharmaceutical Co., Ltd.No. 3 Jia 6 Road 10, Shenyang Economic & Technological Development Zone, Shenyang, Liaoning Province, People’s Republic of China
Taiwan Yamanouchi Pharmaceutical Co., Ltd.*Shin Kong World Commercial Bldg., 6th Floor, No. 287, Sec. 3, Nanking East Road,Taipei, Taiwan
Korea Yamanouchi Pharmaceutical Co., Ltd.*Duckmyung Bldg., 3rd Floor, #170-9, Samsung-dong, Kangnam-ku, Seoul, Republic of Korea
Yamanouchi Philippines, Inc.*17B, Multinational Bancorporation Centre, 6805 Ayala Avenue, Makati City, Metro Manila, The Philippines
Yamanouchi (Thailand) Co., Ltd.*10th Floor, Wave Place, 55 Wireless Road,Bangkok 10330, Thailand
GPDC Partnership*87 CambridgePark Drive, Cambridge, MA 02140, U.S.A.
NUTRITIONAL PRODUCTS
Shaklee Japan K.K.2-6, Nishiazabu 3-chome, Minato-ku, Tokyo 106-8601, Japan
Shaklee CorporationShaklee Terraces, 444 Market Street, San Francisco, CA 94111, U.S.A.
Shaklee U.S.Shaklee Terraces, 444 Market Street, San Francisco, CA 94111, U.S.A.
Shaklee Research Center1992 Alpine Way, Hayward, CA 94545, U.S.A.
Shaklee Manufacturing Center3300 Marshall Avenue, P.O. Box 1550, Norman, OK 73069, U.S.A.
Yamanouchi Shaklee Pharma Research CenterStanford Research Park, 1050 ArastraderoRoad, Palo Alto, CA 94304, U.S.A.
Shaklee Canada, Inc.952 Century Drive, Burlington, Ontario L7L 5P2, Canada
Shaklee Mexico, S.A. de C.V.Boulevard Avila Camacho No. 40, Desp. 615, Col. El Parque C.P. 53390,Naucalpan, Mexico
Shaklee Products (Malaysia) Sdn. Bhd.7 Jalan USJ 10/1, UEP Subang Jaya, 47620 Petaling Jaya, Selangor, Darul Ehsan, Malaysia
FOOD AND ROSES
Bear Creek Corporation(a subsidiary of Shaklee Corporation)2518 South Pacific Highway, P.O. Box 299, Medford, OR 97501, U.S.A.
Harry and David2518 South Pacific Highway, P.O. Box712, Medford, OR 97501, U.S.A.
Jackson & Perkins2518 South Pacific Highway, P.O. Box1028, Medford, OR 97501, U.S.A.
Bear Creek Gardens, Inc.2518 South Pacific Highway, P.O. Box9100, Medford, OR 97501, U.S.A.
Bear Creek Stores, Inc.2518 South Pacific Highway, P.O. Box712, Medford, OR 97501, U.S.A.
OTHERS
Yamanouchi Real Estate Co., Ltd.17-1, Hasune 3-chome, Itabashi-ku, Tokyo 174-8612, Japan
*Unconsolidated company
(As of August 1999)
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Yamanouchi’s Medium-Term Vision
1To develop a continuing stream of big-selling new drugs. Backed by a formidable R&D
pipeline both domestically and overseas, Yamanouchi Pharmaceutical Co., Ltd., is poised
to enter a new era of growth.
2To ensure the long-term strength of our R&D pipeline. We have strengthened our
capabilities for in-house drug discovery while proactively encouraging strategic alliances
with other research organizations.
3To commence operations through an independent sales network in the United States. This
is Yamanouchi’s top priority over the medium term. Yamanouchi will become a truly global
enterprise once this sales network is fully established and joins the Company’s growing
networks in Asia and Europe.
4To further develop and commercialize such drug delivery technologies as WOWTAB® and
OCAS™. Another pillar of its pharmaceutical operations, Yamanouchi’s drug delivery
technology business is set to take off in the United States.
5To further develop the nutritional products and food and roses businesses. Yamanouchi will
expand these operations in tandem with its pharmaceutical business to continue
advancing toward its goal of being a comprehensive health care enterprise.
Financial Highlights 1A Report to Our Shareholders and Friends 2Racing Major New Drugs to Market 4Review of Operations 14
Pharmaceuticals 14Nutritional Products 18Food and Roses 20
Corporate Citizenship 21Environmental Protection 22
Financial Section 23Board of Directors 45Principal Subsidiaries and Affiliates 46Corporate Data 47Corporate Information 47
CONTENTS
47
Corporate Data
HEAD OFFICE3-11, Nihonbashi-Honcho 2-chome,Chuo-ku, Tokyo 103-8411, Japan
Seoul OfficeDuckmyung Bldg., 3rd Floor, #170-9, Samsung-dong, Kangnam-ku, Seoul, Republic of Korea
Beijing Office20/F, A-7-10, East Wing, HANWEI PLAZA,No. 7, Guanghua Road,Chaoyang District, Beijing 100004,People’s Republic of China
Jakarta Office17th Floor, #1701, Jakarta Stock Exchange Tower 2, Jl. Jend. Sudirman Kav. 52-53,Jakarta 12190, Indonesia
Taipei BranchShin Kong World Commercial Bldg., 6th Floor, No. 287, Sec. 3, Nanking East Road, Taipei, Taiwan
Domestic BranchesSapporo, Sendai, Tokyo 1, Tokyo 2, Tokyo 3,Yokohama, Nagoya, Osaka, Kyoto, Kobe,Hiroshima, Takamatsu, Fukuoka
PlantsAzusawa, Yaizu, Takahagi, Nishine
Research LaboratoriesTsukuba, Azusawa, Takahagi, Yaizu
Annual MeetingThe annual meeting of shareholders was heldat 10 a.m. on Tuesday, June 29, 1999, at: Royal Park Hotel 1-1, Nihonbashi-Kakigaracho 2-chome, Chuo-ku, Tokyo, Japan
Stock Trading InformationYamanouchi stock is listed on: Tokyo Stock Exchange (code number 4503)Osaka Stock Exchange Nagoya Stock Exchange Sapporo Stock Exchange Paris Stock Exchange
Independent Certified Public AccountantsShowa Ota & Co.Osaka Kokusai Bldg., 3-13, Azuchi-machi 2-chome, Chuo-ku, Osaka 541-0052, Japan
Shareholders’ ServiceShareholders with questions on such stock-related matters as proxy voting should write to:Finance & Accounting Dept.Yamanouchi Pharmaceutical Co., Ltd.3-11, Nihonbashi-Honcho 2-chome, Chuo-ku, Tokyo 103-8411, Japan
Investor RelationsSecurities analysts and investors with business-related questions should write to: Investor RelationsCorporate Communications Dept.Yamanouchi Pharmaceutical Co., Ltd.3-11, Nihonbashi-Honcho 2-chome, Chuo-ku, Tokyo 103-8411, Japan
Yamanouchi on the InternetOur home page is: http://www.yamanouchi.com
(As of August 1999)
Corporate Information
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3-11, Nihonbashi-Honcho 2-chome,Chuo-ku, Tokyo 103-8411, Japanhttp://www.yamanouchi.com
Printed in Japan on recycled paper
Annual Report 1999
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Racing Major
New Drugs
to Market
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