Progress in Fiscal 2010

We believe that to have questions about Kampo medicine incorporated into the National Medical Practitioners Qualifying Examination would mean that Kampo medicine has been truly recognized as "the medicine of Japan", and that this is what it means to "establish Kampo medicine." We have been promoting various measures in order to make this a reality.

Specifically, we are working towards making it compulsory for medical students (at all of the eighty medical universities and faculties of medicine in universities around Japan) to attend lectures about Kampo. We are also implementing programs to train lecturers that can train students in Kampo medicine, as well as continuing support activities, such as establishing Kampo clinics for outpatients for the purpose of clinical trials at university hospitals.

An investigation by the Company found that it is now compulsory for medical students to attend at least eight lectures on Kampo medicine at 78 of the 80 medical schools around Japan. Similarly, 79 medical schools have Faculty Development (FD) programs for training lecturers in Kampo medicine, and 79 medical schools have established Kampo outpatient clinics. Thus we believe we are making steady progress towards "establishing Kampo medicine."

Progress in Fiscal 2010

During 2010, we will continuously developed activities to promote the fostering and evaluation of Kampo in order to establish evidence for its efficacy, by focusing on disease trends in recent years and targeting on ailments in areas with a high level of medical need where new drug treatments have become bogged down, and where prescription Kampo formulations exhibit specific effects.

Specifically, we have promoted activities that foster the drug development and evaluation of five Kampo formulations: Daikenchuto, Rikkunshito, Yokukansan, Goshajinkigan, and Hangeshashinto. For Daikenchuto, Rikkunshito, and Yokukansan in particular, we have been steadily establishing evidence as we proceed with various clinical studies and fundamental research to corroborate these results, and sales are also growing.

Progress in Fiscal 2010

We have been planning and conducting clinical trials with the goal of gaining approval for TU-100 (Daikenchuto) as a prescription product in the United States.

In 2008 we completed a trial testing the tolerability of Daikenchuto targeting post-operative ileus patients, which found no problems with the safety or drug compliance for post-operative patients.

At Mayo Clinic in the United States, clinical pharmacological trials targeting healthy subjects were completed in 2009, and clinical pharmacological trials targeting patents started in 2010, and these trials are planned to conduct continuously in 2011.

Furthermore, from April 2010 we have started compiling a Drug Use Result Survey. This Japanese survey is an investigation into the frequency of the side effects of a drug, which will also be one of the documents for the US development application. The survey is proceeding as planned.

In relation to the development of Daikenchuto, we are creating more efficient development systems by establishing a system for linking the latest data from clinical studies and fundamental research in Japan to the procedures for clinical trials in the United States, in tandem with our efforts to promote the fostering and evaluation of Kampo.

At present, we are aiming to release Daikenchuto to the US market by around 2017.

Progress in Fiscal 2010

We are making plans for the increasing capacity and its timing throughout the entire product manufacturing process, from producing extract powders through to forming granules, based on long-term forecasts of the demand for prescription Kampo preparations. We are also making plans for securing and training the personnel for each process.

In relation to capital investment, our policy is to maximize our current production capacity at our three bases in Shizuoka, Ibaraki and Shanghai, while also expanding our facilities systematically and incrementally, in order to maintain a stable supply for prescription Kampo preparations.

The Ibaraki plant, which was damaged as a result of the Great East Japan Earthquake, recommenced operations from the beginning of May, but we will continue to work on the stable supply of medicinal products by studying of further disaster readiness measures.

In relation to our quality control business, all research on improvements to quality control tests is performed at the Analytical Technology Center, which is striving to enhance the quality control system for the Tsumura Group, together with the Quality Assurance Department at our head office.

Progress in Fiscal 2010

In order to secure a stable supply of safer crude drugs, Tsumura is developing medium and long term plans for expanding the areas where crude drugs are cultivated in Japan and overseas, and increasing our warehouses for storing these crude drugs. These plans are based on long-term forecasts of the demand for prescription Kampo preparations.

In April 2010, we established the Tsumura GACP (Good Agricultural and Collection Practices), which is a set of standards relating to management of the production of crude drugs for Tsumura. We also created our own comprehensive, systematic standards for managing crude drugs by adding management rules etc. to measures that we have been implementing for some time, such as the "crude drug materials traceability system" and the "cultivation management based on production standards for crude drugs."

As a result of the increase in demand for crude drugs, there has been a need to expand the production of crude drugs in Japan as well as in China. In July 2009 we established Yubari Tsumura Co. Ltd. in Hokkaido, as a wholly owned subsidiary.

As well as producing seeds and seedlings and researching how to improve cultivation efficiency at Tsumura farms, Yubari Tsumura Co. Ltd. also procures and performs primary processing for crude drugs from all over Hokkaido, and stores them. In November 2010 a factory for processing crude drugs and a warehouse for storing them were completed.

At the same time, a small fraction of our crude drugs are procured from outside of Japan and China. In these cases it has been difficult to collect production records, and so in February 2010 we established Lao Tsumura Co., Ltd. as a fully-owned subsidiary in the Lao People's Democratic Republic. This company is cultivating materials for Tsumura.

Through these measures, the Company has created a foundation for securing a stable supply of safer crude drugs.

Progress in Fiscal 2010

When Tsumura announced its new medium-term management plan in May 2009, it changed its basic direction from "tradition and innovation" to "becoming a people friendly company that will contribute to society and humanity."

This change signifies that we recognize that Tsumura cannot just seek to fulfill its basic responsibility of complying with the law and creating profit through the operation of its business. Tsumura has to address a variety of social considerations, including environmental activities to reduce the burden its operations place on the environment.

Kampo preparations pass through a long process, from the cultivation of crude drugs through to manufacture and sale of extract preparations, before they arrive at medical institutions and eventually patients. Although Tsumura is a pharmaceutical company, we also have a very close relationship with the primary industry of agriculture through our botanicals agricultural operations. Because of these areas of involvement, it is our wish—through these types of business activities—"becoming a people-friendly company that contributes to society and humanity." To that end, we are implementing such activities as creating job opportunities for people with disabilities and implementing environment measures aimed at becoming a "green" company.