The Source of Value Creation - Production

For the Efficient Supply of High-Quality Pharmaceuticals

Under our long-term vision of being a drug manufacturer trusted and appreciated by patients, the Kyorin Group steadily carries out production activities that are trusted in Japan and overseas and are guided by the basic approach of quality assurance, supply stability, and cost reduction?the mission of our production divisions. In fiscal 2014, the government enacted a policy of accelerating relative use of generic drugs for longstanding pharmaceutical products and made further drug price revisions, so corporate management faced a more challenging situation and further pursuit of efficient production to ensure sustained growth and earnings for the Group has become a pressing issue. Given this, the Production & Manufacturing Headquarters focused specifically on building a new production system for the stable supply of high-quality products at low costs, and promoted the following four priority initiatives to realize the long-term vision HOPE100 and achieve the goals of HOPE100 Stage 1, our medium-term business plan.

1) Overall optimization of the Group’s production system: We are deepening coordination between KYORIN Pharmaceutical’s Noshiro and Okaya plants, KYORIN Rimedio and KYORIN Pharmaceutical Facilities to ensure a stable Group supply system responsive to business plans and raise the efficiency of production activities.

2) Development of new global production and delivery: We are working to strengthen the production system for compliance with global standards into the future. This includes further implementing Good Manufacturing Practice (GMP) quality assurance standards at all production facilities and maintaining a quality assurance system directly linked to the Quality Assurance & Reliability Headquarters to ensure compliance with the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme, which aims to harmonize quality system and GMP standards at the global level.

Through this, we intend to provide stable supplies of high-quality products, improve manufacturing technologies, reduce costs and realize global development.

3) Low-cost operations: Production divisions established a new Supply Chain Management department in fiscal 2014 and have worked, through greater transparency, to achieve supply stability, cost reductions and quality improvements. With a goal of shortening lead times, we are working now to reduce inventories of products and raw materials.

4) Human resources development: In order to stably supply high-quality products to patients and medical professionals, we’ve set a clear policy that calls on each and every employee to work with a sense of mission and maximize their respective roles while maintaining cohesiveness, and all employees are engaged as a single team in an action program to achieve this. We respect the idea that an organization ultimately comes down to its people and intend to promote the type of organization that allows high levels of creativity to be exhibited, while also keeping the workplace lively and cheerful to maintain and raise employee motivation and morale.

Through these initiatives we are working to create one of the top production systems in Japan in terms of quality, delivery and cost (QDC).

Strategic Promotion of Supply Chain Management

With the goal of establishing robust earnings power that is resistant to changing conditions, we are comprehensively assessing the supply chain throughout the entire Kyorin Group and building a system for more efficient production and greater supply stability.

It is essential that we promote supply chain management to raise speed and accuracy through product-by-product management on a worldwide basis, from raw material procurement to production management, manufacturing and shipping. To mitigate supply-side risk and ensure we continue to receive stable supplies, we are building strong relationships rooted in trust with domestic and overseas suppliers while also securing second and third supply sources and alternate transport routes. We consider daily how to pursue efficient forms of production that also reduce manufacturing costs. Going forward, the entire Kyorin Group will be involved in building a new production system for overall optimization and low-cost operations.

Accelerating Group Collaboration in Production

The Noshiro Plant, the main factory of KYORIN Pharmaceutical, is an environmentally and worker-friendly production facility with highly effi¬cient automated equipment including a flow-bin production system for automatic conveyance of raw materials and intermediate prod¬ucts. The Kyorin Group is working to build a Group production system for the maximum utilization of the production resources and characteristics of the Noshiro Plant, KYORIN Pharmaceutical Facili¬ties and KYORIN Rimedio’s Inami Plant.

We will promote overall optimization at Group level in order to securely and stably supply generic pharmaceutical products, whose reputation has been improving on the tailwind of the govern¬ment’s policy on use of generic drugs. Specifically, employees from the production divisions of KYORIN Pharmaceutical and KYORIN Pharmaceutical Facilities have been dispatched to KYORIN Rimedio, which manufactures generic drugs, to disseminate technologies via personnel exchange and provide manufacturing support.

We currently have a project underway to relocate the production functions of KYORIN Pharmaceutical’s Okaya Plant to KYORIN Pharmaceutical Facilities. To ensure that the transfer is smooth and goes according to plan, we will deepen the coordination between KYORIN Pharmaceutical Facilities and KYORIN Pharmaceutical’s Okaya and Noshiro plants.

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