Annual Report - Takeda

8/10/2019 Annual Report - Takeda

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TAKEDA

A N N U A L R E P O R T 1999Year ended Ma rch 31, 1999


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Years ended March 31, 1999 and 1998

Thousands of

Millions of yen U .S . dolla rs (Note)

1999 1998 1999

For the years ended March 31:Net sa les ....................................................................................................... 844,643 841,816 $ 6,980,521

P ercenta ge increa se ................................................................................... 0.3% 0.4%Net income.................................................................................................... 91,755 81,610 758,306

P ercenta ge increase .................................................................................. 12.4% 14.3%Resea rch a nd d evelopment costs ................................................................. 77,487 79,039 640,388Capital investments..................................................................................... 29,241 34,091 241,661Depreciation and amortization.................................................................... 32,651 32,763 269,843

Per sha re amounts (Yen a nd U .S. dol lars)(See Note 11 to the consolida ted fina ncial sta tements):Net income.................................................................................................. 103.52 92.97 $0.86Ca sh dividends ........................................................................................... 29.00 21.25 0.24

At March 31:Tota l a ssets ................................................................................................... 1,326,999 1,296,202 $10,966,934Sh a reholders equit y .................................................................................... 907,373 829,381 7,498,950

Num ber of employees................................................................................... 15,776 16,443Note: The U.S. dollar am ounts in this report represent tra nslat ions of J apa nese yen, for convenience only, at t he rat e of 121=U S$1, the approximate

exchan ge rat e at March 31, 1999.

NET SALES

( Billion)

99989796950

400

600

800

1,000

200

NET INCOME

( Billion)

99989796950

40

60

80

100

20

RETURN ON EQUITY

(%)

99989796950

8

9

10

11

7

R&D COSTS

( Billion)

99989796950

40

60

80

100

20

Takeda Chemical Industr ies, Ltd. and Consolidated Subsidiaries

Financial Highlights


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Takedas medium-term management

plan is now in its fifth year. Is the plan

proceeding on schedule?

Amid intense global competition, weve

continued to move forward with our

medium-term management plan, which

covers fiscal 1995 to fiscal 2000, to generate

international growth as an R&D-driven

pharmaceutical company. Since Takedabegan implementing the plan, both sales

and profi ts have increased thanks to the

solid performance of our pharmaceutical

business overseas.

However, overseas pharmaceutical

companies, particularly the leading U.S.manufacturers, have achieved robust

growth in the rapidly expanding U.S.

market, and the gap between Takeda and

these companies has been widening.

Moreover, the speed and scale of changes in

our operating environment have exceeded

the projections we made at the time the

plan was devised. These changes include the

prolonged recession in Japan, economic

turmoil in Asia, and increasingly stringent

government policies to contain healthcare

costs in Japan and other countries. To

respond to these conditions, we have

implemented a stronger revised medium-

term plan for fiscal years 1998 to 2000 with

the objective of creating a structure that will

allow Takeda to make rapid strides toward

becoming an international enterprise by the

end of fiscal 2000.

What issues are included in the revised

plan?

The two main themes are strengthening

growth strategies in our pharmaceutical

business in global markets and promotingthe independence of our non-

pharmaceutical businesses. Through

focused investment of management

resources in our pharmaceutical business,

2

An Interview with the President

Kun i o Ta k eda, President


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we will further strengthen and promote the

growth of this business, centered oninternationally strategic products. In non-

pharmaceutical businesses, as part of our

emphasis on cultivating high-value-added

businesses and selectively allocating

corporate assets, we are reexamining low-

potential businesses and creating an

operating structure centered on high-value-

added core businesses to make non-

pharmaceutical businesses truly

independent.

What are some specific ways in which

Takeda will strengthen growth

strategies in its pharmaceutical

business?

Although weve achieved good

performance overseas up to now, a large

part of that is attributable to the rapid

growth of TAP Holdings Inc., a U.S. affiliate

accounted for by the equity method. So we

have to bui ld on that momentum by

establishing further international bases. We

have already established two holding

companies Takeda America Holdings,

Inc. in the United States and Takeda EuropeHoldings Ltd. in Europe and we also

added a second U.S. marketing company,

Takeda Pharmaceuticals America, Inc.

In August 1999, Takeda Pharmaceuticals

America launched the antidiabetic agent

pioglitazone hydrochloride (brand name:Actos). With once-daily dosing, Actoshas

demonstrated its benefi ts in significantly

improving glycemic control in Type 2

diabetes. In addition, clinical data show that

Actoshas a beneficial impact on lipids,

lowering plasma triglycerides and raising

levels of HDL the so-called good

cholesterol. Unlike other antidiabetic

agents, moreover,Actosdoes not raise levels

of LDL cholesterol. With these

characteristics,Actosshould help to further

boost Takedas presence in the U.S.

pharmaceutical market.

What about the domestic market?

Although the Japanese pharmaceutical

market has been shrinking, Takeda has

increased its market share by focusing on

treatments for lifestyle-related diseases

including hypercholesterolemia,

hypertension and diabetes. In May 1999, we

launched cerivastatin sodium, an HMG-

CoA reductase inhibitor, under the brand

nameCertaas a treatment for

hypercholesterolemia.Certa, originallysynthesized by Bayer AG of Germany, is a

competitive inhibitor of the enzyme HMG-

CoA reductase that has proven effective in

lowering serum cholesterol.


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In June 1999 we launched candesartan

cilexeti l, an angiotensin I I receptorantagonist, under the brand nameBlopress.

This product selectively binds to

angiotensin II AT1 receptors and thereby

suppresses the action of angiotensin I I to

provide long-lasting and assured

hypotensive action with once-daily dosing.

In addition, an application for pioglitazone

hydrochloride, an agent for the treatment of

diabetes mellitus, has been filed.

Please expand upon Takedas R&D

strategy for its pharmaceutical

business.

Takeda is focusing on six core areas:

diabetes, cardiovascular diseases, central

nervous system disorders, bone and joint

diseases, allergic diseases and infectious

diseases. We have already achieved a

number of successes in these areas. Themost recent is Actos, which we launched in

the U.S. market. In the competitive

thiazolidinedione class,Actoswas approved

for use both as a monotherapy and in

combination with insulin, sulfonylureas or

metformin.

Furthermore, we have implemented our

Marketing-Production-Development-

Research (MPDR) strategy to bring the

results of our research to the market more

quickly. This strategy helps us set

parameters in areas such as product

originali ty, market need, continuity of

therapeutic area strategies, profitability and

investment risk, and then prioritize R&D

accordingly. Thus we are better able to

allocate resources to projects most likely to

4

G L O B A L O P E R A T I O N S

U.S.A.

Takeda AmericaHoldings, Inc.

Takeda EuropeHoldings Ltd.

Production

Takeda America Research &Development Center Inc.

TAP Holdings Inc.

Takeda PharmaceuticalsAmerica, Inc.

Takeda Europe Research &Development Centre Ltd.

(U.K.)

Laboratoires Takeda(France)

Takeda Pharma GmbH(Germany)

Takeda Italia FarmaceuticiS.p.A.

Takeda UK Limited

EUROPE

Takeda Ireland Ltd.

(This illustration shows Takedas pharmaceutical operations outside Japan)

ASIA

Tianjin Takeda Pharmaceuticals Co., Ltd. (China)Takeda IMC Chemical Ltd. (Hong Kong)Takeda Chemical Industries (Taiwan), Ltd.Boie-Takeda Chemicals, Inc. (Philippines)Takeda (Thailand), Ltd.P.T. Takeda Indonesia


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generate solid

earnings andincrease the

speed of R&D.

To ensure a

pipeline full of

high-potential

products, we are aggressively promoting

licensing deals and research collaborations

in addition to strengthening and

accelerating our own research.

What is Takedas strategy for its group

of companies?

Given the intense competition with U.S.

and European pharmaceutical companies,

we must take full advantage of the

capabilities of the Takeda Group. We are

therefore restructuring the Takeda Group

portfolio and establishing the management

framework necessary to support a strategy

that maximizes group strengths.

Specifically, we are evaluating the

positioning and responsibilities of each

subsidiary and affiliate in l ight of our group

strategy and the changes in our operating

environment to determine which should bestrengthened, liquidated or consolidated.

Measures to reinforce our core businesses

and raise management efficiency will

include a sweeping restructuring of group

companies and alliances with other

companies.

What fundamental principles provide

the framework for Takedas continuinggrowth?

Takeda carries out all business activities

on the basis of our corporate philosophy:

contr ibuting to better health and quali ty of

li fe for people throughout the world. This

philosophy guides us in creating

pharmaceuticals that meet the expectations

of patients and healthcare professionals,and we strive to help people by delivering

our products to global markets ever more

quickly.

In addition to an objective management

system for executives and a performance

evaluation system for divisions, we are also

implementing various reforms to fairly

reward employees who produce results.

These include phasing in a merit-based pay

system that is aimed at making Takeda an

attractive company where employees feel a

sense of challenge and satisfaction.

Finally, we are committed to earning the

understanding and trust of shareholders

through timely disclosure of appropriate,

extensive and clear information on

operations and management.

August 1999

Kunio Takeda

President

An Interview with the President


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The following are some of the Pharmaceutical Discovery Research Divisions recent

accomplishments. Discovery of a new anti-HIV drug candidate (CCR5 antagonist)

Discovery of a prolactin-releasing peptide

Discovery of Apelin, a new ligand for an HIV infection-related receptor

Discovery of a gene for LLPL, a newly discovered enzyme related to atherosclerosis

Development of a new manufacturing process for human growth hormone

Pharmaceutical Research Division

The Pharmaceutical Research Division focuses on keeping Takedas pipeline stocked with new

drug candidates for global use by speeding up pharmaceutical research.

The Pharmaceutical Research Division conducts research into the synthesis, drug action and

pharmacology of investigational medicines for the core disease areas of diabetes, cardiovascular

diseases, central nervous system disorders, bone and joint diseases, allergic diseases and

infectious diseases.

In the area of drug synthesis research, the utilization of advances in molecular pharmacology

and molecular physiology is becoming increasingly important. For example, our researchers

continuously try to uncover the seeds of breakthrough pharmaceuticals through detailed study

of the structure and active relationships of compounds such as enzyme inhibitors and receptor

antagonists. Moreover, in addit ion to analyzing compounds and conducting structural analysis,

researchers employ advanced technology for molecular design, automatic synthesis andautomatic screening of new active substances.

Currently the Pharmaceutical Research Division is focusing on the following.

Establishing an efficient system for pharmaceutical research to accelerate priori tyresearch themes and advancethem to the next stage

Evaluating safety at an earl ierstage of research to increase theprobability of creatingsuccessful new drugcandidates

Enhancing Takedas pipeline bypromoting in-l icensingactivities and researchcollaborations.

The Pharmaceutical Research Division contributes to the creation of new pharmaceuticals by

using automated machines to synthesize novel compounds and derivatives.


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The progress of the International Conference on Harmonisation (ICH) is enabling the use of

essentially the same clinical data in Japan, Europe and the United States. In response, Takeda has

established the Global Development Committee to create global development plans and coordinate

our tripartite development strategy. Based on Takedas MPDR strategy, which links research,

development, production and marketing, the committee adds value through its activities at every

stage, from product development to post-marketing, in accordance with the needs of the marketing

and sales divisions in the above three regions.

Since launching its fi rst international strategic product, leuprolide acetate, in the United States in

1985, Takeda has increased this products potential by implementing a global rollout and adding

new indications and formulations. In 1991, we launched lansoprazole in France and subsequently

With progress of the ICH, Takeda America Research & Development Center Inc. has increased in

importance as a vital component of Takedas global development strategy.

Global Development Speeds Products to Market

Takedas tr ipar t i te development organi zation is centered around the

Pharmaceut ical Development D ivi sion in Japan; Takeda Ameri ca Research &

Development Center Inc. and the Development Division of TAP Holdings Inc., a

joint vent ure wi th Abbott Laborator ies, in the Uni ted States; and Takeda Europe

Research &Development Centre Ltd. in the Uni ted Ki ngdom. Together these bases

conduct effi cient development operat ions, focusing on the swi ft launch of new

products in the global marketplace. At the same time, they help to maximi ze added

value through clini cal development and post-marketing sur vei l lance.


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Takeda Europe Research & Development Centre Ltd. in London, where the European Agency for the

Evaluation of Medicinal Products is based, has contributed to development efficiency.

have expanded the number of countries in which it is marketed and added new indications.

Applications for the use of this product in the treatment of reflux esophagitis (maintenancetherapy) and eradication of Heli cobacter pyloriare currently being reviewed by the Ministry of

Health and Welfare in Japan. Candesartan cilexetil, a drug for the treatment of hypertension

marketed in Europe, the United States and Japan, is now in Phase III for the indication of

congestive heart failure. Each of these products is marketed in countries around the world.

Our new international strategic product is AD-4833 (pioglitazone hydrochloride), an agent for

the treatment of diabetes mellitus. This drug is a member of a new class of antidiabetic agents that

resulted from Takedas many years of research on diabetes. With one dose daily, AD-4833 reduces

insulin resistance in patients suffering from Type 2 (non-insulin-dependent) diabetes. New Drug

Applications were filed in Japan in December 1996, in the United States in January 1999, and in

Europe in March 1999. The U.S. Food and Drug Administration granted AD-4833 priori ty review

status and approved it in July 1999. AD-4833 was launched in August 1999 in the United States

under the brand name Actos.

Besides AD-4833, development is focusing on new treatments in the fields of diabetes,

cardiovascular diseases, central nervous system disorders, bone and joint diseases, allergic diseases

and infectious diseases. For example, TAK-778-SR, a treatment for bone fractures resulting from

osteoporosis, is now in Phase I in Japan. TAK-661, a substitute for steroid treatment in bronchial

asthma and atopic dermatitis, is in Phase II in Japan and Phase I in Europe. We are endeavoring to

rapidly develop and deliver to the global marketplace candidate compounds that have been selected

for both innovativeness and marketabil ity.


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Overview of Product StatusProduct Description Indication / Formulation Country (Brand Name) Status

Ca ndesa r t a n Angiot ensin I I H ypert ension J a pa n (Blopress) La unched

cilexet il recept or a nt a gonist U .S . (Atacand) La unched

(TCV-116) U .K. (Amias) La unched

Germany (Blopress) Launched

Other European countries Launched

Congest ive hea rt fa ilure J a pa n & Europe P hase III

U .S . P hase III

P revent ion of rest enosis J a pa n P ha se II

following P TCA

D ia bet ic nephropa t hy a nd J a pa n P ha se II

glomerular nephrit is

(TCV-116C) Combination of H ypert ension E urope Approved 6/98

TCV-116 a nd a diuret ic U .S . P hase III

Leuprolide acetat e Luteinizing hormone-releasing Prosta te cancer , J apan (Leuplin) La unched

(TAP -144S R) hormone (LH -RH ) a na log endomet r iosis, U .S . (Lupron Depot) La uncheduterine fibroids Europe (Enantone, others) Launched

Asia (Enantone, ot hers) La unched

Over 60 count ries La unched

C en t ra l p re coci ou s p ub er t y J a p a n, U . S ., F r a n ce , L a u nch ed

Germany & I ta ly

Breast cancer J apan , Germany , Launched

Ita ly & Fra nce

K it -t ype once-mont hly G erma ny, U .S . & La unched

inject a ble formula t ion J apa n

Three-month sust ained-relea se U .S ., U .K ., G erma ny, La unched

inject a ble formula tion Fra nce & I t a ly

J a pa n P ha se II

Four-mont h sust a ined-relea se U .S . La unched

injectable formulation

Kit-type t hree-month susta ined- U .S . La unched

release injectable formulation

Kit-type four-month sustained- U .S . La unched

release injectable formulation

La nsopra zole P rot on pump inhibit or Reflux esophagitis, peptic ulcers J a p a n (Takepron) La unched

(AG-1749) and Zoll inger-Ell ison syndrome U.S. (Prevacid) La unched

Fra nce (Ogast) La unched

I ta ly (Lansox) La unched

Germany (Agopton) La unched

Over 90 count ries La unched

Ma int ena nce t hera py a ft er U .S ., U .K ., Fra nce, La unched

ulcer hea ling G erma ny & I t a ly

Ma int ena nce t hera py for J a pa n Filed 1/99

reflux esophagitis

Era dicat ion of U.S. , U.K. , Italy , Launched

H eli cobacter pylori France & Germany

J a pa n Filed 2/99

G a st r it is J a pa n P ha se II

D yspepsia U .S . P ha se III

U .K. La unched

G erma ny Filed 1/99


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Product Description Indication / Formulation Country (Brand Name) Status

L a ns opr az ole IV P r ot on pu mp in hib it or Postoperat ive invasive stress J a pa n Filed 7/96

(AG -1749 IV) (I nject able for mula tion) U pper ga st roint est ina l J apa n P hase III

bleeding

Ma jor st ress exer t ed by J a pa n P ha se II

operation or external st imulus

P ioglit a zone Insulin sensit ivit y enha ncer Dia bet es mellit us J apa n (Actos) F iled 12/96

hydr ochloride (monothera py an d combina tion

(AD-4833) w it h sulfonylurea s)

Dia bet es mellit us U .S . (Actos) La unched

(monotherapy and combination

w it h in su lin , su lfon ylu rea s E ur ope (Actos) F iled 3/99

or metformin)

Combination with Basen J a pa n P ha se III

Combination with insulin

Voglibose Disa ccha rida se inhibit or D ia bet es mellit us J a pa n (Basen) La unched(AO-128) U .S . P ha se III

E urope Filed 3/98

I mpa ir ed glu cose t olera nce J a pa n Pha se II

Sera t roda st Thromboxa ne A2 B ronchia l a st hma J a pa n (Bronica) La unched

(AA-2414) recept or a n t a gonist

Cefozopra n B roa d spect rum B a ct eria l in fect ion J a pa n (Firstcin) La unched

hy dr ochlor id e in ject able cepha losporin

(S CE -2787) P edia t ric use a nd meningit is J a pa n (Firstcin) La unched

Ceriva st a t in sodium H MG -CoA reduct a se H ypercholest erolemia J apa n (Certa) La unched

(B AY w 6228) inhibit or [J oin t development

wi th B ayer Yakuhin]

TAK -147 Acet ylcholinest era se inhibit or D ement ia of Alzheimers t ype J a pa n P ha se III

Risedrona t e B one resorpt ion inhibit or Ost eoporosis J a pa n P ha se III

(NE -58095) [J oint development

wit h Ajinomoto]

TNP -470 Ant i-a ngiogenesis a gent Ma ligna nt t umor U .S . P ha se II

TAK -603 Disea se-modifying Rheuma t oid a rt hrit is J a pa n , U .S . & E urope P ha se II

ant i-rheumat ic drug

Idebenone B ra in energy-met a bolism Dement ia of Alzheimers t ype G erma ny Filed 6/96

(C V-2619) enha ncer I t a ly & Sw it zerla nd Filed 2/97

Aust ria F iled 8/96

U.S . P ha se II/III

TAK -751S Verot oxin a dsorbent H emolyt ic uremic syndrome J apa n P ha se II

(HUS) [Licensed from Synsorb]

M or ph in e h y dr o- H ig h c on t en t /con ce nt r a t ion Severe pain due t o ca ncers J a pa n P ha se III

chloride (MH-200) prepa ra t ion [J oint development ]

TAK -661 E osinophil chemot a xis Bronchia l as thma a nd J a pa n P ha se II

inhibitor atopic derma t it is E urope P ha se I

MKC-231 Choline upta ke enhancer Dement ia of Alzheimers type J apan Ph ase II

[J oint development

with Mitsubishi]


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In 1998, TAP continued its strong performance and achieved net sales that exceeded $2 billion.

TAP is now the seventeenth largest U.S. pharmaceutical company in terms of sales, and expects to

continue moving up the ranks as it fosters current products and introduces new ones.Net sales of the ulcer treatment Prevacid(lansoprazole), TAPs leading product, nearly doubled to

$1.3 bil lion in 1998. One of the reasons for this outstanding growth is the expansion of the drugs

range of uses. In 1998, TAP received approval from the U.S. Food and Drug Administration (FDA)

for Prevaciddelayed-release capsules for the short-term treatment of symptomatic gastroesophageal

reflux disease (GERD), as well as new administration options that allow patients who cannot

swallow a capsule to sprinklePrevacidon soft food or into juice. In addit ion, TAP introduced 10-

and 14-day regimens of Prevpac, a new and convenient package for three medications used to treat

Heli cobacter pyloriinfection in patients with duodenal ulcers. The package, which contains

Prevacid, Biaxin(clarithromycin) and Trimox(amoxicillin capsules), provides a simplified, more

convenient regimen for eradicatingH. pylori.

The National Sales Meeting at TAP Holdings Inc. boosts sales force effectiveness and morale by

gathering U.S. medical representatives (MRs) together to review the past years performance and

determine strategic directions for the year ahead.

Expanding Participation in Markets Worldwide

Takeda markets i ts ethical dr ugs through a global marketing organi zat ion

spanni ng Japan, the Uni ted States, Europe and Asia. In the United States, the

worlds lar gest and fastest-growing pharmaceut ical market, Takedas marketing

organi zati on includes TAP Holdings Inc. (a joint venture wi th Abbott Laboratori es),

and the whol ly owned subsidiary, Takeda Pharmaceut icals America, Inc.


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Lupron Depot(leuprolide acetate for depot suspension), TAPs synthetic hormone indicated for

the palliative treatment of advanced prostate cancer, endometriosis, anemia caused by uterinefibroids, and precocious puberty, posted solid sales growth in 1998. It continues to maintain i ts

dominant position in most of these markets.

In addition to these successful current products, TAP has an active pipeline. In June 1999, TAP

filed a New Drug Application with the FDA for Uprima(apomorphine), an oral treatment for male

erecti le dysfunction. Takeda and Abbott Laboratories will jointly develop and co-market

apomorphine in countries outside the United States and Canada. TAP also plans to file an

application for an adult formulation of the antibiotic Spectracef(cefditoren pivoxil) in 1999.

TAPs research and development teams are focusing on developing a range of promising new

compounds for use in medical fields such as urology, gynecology and oncology, and are also

pursuing additional indications for current products. TAPs aggressive in-licensing efforts will

continue to fuel the companys pipeline.

Building on i ts momentum in the United States, in May 1998 Takeda established its second U.S.

marketing company, Takeda Pharmaceuticals America, Inc. This company launched piogli tazone

hydrochloride, an antidiabetic agent, under the brand name Actos in August 1999 after Takeda

America Research & Development Center Inc. received FDA approval for it in July 1999. A

treatment for lowering blood glucose levels that resulted from Takedas many years of research on

diabetes mellitus, Actosis an insulin sensitizer for patients with Type 2 (non-insulin-dependent)

diabetes. Takeda Pharmaceuticals America has built a sales force of more than 500 MRs to launch

Actos. Takeda Pharmaceuticals Americas MRs have undergone extensive education on diabetes

Takeda Pharmaceuticals America, Inc. recruited and trained more than 500 MRs in preparation for the

launch of the companys first product, the new pharmaceutical Actos.


16/5014

mellitus and Actosto ensure the successful launch of this product. The company has also

established a marketing organization, distr ibution capabili ties and other key business functions tofully support the U.S. commercialization of Actosand future products.Actoswill be co-promoted

with Eli Lilly and Company, a leader in the U.S. diabetes treatment market.

In Europe, subsidiary Laboratoires Takeda in France, affiliate Takeda Pharma GmbH in Germany

and subsidiary Takeda Italia Farmaceutici S.p.A. in I taly have been increasing sales of original

Takeda products each year, including the prostate cancer treatment leuprolide (brand name:

Enantone), ulcer treatment lansoprazole (brand names: Ogast, Agopton, Lansox), and hypertension

treatment candesartan cilexetil (brand names: Kenzen, Blopress). In addition, in April 1997 we

established the U.K. subsidiary Takeda UK Limited, which is co-promoting candesartan cilexetil

with AstraZeneca PLC in the United Kingdom under the brand name Amias.

In Japan, Takedas Pharmaceutical Marketing Division, which is responsible for ethical drug

marketing, has been making steady progress in strengthening Takedas market posit ion in the

treatment of lifestyle-related diseases. Hypercholesterolemia, hypertension and diabetes are

representative lifestyle-related diseases that are intricately related to the onset of arteriosclerosis.

They show a high incidence of complications and exhibit increased synergism with arteriosclerosis

as well. In May 1999, the Division launched the HMG-CoA reductase inhibitor cerivastatin sodium

Takeda Pharma GmbH ensures solid coverage of the crucial German market, where Takedas strategies

include expanding market penetration for Blopress.


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under the brand nameCertaas a treatment for hypercholesterolemia. In June 1999, the Division

also launched the angiotensin II receptor antagonist candesartan cilexetil under the brand nameBlopressfor treatment of hypertension. Now being marketed in Europe and the United States,

Blopressis an ideal drug because in addition to its hypotensive action, it has an organ protective

effect and rarely causes coughing, which is a common adverse reaction with ACE inhibitors used to

treat hypertension. Moreover, we fi led an application for AD-4833 (pioglitazone hydrochloride), an

agent for the treatment of diabetes mellitus. To ensure the acceptance of our products by specialists

shortly after they are launched, we implement systematic promotions such as launch meetings,

meetings for opinion leaders and medical conferences.

Takeda is conducting regional launch meetings for Blopressin Japan.


18/50

Takedas Production BasesTakeda produces pharmaceuticals at three domestic plants the Hikari Plant, Osaka Plant and

Shonan Plant. In Asia, the Company has plants in China, Taiwan, Thailand and Indonesia. In

October 1997, we acquired a

plant in Ireland and established it

as a local manufacturing

subsidiary, Takeda Ireland Ltd.,

our first pharmaceutical plant in

Europe. Takeda Ireland

manufactures lansoprazole

capsules, candesartan cilexetil

tablets, pioglitazone

hydrochloride tablets and other

new products for the European

and U.S. markets. It also

manufactures drugs for clinical

trials of candidate compounds

under development.

The Pharmaceutical Production

Division manages the entire process from the chemical and pharmaceutical development researchstage through the production stage. This division works to minimize total production costs by

analyzing domestic and overseas demand, cost and risk.

Environmental ProtectionTakeda implemented the Responsible Care program in 1995 based on its Basic Principles on the

Environment. Objectives of the program include reducing the volume of industrial waste treated

off-site, reducing the amount of emissions of priori ty control chemical substances, and promoting

energy conservation. Other focuses are conducting environmental audits for domestic plants and

Tsukuba research laboratories, promoting resource conservation and recycling, pursuing

development of environment-friendly products, and establishing occupational safety and health

management systems.

In December 1998, the Hikari and Tokuyama plants obtained the ISO 14001 certification for their

environmental management systems. The Hikari Plant is Takedas main plant, manufacturing

mainly bulk pharmaceuticals, vi tamins and agrochemicals. The Tokuyama Plant produces chemical

products, including polyether polyols, polyester polyols, unsaturated polyester resins and succinic

acid. Takeda will continue promoting acquisition of the ISO 14001 certification at its other plants.

Global, Efficient, EnvironmentallySound Production

16

Takeda Ireland Ltd., Takedas first European production base,

produces drug products to keep up with our expanding sales in

Europe and the United States.


19/50

PHARMACEUTICALS

(Ethical Drugs)

In fiscal 1998, the Takeda Group

focused its core Pharmaceutical

business on discovering and

developing original new drugs for

global use, while also working to

expand its marketing bases in the

United States and Europe. These

efforts fur ther advanced our mission

to be an R&D-driven international

company. Takedas sales of

pharmaceuticals, including OTC

drugs, increased 2.9 percent year-on-

year to 597.5 billion (US$4,938

million).

In May 1998, we established the

wholly owned subsidiary Takeda

Pharmaceuticals America, Inc., as

our second marketing base in the

United States, the worlds largest

market for pharmaceuticals. This

move creates an organization to

conduct marketing activities for

Actos(piogli tazone hydrochloride),

an antidiabetic drug developed by

Takeda. Furthermore, in March

1998, we established Takeda Europe

Holdings Ltd., a holding company

for our pharmaceutical business in

Europe, and in September we

established Takeda Europe Research

& Development Centre Ltd. in

London, where the European Agency

for the Evaluation of Medicinal

Products is located.

Reviewing Takedas main

products, leuprolide acetate

(marketed as Leuplinin Japan,

Lupron Depotin the United States

andEnantoneand other names in

Europe), a treatment for prostate

cancer, endometriosis, uterine

fibroids, breast cancer and central

precocious puberty, is sold in more

than 60 countries. We have steadily

developed new formulations for

leuprolide acetate in markets around

the world. Following the original

1 Month Depot, a dual chamber pre-

fi lled syringe (DPS) launched in

1995, an injectable three-month

formulation, 3 Month Depot, was

launched in 1996, and 4 Month

Depot was launched in the United

States in July 1997. As a result,

leuprolide acetate contributed

strongly to overseas sales in fiscal

1998.

Sales are also expanding steadily

in Japan, where leuprolide acetate

contributes to effective patient

Skilled MRs from

Laboratoires Takeda in

France give physicians

detailed explanationsof new products,

playing a key role in

Takedas strategy of

strengthening its

operations in France.

1

Review of Operations


20/5018

treatments in a wide range of

therapeutic categories.

Launched in Japan in December

1992 as a treatment for peptic ulcers

and reflux esophagitis, lansoprazole

(marketed under the brand names

Takepronin Japan,Prevacidin the

United States, andOgast, Agopton

and others in Europe) has become

the leading proton pump inhibitor

because of its superior efficacy.

Following its introduction in major

European countries, lansoprazole

was launched in the United States inJune 1995. Backed by favorable

evaluations from healthcare facilities,

lansoprazole achieved rapid market

penetration, and further increased

its contr ibution to results in fiscal

1998. It is now sold in more than 90

countries. New indications are being

added to the product profile,

including maintenance therapy

following healing of erosive

esophagitis and duodenal

ulcers, eradication of

Heli cobacter pylor iand

symptomatic

gastroesophageal reflux

diseases.

In December 1997,

Takeda launched a

promising new product,

candesartan cilexetil, a

novel angiotensin I I

receptor antagonist

(AIIRA) for the

treatment of essential hypertension,

under the brand namesBlopressin

Germany andAmiasin the U.K.

Takeda originally discovered this

compound, the first non-peptide

AIIRA in the world. Its ini tial launch

was followed by introductions in

major countries including France,

Italy and the United States in 1998.

In 1999, candesartan cilexetil has

been launched asBlopressin some

Asian countries including Japan, and

it is now marketed in 28 countries

worldwide.In Japan, National Health

Insurance (NHI) drug prices were

significantly reduced for the third

consecutive year in fiscal 1998. In

addition, the pharmaceutical market

has been affected by increased

patient copayments resulting from

revision of the NHI Law in

September 1997. Consequently, the

market in fiscal 1998 was virtually

flat compared with the previous

fiscal year. Starting from fiscal 1999,

the fiscal policy for health insurance

will become more stringent in

response to the declining birth rate

and aging of the population in

Japan. Given the urgent issues raised

recently by healthcare cost

containment measures and the

impact of health insurance reforms,

we must be prepared for an even

more severe operating environment.

However, the graying of Japanese

society is expected to increase theneed for pharmaceuticals, and the

pharmaceutical industry has

excellent potential. The market will

increasingly favor drugs that are

primary medical treatments and

offer clear beneficial effects, as well

as those that match the needs created

by the aging society and changing

lifestyles. Takeda has always focused

on research and development of

MRs at sales offices regularly attend practice study conferences to support the smooth market penetrationof new pharmaceuticals.


21/50

pharmaceuticals that offer

characteristics required by healthcare

facil ities and on building their

market presence.

One example is Leuplin, a

prostate cancer treatment for which

we have added a succession of new

indications, including endometriosis,

central precocious puberty, uterine

fibroids and breast cancer. Sales have

expanded steadily, and we expect

Leuplinto make an even larger

contribution to results in the future.

Basen, a disaccharidase inhibitor,was launched in 1994 as a diabetes

treatment with a novel mechanism

of action. It has become the first

choice of many physicians in treating

diabetes.

The addition of planned new

indications for the ulcer treatment

Takepronshould contribute to

further growth in sales of this

product.

In fiscal 1999, the hyper-

cholesterolemia treatmentCerta

(BAY w 6228), an HMG-CoA

reductase inhibitor, and Blopress, an

angiotensin II receptor antagonist

that provides a novel method for

treating hypertension, have already

been launched. We also plan to

launch the insulin sensitivity

enhancer AD-4833, for which we are

awaiting manufacturing approval.

Because these products have more

concentrated activity, we expect

them to gain a large share of the

market in their respective

therapeutic categories. Furthermore,

we will take advantage of the launch

of these drugs to educate patients

and the general public on the cause,

prevention, treatment and

complications of lifestyle-related

diseases, further boosting Takedas

domestic market presence.

Outside Japan, despite intensified

competition accompanying the

reorganization of the industry and

the advancement of policies tocontain healthcare costs, markets for

pharmaceutical products grew

steadily in fiscal 1998. The efforts of

TAP Holdings Inc., a U.S. affiliate

accounted for by the equity method,

to generate sales of lansoprazole in

the United States contributed to net

sales of US$2,062 million and net

income of US$532 mill ion for the

company. Lansoprazole sold strongly

in Europe as well, while sales of

leuprolide acetate, in the face of

strong competition, increased over

the previous fiscal year, a result of

leuprolide acetates precise response

to market needs. Moreover, as

mentioned earlier, the hypertension

treatment candesartan cilexetil was

launched in France in September

and in Italy in October 1998.

In August 1999, the antidiabetic

agentActos(pioglitazone

hydrochloride) was launched in the

United States. We expect to expand

sales of this product in other

overseas markets as well. In addition,

we are steadily carrying out

development activities for

apomorphine, a treatment for

erectile dysfunction. TAP Holdings

Inc. has submitted a New Drug

Application with the U.S. Food and

Drug Administration for

apomorphine under the brand name

Uprima.

To further develop its

pharmaceutical business, Takedakeeps its pipeline full by efficiently

allocating management resources

toward selected therapeutic

categories and focused development

themes. A key to success in this effort

is our MPDR strategy that

emphasizes cooperation and

collaboration among marketing,

production, development and

research divisions, as well as our

framework for speedily resolving

cross-divisional issues. We will

continue strengthening our MPDR

strategy to promote effective

interdivisional cooperation in order

to maximize the benefits from each

divisions efforts. Employing this

original business structure, we will

advance our global strategy and

further promote Takedas position as

an R&D-driven international

company.

1


22/5020

CONSUMERHEALTHCARE(OTC Drugs)

In the domestic

OTC drug market in

fiscal 1998, the lack of

any foreseeable

recovery in consumer

spending, coupled with

unfavorable summer

weather, led to a large

decrease in sales of

health maintenance

products. However,

demand for remedies

for colds, constipation

and athletes foot was favorable. As a

result, sales of the Consumer

Healthcare business declined slightly

compared with fiscal 1997.

Sales ofAlinamin EX, part of the

Alinaminline of vitamin B1

derivative tablets, expanded steadily.

In June 1999, we launched New

Alinamin A, which contains more

vitamins B6 and B12 than the current

Alinamin A. This product wi ll add

further strength to theAlinaminline.

Sales ofAlinaminhealth tonics

declined from the previous year

because of weakness in this market

segment. Following the easing of

regulations in March 1999, three

products includingAlinamin Vwere

reclassified as non-pharmaceutical

products, allowing them to be sold at

retail stores other than pharmacies.

By expanding sales channels, we

expect to increase sales of these

products in fiscal 1999.

Despite many competing

products, TakedasBenzabrand,

which includes the cold remedy

Benza Block, achieved a large sales

increase over the previous fiscal year.

Contributing to this gain were the

January 1999 launch of Benza Block

Cough Syrup, an antitussive/

expectorant, and the February 1999

launch of Benza AL, a remedy for

allergic rhinitis.

Takeda will fur ther develop the

Consumer Healthcare business based

on the goal of contributing to better

health and quality of life. In fiscal

1999, we will strengthen this

business by aggressively developing

and launching a steady stream of

new products while continuing our

efforts to earn the trust of

consumers. We will also work to

maintain solid relationships of trust

with retailers and wholesalers.

BULK VITAMIN & FOOD

Takedas Bulk Vitamin and Food

business is engaged primarily in the

manufacture and marketing of bulk

vitamins and food additives. We

contribute to healthier life and better

food culture through our

involvement in the health

supplements, food, beverage and

livestock feed markets.

With a broad lineup of bulk

vitamin products that includes

vitamin C as well as vitamins B1, B2,

B6, folic acid and others, Takeda is

one of the worlds leading

manufacturers of water-soluble

vitamins. Bulk vitamins are highly

Preparations for the launch of New Alinamin A were based on an

action plan that was ideally tailored to implement the marketing

strategy for this brand.


23/50

international products used in a

wide range of applications. Takeda is

therefore aggressively developing this

business overseas through its

subsidiaries in the United States,

Europe and Asia.

In the food additive business,

Takeda manufactures and sells a

variety of products such as flavor

enhancers and food texture

improvers. These includeRibotide, a

ribonucleotide flavor enhancer

originally developed by Takeda. Our

full product lineup and superior

quality assurance system have earned

us a high level of reliance among our

customers.

Results for fiscal 1998 were

affected by intense price competition

worldwide in addition to the

prolonged economic slump in Japan.

Consequently, net sales declined

from the previous fiscal year to 78.3

billion (US$647 million). A

continued decline in prices and

lower sales volume led to decreased

sales of vitamin C the main

product of the bulk vitamin business

although this decline was partially

offset by the beneficial effects of the

weaker yen. Despite unfavorable

market conditions, Takeda

maintained market share and sales

volume in the food additive business

thanks to relatively firm demand.

However, a sudden and sharp price

erosion of Ribotideresulted in

decreased food additive sales

revenue.

In fiscal 1999, though we foresee

keener competition in the industry,

we will work to strengthen our

competitive edge by pursuing better

efficiency in our production, sales

and research activities.

CHEMICAL PRODUCTS

The mission of Takedas Chemical

Products business is to contribute to

greater convenience in peoples lives

by supplying advanced polymer

materials based on our technological

strengths.

Main products include

intermediate materials for industrial

use such as polyurethane (PU)

resins, adhesives, toluene

diisocyanate (TDI), polyethers,

unsaturated polyester resins and

compounds, organic acids andsynthetic latexes.

Chemical Products segment sales,

which include sales of the Life-

Environment business, declined 6.0

percent year-on-year to 110.5

billion (US$913 million), due to the

prolonged economic recession in

Japan. Exports of TDI and sales ofadhesives increased, but depressed

building and construction activity in

Japan decreased sales of PU resins

for coating and unsaturated

polyester resins and compounds

mainly used in the housing industry.

In fiscal 1999, the Chemical

Products business will directcontinous efforts toward sales

expansion, R&D and production

efficiency. We will work to expand

sales of highly profitable products

including PU resins and adhesives.

Our research is focused on

developing eco-friendly newTakeda participates in such events as Food Ingredients Europe, held

in Frankfurt, Germany in November 1998.

2


24/50

products such as water-based resins,

PVC replacement materials, CFC-

free PU rigid foam systems and

recycling technologies. We plan to

launch new PU dispersions, foodpackaging adhesives without

purported endocrine disrupters, and

reactive hot melt adhesives. We will

also carry out capacity expansions of

and cost reductions for TDI and

maleic anhydride.

One of our strategies is to

strengthen our overseas activities.We are targeting a higher market

share for food packaging adhesives

in China and ASEAN countries and

starting their sales in Europe and the

United States. Expansion in the

export of TDI and synthetic latex for

gloves is also targeted.

AGRO(Plant Protection and Animal

Health Products)

Takedas Agro business is

aggressively working to

expand sales in its two

main product areas: plant

protection products and

animal health products.

Core plant protection

products include

insecticides such asPadan,

Bancoland Bestguard;

fungicides such asValidacin

andBlasin; and rice

herbicides such asAward,

Batl, Sheriff,Crush, The

One, and Longet. All of

these are proprietary products of

Takeda. In fiscal 1998, overseas sales

increased sharply

despite the economic

turmoil in Asia,

backed by higher

sales ofPadanand

Validacinand the

full- fledged start of

exports of the wheat

herbicide

sulfosulfuron. In

Japan, however, sales

were strongly

impacted by the

reduction of rice

fields, which is

decreasing the scale

of the domestic

agriculture industry.

The result was a moderate decline in

total sales of plant protection

products.

The animal health products

segment covers a broad range of

markets from veterinary medicines

to feed additives and drugs for

fisheries. Fiscal 1998 sales decreased

because of a rise in imports of

livestock products and greater

competi tion in the market for pet-

related products.

In the plant protection business,

Takeda plans to expand sales of

sulfosulfuron in major advanced

countries. We will also continue

developing world markets for TI-

435, an insecticide with a broad

spectrum of activity against

agricultural pests at low application

The Agricultural Research Laboratory screens plant protection

products for effectiveness at its greenhouses while working to

create breakthrough products.

22

Takedas maleic anhydride plant has introduced the

latest technology to detoxify exhaust gas.


25/50

rates.

With the need for

increased food production to

support the expanding world

population, continued

growth is foreseen in the

global market for both plant

protection and animal health

products. Takeda is well

prepared to meet global

market demand with a

research organization that is

steadily creating the seeds of

new products.

LIFE-

ENVIRONMENT

Takedas Life-Environment

business is dedicated to contributing

to the improvement of peoples lives

and the environment with products

such as activated carbon and

preservatives for wood care and

industrial use as well as

environment-related products. The

core mission of this business is to

solve environmental problems and

create comfortable living

environments in fields such as water,

air and housing.

In fiscal 1998, sales of activated

carbon for water puri fication

expanded. Sales ofXyladecor, which

is used for preservation and

beautification of wood, also

increased, particularly at consumer-

oriented home centers. However,

Takeda discontinued sales of several

products, including boron products.

As a result, Life-Environment sales

decreased slightly from the previous

fiscal year.

In the field of activated carbon,

we are focusing on strengthening

sales of highly functional, high-

value-added products such as

molecular sieving carbon; sales of

environment-related products such

as carbon for dioxin removal; and

marketing of exports in overseas

markets. In November 1998, Takeda

increased its ownership in Davao

Central Chemical Corporation, a

manufacturer of activated carbon

from coconut shells in the

Philippines, from 35 percent to 80

percent, making the company a

consolidated subsidiary.

In the field of wood preservatives,

Takeda is working toward the

development and

speedy market launch

of safer, easy-to-use

and environmentally

sound products for

such applications as

water-based paints and

ant-repellent systems

with minimal

environmental impact.

In addition, as new

housing starts are

forecast to remain

stagnant, we will focus

on cultivating new

sales routes to target

general users. Demand from this

sector has been increasing since fiscal

1998, reflecting steady growth in the

populari ty of gardening and do-i t-

yourself projects.

In environment-related fields, we

will promote faster development of

products that contribute to clean

environments. In fiscal 1998, we

launched two pollutant test kits,

which measure the concentration of

surfactants in water with a high

degree of sensitivity. New product

introductions planned for fiscal 1999

include additional pollutant test kits

and adsorbents to remove and

reclaim defined ions such as

fluorides or phosphates in sewage or

drainage water.

2

The Life-Environment Research Laboratory carries out a wide range

of research to improve the environment, including the development of

activated carbon technologies for eliminating offensive odors at thefacility.


26/5024

Yuzuru TakagiGeneral ManagerPlanning & Coordination

Corporate Planning Department

Ken MatsumotoGeneral ManagerGeneral Affairs & Personnel Department

Osamu Nishimura, Ph.D.General ManagerPharmaceutical Discovery Research

Division

Yasuhiro Sumino, Ph.D.General ManagerPharmaceutical Research Division

Yasuhiko Hamanaka, M.D., Ph.D.General ManagerPharmaceuti cal Development Division

Kiyoshi Kitazawa, Ph.D.General ManagerStrategic Development Department

Pharmaceuti cal Development Division

Shuji HiguchiManaging DirectorTakeda Europe Research and

Development Centre Ltd.

Mikihiko Obayashi, Ph.D.PresidentTakeda America Research and

Development Center Inc.

Makoto YamaokaGeneral ManagerMarketing Administration Department

Pharmaceutical Marketing Division

Katsumi NozawaGeneral ManagerEthical Products Marketing Management

DepartmentPharmaceutical Marketing Division

Naohide MuroPresidentConsumer Healthcare Company

Hiroshi Uchiyama

PresidentVitamin & Food Company

Yoshiro NamazuPresidentAgro Company

Atsuo Kobayashi, Ph.D.PresidentLife-Environment Company

Hiroshi Akimoto, Ph.D.General ManagerIntellectual Property Department

(as of J un e 29, 1999)

CHAIRMAN

Masahiko Fujino, Ph.D.

PRESIDENT

Kunio Takeda

SENIOR MANAGING DIRECTORS

Koichi Yanashita

Hideyuki Nagasawa

MANAGING DIRECTORSNobuto Nakamura, M.D., Ph.D.

Mitsuo Yashiro

DIRECTORS

Hiroshi Nagasaki

Hisayoshi Okazaki, Ph.D.General ManagerPharmaceutical Business

Development Department

Ken-ichi NishinoPresidentChemical Products Company

Teruji Ono

General ManagerLegal Department

Shozo NakamuraGeneral ManagerPharmaceutical Production Division

Nobutaka SuzukiGeneral ManagerPharmaceutical Marketing Division

Toshiyuki ArakiGeneral ManagerFinance & Accounting Department

Yoshihiro NaraiGeneral ManagerCorporate Planning Department

Yasuchika HasegawaGeneral ManagerPharmaceutical International

Division

FULL-TIME CORPORATE

AUDITOR

Kunio Ueshima

CORPORATE AUDITORS

Masao Ariyasu

Kiyoshi Taura

Naoaki Yoshii

Board of Directors, Auditors and Corporate Officers

Left to right: Ko i ch i Yanash i t a , Senior

M anagin g Di rector; Kun i o Ta k eda ,

President; Masah i ko Fu j i no , Ph .D .,

Chairman; and H i d ey u k i N aga sawa ,

Seni or Man aging Di rector

CORPORATE OFFICERS


27/50

FINANCIAL REVIEW

Net Sales Breakdown( Billion)

0

150

300

450

600

750

900

9998979695

Pharmaceut icalsBulk Vitamin & FoodChemical ProductsAgro Products an d Others

0

50

100

150

200

0

5

10

15

20

9998979695

Overseas S alesPercentage of Net Sales

2

Consolidated Sales and IncomeThe business environment surrounding the Takeda

Group grew more severe during fiscal 1998, the yearended March 31, 1999, due to the effects of global creditinstability and the Asian economic crisis. In the pharma-ceutical industry, Takedas principal business, a successionof large-scale mergers and acquisitions, especially bymajor companies in Europe and the United States, com-bined with borderless markets to usher in an era ofintense competition.

Amid these trends, the Takeda Group, which aims to bean R&D-driven international enterprise, is developing itsglobal operations and drawing on the strengths of eachgroup company to improve consolidated financial resultsand raise the value of the Company.

During fiscal 1998, Takeda continued to make rapidstrides in i ts global business. We established our own

marketing company in the United States and filed a NewDrug Application for diabetes treatment AD-4833(pioglitazone hydrochloride) in Europe and the UnitedStates.

The tough business environment in Japan continuedduring fiscal 1998 with no sign of economic recovery.Overseas, however, market conditions for ethical drugswere favorable, particularly in the United States.As a result, both net sales and income increased comparedwith the previous fiscal year.

Net sales increased 0.3 percent to 844.6 billion(US$6,980 million) as increased sales of ethical drugs in

overseas markets offset a decrease in domestic sales. Netsales to customers outside Japan totaled 175.2 bil lion(US$1,448 million), a year-on-year increase of 29.1percent, and accounted for 20.7 percent of total net sales,an increase of 4.6 percentage points from fiscal 1997.

In income categories, operating income increased 7.0percent to 142.2 billion (US$1,175 million), reflectingTakedas success in expanding sales of high-value-addedproducts and other factors. U.S. affi liate TAP HoldingsInc., accounted for by the equity method, achievedgrowth in sales of the proton pump inhibitor lansoprazole(U.S. brand name: Prevacid), an international strategic

product, which contributed strongly to a 9.3 percentincrease in income before income taxes and minorityinterests to 182.1 billion (US$1,505 million). As a result,net income increased 12.4 percent to 91.7 billion(US$758 mill ion).

Net income per share was 103.52 (US$0.86), 10.55higher than in the prior fiscal year. Furthermore, returnon shareholders equity increased to 10.6 percent from10.3 percent. Takeda increased cash dividends per share to29.00 (US$0.24) from 21.25 in fiscal 1997.

Segment Information

The Companys operations, as explained in Note 12 of

Overseas Sales( Billion; %)


28/50

Net Income and Net Income per Share( Billion; )

0

20

40

60

80

100

0

20

40

60

80

100

9998979695

Net In come

Net Income per Sh are

0

200

400

600

800

1,000

1,400

1,200

9998979695

26

Total Assets

( Billion)

the Notes to Consolidated Financial Statements, areclassified into four business segments: Pharmaceuticals,Bulk Vitamin and Food, Chemical Products and Other.

PharmaceuticalsIn keeping with its goal of being an R&D-driven

international enterprise, Takeda focused efforts in i tspharmaceutical business on creating and developing

original new drugs for the global market. At the sametime, the Company moved quickly to expand i ts market-ing bases in the United States and Europe.

In the United States, the worlds largest market forpharmaceuticals, we established our second marketingbase, Takeda Pharmaceuticals America, Inc., in May 1998.In Europe, we established Takeda Europe Research &Development Centre Ltd. in September 1998 in theUnited Kingdom, where regulatory affairs for theEuropean pharmaceutical market are centered.

In January 1999 in the United States, and in March1999 in Europe, we fi led a New Drug Application for

diabetes treatment AD-4833 (pioglitazone hydrochlo-ride). AD-4833, our newest international strategic prod-uct, was launched in August 1999 under the brand nameActosin the United States.

Following introductions in the United States andEurope, in June 1999 we began sales of hypertensiontreatment Blopressin Japan.

In Japan, where policies to contain healthcare costsmake market expansion difficult, Takeda successfullyexpanded sales of core products such as Leuplin, aluteinizing hormone-releasing hormone (LH-RH) analog,and Basen, a disaccharidase inhibitor for preventingpostprandial hyperglycemia in diabetes mellitus.However, factors such as the withdrawal from the marketof Avan, a brain-energy metabolism enhancer, resulted ina decrease in domestic pharmaceutical sales.

Outside Japan, sales of lansoprazole (brand name:Prevacid) in the United States contributed strongly tooverseas results.

Total net sales of the Pharmaceuticals business there-fore increased 2.9 percent, to 597.5 billion (US$4,938million), and operating income from this businessincreased 8.2 percent to 132.7 billion (US$1,097 mil-lion). The Pharmaceuticals business thus increased itsweighting in the overall business of the Takeda Group.

Bulk Vitamin and FoodIn April 1998, the U.S. manufacturing and marketing

subsidiaries merged to bolster earnings potential in theNorth American market. However, pr ice declines forvitamin C and Ribotideled to a decrease of 5.4 percent inBulk Vitamin and Food business sales to 78.3 billion(US$647 mill ion).

Although the Bulk Vitamin and Food business postedan operating loss of 0.6 billion (US$5 million), thisrepresented an improvement of 0.4 bil lion over the priorfiscal year, in part due to better performance at subsidiaryTakeda Food Products, Ltd.


29/50

Shareholders Equity & ROE

( Billion; %)

0

150

300

450

600

750

900

0

2

4

6

8

10

12

9998979695

Shareholders EquityROE (Return on Equity)

2

Chemical ProductsThe Chemical Products business, which includes the

Life-Environment business, further developed i tsoverseas presence in fiscal 1998 with the acquisition ofactivated carbon manufacturer Davao Central ChemicalCorporation in the Philippines. However, the economicslump in Japan reduced demand related to housing andautomobiles. Consequently, sales in the Chemical

Products business declined 6.0 percent to 110.5 billion(US$913 million), and operating income fell 13.4percent to 6.8 bill ion (US$56 million).

Other BusinessesIn the Agro business, sales of agricultural chemicals

and animal health products decreased due to weakdomestic demand. As a result, net sales of otherbusinesses decreased 4.2 percent to 58.2 billion(US$481 million), and operating income dropped 8.1percent to 3.2 billion (US$26 million).

Financial Position and LiquidityAs of March 31, 1999, total assets were 1,326.9 bil-lion (US$10,966 million), an increase of 2.4 percentfrom a year earlier resulting primarily from an increasein marketable securities and investment securities. Totalliabilities, the sum of current and long-term liabil it ies,decreased 11.1 percent to 389.7 billion (US$3,221million) as conversion into shares of an issue of 1.9percent unsecured convertible bonds due in 1998reduced the current portion of long-term debt and

income taxes payable decreased.Higher retained earnings resulted in a 9.4 percent

increase in shareholders equity to 907.3 billion(US$7,498 million), which accounted for 68.4 percent oftotal assets, compared to 64.0 percent at March 31,1998. Shareholders equity per share increased 76.79from a year earlier to 1,020.35 (US$8.43).

Net cash provided by operating activities decreased

4.0 bil lion to 104.9 bil lion (US$867 mill ion). Thisdecrease in cash flow occurred despite increased netincome as accrued expenses and income taxes payabledecreased.

Net cash used in investing activities increased 96.6billion from the previous fiscal year to 169.3 billion(US$1,399 million). This was due mainly to an increasein purchases of marketable securities.

Net cash used in financing activities increased 3.2bill ion to 22.8 bil lion (US$189 million), primari lybecause of the increase in cash dividends paid for thefiscal year.

Cash and cash equivalents at the end of the yeardecreased 85.9 billion to 313.7 billion (US$2,593mill ion) from a year earlier.

Takeda will continue working to improve results anddeploy capital efficiently in order to maintain a soundfinancial structure.

Year 2000 (Y2K) IssueTakeda recognizes the Y2K issue as a critical

management concern, and has charged a director withresponsibili ty for ensuring that Takeda and i ts groupcompanies deal wi th it effectively. To prevent a materialadverse impact caused by external entities such assuppliers on its business operations, the Company isalso working to ensure their Y2K readiness.Remediation and replacement of information systemsand equipment have been progressing according to plan,with remediation and replacement of all critical systemsscheduled for completion in September 1999. TheCompany has also prepared a comprehensivecontingency plan detailing responses to foreseeablerisks. Expenses related to Y2K remediation are notexpected to have a material impact on the operations orresults of the Takeda Group.

Legal ProceedingsThe Companys 100-percent-owned subsidiary,

Takeda Vitamin & Food USA, Inc. (TVFU), whichmanufactures and sells vitamin bulks in the U.S.A.,submitted the documents regarding its vitamin businessto the U.S. Department of Justice according to certainsubpoena issued in May 1998.

The Company and TVFU are among co-defendantswith other companies in class-action law suits broughtin the U.S.A. by plaintiffs claiming that they suffereddamages from an alleged conspiracy of price fixing andmarket allocations in the worldwide vitamins market.


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Takeda C hemical Industries, Ltd. a nd Consolidated Subsidiaries

ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA

28

1999 1998 1997 1996

For the years ended March 31:

Net sa les ............................................................................. 844,643 841,816 838,824 801,341

Operating income............................................................... 142,220 132,952 127,350 112,707Income before income ta xes and minori ty interests . . .. . .. . 182,142 166,649 147,985 125,787

In come ta xes....................................................................... 89,019 83,368 75,094 64,837

Minor ity int erest s .............................................................. 1,368 1,671 1,508 1,106

Net income.......................................................................... 91,755 81,610 71,383 59,844

Capital investments........................................................... 29,241 34,091 30,741 30,358

Depreciat ion a nd a mortiza tion.. . . . .. . . . .. . . .. . . . .. . . . .. . . . .. . . .. . . . .. . . 32,651 32,763 31,473 33,255

Resea rch a nd development costs . . . . .. . . .. . . . .. . . .. . . . .. . . . .. . . . .. . . .. . 77,487 79,039 71,754 68,006

P er share am ounts (Yen an d U.S. dollars)

(See Note 11 to consolida ted fina ncial st a tement s):

Net in come ...................................................................... 103.52 92.97 81.52 68.35

Cash dividends................................................................ 29.00 21.25 17.25 15.00

At March 31:

Cu rr ent a sset s .................................................................... 913,263 877,808 826,288 787,615

P roperty, pla nt a nd eq uipment .. . . .. . . . .. . . .. . . . .. . . .. . . . .. . . . .. . . . .. . . 224,229 232,092 229,400 231,532

Invest ment s a nd other a ssets . . . . .. . . . .. . . .. . . . .. . . .. . . . .. . . . .. . . . .. . . .. . 189,507 186,302 165,087 153,086

Tota l a sset s......................................................................... 1,326,999 1,296,202 1,220,775 1,172,233

Cu rr ent lia bilit ies .............................................................. 280,058 324,735 292,873 299,032

Long -ter m lia bilit ies .......................................................... 109,705 113,920 144,198 147,825

Minor ity int erest s .............................................................. 29,863 28,166 26,565 25,467

Sh a reh olders equ ity .......................................................... 907,373 829,381 757,139 699,909

Num ber of sha reh olders .................................................... 54,059 59,008 71,172 81,278

Num ber of employees ......................................................... 15,776 16,443 16,586 17,258

Notes: 1. The U.S . dollar a mounts in th is report represent tra nsla tions of Ja panese yen, for convenience only, at the ra te of 121= US $1, the approximat eexchan ge rat e at March 31, 1999.

2. In the year ended March 31, 1995, 35 previously unconsolidated subsidiaries accounted for by the equity method were consolidated. As a result, thenumber of consolidated subsidiaries t otaled 47 and 24 companies were a ccounted for by t he equity m ethod.

Years ended March 31


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Thousands of

Millions of yen U .S . dolla rs (Not e 1)

1995 1994 1993 1992 1991 1990 1989 1999

771,667 727,845 720,140 709,686 691,409 697,915 689,381 $ 6,980,521

95,285 88,434 76,675 67,963 70,297 78,145 87,931 1,175,372107,145 103,210 93,029 85,727 104,998 92,767 97,297 1,505,306

54,424 54,520 43,827 50,603 58,902 54,849 57,173 735,694

1,291 1,064 1,168 1,288 1,607 1,057 1,270 11,306

51,430 47,626 48,034 33,836 44,489 36,861 38,854 758,306

36,337 42,965 37,953 39,627 45,726 38,179 29,032 241,661

29,768 27,922 27,508 26,199 23,718 21,185 17,805 269,843

67,159 62,934 62,277 59,742 53,388 51,163 45,336 640,388

58.74 54.43 54.98 38.74 50.98 42.28 44.77 $0.8614.00 13.00 12.00 12.00 12.00 10.00 10.00 0.24

721,814 693,837 662,777 641,275 645,414 659,782 621,447 $ 7,547,628

241,506 210,236 196,441 188,145 182,200 163,221 123,343 1,853,132

147,428 148,350 147,427 149,134 135,385 129,854 141,846 1,566,174

1,110,748 1,052,423 1,006,645 978,554 962,999 952,857 886,636 10,966,934

275,636 271,498 249,853 261,689 273,902 304,478 277,677 2,314,529

157,323 145,657 158,628 158,081 155,422 151,436 147,296 906,653

24,666 21,407 20,508 19,484 18,342 16,846 12,606 246,802

653,123 613,861 577,656 539,300 515,333 480,097 449,057 7,498,950

87,897 89,384 88,446 89,349 87,329 82,282 72,873

17,580 15,792 15,781 15,497 15,210 15,137 13,675


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33/503

Thousands of


LIABILITIES AND SHAREHOLDERS EQUITY 1999 1998 1999

Current liabilities:

B a nk loa ns (Note 5)................................................................................. 9,361 9,509 $ 77,364

Current portion of long-term debt (Note 5)............................................ 2,119 24,077 17,512

Notes and a ccounts paya ble

Tra de notes ........................................................................................... 11,277 12,373 93,198

Tra de account s ..................................................................................... 80,154 78,287 662,430

Due t o unconsolida ted subsid ia ries a nd a ffiliat es.. . . .. . . . .. . . . .. . . .. . . . .. . . . .. 21,603 20,101 178,537

Tota l ....................................................................................... 113,034 110,761 934,165

Accrued expenses .................................................................................... 68,464 76,014 565,818

In come ta xes pa ya ble .............................................................................. 38,698 54,902 319,818

Ot her curr ent lia bilit ies .......................................................................... 48,382 49,472 399,852Total current liabilities........................................... 280,058 324,735 2,314,529

Long-term liabilities:

Long -ter m debt (Note 5).......................................................................... 9,858 10,896 81,471

Ret irem ent benefit s (Note 6) .................................................................. 93,961 96,909 776,537

Reserve for SMON compensation (Note 7)............................................. 5,886 6,115 48,645

Total long-term liabilities....................................... 109,705 113,920 906,653

Minority interests .................................................................................. 29,863 28,166 246,802

Commitments and contingencies (Note 13)

Shareholders equity (Notes 8 a nd 14):

Common st ock aut horized, 2,400,000,000 sha res;

issued and outsta nding sha res with par va lue of 50 per share:

Ma rch 31, 1999 889,272,395 sha res

Ma rch 31, 1998 878,991,506 sha res................................................. 63,540 52,468 525,124

Additi ona l pa id-in capit a l ....................................................................... 49,637 38,578 410,223

Lega l reser ve ........................................................................................... 14,250 12,804 117,769

Ret a ined ea rn ing s ................................................................................... 779,946 725,531 6,445,834

Total shareholders equity ..................................... 907,373 829,381 7,498,950

TOTAL ....................................................................................................... 1,326,999 1,296,202 $10,966,934


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CONSOLIDATED STATEMENTS OF INCOME

32

Thousands of


1999 1998 1997 1999

Net sales (Notes 3 a nd 12)........................................................... 844,643 841,816 838,824 $6,980,521

Operating costs and expenses (Note 12):

Cost of sa les (Note 3).................................................................. 435,787 443,292 449,228 3,601,546

Selling, genera l a nd a dminist ra tive (Note 9).. .. . . . .. . . . .. . . . .. . . .. . . . .. 266,636 265,572 262,246 2,203,603

Tota l .......................................................................... 702,423 708,864 711,474 5,805,149

Operating income (Note 12)...................................................... 142,220 132,952 127,350 1,175,372

Other income (expenses):

Int erest a nd dividend income ... . .. . . .. . . . .. . . . .. . . . .. . . .. . . . .. . . .. . . . .. . . . .. . . . . 8,603 6,677 5,783 71,099

In ter est expen se.......................................................................... (1,059) (1,808) (2,257) (8,752)

Eq uity in ear nings of unconsolidated

subsidia ries a nd a ffiliat es .. . .. . . . .. . . . .. . . . .. . . .. . . . .. . . .. . . . .. . . . .. . . . .. . . .. . . . . 35,981 24,193 17,270 297,364G a in on sale of investment in a n a ffiliat e .. . . .. . . . .. . . .. . . . .. . . . .. . . . .. . . . 4,833

Loss on sales and disposals of property,

plan t a nd equipment .. . . .. . . .. . . . .. . . .. . . . .. . . . .. . . . .. . . .. . . . .. . . .. . . . .. . . . .. . . . .. . . (332) (666) (37) (2,744)

Exchange gains (losses).............................................................. (734) 1,328 968 (6,066)

Ot her net ................................................................................ (2,537) (860) (1,092) (20,967)

Tota l .......................................................................... 39,922 33,697 20,635 329,934

Income before income taxes and minority interests......... 182,142 166,649 147,985 1,505,306

Income taxes (Note 10):

Cu rr ent ........................................................................................ 78,014 93,088 78,219 644,744

Defer red ...................................................................................... 11,005 (9,720) (3,125) 90,950

Tota l .......................................................................... 89,019 83,368 75,094 735,694

Income before minority interests.......................................... 93,123 83,281 72,891 769,612

Minority interests...................................................................... 1,368 1,671 1,508 11,306

Net income................................................................................... 91,755 81, 610 71, 383 $ 758,306

Yen U .S. dolla rs (Not e 1)

Amounts per common share (Note 11):

Net income .................................................................................. 103.52 92.97 81.52 $0.86

Ca sh d ividends a pplica ble to t he yea r .. . . .. . . . .. . . . .. . . . .. . . .. . . . .. . . .. . . . .. 29.00 21.25 17.25 0.24

See notes to consolidated financial sta tements.

Year s ended Ma rch 31, 1999, 1998 and 1997


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Takeda Chemical Industr ies, Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

3

Thousands of


1999 1998 1997 1999

Common stock:

B a la nce, beginn ing of yea r ......................................................... 52,468 48, 948 48, 942 $ 433,620

Sh a res issued upon convers ion of debt ...................................... 11,072 3,520 6 91,504

B a la nce, end of yea r ................................................................... 63,540 52, 468 48, 948 $ 525,124

Additional paid-in capital:


In crea se due to conversion of debt ............................................. 11,059 3,515 6 91,397

B a la nce, end of yea r ................................................................... 49,637 38, 578 35, 063 $ 410,223

Legal reserve:


Tra nsfer from r eta ined ea rnin gs . . . . .. . . .. . . . .. . . .. . . . .. . . . .. . . . .. . . .. . . . .. . . . 1,446 569 11,951B a la nce, end of yea r ................................................................... 14,250 12, 804 12, 235 $ 117,769

Retained earnings:

B a la nce, beginn ing of yea r ......................................................... 725,531 660,893 603,675 $5,996,124

Net income .................................................................................. 91,755 81,610 71,383 758,306

Cash dividends paid; 24.75 ($0.20) 1999,

18.25 1998 a nd 15.75 1997 (per sh a re)........ ........ ....... (21,885) (16,001) (13,792) (180,868)

B onuses to dir ectors a nd corporat e a uditors .. . .. . . . .. . . . .. . . . .. . . .. . . . .. (239) (402) (373) (1,975)

Tra nsf er to lega l reser ve ............................................................ (1,446) (569) (11,951)

Effect on beginning reta ined earnings of cha nging from

the equit y meth od to the cost met hod of a ccounting fora n investm ent in a cert a in former affilia te . . . . .. . . .. . . . .. . . .. . . . .. . . . . (13,770) (113,802)

B a la nce, end of yea r ................................................................... 779,946 725,531 660,893 $6,445,834

See notes to consolidated financial sta tements.

Year s ended Ma rch 31, 1999, 1998 and 1997


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CONSOLIDATED STATEMENTS OF CASH FLOWS

34

Thousands of


1999 1998 1997 1999

Operating activities:Net income ............................................................................................................................ 91,755 81, 610 71, 383 $ 758,306Adjustment s to reconcile net income to net ca sh provided by operat ing a ctivities:

Depreciation an d amortiza tion ........................................................................................ 32,651 32,763 31,473 269,843Loss on sales an d disposals of property, plant and equipment...................................... 332 666 37 2,744Pr ovision for deferred income ta xes ................................................................................ 11,005 (9,720) (3,125) 90,950Undist ributed earnings of unconsolidated subsidiaries and affiliat es .......................... (7,998) (16,370) (16, 252) (66,099)Ga in on sale of investment in an affiliat e ....................................................................... (4,833) Cha nges in assets a nd liabilities, net of effects from consolidating

a former affiliat e (Note 2):Decrease in notes an d accounts receivable ............................................................ 4,676 18,312 10,350 38,645Decrease (increase) in inventories........................................................................... (718) (4,643) 802 (5,934)Decrease (increase) in other current assets ............................................................ (384) 342 1,458 (3,174)Decrease (increase) in other assets ......................................................................... (4,853) (13) 3,553 (40,107)Increase (decrease) in notes a nd a ccounts pa yable ................................................ 2,273 (6,784) 2,140 18,785Increase (decrease) in accrued expenses ................................................................. (7,550) 3,593 5,527 (62,397)Increase (decrease) in income t axes paya ble .......................................................... (16,204) 12,042 (111) (133,917)Increase (decrease) in other current liabilities....................................................... 1,043 1,839 (13,175) 8,620Decrease in liability for retirement benefits........................................................... (2,948) (892) (1,079) (24,364)Increase in minority interests.................................................................................. 1,697 1,167 1,098 14,025Other ......................................................................................................................... 202 (98) (21) 1,669

Net cash provided by operating activities........................................... 104,979 108,981 94,058 867,595

Investing activities:P ayment for purcha ses of property, plant and equipment................................................. (28,932) (33,936) (31, 745) (239,107)P roceeds from sales of property, plant and equipment ...................................................... 1,085 89 2,492 8,967P ayment for purchases of investment securities ................................................................ (8,652) (337) (3,540) (71,504)P roceeds from sale of invest ment in a n a ffiliate................................................................. 5,488 P roceeds from sales of investm ent securities...................................................................... 1,199 1,350 911 9,909Decrease (increase) in investments in a nd ad vances to

unconsolidated subsidiaries a nd affiliat es ........................................................................ 184 (78) 17 1,521Net increase in mar ketable securities ................................................................................. (134,187) (40,191) (13, 175) (1,108,984)Cash paid for acquiring a majority interest in a former affiliate,net of cash a nd cash equivalent s from consolidating t his subsidiary .............................. (5,078)

Net cash used in investing activities..................................................... (169,303) (72,693) (45, 040) (1,399,198)

Financing activities:Redemption of bonds ............................................................................................................ (215) (500) (600) (1,777)P roceeds fr om issuance of long-term debt ........................................................................... 2,256 2,708 1,995 18,645

Repayment of long-term debt ..............................................................

Annual Report - Takeda

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