Dainippon Sumitomo Pharma 2006 Annual Report to Shareholders, 'True Quality, Our New Beginning'

JCN Newswires, Sept 21, 2006

Osaka, Japan, Sept 21, 2006 - (JCN Newswire) - Dainippon Sumitomo Pharma Co., Ltd. is pleased to present its Annual Report to Shareholders for the fiscal year ended March 31, 2006. DSP was formed in October 2005 through a merger of Dainippon Pharmaceutical and Sumitomo Pharmaceuticals, based on a firm conviction that this move would allow the two companies to capture significant synergies by sharing a common management philosophy, business strategies and sense of urgency.

DSP reported large increases in both net sales and earnings for the year, reflecting the greater scale of operations in the second half of the fiscal year following the merger as well as the benefits of certain merger-derived synergies.

To learn more about Dainippon Sumitomo Pharma, and download the new 2006 Annual Report, please visit the Company IR website at http://www.ds-pharma.co.jp/english/index.html

Dainippon Sumitomo Pharma 2006 Annual Report: 'True Quality, Our New Beginning'

Chairman Yasuo Okamoto and President Kenjiro Miyatake, in their 2006 Message to Shareholders, explain that, "Together with the rapid realization of integration synergies, Dainippon Sumitomo Pharma aims to actualize its vision of becoming 'an innovative pharmaceutical company with a strong market presence'."

Merger Objective and Forecast Synergies

"In October 2005, DSP commenced operations anew following the merger of Dainippon Pharmaceutical Co., Ltd. and Sumitomo Pharmaceuticals Co., Ltd. To remain competitive amid the increasingly challenging pharmaceutical business environment, it is essential that we strengthen our domestic earnings base and R&D capabilities, while achieving global business expansion. The decision to proceed with the merger reflected our mutual belief that significant synergies could be captured through our commonalities in management philosophy, business strategy and awareness of the urgency for change.

Following the merger, we have focused on expanding DSP's domestic market presence through our network of 1,500 MRs (Medical Representatives) - which now provides us with nationwide sales coverage - and the introduction of a specialist MR system in specialist fields, such as CNS (the central nervous system). DSP has also been pursuing cost synergies through reductions in personnel costs; increasing drug development efficiency by implementing a Project System and conducting prioritization evaluations of projects; the unification of procurement operations; and the consolidation and closure of business sites.

Furthermore, it is anticipated that the fusion of different corporate cultures and histories, as well as their respective philosophies and techniques, will continue to be a significant source of stimulus for new ideas. Through the rapid realization of marketing, cost and knowledge synergies, a strengthened domestic operating base, and the careful consideration and pursuit of concrete initiatives to expand overseas operations, we aim to actualize our vision for DSP as 'an innovative pharmaceutical company with a strong market presence'.

Operating Results in the Fiscal Year Ended March 31, 2006

DSP reported large increases in both net sales and earnings in the fiscal year ended March 31, 2006, reflecting the greater scale of operations in the second half of the fiscal year following the merger as well as the benefits of certain merger-derived synergies. Net sales were 245.8 billion yen, up 40.4% year on year; operating income was 28.9 billion yen, up 149.3%; and net income was 15.4 billion yen, an increase of 122.1%. On the basis of comparing the simple sums of the results of the merged companies, net sales were up 0.2% at 318.2 billion yen, operating income increased 12.9% to 44.7 billion yen, and net income rose 11.6% to 25.3 billion yen. Based on these results we are pleased to say that DSP has made a strong start without any disruptions caused by the merger.

Vision for DSP

By leveraging innovative and creative R&D capabilities, superior quality and manufacturing techniques that engender trust in our products, and one of Japan's leading domestic marketing capabilities to provide accurate and timely drug information, DSP is committed to doing its utmost to satisfy people's desire to lead healthy and fulfilling lives. It is furthermore our resolve to meet the expectations of all stakeholders by delivering sustained growth in corporate value through constant business development.

In an extended interview with the President, Mr. Miyatake speaks at length on issues including basic strategy for succeeding in an increasingly competitive environment, the progress of integration since the merger, marketing strategy for the domestic market, R&D strategy towards overseas business development, distribution policies, and the Company's philosophy and approach to corporate governance.

Mr. Miyatake concludes, "I believe that fiscal 2007 heralds the true beginning of DSP and will be a highly significant year. Since the announcement of the merger, I have stated both publicly and within the Company that my goal is to make DSP a company that provides aspirations and hope to younger people. In this context, the Mid-term Corporate Plan Development Department - which was established this May - brings together both younger and mid-career employees from each of the company's various divisions and other departments to formulate a mid-term corporate plan based on a lively exchange of views and opinions. The new mid-term corporate plan will cover the three-year period from the fiscal year ending March 31, 2008 to March 31, 2010 and is anticipated to be completed within the current fiscal year."