TOWA PHARMACEUTICAL CO., LTD.

Business Details

Comprises Towa Pharmaceutical (the parent company) and domestic consolidated subsidiaries including Jaydorf Pharmaceutical, Daichi Kasei, Green Capsule Pharmaceutical, and Sansei Pharmaceutical. Towa Pharmaceutical sells generic pharmaceuticals it manufactures in-house to medical institutions, pharmaceutical wholesalers, and agents via its sales offices. Domestic sales for FY2026 (ending March 2026) totaled ¥216,976 million (up 5.3% year on year), with increased production volume and higher unit prices driving revenue growth. On the other hand, a deterioration in business mix due to a decline in Sansei Pharmaceutical's new application business weighed on segment profit.

Recent Overview

Sansei Pharmaceutical's goodwill impairment of ¥14,729 million directly hit net income; the parent company posted higher revenue

In the Domestic Segment for FY2026 (ending March 2026), Towa Pharmaceutical achieved net sales of ¥216,976 million (up 5.3% year on year), driven by increased production volume and an improved sales mix resulting from its pricing strategy and expanded sales of supplementary-listed products. However, the cost of sales ratio rose due to a deteriorating business mix from a decline in Sansei Pharmaceutical's new application business, and segment profit was limited to ¥27,097 million (down 0.4% year on year). Furthermore, following a reassessment of Sansei Pharmaceutical's future cash flows, the company recorded a goodwill impairment loss of ¥14,729 million (calculated based on value in use using a discount rate of 7%) as an extraordinary loss. The Yamagata Plant's third solid dosage form building completed the startup of all equipment in October 2025 and began full-scale operation, increasing the combined annual production capacity of the three plants to 17.5 billion tablets from fiscal 2026 onward. In addition, in January 2026, the company entered into a basic agreement with Otsuka Pharmaceutical for strategic collaboration in pharmaceutical manufacturing.

Key Products

Growth Drivers

• Expansion of sales volume at Towa Pharmaceutical (the parent company) due to increased production volume (combined annual production capacity of the three plants increased to 17.5 billion tablets following the full-scale operation of the Yamagata Plant's third solid dosage form building)
• Policy support for generic pharmaceutical volume share targets (80% or more in all prefectures by the end of fiscal 2029) and value share targets (65% or more)
• Promotion of the shift to generic pharmaceuticals through the introduction of "selective treatment for long-listed products" starting October 2024 (generic pharmaceutical volume share was 90.0% in the October-December 2025 quarter)
• Improved sales mix and higher unit prices through pricing strategy and expanded sales of recently supplementary-listed products
• Continued listing of new products for reimbursement pricing (742 products across 316 active ingredients) and the launch of "Rivaruen® LA Patch," Japan's first such product
• Securing manufacturing capacity and establishing mutual backup arrangements through collaboration with Otsuka Pharmaceutical, Adragos Pharma Kawagoe, and Sanwa Kagaku Kenkyusho
• Price support for certain products through the raising of minimum drug prices and re-pricing of unprofitable products in the fiscal 2026 drug price revision

Risks

• Price reduction pressure from the annual drug price revisions (revised every year since fiscal 2021)
• Continued decline in confidence in generic pharmaceuticals and ongoing supply concerns stemming from quality issues since 2020
• Risk of deteriorating performance at Sansei Pharmaceutical (a goodwill impairment loss of ¥14,729 million was recorded in FY2026 (ending March 2026), and the deterioration in business mix is continuing)
• Rising procurement costs for active pharmaceutical ingredients and raw materials (price increases and raw material cost surges associated with geopolitical risk)
• Increased fixed costs and depreciation expense associated with investment in expanding production capacity (depreciation expense of ¥15,738 million in FY2026 (ending March 2026), up 17.6% year on year)
• Costs arising from policy responses aimed at industry restructuring and resolving the low-volume, multi-product structure (industry restructuring for generic pharmaceuticals is explicitly promoted in the 2025 Basic Policy)
• Changes in the competitive environment due to new authorized generic (AG) products being priced the same as the original brand-name drugs upon listing from October 2026 onward