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Internal Message from Our CEO, George Nakayama【The Fourth 5-Year Business Plan of the Daiichi Sankyo

I would like to deliver a summary of the Daiichi Sankyo Group’s new 5-Year Business Plan (5YBP), which was announced on March 31.

Last year, we decided to refocus our strategy on our innovative business, and away from a “global hybrid business.” Based on that new direction, we have created a new 10 year vision for the Daiichi Sankyo Group, and formulated a new 5YBP.

By the year 2025, the Daiichi Sankyo Group is going to become a "Global Pharma Innovator with Competitive Advantage in Oncology," so the new 5YBP period will be an important first five years for the Group to realize our 2025 vision. Consequently, “Transformation” is a key message for the new 5YBP, describing the strong will with which we will transform our business structure drastically to achieve that vision.

The new 5YBP is the basis of our activities from FY2016. I expect all of you to understand the background and objectives laid out in the new 5YBP and make best efforts as teams and as individuals to achieve our vision and goals.

 

■ Review of the Past

First, I would like to look back on our past key objectives and initiatives following the establishment of Daiichi Sankyo.

Since the founding of the Daiichi Sankyo Group, we have aimed to be a “Global Pharma Innovator,” carrying out our mission, "To contribute to the enrichment of quality of life around the world through the creation of innovative pharmaceuticals, and through the provision of pharmaceuticals addressing diverse medical needs".

Although the launch of our oncology business and the creation of a global, top-class pipeline are still underway, we have fully achieved our target for the expansion of our business base in Japan and the maximization of the Olmesartan franchise. We have also seen some degree of progress in establishing a thrombosis franchise through prasugrel and edoxaban, and establishing industry best operational efficiency.

However, regarding “the advancement of a Global Hybrid Business model,” within the third Mid-term Business Plan period we made a major decision to separate Ranbaxy from the Group and move away from such a business model.

 

2025 Vision

After in-depth discussions among management based on an analysis of the current business environment and company situation and capabilities, we decided to aim for the Daiichi Sankyo Group becoming a "Global Pharma Innovator with Competitive Advantage in Oncology." That means we will shift from a company focused on cardiovascular diseases, such as hypertension, to a global company with innovative products, changing the standards of care (SOC) in specialty areas, such as oncology.

The environment surrounding us is changing at an extremely fast speed. When we discuss the long-term strategies and visions, we have taken into consideration environmental changes, such as the growth in the market of drugs commonly prescribed by hospitals and specialists, the apparent expansion of innovative new drugs that bring about revolutionary changes in SOC, and the varied drug shares in respective countries and regions due to differences in regulatory and insurance systems. In addition, we also incorporated aims to realize shareholders’ value through highly efficient management into the 2025 vision .

 

■ Aiming for Change in Management Policy

We defined the new 5YBP as the plan to realize the “Transformation” of the Daiichi Sankyo Group business structure to support the 2025 vision. Here are the two major business challenges that we will tackle in next 5 years.

Business Challenge 1. Grow beyond FY2017 LOE

Business Challenge 2. Establish Foundation of Sustainable Growth

Fourth 5-year Business Plan

■ Targets for FY2020

First, I would like to indicate the goals for FY2020. Our numerical targets for FY2020 are as follows: sales revenue of 1.1 trillion yen; operating profit of 165 billion yen; and ROE of 8% or more.

At the same time, we will increase the value of our late-stage pipeline and aim to have 3-5 products that will be ready for market launch within the next five years, by FY2020, and which can generate peak sales of more than 100 billion yen.

Business Challenge 1. Grow beyond FY2017 LOE

? Revenue recovery

Through the rapid expansion of edoxaban, growth of major Japanese products, and growth of the Luitpold business, we aim to overcome the revenue decrease associated with patent expirations and NHI price cuts in Japan to achieve 940 billion-yen rebound in revenue in FY2017.

Based on its unique product profile, such as high safety and convenience (once daily), evidence based on high-quality study results, and dose adjustments according to patient characteristics, we will rapidly increase edoxaban sales in Japan and Europe and achieve our sales target of 69 billion yen in FY2017.

In Japan, in addition to Lixiana, we will accelerate the growth of our major products (Nexium, Memary, Pralia, Ranmark, Efient, Teneria), and greatly improve sales revenue, with a target of 226 billion yen in FY2017 (excluding the impact of the NHI price cut).

With regard to Luitpold, the sales revenue target is 120 billion yen for FY2017 by growing Injectafer (ferric carboxymaltose injection) by 20 - 30% each year and the rapid market launches of other generic injectables,.

 

? Profit generation

In addition to the increase in gross profit due to the increase in sales revenue, our initiatives to improve our profit-generating capabilities through making reductions in costs, etc., will allow us to obtain an operating profit of 100 billion yen in FY2017.


In addition to the cost-reduction measures conducted up to FY2015, we will consider further policies to reduce costs and promote optimization of the Group. Moreover, we plan to continue to optimize our supply chain on a global level as well as further enhance our procurement function.

Business Challenge 2. Establish Foundation of Sustainable Growth

I would like to explain our strategy to reach our targets for FY2020.

Global products "growth of edoxaban and launch and establishment of our oncology business"

Strategy 1: In order to develop edoxaban as our mid-term growth driver, we will take concrete steps in our global market launch strategy, continue to appeal to edoxaban’s unique characteristics, and proceed with creating new evidence to strengthen its product profile. Thus, we will achieve edoxaban sales revenue of 120 billion yen by FY2020.

Strategy 2: We aim to establish our oncology business and earn 40 billion yen in FY2020, and as a core business of the Group, we aim to further increase sales revenue to a 300 billion yen level in FY2025. In addition to the market launch of four products (quizartinib, tivantinib, pexidartinib, and patritumab) by FY2020, we will promote the steady development of current early-stage projects for them to become major products in 2025. Moreover, we plan to further accelerate acquisitions and alliances to incorporate external resources into our capabilities, while placing a priority on investments to strengthen our oncology business.

Regional value products "growth and expansion of Japanese and US businesses"

Strategy 3: We aim to become the top sales company in Japan with our strong innovative franchise other three businesses (vaccines, generics, and OTC), and through future opportunities to meet various medical needs, such as prevention, self-medication, and treatment .

Strategy 4: We aim to launch CL-108 in FY2017 and mirogabalin in FY2019 in the United States. In FY2020, we aim to increase the sales revenue of our DSI pain franchise to 100 billion yen or more. Furthermore, through the growth in sales from Injectafer and generic injectables, Luitpold aims to achieve sales revenue of 150 billion yen or more.

Value for Pipeline “Continuously Generate Innovative Medicine Changing Standards of Care (SOC)”

Strategy 5: We focus our R&D activities on our top priority field, oncology, and the next-generation disease targets: pain, diseases of the central nervous system, heart failure, kidney failure, and rare diseases. In addition, we will ensure that the transformation of our R&D organization with a Bioventure model this April will lead to an acceleration of research and improvement in productivity.

Highly Efficient Management "Realization of process excellence as part of profit generation"

Strategy 6: During the period of this 5YBP, we plan to continue to optimize our supply chain on a global level as well as strengthen our procurement function. At the same time, we will generate profit by major cost reductions and optimization of the entire Group based on a review of our cost of goods sold, selling, general and administrative expenses, and research and development expenses.

 

 ■ Conclusion

The above is a summary of the new 5YBP. We will continue to promote better understanding of the 5YBP in various ways so that all employees can be confident that they can put it into action. Moreover, on April 6, we held the Daiichi Sankyo Group Senior Management Meeting, in which the DS directors, Group company presidents, and other senior members came together to confirm a common awareness of the new 5YBP.

I'd like to request that each of you first understand well each unit or department’s business plan. Then strive to always stay aware of what you must do to be able to contribute to the realization of your own unit or department’s plan, and take appropriate actions based on that aim.

We are not simply passively preparing for the approaching future. Rather, we are proactively taking action with our own hands to create the future we desire. In order for us to see concrete results in our work, let us all have a strong motivation to achieve our objectives, work autonomously, not leave issues for others, and continue the PDCA cycle with the aim of solving problems and achieving our objectives by working closely with our colleagues.

I believe that if all members of the Daiichi Sankyo Group, including the management team, can successfully work together and increase our strategy implementation capabilities, we will invariably succeed in achieving our business targets for 2020. Let us all move forward and aim to achieve robust growth as we focus on our 2025 goal of becoming a "Global Pharma Innovator with Competitive Advantage of Oncology."

2016-04-14

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