Medium- to Long-Term Vision as a Total Healthcare Company
The Otsuka group’s corporate philosophy is “Otsuka-people creating new products for better health worldwide.” As a total healthcare company, Otsuka aims to support the health of people across the world down to local communities through the provision of products, services, and information—in other words, to contribute to the well-being of society as a whole. This corporate philosophy has been our constant and towering aspiration since our humble beginnings in Tokushima in 1921.
Today, the environment surrounding us is rapidly changing, and a variety of phenomena are emerging that will have a significant impact on society. These include climate change, women’s empowerment, declining birthrates, aging societies, infectious diseases, scientific advancements, and technological innovations such as AI. The implications inherent in each will have a significant bearing on our business strategies and product development, so it is essential that we understand and adapt to them.
Based on this recognition, the 4th Medium-Term Management Plan (MTMP) announced in June 2024 identifies three social issues on which the Otsuka group will focus its efforts: the global environment, women’s health, and aging societies with declining birthrates, outlining our ideal impacts for 2035. To achieve our goals in these areas, the Otsuka group will develop therapies aimed at personalized medicine and overcoming diseases, deliver new health value by utilizing personalized health data and digital technologies, and propose health solutions tailored to life stages and adapted to social changes. Under the concept of total healthcare, we have covered processes from diagnosis to treatment through the Pharmaceutical Business and from prevention to health promotion through the Nutraceutical Business. Additionally, we will work on the creation of new, complex health value that cannot be clearly categorized to provide more comprehensive healthcare solutions to address the aforementioned three social issues. As for the theme of “From Better Health to Beyond Health to Well-Being,” we will take a broader view of health and conduct business in a way that addresses the health experience of each individual person.
Now that the group has grown in scale, we created the new executive position of COO as of January 2024 in order to further develop our business. We have developed a structure in which group companies collaborate in management, by having clearer division of responsibilities and accountability among management and department leaders. This has enabled stronger and more fleshed-out management, letting us create an environment in which we can carefully manage the execution of our strategies toward our medium- to long-term vision.
A Total Healthcare Company Created by a Cycle of Investment and Growth
Otsuka was founded in 1921 in Tokushima Prefecture, Japan, as a manufacturer of chemical raw materials, producing magnesium carbonate in compliance with the Japanese Pharmacopoeia from the liquid called bittern that is left over after taking the salt out of salt pans. In a way, we began as a B2B company supplying raw materials by taking advantage of local characteristics. From there, we decided to make a major investment, which took us a step forward to become one of Japan’s leading manufacturers of IV solutions. Following this success, the company worked on the development and growth of Oronine Ointment and expanded to B2C businesses, including ORONAMIN C DRINK and POCARI SWEAT, continuing to realize a cycle in which a series of business challenges and successes lead to investment for the next stage of growth. The growth of POCARI SWEAT became a source of funds for clinical development of pharmaceutical products in the U.S., the foundation for the growth of what is now our Pharmaceutical Business. Otsuka has always been quick to identify market and economic trends, and has repeatedly invested profits from its businesses to new businesses with an eye to the next stage of growth. This virtuous cycle of investment and results has led to the current growth of the Otsuka group.
Growth in corporate scale and globalized operations come with greater need to flexibly adapt to diverse cultural and economic conditions. The Otsuka group emphasizes a “multiglocal” approach that combines a global perspective with local practices. For example, our strategy for POCARI SWEAT in Asia is tailored to each area, producing locally to meet each area’s demand. These strategies based on regional and business characteristics, as well as our efforts to realize new business and product concepts, have led to our current scale of 2 trillion yen in revenue. However, I believe that the context behind these numbers is more important than the numbers themselves. In other words, we need to give more thought to the quality of the businesses we are currently engaged in, and whether we have been able to plant new seeds that will lead us to the next step.
Each successive head of Otsuka, including founder Busaburo Otsuka, was extremely rigorous in their work, not out of personal greed but out of enthusiasm for the business, while at the same time having a strong sense of appreciation for their employees. I am convinced that this has made Otsuka an attractive organization, earning the trust of employees and other stakeholders. Furthermore, the founding family’s enthusiasm and dedication to the business have been passed on as genetic makeup, represented in the Otsuka group’s values: Ryukan-godo (by sweat we recognize the way), Jissho (actualization), and Sozosei (creativity). This Otsuka corporate culture has been the cornerstone of many innovations, and I believe we must make our innovations highly reproducible.
Our Goals in the 4th Medium-Term Management Plan
The 3rd MTMP concluded with revenue exceeding 2 trillion yen in the final year, achieving the plan’s target. With the significant growth of our four Global Products in the Pharmaceutical Business and steady growth of functional beverages and supplements in the Nutraceutical Business, business profit before R&D expenses, which represents earning power for our businesses, was approximately 620 billion yen. The Otsuka group allocates about half of this amount to R&D investments, and by making progress on research themes, we are fostering our next drivers of growth. Naturally, we will not have success with all our themes. For example, if we undertake multiple projects, I believe it is fine if half of the projects move forward, and at least one of those significantly contributes to society.
When we went public in 2010, the Otsuka group faced calls to be more accountable for our corporate activities and ensure greater transparency to investors and the stock market, and our awareness of our growth shifted from an internal perspective toward external evaluations. Then, through three medium-term management plans, we worked to steadily nurture large-scale products and were able to turn them into seeds for medium- to long-term growth. Through this 15-year-long process, the quality of our management has steadily evolved, as we have increased the capability of our human resources and organization, made investments from a long-term perspective with positive outcomes, and enhanced our presence and operational capabilities in each region of the world. For the 4th MTMP period we have chosen the theme “Promotion of new business expansion and investment to generate growth for the next generation: Five years of creation and growth,” in which we will focus efforts on the social issues of global environment, women’s health, and aging societies with declining birthrates as mentioned earlier, under the concept of total healthcare from prevention, health promotion, and diagnosis to treatment.
Establishing Mechanisms to Make Innovation Reproducible
I believe that innovation is born from the constant repetition of gathering information, thinking, forming hypotheses, and then conducting experiments and verifying our hypotheses. To this end, it is essential to expand our knowledge and networks, strengthen internal and external communication, and systematically build mechanisms that lead to innovations from unexpected discoveries. This is my life’s work. It is an effort to make a reproducible process out of one that has traditionally been conducted unconsciously.
The key elements of our innovation-creating infrastructure are the development of business concepts, strong capabilities both in human resources and organizations, and the cultivation of a corporate culture, through which we have created an environment conducive to innovation. Improving the capability of our human resources is one of the most important elements; we have provided numerous opportunities to take on challenges through unique businesses, and we expect our human resources to grow by overcoming these challenges. To this end, we plan and implement a variety of training programs, and we expect each employee to be curious about various things on a daily basis and to be in the habit of critical thinking while they are engaged in their work. Furthermore, we are continuing to evolve this into an even stronger innovation-creating foundation by not only using our own assets, but also by expanding new technologies and proactively incorporating know-how through M&A and alliances with academia and companies that synergistically enhance one another’s strengths.
From this innovation-creating foundation, we will generate many seeds, carefully plant and nurture them while responding to changes in social issues and the social structure through the incorporation of technological innovations, and link them to new innovations. Moreover, this mechanism of constant innovation creation, in other words an innovation ecosystem, will evolve through feedback via the insights and knowledge gained from delivering innovations to the world. Through these activities, we hope to create a future of well-being and evolve our business to realize our corporate philosophy.
Message to Stakeholders for Realizing Our Vision
The Otsuka group will always strive to achieve growth and returns, and to build trust with its
stakeholders including shareholders by providing them with timely, clear, and sufficient information. This will enhance management transparency and strengthen the foundation for sound corporate growth.
The Otsuka group is a health-related company. As a manufacturer, it is our greatest commitment to produce quality products, and we will not go in a direction that is inconsistent with our philosophy, even if it means incurring significant costs. We want our employees to identify with this policy and be willing to work together with us.
The Otsuka group, as steward of the long-inherited Otsuka culture of Ryukan-godo, Jissho, and Sozosei, will strive to put into practice what only Otsuka can do. To support the lives of people around the world through a wide range of innovative and creative products and services, we will continue to constantly create new value through innovation and work together with our stakeholders to realize the well-being of society as a whole. We look forward to your continued support as we strive forward toward this mission.
December 12, 2024
President and Representative Director, CEO
