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The information in news releases is current at the time of the release. Note that the information shown here may not be latest information (termination of production or sales, changes to specifications or pricing, organizational or contact address changes, etc.), and may be subject to change without prior notice.

Toyama Chemical Agrees on Third Party Allocation of New Stock and Business Alliance with Taisho Pharmaceutical Co., Ltd.
September 9, 2002

Toyama Chemical Co., Ltd., Tokyo (hereinafter referred to as "Toyama") has entered into a basic agreement with Taisho Pharmaceutical Co., Ltd., Tokyo (hereinafter referred to as "Taisho") concerning a capital alliance and a strategic alliance in R&D and sales in the prescription pharmaceutical business dated August 9, 2002. At the board meeting held on September 9, 2002, Toyama decided upon allocation of new stock to a third party and a business alliance with Taisho, and has executed the agreement of business alliance and the agreement between shareholders of the two parties to establish a sales and marketing company.

Third Party Allocation of New Stock

1. New stock issued

(1) Number of new shares issued 43,000,000 common shares
(2) Issuing price ¥434/share
(3) Total amount of new stock issued ¥18,662,000,000
(4) Capital incorporation ¥217/share
(5) Offering date September 24, 2002
(6) Due date of payment September 25, 2002
(7) Start date of dividend April 1, 2002
(8) Allottee and number of shares allocated 43,000,000 shares for Taisho
(9) Continuous acquisition of new stock Toyama will receive a commitment from Taisho to notify if Taisho assigns new stocks acquired from Toyama within two years from the date of issue (September 26, 2002).
(10) The above terms and conditions shall become effective after the notification according to the Securities and Exchange Law.

N.B.: Determination of the issuing price
The issuing price, ¥434, was determined based on ¥479.65, which was the average of final trading prices of a Toyama's stock in the Tokyo Stock Exchange for the last month before the business day when the board meeting agreed to issue new stock, taking into account the discount rate of 9.52%.

2. Total number of outstanding shares after this capital increase

Current total number of outstanding shares 153,935,673
(as of August 31, 2002)
Number of new shares after capital increase 43,000,000
Total number of outstanding shares after this capital increase 196,935,673

3. Purpose of increased capitalization

(1) Purpose of capital increase
Toyama aims to ensure remarkable growth as a research-based company by establishing a strong partnership with Taisho while maximizing investment efficiency in the R&D area through capital alliance with Taisho.

(2) Application of capital increment
The capital increment will be mainly used for investment for R&D.

(3) Impact on business results
Toyama expects to enhance its R&D structure for new products currently under development and sales activities in Japan. The allocation of new stock to a third party will have no impact on business results expected this fiscal year.

4. Profit sharing with shareholders

(1) Policy on profit sharing
One of Toyama's management policies is to ensure profits of shareholders providing dividends. Toyama will commit to consistent distribution of dividends according to its financial status and earnings performance.

(2) Policy for determination of dividends
Toyama will maintain consistent distribution of dividends and the amount of dividends will be determined taking into consideration economic, financial, and management environments.

(3) Use of internal reserve
Toyama will provide an internal reserve for capital demands for investment in future R&D activities and business operations in Japan and abroad in order to ensure an increase in shareholders' benefits.

(4) Miscellaneous
Toyama aims to achieve ordinary profit in black by March 2003 while promoting company-wide cost reduction, increased operational efficiency, and increased speed in operations.

5. Equity finance and stock prices over the past three years

(1) Equity finance

Date Type Total amount Remarks
Apr. 12, 2000 First unsecuredconvertible bond ¥10 bil. Conversion value: ¥472

(Provisions on downward adjustment of conversion price and limited concurrent rider with convertible bond)

(2) Stock prices over past three fiscal years and latest prices

Price FY1999 FY2000 FY2001 Apr. 1-Sep. 6, 2002
Opening ¥538 ¥470 ¥461 ¥531
Highest ¥609 ¥839 ¥621 ¥608
Lowest ¥380 ¥360 ¥388 ¥416
Closing ¥474 ¥470 ¥530 ¥475
 
6. Outline of allottee
Name Taisho Pharmaceutical Co., Ltd.
Head office 24-1, Takada 3-chome, Toshima-ku, Tokyo, Japan
Representative president Akira Uehara, President & CEO
Capital stock ¥29,804 million (as of March 31, 2002)
Total number of outstanding shares 340,965,510 (as of March 31, 2002)
Major shareholders and Ratio of shareholding Uehara Memorial Foundation 43,000,000 shares (12.61%)
Shoji Uehara 36,614,000 shares (10.74%)
Sumitomo Mitsui Banking Corp. 17,000,000 shares (4.99%)
The Bank of Tokyo-Mitsubishi, Ltd. 17,000,000 shares (4.99%)
Sumitomo Chemical Co., Ltd. 12,100,000 shares (3.55%)
Business description Manufacturing and sales of pharmaceutical products
Operating results/financial status
(on a consolidated basis)
FY2000 FY2001
Net sales ¥274,396 mil. ¥271,397 mil.
Operating profit ¥66,591 mil. ¥60,701 mil.
Ordinary profit ¥73,826 mil. ¥67,472 mil.
Net income ¥31,269 mil. ¥37,361 mil.
Total assets ¥573,612 mil. ¥590,036 mil.
Shareholders' equity ¥467,601 mil. ¥486,882 mil.
Relation to Toyama Not applicable
 
7. Major Shareholders after Capital Increase
Rank Shareholder Number of
shares held*
Ratio of
shareholding**
1 Taisho Pharmaceutical Co., Ltd. 43,000,000 21.8%
2 The Hokuriku Bank, Ltd. 7,487,000 3.8%
3 Sumitomo Mitsui Banking Corp. 7,487,000 3.8%
4 Lombard Odier et Cie (Standing proxy, The Bank of Tokyo-Mitsubishi, Ltd.) 7,350,000 3.7%
5 Taisei Corporation 4,699,000 2.4%

* The number of shares held by stockholders excluding Taisho is cited from the shareholder list as of March 31, 2002.

** The ratio of shareholding is calculated based on the sum of the number of outstanding shares (153,935,673 shares) and the number of newly issued shares (43,000,000 shares).

Business Alliance with Taisho

1.

Aim of the alliance

Toyama and Taisho will strengthen marketing activities by jointly establishing a new sales and marketing company in order to centralize marketing resources. Moreover, maximization of investment efficiency in R&D will be targeted through cooperation of both parties in the R&D area. Based on the above agreement of alliance, Taisho accepts Toyama's allocation of new stock to a third party and becomes Toyama's largest shareholder. This capital alliance will ensure enhancement of cooperative relations of both parties to make them grow remarkably.

2.

Outline of alliance

(1) Acquisition of Toyama's shares by Taisho
See "Third Party Allocation of New Stock" about Toyama's allocation of new stock to a third party

(2) Establishment of a sales and marketing company for prescription pharmaceutical products in Japan.
Toyama and Taisho will jointly establish a sales and marketing company for prescription pharmaceutical products in Japan. Upon opening of the business, the new company will perform the sales and promotional activities for existing products. Moreover, the new company will hold the first refusal rights in marketing of new drugs developed by Toyama or Taisho.

Outline of new sales and marketing company

Name Taisho Toyama Pharmaceutical Co., Ltd.
Representative Katsuhiko Nakano, Chairman (Toyama's President and CEO)
Akira Uehara, President (Taisho's President)
Address of head office 25-1, Takada 3-chome, Toshima-ku, Tokyo
Establishment October 2002
Business description Sales and promotion of prescription pharmaceutical products
Fiscal year end March
Employees About 1,300 (including about 1,000 Medical Representatives),
temporarily transferred from Toyama and Taisho
Paid-in capital ¥ 500 millions
Shareholders' equity ¥1,000 millions
Number of outstanding shares 10,000 shares
Shareholders Taisho (5,500 shares; 55%)
Toyama (4,500 shares; 45%)
Start of operation April 2003 (expected)
Sales estimated*
  FY2003 FY2004 FY2005
Sales ¥95.0 bil. ¥105.0 bil. ¥120.0 bil.
Major products and sales (estimated amount in March 2002)
<Taisho> <Toyama>
Clarith ¥25.9 bil. Tomiron ¥7.3 bil.
Palux ¥17.2 bil. Pentcillin ¥6.9 bil.
Lorcam ¥ 3.4 bil. Ozex ¥5.3 bil.

* The new company will be dedicated to co-promotion of some products for business transaction during the period from the opening of the business to March 31, 2003, while making preparations for full-scale operation and obtaining approvals and licenses required for marketing of new products. Prospects on returns from the new company will be disclosed as soon as they are available.

(3) Construction of collaboration for R&D in the prescription pharmaceutical business
1) Collaboration in discovery research and development activities
2) Sharing R&D staff from Toyama and Taisho
3) Sharing development platforms such as compound libraries, overseas R&D center and clinical trial sites
4) Granting the first refusal rights for the option of joint development of new products in specific therapeutic areas
Details will be decided upon in agreements to be concluded hereafter.

(4) Collaboration in overseas ethical pharmaceutical business
Toyama and Taisho will also collaborate in overseas operations in order to explore new medical areas. Details will be decided upon in agreements to be concluded hereafter.

3. Schedule hereafter (tentative)
September 25, 2002 Due for payment by Taisho for new shares allocated to a third party by Toyama.
October 2002 Establishment of the new sales and marketing company (Taisho Toyama Pharmaceutical Co., Ltd.).
April 2003 Start of operation of the new sales and marketing company (Taisho Toyama Pharmaceutical Co., Ltd.).
4. Toyama's relation to the new company
The new sales and marketing company will be a Toyama's subsidiary to which the equity method is applied.
5. Perspective after alliance with Taisho
The alliance with Taisho is expected to have little impact on Toyama's consolidated results for the current fiscal year because the new sales and marketing company is not scheduled to start business operations until April 2003. Prospects on returns from the new company after the fiscal year ending March 2004 will be disclosed as soon as they are available.
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