News Release

Yamanouchi Pharmaceutical Co., Ltd.

Fujisawa and Yamanouchi Enter into a Basic Agreement to Integrate OTC Businesses and Establish a New Joint Venture

October 16, 2003

Fujisawa Pharmaceutical Co., Ltd (Headquartered in Osaka, Japan; President: Hatsuo Aoki, Ph.D.; hereinafter referred to as "Fujisawa") and Yamanouchi Pharmaceutical Co., Ltd. (Headquartered in Tokyo, Japan; President: Toichi Takenaka, Ph.D.; hereinafter referred to as "Yamanouchi") today announced that they have reached a basic agreement to merge their OTC pharmaceutical businesses and to establish a new joint venture (hereinafter referred to as the "New JV") for the purpose.

Fujisawa and Yamanouchi conduct OTC businesses in Japan, while conducting ethical pharmaceutical businesses globally. Both companies have leading brands in their OTC pharmaceutical businesses that are well recognized by and popular among the consumers, such as Precol, AG Eyes/AG Nose and Eurax for Fujisawa, and Gaster 10, Cakonal, and Makiron for Yamanouchi. The both companies decided to enter into the basic agreement because they share the same views to further enhance competitiveness of their respective OTC business and to secure a platform for future growth. The New JV will aim to increase sales through the integration in terms of products, distribution channels, and know-how of the both companies for the OTC businesses, as well as to improve profitability by efficient operation with effect of the integration. The New JV will be granted the first refusal rights for switch OTC pharmaceutical candidates originating from each of the companies.

The OTC businesses of the both companies have little overlap among main products and are about the same size, which they believe will make this combination the most suitable one. The New JV will leverage these strengths to obtain further recognition from consumers, as well as further enhance its presence within the OTC pharmaceuticals market in Japan as we expect the increased business opportunities through further promotion of self-medication practices, as well as deregulation of the OTC pharmaceuticals market in Japan.


The main points of the basic agreement is as follows:

1. Fujisawa and Yamanouchi will separate their respective OTC businesses (including quasi-drugs, cosmetics and food) and integrate the separated businesses into the New JV
2. The New JV will be established on October 1, 2004
3. The both companies will have an equal ownership of 50:50 in the New JV
4. Masaji Ohe(Currently Corporate Vice President, OTC & Consumer Products of Fujisawa) will serve as Representative Director and President, while Koji Yoshinaga (Currently Director of the Board, Consumer Healthcare Division of Yamanouchi) will serve as Representative Director and Deputy President
5. The New JV will have about 200 employees, all of which will be transferred from both companies in an almost equal number, in principle
6. In the event that Fujisawa or Yamanouchi plan to switch its ethical pharmaceutical ingredients to OTC pharmaceutical products, the New JV will be granted the first refusal right to consider the development and marketing of such ingredients


Both companies will continue to engage in further discussions on the operations of the New JV and plan to execute a definitive agreement around May 2004.

The overview of the New JV and OTC businesses of Fujisawa and Yamanouchi are listed as follows:


Overview of the New JV
Company Name: To be determined
Headquarters: Tokyo
Capital: To be determined
Representative: Representative Director and President: Masaji Ohe (Currently Corporate Vice President, OTC & Consumer Products of Fujisawa)
Representative Director and Executive Deputy President: Koji Yoshinaga (Currently Director of the Board, Consumer Healthcare Division of Yamanouchi)
Number of
Employees:
About 200
Annual Sales: Annualized sales of approximately 24 billion yen for the first fiscal year (Ranks about 8th in the OTC market)
Business: Research & Development and sales of OTC pharmaceuticals, quasi-drugs, cosmetics, and food, etc. (manufacturing to be outsourced)
Main Products: Gastrointestinal drug "Gaster 10", cold remedy "Precol" and "Cakonal", anti-allergy drug "AG Eyes/AG Nose", disinfectant "Makiron", dermatological product "Eurax", athlete's foot treatment "Pyroace", vitamin supplement "Neuvita Gold", natural skin soap "Minon", and condom line "Sunsea"


Overview of the OTC Business of Fujisawa
Division Name: OTC and Consumer Products Division
Representative: Masaji Ohe(Corporate Vice President, OTC & Consumer Products)
Number of
Employees:
About 150(Fujisawa non-consolidated basis)
Sales: 12,122 million yen (Non-consolidated basis for fiscal year ended March 31, 2003)
Business Area: OTC pharmaceuticals and quasi-drugs
Main products: Cold remedy "Precol", Anti-allergy drug "AG Eyes/AG Nose", dermatological product "Eurax", athlete's foot treatment "Pyroace", vitamin supplement "Neuvita Gold"

Overview of the OTC Business of Yamanouchi
Division Name: Consumer Healthcare Division
Representative: Koji Yoshinaga(Director of the Board, Consumer Healthcare Division)
Number of
Employees:
About 160(Yamanouchi non-consolidated basis)
Sales: 11,910 million yen (Non-consolidated basis for fiscal year ended March 31, 2003)
Business Area: OTC pharmaceuticals, quasi-drugs, cosmetics, and food
Main products: Gastrointestinal drug "Gaster 10", cold remedy "Cakonal", disinfectant "Makiron", natural skin soap "Minon", and condom line "Sunsea"

Overview of Fujisawa
Company Name: Fujisawa Pharmaceutical Co., Ltd.(www.fujisawa.com)
Headquarters: 4-7, Doshomachi 3-chome, Chuoku, Osaka 541-8514, Japan
Representative: Hatsuo Aoki, Ph.D., President & CEO
Number of
Employees:
8,330 (Fujisawa consolidated basis, on March 31, 2003)
Sales: 382,079 million yen (Consolidated basis for fiscal year ended March 31, 2003)
Description of
Business:
Manufacturing, marketing, import and export of ethical pharmaceuticals, OTC drugs, medical supplies and systems, and home care business , etc.

Overview of Yamanouchi
Company Name: Yamanouchi Pharmaceutical Co., Ltd.
Headquarters: 3-11, Nihonbashi-Honcho 2-chome, Chuo-ku, Tokyo 103-8411, Japan
Representative: Toichi Takenaka, Ph.D., President & CEO
Number of
Employees:
9,278 (Yamanouchi consolidated basis, on March 31, 2003)
Sales: 506,602 million yen (Consolidated basis for fiscal year ended March 31, 2003)
Description of
Business:
Manufacturing, marketing, import and export of drugs, quasi-drugs, foods, and medical devices