Roundtable with Outside Audit & Supervisory Board Members

The Effectiveness of the Board of Directors That Has Vibrant Discussions

Sanuki Effective corporate governance is essential for the sustainable growth of a company. The core of that is the Board of Directors. The MEDIPAL’s Board of Directors meetings play host to vibrant discussions, where opinions are exchanged and shared without overlooking any statements. On this point, I highly rate the effectiveness of the Company’s Board of Directors. It is coming up on six years since I was appointed to this role. A major development in that time has been that the Board of Directors has come to discuss the opinions offered by institutional investors through the Company’s IR activities.

Ichino That is certainly correct. It is approaching two years since I was appointed, and I rate the Board of Directors as highly effective. I have previously taken part in board meetings at many small to medium-sized enterprises, but I was surprised by the openness of the debate I saw when I took part in the Board of Directors of the MEDIPAL, as a Prime-listed company. As Ms. Sanuki mentioned earlier the chairperson’s questions bring out a wide range of opinions, and each director speaks independently at the board meeting. In addition, the company’s stance of objectively evaluating the effectiveness of the Board of Directors based on a third-party questionnaire survey in accordance with the Corporate Governance Code is also commendable.

Key Themes for the Medium- to Long-Term From the Perspectives of Outside Audit & Supervisory Board Members

Sanuki As an Outside Audit & Supervisory Board Member, I believe my role lies in “suitably establishing risk management structures, including for legal risks.” The risks surrounding companies are changing, and new threats including cyberattacks have also emerged in recent years. To deal with such changes, the Company needs to keep updating its risk management structures. How the Company distributes limited resources is important in terms of achieving this. While operations are progressing in good order at present, I believe we need to be furthermore vigilant for sudden risks that could emerge going forward.

Ichino I am a corporate financial reporting specialist, so I believe that my role as an outside auditor is to improve the quality of financial reporting and establish a group governance system. Recent years have seen the number of Group companies grow through M&A deals. The importance of Group governance is thus ever increasing. In particular, the TSE has called for “Action to Implement Management that is Conscious of Cost of Capital and Stock Price” so I believe that improving capital profitability will be an important challenge for the Group as a whole going forward.

Proposals to Deepen Group Governance

Sanuki I evaluate the activities of the Compliance Committee¹ very highly. When an Antimonopoly Act issue arose, the president of MEDIPAL took charge and led the committee, and sought to ensure thorough legal compliance. Regular reports are made from the Compliance Committee. I believe the Audit & Supervisory Board is highly active as a legal organ, and it works well with each department.

Sanuki Looking at Group governance overall, I do feel that Board of Directors discussions are currently concentrated on the four prescription pharmaceuticals wholesale companies,² and that there is an issue in terms of information sharing at other Group companies being somewhat slow. I believe there should be a little more discussion about conditions at businesses outside of prescription pharmaceuticals distribution, such as PALTAC CORPORATION in particular. Recent years have also seen in increase in the number of Group companies. As all of these companies differ in terms of their scale and intensity of relationship to one another, I believe they may benefit from greater modulation in their governance.

I also have the sense that the purpose of the Nomination and Compensation Committees has not yet permeated the Company, due to these being voluntary systems and the committees still being only recently established. I feel that these tend to take on relatively passive roles, so I expect the Board Regulations or some other instrument to strengthen its position, and move it to a more active role going forward.

Ichino That’s a good point. The MEDIPAL is engaged in a wide range of businesses, primarily prescription pharmaceutical wholesale business, and we believe it is necessary to manage each Group company with a constant focus on and pursuit of business synergies.

On the other hand, in order to deepen Group governance, it is also necessary to enhance the financial synergies of all Group companies. To do so, it is necessary to analyze the current situation correctly. Our capital costs have already been disclosed, so going forward, in order to achieve the numerical targets set forth in the 2027 MEDIPAL Medium-Term Vision, it will be necessary to improve capital profitability, and further improvements in profitability and capital efficiency will be required.

I believe it is necessary to establish a department that continuously monitors the financial status of each Group company, aggregates the information necessary for financial decision-making, and formulates specific financial policies to propose to the Board of Directors. The department is responsible for constantly monitoring the financial status of the Group as a whole and considering specific measures to implement our basic capital policy. I believe that discussing this proposal at the Board of Directors meeting and presenting the results will enable the market to accurately assess our company’s growth potential, which I think should be considered a task for the future.

1. On April 1, 2025, the name of the Compliance Committee was changed to the Compliance and Risk Management Committee.

2. MEDICEO CORPORATION, EVERLTH Co., Ltd., ATOL CO., LTD., TOSHICHI CO., LTD.

Expectations of MEDIPAL Group

Ichino I believe that a mission-oriented attitude has taken root across all of MEDIPAL Group, beginning with the Board of Directors at MEDIPAL HOLDINGS CORPORATION. In order to realize our management philosophy of “Contributing to people’s health and the advancement of society through creation of value in distribution,” I hope that MEDIPAL will continue to set its own goals and work toward its desired future. I also expect that it will continue to be a central presence in the business field of “Pharmaceuticals, Health, and Beauty.”

Furthermore, although investing in the development of orphan drugs requires patience until results are achieved, I believe that it is an important social contribution of the Company, and I have high expectations for its future growth. I hope that MEDIPAL Group and its wide range of businesses continues to challenge for improved business and financial synergies and sustainable growth across the Group as a whole.

＊ALC: Area Logistics Center
A state-of-art distribution center that supplies prescription pharmaceuticals, medical materials, and clinical diagnostics reagents, etc., primarily to dispensing pharmacies, hospitals, and clinics