Round-table Discussion with Outside Directors

Nomura The selection process for the successor to the president, which took about a year starting in January 2023, was led mainly by the outside directors while discussing the selection methods and schedule in the Executive Appointment Meeting. In addition to formal meetings and interviews with candidates, the three of us outside directors at times also exchanged opinions privately. This approach would not have been possible without the solid relationship of trust between the management team and the outside directors. I believe that we were able to manage this highly-independent succession plan because of this trust relationship.

Okuno After the interviews with the candidates, we also took an additional step where we individually submitted our selection opinions to Chairman Nomura when summarizing our opinions, in order to ensure independence and objectivity. Top management leaders need to have a long-term perspective, one that lasts beyond their own tenures. During the interviews, I focused on the duration over which candidates envisioned upcoming long-term management—all of them were thinking about management with eyes toward the next generation and beyond.

Nagae What I focused on in the interviews with the candidates was their human skills, or interpersonal relationship skills. Technical skills (ability to perform tasks) and conceptual skills (ability to conceptualize) can be substituted, but human skills cannot. Therefore, I paid particular attention to whether they listen to their team staff, and to whether they were sincere. Company scandals are often caused by poor communication. Given that the president’s character is reflected in the Company’s culture. I consider human skills an indispensable capability for top executives.

Nomura Although the three of us reviewed the candidates from our own positions and respective perspectives, our evaluations generally aligned, and led us to the same conclusion. As a result, we were confident when attending the Executive Appointment Meeting to assign the successor. As of June this year (2024), I have been an outside director of this company for six years, and I am well acquainted with the personalities of Chairman Sagara and the other directors through discussions at Board of Directors meetings. I believe that the management of this succession plan was made possible by the mutual sincerity of the management team and the outside directors in the discussions.

Okuno As is the case with this appointment, the Board of Directors always responds to our various questions and requests in a constructive manner. If immediate action is not available, we have in-depth discussions about how to handle that issue looking forward.

Nomura The main reason for selecting Mr. Takino as the successor to the president was not just his human qualities, but the fact that he is the best person to lead the Group in realizing ONO’s long-term vision of becoming a Global Specialty Pharma. He has extensive overseas experience, and possesses a global business sense. Additionally, his career in expanding the pipeline, which is the lifeline of a pharmaceutical company, is indispensable for ONO’s future management. He also has the nature required in a president: leadership and strong sense of challenge. Taking all these elements into account, we decided he was the right person for the position.

Okuno At the same time, Mr. Takino is also a highly emotional person. Once, I spoke with him about the contradictions pharmaceutical companies were facing—like new drugs, which should be used for saving lives, being extremely expensive in the U.S. and not affordable for the patients that need them. At that time, Mr. Takino told me his experience when he talked to children hospitalized for their illnesses, emphasizing that the fundamental duty of a pharmaceutical company is to serve patients. He responded passionately, speaking about the need to work hard for the sake of patients and their families, leaving a strong impression on me.

Nagae People would not follow a leader lacking empathy. The decisive factor in selecting Mr. Takino was his cheerful personality and his sincerity in listening to his staff. Listening attentively to others contributes to better communication within the Company. To transform this company into a global business and to spearhead it, a leader needs to become ever more wise. The ability to quickly find the one correct answer is mere intelligence—this is something AI has. Wisdom, however, is the ability to derive the optimal solution in situations where there may be no correct answer or multiple correct answers— this ability is essential for management to identify unique abilities among diverse talent, and to harness those abilities effectively.

Okuno What I expect for ONO is to take on the challenge of “change.” ONO is a company with a long history and tradition, but as the Company positions itself for a major leap forward, it is essential to boldly embrace change so that this history does not in itself become a stumbling block.

Nomura Mr. Takino embodies the “Passionate Challengers” envisioned in the mission statement’s “Our Vision,” and I believe his principal mission as the president is to increase the number of passionate employees like himself. Now, with the three-executive representative director structure, I believe the Company has a solid foundation for the advancement of the global strategy.

Nagae Up until now, the Company had only one representative director; the President. Now, with the appointment of President Takino and Vice President Tsujinaka, the Company now has three representative directors. This structural change was to create a system in which each of them could take their roles, enabling prompt decision-making on management issues. I believe this is a reasonable idea and a logical transformation.

Okuno For this to work, I hope that Chairman Sagara hands over this mantle, while supporting the new president, without being tied to the old ways. I also hope that the outside directors strive to promote a management style that will further encourage changes.

Okuno I believe that what the Company needs in its employees are those who can both embrace change and work in a way that promotes it. ONO has many employees who genuinely love the Company. Because of this, the Company needs more employees not with the mindset of “I love this company, so I don’t want to change it,” but instead “I love this company, so I want to change it for better.” The same is true for the advancement of women—the Company has many outstanding women, and it is making progress in training women for management positions, but the results are not yet reflected in the numbers. Additionally, if there are any promotion rules that serve as barriers to the promotion of potential talent, I think the Company should revise those systems and actively promote talented and capable people to accelerate the momentum of change.

Nomura While the Company is currently developing talent under the classifications of “professional talent” necessary for promoting each growth strategy and “versatile talent” for supporting the management foundation across departments, it is necessary to increase the number of people with strengths in multiple cross-functional areas. I hope it can become a highly capable group, by bringing together many people possessing multiple strengths. Up until now, Japanese companies have competed in the global market based on the strength of their strong teamwork, and with a team of highly capable talent, they can achieve even greater strengths. Many of the Company’s employees are highly engaged and eager to develop their skills, and so the Company should be able to utilize such qualities in its talent development.

Nagae According to one study, 80% of employees in general are either “people who only do the work they like” or “people who only do what they are told,” and only the other 20% have strong mindsets, capable of taking initiative and responding proactively to various issues. By increasing that 20% would therefore increase the Company’s strength proportionately. Employees must not only follow the instructions of their managers, but be able to express their opinions when necessary. This is also important to prevent the Company from becoming insular and secretive.

Nagae Globalization of a company takes more time than anticipated. It is often seen that a country’s standards differ from global standards. When stationed overseas in the past, I always kept it in mind that when doing business globally, it is important to neither be too accepting of the characteristics of a particular country, nor to overly resisting these. Things are particularly complicated in the U.S., as laws differ between states. Since the Company is aiming to sell directly in the U.S. and Europe, it needs to be mindful of the anticipated high levels of legal risk.

Nomura A future challenge for the Company is to increase personnel transfers and exchanges between domestic and overseas offices. Additionally, as pointed out by Mr. Nagae earlier, the Company needs to transform its governance and compliance systems at the Japanese headquarters to meet global standards, while also investigating the laws, regulations, and business practices in other countries that may be difficult to understand with Japanese sensibilities in order to adhere to international compliance. The Company introduced a global personnel system in October 2023, incorporating competency (behavioral characteristics) into evaluation items, and I believe this will lead to globalization with a sense of unity.

Okuno I believe that the challenges of globalization are also challenges of diversity. Globalization of business requires that the Company be compliant with laws that differ between countries and regions. Additionally, continuing global activities requires understanding and respecting the target party’s culture and attitudes toward business, rather than just their laws. The attitude of respecting the different cultures and perspectives that are required for globalization also applies to tackling diversity issues within the Company. Promoting globalization and diversity requires a combination of small and continuous activities to reform the corporate culture with strong initiatives by top management. In terms of governance also, in the future, the Company should consider appointing foreign directors as part of its efforts for globalization.

Nomura What future leaders need is the spirit to lead by showing good examples, and to actively promote global expansion. As the Company heads toward FY2031, the final year of its current medium-term management plan, I believe that if its employees approach this highly challenging era with a positive attitude, they will be able to achieve outstanding results.

Okuno “Change,” of which I have spoken today, can also be described as a form of “self-renewal.” The Company is now at a major crossroads. Change in such a situation does not mean discarding everything it has; rather it means transformation using what it has, including its long tradition. The Company needs to take the next step, with everyone in the Company envisaging a great leap forward, casting off the same old mindset of continuing growth.

Nagae The company where I previously worked was a manufacturer, and it was said that globalization requires the integrated promotion of production, sales, and technology— manufacturing products, securing sales routes, and promoting technological development. Of these, the most difficult is securing sales routes. Establishing its own sales routes overseas takes 10 to 20 years, and therefore in order to secure these, the Company has engaged in M&A as well as various partnerships. For ONO, as it continues to move forward with globalization, being active in M&A and partnerships will be unavoidable. While the concept of multi-stakeholders is more in focus recently, I consider employees themselves as vitally important stakeholders. I think the Company needs to consider what should be done for its employees, including their labor conditions and welfare.

Nomura As seen with Opdivo, the Company has unique strengths that are not seen in other pharmaceutical companies, such as its long use of open innovation for developing innovative drugs. I believe it is entirely possible for the Company to leverage this strength overseas as well.
In addition to its corporate philosophy of “Dedicated to the Fight against Disease and Pain,” the sustainability management goals include “striving for health." While grounded in overcoming diseases and extending healthy life expectancy, a necessity for mankind, the Company prioritizes unique approaches to research and development. To become a global company, the Company does not necessarily need to compete on the same footing as overseas companies. Rather, leveraging the strengths of a Japanese company may seem circuitous, but it could actually be the shortest path.

Okuno I also believe that it is possible to explore the Company’s unique vision of being a “Global Specialty Pharma." This means that there is room for further discussion within the Company regarding what type of global company ONO aims to become in the future. The Company needs to refine its vision more concretely as what kind of a pharmaceutical company it wants to be.

Nagae I have always believed that a bigger company is not necessarily a great company. I think targeting globally niche fields and aiming to be the best in such markets is a viable strategy. To achieve this, it is important to set a clear direction and move forward. Showcasing ONO’s uniqueness will also enhance its recognition overseas.

Nomura On the extent of the discussion of strengths, I think it is important that the Company have multiple characteristics. Until now, pharmaceutical companies have focused on providing treatments for diseases with large numbers of patients. However, one of ONO’s goals is deliver innovative drugs for rare diseases and pediatric diseases as part of its sustainability initiative, “Improving Access to Healthcare.” We would like to support ONO’s challenge of further contribution to patients around the world.