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2024.07.23

Word count: 2330, reading time: about 4 minutes

Introduction: Until now, Kobayashi Pharmaceutical has been led by members of the company's founding family, and Satoshi Yamane is also the first non-family member to serve as president in Kobayashi Pharmaceutical's history.

Author |First Financial News Qian Tongxin Pan Yinru

On the morning of July 23, the board of directors of Kobayashi Pharmaceutical held an extraordinary meeting and approved 64-year-old Satoshi Yamane to take over as president, effective August 8. The board also approved the resignation of the company's 84-year-old chairman Kazumasa Kobayashi and 53-year-old president Akihiro Kobayashi.

Until now, Kobayashi Pharmaceutical has been led by members of the company's founding family, and Satoshi Yamane is also the first non-family member to serve as president in Kobayashi Pharmaceutical's history.

Kazumasa Kobayashi and Akihiro Kobayashi are the fourth and fifth generation leaders of Kobayashi Pharmaceutical respectively.

After stepping down as chairman, Kazumasa Kobayashi will become a special advisor to the company. After his resignation, Akihiro Kobayashi will lose his legal personality, but he will continue to remain on the board of directors, responsible for dealing with a series of problems caused by the company's "red rice mold" supplements and setting up compensation for the victims.

Japan's "national pharmaceutical company" has launched many "phenomenal" products

On March 22 this year, Kobayashi Pharmaceutical announced that the health product "Red Rice Mold" supplement may cause health problems and urgently recalled three products, two months after the company received the first death report. So far, more than 80 deaths have been suspected to be related to the "Red Rice Mold" supplement, and many of them have been clearly caused by taking the problematic products.

According to a report submitted by Kobayashi Pharmaceutical to the Ministry of Health, Labour and Welfare of Japan on March 29, the ingredient causing the problem in its red yeast rice products may be a substance called "penicillic acid", which was detected in the red yeast rice supplements produced by the company's Osaka factory from April to October last year.

A committee of outside lawyers has been investigating the incident, questioning Kobayashi's failure to promptly notify the public of the problem and potentially alleging the company was slow to warn consumers or recall the product.

The resignation of the two family members also came under pressure from outside shareholders. In a report on Kobayashi Pharmaceutical's corporate governance dysfunction, four outside directors called for an update of the management structure, including the replacement of top management. The company's founding family accepted the request.

Kobayashi Pharmaceutical (Source: Xinhua News Agency)

In Japan, Kobayashi Pharmaceutical is known as the "National Pharmaceutical Company". The company was first founded by Kobayashi Chubei in Osaka in 1886 as a pharmacy, which lasted for 70 years. It was not until the 1960s that Kobayashi Kazumasa took over the family business and became the fourth-generation president of Kobayashi Pharmaceutical.

Kobayashi Kazumasa has both innovative consciousness and business acumen. After he took office, his greatest invention was the toilet cleaning ball, which became popular in Japan and was successfully sold to Europe and the United States, expanding the company's business from a pharmacy to the field of daily chemicals. To this day, daily chemicals are still an important business sector of Kobayashi Pharmaceutical, and it has launched many "phenomenal" products including the Warm Baby.

"Big fish in a small pond" is Kobayashi Kazumasa's famous marketing strategy. He believes that "big business can be done in a small market" and that consumption can be created where there is no consumption. He even wrote a book on this.

Akihiro Kobayashi is the fifth-generation head of the company. He officially took over in 2013 and became the legal representative of Kobayashi Pharmaceutical.

Failure to promptly report damage to consumers’ health

According to CCTV News, Kobayashi Pharmaceutical received reports in January this year that health products containing red yeast rice caused damage to consumers' health. However, it took more than two months to inform the company's external directors and announce the recall of the relevant products.

The latest investigation report released on July 23 showed that after learning that consumers' health was damaged by the company's health products, the company did not report to the administrative department in a timely manner, and did not make a timely decision to remind consumers and recall products. "(Kobayashi Pharmaceutical) internal directors have a heavy responsibility for management." The report stated. As a result, the company's four external directors believed that the management system must be adjusted, including replacing the leadership, and the founder's family also accepted this decision.

After the media exposed the health damage caused by taking related health products at the end of March, the Ministry of Health, Labor and Welfare of Japan, together with experts from multiple fields, conducted a joint investigation into the "problematic red yeast rice."

On May 28, Japan's Minister of Health, Labor and Welfare Keizo Takemi said that after joint research with experts in related fields, it has been basically determined that the penicillic acid in the problematic red yeast rice produced by Kobayashi Pharmaceutical can cause kidney-related health damage.

The Ministry of Health, Labor and Welfare stated that animal experiments conducted after bacterial culture have confirmed that the "penicillin acid" contained in the raw materials of these health products can cause renal tubular necrosis. The survey results of the Japanese Society of Nephrology showed that many patients had symptoms suspected of "Fanconi syndrome", a typical disease caused by renal tubular damage, further verifying the findings of the Ministry of Health, Labor and Welfare.

Or face high compensation

Although the leadership of Kobayashi Pharmaceutical resigned due to the "Red Yeast Rice Controversy", the incident itself has not come to an end.

The Ministry of Health, Labor and Welfare also found in its previous investigation that in addition to penicillic acid, experts also detected two "other" substances that may indicate the mixing of penicillium in a batch of raw materials produced from June to August last year. At that time, experts involved in the investigation believed that this might be caused by the interaction between Monascus and Penicillium during the cultivation process. The discovery of new substances has undoubtedly added new complexity to Kobayashi Pharmaceutical's "Monascus storm". As of the time of publication of the first financial news, the Ministry of Health, Labor and Welfare of Japan has not yet announced the situation of the two "other" substances.

In addition, Kobayashi Pharmaceutical has not yet disclosed relevant information regarding compensation for consumers whose health has been damaged. It only compensates consumers who purchased the relevant problematic products in the form of vouchers.

Kobayashi Pharmaceutical's website shows that the company has a history of more than 130 years. It is a product development company that mainly engages in the research, development, production and sales of medicines, medical devices, daily necessities, food, etc. Its products are not only sold in Japan, but also sold to the United States, the United Kingdom, Southeast Asia and other parts of the world.

According to data released by the company, a total of 18.5 tons of red yeast rice raw materials were produced in 2023, of which about 16 tons were sold to other companies for use in brewing and food manufacturing. A previous survey by Japan's Imperial Database Company showed that the problematic red yeast rice raw materials produced by Kobayashi Pharmaceutical may affect up to 33,000 companies in Japan, including more than 5,000 food and beverage retailers.

Some Chinese people in Japan told Caixin through social media that all Kobayashi Pharmaceutical and red yeast rice-related products have been removed from the shelves in Japanese drugstores. At the same time, it can be seen that in drugstores, people consult with the in-store pharmacists more carefully when purchasing products.

According to preliminary estimates by a Japanese think tank, Kobayashi Pharmaceutical may need to pay up to 1.8 billion yen in compensation to manufacturers that purchased red yeast rice from the company. This amount of compensation may have a serious impact on the company's financial situation, and may lead to a drop in its stock price and a reduction in its market value.

According to Kobayashi Pharmaceutical's financial report data, in fiscal year 2023, Kobayashi Pharmaceutical's operating income was 173.5 billion yen, a year-on-year increase of 4.3%; operating profit was 25.78 billion yen, a year-on-year decrease of 3.3%. Prior to this, Kobayashi Pharmaceutical had maintained profit growth for 25 consecutive fiscal years.

In order to prevent such incidents from happening again, Japanese Prime Minister Fumio Kishida has said that the Japanese government will explore countermeasures. The Japanese Consumer Affairs Agency has begun emergency inspections of more than 6,000 registered functional health products.

WeChat Editor| Su Xiao