English translation

Summary of Financial Statements for the Fiscal Year Ended December 31, 2019
[Japanese GAAP] (Non-consolidated)
February 6, 2020
Company Name

SymBio Pharmaceuticals Limited

Listing: Tokyo Stock Exchange

Securities Code4582

URL: https://www.symbiopharma.com/

Representative

Representative Director,
President and Chief Executive Officer

Fuminori Yoshida

Contact Person

Corporate Officer, Head of Finance andAccounting Division, and Chief Financial
Officer

Takaaki Fukushima

TEL +81-3-5472-1125

Ordinary Annual General
Meeting of Shareholders

March 26, 2020

Date of Dividend
Payment (plan)—

Scheduled Date to File
Securities Report

March 27, 2020

Supplementary materials for the financial statements: Yes

No

Holding of earnings performance review:

No (For securities analysts and institutional investors)

Yes(Amounts of less than one million yen are rounded down.)
1. Business Results for FY 2019 (January 1, 2019 to December 31, 2019)(1) Operating Results
Net Sales(Percentages indicate year-on-year changes.)

Operating Profit (Loss)

Ordinary Profit (Loss)

Profit (Loss)

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen

%

2,837
3,835

(26.0)
11.4(4,301)(2,656)——(4,376)(2,748)——(4,376)(2,752)——

FY 2019
FY 2018

Earnings (Loss) per
Share
FY 2019
FY 2018

Ratio of Ordinary
Diluted Earnings per Ratio of Profit (Loss)
Profit (Loss) to Total
to Equity (ROE)
Share
Assets (ROA)

Ratio of Operating
Profit (Loss) to Net
Sales

Yen

Yen

%

%

%

(189.03)(165.54)——(107.4)(77.8)(76.0)(52.4)(151.6)(69.2)(Reference) Equity in earnings of affiliates:

FY 2019— million yen

FY 2018— million yen(Note 1) On July 1, 2019, the Company conducted a 1-for-4 reverse stock split of common share. Earnings per share have been
calculated based on the assumption that this consolidation was conducted at the beginning of FY 2018.
(Note 2) Diluted earnings per share is not stated above due to recording of a net loss per share, despite the potential dilution ofshares.
(2) Financial Position
Total Assets
FY 2019 (as of December 31, 2019)
FY 2018 (as of December 31, 2018)

Net Assets

Equity Ratio

Net Assets per Share

Millions of yen

Millions of yen

%

Yen

5,273
6,239

4,400
4,901

71.7
70.1

143.07212.23(Reference) Shareholders’ equity:

FY 2019 (as of December 31, 2019)
3,779 million yen
FY 2018 (as of December 31, 2018)
4,371 million yen(Note) On July 1, 2019, the Company conducted a 1-for-4 reverse stock split of common share. Net assets per share have been
calculated based on the assumption that this consolidation was conducted at the beginning of FY 2018.

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(3) Cash Flows
Cash Flows fromOperating Activities

Cash Flows from
Investing Activities

Cash and Cash
Equivalents at End of
PeriodCash Flows from
Financing Activities

Millions of yen

Millions of yen

Millions of yen

Millions of yen(4,350)(2,324)

(216)
(26)

3,740
4,272

3,910
4,821

FY 2019
FY 2018
2. Dividends

Annual Dividend per ShareFY 2018
FY 2019
FY 2020 (Forecast)

1st QuarterYen

2nd Quarter
Yen

—
—
—

0.00
0.00
0.00

Total Dividends

3rd Quarter Fiscal Year End
Yen
Yen

—
—
—

Payout Ratio

Full Year
Yen Millions of yen

0.00
0.00
0.00

0.00
0.00
0.00

%

—
—

Ratio of
Dividends to
Net Assets
%

—
—
—

—
—

3. Earnings Forecasts for FY 2020 (January 1, 2020 to December 31, 2020)(Percentages indicate year-on-year changes.)
Operating Profit(Loss)Net Sales
Millions of yen

Full Year

3,404% Millions of yen

20.0(5,090)Ordinary Profit(Loss)

Earnings (Loss) per
Share

Profit (Loss)% Millions of yen% Millions of yen

%

Yen

—

—

—

(181.84)(5,134)(4,803)

Notes:(1) Changes in accounting policies, changes in accounting estimates, and restatements after error corrections(a) Changes in accounting policies due to revision of accounting standards:

Yes・ No(b) Changes in accounting policies due to other reasons:Yes・ No(c) Changes in accounting estimates:

Yes・ No(d) Restatements after error corrections:

Yes・ No(2) Number of issued shares (common stock)(i) Total number of issued shares at the end of
the year (including treasury shares)

FY 2019

26,437,681 shares

FY 2018

20,599,731 shares(ii) Total number of treasury shares at the endof the year

FY 2019

22,593 shares

FY 2018

18 shares(iii) Average number of shares during the year

FY 2019

23,150,655 shares

FY 2018

16,627,778 shares(Note) On July 1, 2019, the Company conducted a 1-for-4 reverse stock split of common share. Total number of issued shares atthe end of the year, total number of treasury shares at the end of the year, and average number of shares during the year havebeen calculated based on the assumption that this consolidation was conducted at the beginning of FY 2018.
* Summaries of financial statements are not subject to audit through certified public accountants or auditing corporations.
* Explanation regarding the appropriate use of earnings forecasts and other matters(Notes on forward-looking statements)
All forecasts presented in this document, including earnings forecasts, are based on the information currently available tomanagement and assumptions judged to be reasonable. Actual results may differ substantially from these forecasts due to various
factors. Regarding the assumptions on which the Company’s earnings forecasts are based and their usage, please refer to “1.
Overview of Business Results, etc. (4) Future outlook,” on Page 10 of the attachment.

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Index of the attachment
1. Overview of Business Results, etc. ........................................................................................................................................................ 4(1) Overview of business results for the fiscal year under review ......................................................................................................... 4(2) Overview of financial position for the fiscal year under review....................................................................................................... 9(3) Overview of cash flows for the fiscal year under review ................................................................................................................. 9(4) Future outlook ................................................................................................................................................................................ 10(5) Basic policies concerning profit distribution and dividends ........................................................................................................... 10(6) Business risks ................................................................................................................................................................................. 11
2. Status of Corporate Group ................................................................................................................................................................... 18
3. Management Policies ........................................................................................................................................................................... 18(1) Basic policy of company management ........................................................................................................................................... 18(2) Key performance index .................................................................................................................................................................. 18(3) Pipeline .......................................................................................................................................................................................... 19(4) Medium- to long-term strategy....................................................................................................................................................... 21(5) Issues to be addressed by the Company ......................................................................................................................................... 22(6) Other important matters concerning the Company’s management ................................................................................................. 23
4. Basic Views on Selection of Accounting Standards ............................................................................................................................. 23
5. Financial Statements and Primary Notes ............................................................................................................................................. 24(1) Balance sheet.................................................................................................................................................................................. 24(2) Statement of income ....................................................................................................................................................................... 26(3) Statement of changes in equity ....................................................................................................................................................... 27(4) Statement of cash flows.................................................................................................................................................................. 29(5) Notes to going concern assumptions .............................................................................................................................................. 30(6) Significant accounting policies ...................................................................................................................................................... 30(7) Notes to financial statements .......................................................................................................................................................... 31(Balance sheet)................................................................................................................................................................................. 31(Statement of income) ...................................................................................................................................................................... 31(Statement of changes in equity) ...................................................................................................................................................... 33(Statement of cash flows)................................................................................................................................................................. 35(Financial instruments) .................................................................................................................................................................... 36(Derivative transactions) .................................................................................................................................................................. 39(Retirement benefits) ....................................................................................................................................................................... 40(Stock options) ................................................................................................................................................................................. 41(Asset retirement obligations) .......................................................................................................................................................... 54(Segment information) ..................................................................................................................................................................... 54(Affiliated party information) .......................................................................................................................................................... 55(Per share information) .................................................................................................................................................................... 55(Significant subsequent events) ....................................................................................................................................................... 56
6. Other .................................................................................................................................................................................................... 56(1) Change in officers .......................................................................................................................................................................... 56(2) Other .............................................................................................................................................................................................. 56―3―

1. Overview of Business Results, etc.
(1) Overview of business results for the fiscal year under review(Business Results for the fiscal year under review)
Progress in the Company’s business for the fiscal year under review is as follows.
(i) Domestic business[Issues concerning product defects]
As stated in the reasons for revisions to our earnings forecasts

released on August 7, 2019, foreign matter contamination andappearance defects were discovered in lyophilized injection agents imported from Astellas Deutschland GmbH, a subsidiary of
Astellas Pharma Inc. The ratio of contamination and appearance defects significantly exceeded limits permitted by quality
standards in our supply agreement with Astellas Deutschland GmbH. Hence, shipments of TREAKISYM® 100 mg vials to theCompany’s distributor in Japan, Eisai Co., Ltd., faced further delays than originally anticipated. As a result, net sales totaled
2,837,753 thousand yen for the fiscal year ended December 31, 2019, was down 36.4% compared to our initial forecast. Operating
loss was 4,301,615 thousand yen (versus our initial forecast of loss of 3,587 million yen).
To prevent similar quality issues from recurring, the Company have filed complaints with Astellas Deutschland GmbHandrequested the manufacture and prompt shipment of replacement product batches. Although the Company received the replacement
batches, the inventory levels for TREAKISYM® remain low due to unreliable delivery dates and continuing high defect rates fora portion of replacement batches. The Company continues request that Astellas Deutschland GmbH to fulfill its obligations as our
supplier. SymBio will continue to negotiate and demand improvement from Astellas Deutschland GmbHandwhile aiming toprovide stable supply of high-quality pharmaceutical products. Astellas Deutschland GmbH has established the corrective andpreventive action program (CAPA), but its effectiveness has not yet been confirmed.

[Establishment of the Company’s own salesforce]
In October 2018, the Company began preparations to establish its own salesforce for the sale of TREAKISYM® after the
expiration of a business partnership agreement with Eisai Co., Ltd. (Eisai) in December 2020. The Company’s top management
objectives are to attain profitability in the fiscal year ending December 31, 2021 and to achieve sustainable growth thereafter. By
transitioning to its own salesforce, the Company plans to solidify its future business development.
During the fiscal year under review, the Company continued to expand and train its team of TREAKISYM® sales
representatives, who would be the core of the Company’s own salesforce. Upon completion of their training, sales representatives
began conducting regionally focused activities to provide information on July 1, 2019, and the Company made steady progress
towardestablishing a nationwide salesforce by 1H FY 2022. During the final three months of the fiscal year under review, theCompany made significant progress in recruiting the additional regional sales managers and TREAKISYM® sales representatives
necessary for a nationwide salesforce and our goal of improving our distribution and logistics capabilities. This achievement is inpart due to the formation of business alliances with pharmaceutical wholesalers and division of our logistics center into easternJapan and western Japan. Furthermore, the Company are diligently preparing for the establishment of information systems
incorporating enterprise resource planning (ERP), which is a part of our internal infrastructure. Through these efforts, theCompany made steady progress in establishing a high-performance and high-productivity salesforce that is based on extensive
expertise and experience.
[Anticancer agents: SyB L-0501 (lyophilized powder formulation), SyB L-1701 (ready-to-dilute (“RTD”) formulation), SyB
L-1702 (rapid infusion (“RI”) formulation) (generic name: bendamustine hydrochloride; trade name: TREAKISYM®)]
The Company currently sells TREAKISYM®, a drug widely used in the field of malignant lymphoma, in Japan through its
business partner, Eisai. The Company obtained manufacturing and marketing approval for first-line treatment of low-grade nonHodgkin’s lymphoma (low-grade NHL) (Note 1) and mantle cell lymphoma (MCL) in December 2016, for recurrent/refractory lowgrade NHL and MCL in October 2010, and for chronic lymphocytic leukemia (CLL) in August 2016. Further, the combination
treatment (BR therapy) of TREAKISYM® and rituximab was added to the Guidelines for Tumors of Hematopoietic andLymphoid Tissues 2018 published by the Japanese Society of Hematology in July 2018, recommending TREAKISYM® as one ofstandard treatments for all previously approved indications. As a result, TREAKISYM® gained its foothold as the standard
treatment for malignant lymphoma. By switching to a highly specialized internal salesforce, the Company aims to achieve amarket share that is on par with our market shares in the U.S. and Europe.

―4―In addition to the approved indications, the Company is conducting a Phase III clinical trial for TREAKISYM® targetingrecurrent/refractory diffuse large B-cell lymphoma (r/r DLBCL). In November 2019, the Company announced the achievementof a favorable response rate that exceeded expected levels, which represents a primary endpoint. Currently, the Company ispreparing to apply for approval for this indication, targeting the second quarter of FY 2020. The above trial is in response to theserious need at clinics and hospitals as there is currently no reliable standard treatment. Patient groups and relevant academic
societies have petitioned to the regulatory authorities for the approval of BR therapy.
The Company entered into an exclusive license agreement (in Japan) for TREAKISYM® liquid formulation (RTD and RI
liquid formulations) (Note 2) with Eagle Pharmaceuticals, Inc. (head office: New Jersey, U.S.) in September 2017. Following
consultations with the Pharmaceutical and Medical Devices Agency concerning RTD liquid formulation products, the Company
completed an application for approval in September 2019 and forecasts a launch in Q1 FY 2021. A clinical trial for RI liquid
formulations began in November 2018 primarily to confirm safety. The Company is steadily recruiting patients since theenrollment of the first patient in April 2019. As of January 31, 2020, 31 patients were enrolled. The Company aims to launchthese RI liquid formulations in the first half of FY 2022 following a prompt application for approval after the clinical trial. RI
liquid formulations significantly reduce the time required for administration to 10 minutes, down from the 60 minutes required by
the currently available freeze-dried (“FD”) powder and ready-to-dilute (RTD) formulations. This will greatly lessen the burdens
placed on patients and healthcare providers, enabling the Company to add significant value. Furthermore, the protection ofmultiple patents including the liquid formulation authorization will make it possible to extend the life of this product until
2031and maximize business value including development strategies.
Further, as a result of the approval obtained in July 2018 of a partial change application to the Company’s TREAKISYM®
marketing authorization, TREAKISYM® can now be used in combination with not only rituximab but also other new anti-CD20
antibodies for the treatment of CD20 positive follicular lymphoma (FL), a common histologic type of low-grade NHL. As a newtreatment option, it is offered to patients in combination with obinutuzumab (Note 3), which was launched in August 2018. In
March 2019, the Company received approval for changes to a portion of its application concerning the use of TREAKISYM® asa pretreatment agent for tumor-specific T-cell infusion therapy (Note 4). This will allow TREAKISYM® to be used as apretreatment for Kymriah® intravenous infusion (Note 5), which was approved as the first chimeric antigen receptor T-cell (CART) therapy (Note 6) in Japan and included in the NHI price listings in May 2019. The status of TREAKISYM® as a standard
treatment for malignant lymphoma is becoming stronger as its use as a pretreatment for regenerative medicine and other products
continues to expand.
Two trials aimed at exploring further possibilities for TREAKISYM®, a Phase I clinical trial examining TREAKISYM® as atreatment for progressive solid tumors and a pre-clinical trial aimed at verifying the therapeutic effects of TREAKISYM® onsystemic lupus erythematosus (SLE), were concluded and achieved the initial goals. However, the Company suspended further
development of TREAKISYM® in these areas. In order to best utilize limited management resources, the Company made thestrategic decision to prioritize the domestic and overseas development of brincidofovir (mentioned below), an antiviral drug forthe treatment of infectious disease, for which the Company have newly acquired a license.
(Note 1)

Non-Hodgkin’s lymphoma (NHL) refers to malignant lymphoma other than Hodgkin’s lymphoma. Malignant
lymphoma is a cancer of the lymphatic system in which lymphocytes develop malignant growths. The majority ofJapanese malignant lymphoma patients are suffering from NHL.

(Note 2)

RTD and RI are pre-dissolved liquid formulations that differ from currently available freeze-dried (“FD”) powder
injection. RTD (ready-to-dilute) will significantly reduce the preparation time and labor cost for healthcare providers,and RI (rapid infusion) will reduce infusion duration to 10 minutes from the current 60 minutes, providing significant
benefit and value to both patients and healthcare providers.

(Note 3)Obinutuzumab (Gazyva®, marketed by Chugai Pharmaceutical Co., Ltd.): Like rituximab recommended by treatment
guidelines for non-Hodgkin’s lymphoma in Japan and overseas, obinutuzumab is a glycoengineered type II anti-20
monoclonal antibody that directly binds to CD20 (a protein expressed on B-cells other than stem cells or plasma cells)
on target B-cells to attack and destroy them along with the body’s immune system.

(Note 4)

Tumor-specific T-cell infusion therapy is a treatment method in which tumor-specific T-cells (T-cells that specificallyrecognize cancer cells) taken from cancer patients are artificially bestowed with cancer specificity extracorporeally,
amplified and then administered to the patient.

―5―

(Note 5)

Kymriah® intravenous infusion (generic name: tisagenlecleucel; marketed by Novartis Pharma K.K.): Kymriah®
intravenous infusion is the first chimeric antigen receptor T-cell (CAR-T) therapy approved within Japan. The
Company received manufacturing and marketing approval for Kymriah® for use in the treatment of CD19 positive
recurrent/refractory B-cell acute lymphoblastic leukemia (B-ALL) and CD19 positive recurrent/refractory diffuse
large B-cell lymphoma (DLBCL) in March 2019. Kymriah® intravenous infusion was included in NHI price listings in
May 2019.

(Note 6)

Chimeric antigen receptor T-cell (CAR-T) therapy is a type of tumor-specific T-cell infusion therapy that introduces
genes that code chimeric antigen receptors (CARs) into T-cells, amplifies these cells and then infuses them. These
chimeric antigen receptors are produced by combining the intracellular domains of T-cell receptors with the antigen
binding sites of antibodies capable of recognizing membrane antigens attached to tumor cells. In clinical trials using
CARs to target CD19 that expresses on B-cells, CD19-targeting CARs were introduced into T-cells that were later
administered to patients with B-cell tumors. These modified cells produced clear clinical effects.

[Anticancer agents: SyB L-1101 (intravenous formulation) and SyB C-1101 (oral formulation) (generic name: rigosertib
sodium)]U.S. licensor Onconova Therapeutics, Inc. (head office: Pennsylvania, U.S.) (“Onconova”) is conducting a global Phase III
clinical trial (with trial sites in more than 20 countries) of the intravenous formulation of rigosertib for higher-risk
myelodysplastic syndromes (HR-MDS) in patients who do not respond to the current standard treatment with hypomethylating
agents relapse after treatment under the current standard of care, or are intolerant to hypomethylating agents. The Company is
responsible for clinical development in Japan and began the trial in December 2015. Forty-eight patients were enrolled as ofDecember 31, 2019, and patient enrollment is in progress. According to an October 2019 announcement from Onconova, global
patient enrollment (final target of 360 patients) was more than 90% complete as of November 2019, and top-line results (primary
endpoints) are expected to be released in 1H FY 2020. Based on the results of the trial, the Company is planning to apply for
approval in Japan at the same time as in the U.S. and Europe.
As for the oral formulation of rigosertib, Onconova completed Phase I/II clinical trials in the U.S. for the target indication of
first-line HR-MDS (in combination with azacitidine (Note 7)), and results suggested that the oral formulation of rigosertib andazacitidine were safe and effective when combined. The Company started a Phase I clinical trial in Japan in June 2017 to confirm
the tolerability and safety of the oral formulation of rigosertib for Japanese patients. We began patient enrollment with the first
patient enrolled in October 2017 and completed the enrollment process in June 2019. After completion of this trial, the Company
plans to promptly conduct a Phase I clinical trial for combination therapy with azacitidine. Further, to apply for approval of theoral formulation of rigosertib in Japan no later than in the U.S. and Europe, the Company plans to take part in a global trial for
combination therapy with azacitidine for the first-line treatment of patients with higher-risk MDS, which Onconova is currently
considering conducting. Data from the global trial was announced at the 61st American Society of Hematology (ASH) Annual
Meeting and Exposition in December 2019. Based on this data, Onconova announced that it is discussing the design of a Phase
II/III adaptive clinical trial testing this combination therapy as a first-line treatment for HR-MDS during the same month.
(Note 7)

Azacitidine (Vidaza®, marketed by Nippon Shinyaku Co., Ltd.): This hypomethylating agent (for injection) wasapproved in 2011 upon successful confirmation of extended overall survival for the first time in the Phase III clinical
trial for the indication of MDS, and is currently used as a first-line drug for MDS patients who have difficulties inhematopoietic stem cell transplantation. MDS is a pre-leukemia, and decreased expression in tumor suppressor gene
due to excessive methylation of DNA is thought to be related to the disease. Hypomethylating agents such asazacitidine are thought to suppress progress to leukemia by restoring tumor suppressor gene with a deterrent effectagainst methylation of DNA.

[Antiviral drug for the treatment of infectious diseases: SyB V-1901 (generic name: brincidofovir)]
On September 30, 2019, the Company entered into an exclusive global licensing agreement for intravenous and oral
formulation of brincidofovir (Note 8), an antiviral drug for the treatment of infectious diseases (SyB V-1901; “BCV IV” and “BCV
Oral,” respectively) with Chimerix Inc. (head office: North Carolina, U.S.; “Chimerix”). Under this agreement, the Company
acquired the exclusive rights for the worldwide development, marketing, and manufacture of BCV for all human indications,excluding smallpox. With the global rights to BCV, the Company aims to transition into a global specialty pharmaceuticalcompany with an integrated system for supplying high-quality pharmaceutical products.
The Company will first develop BCV IV for the treatment of viral hemorrhagic cystitis (Note 9) (vHC) that often occurs after
hematopoietic stem cell transplantation, which are a niche market with high unmet medical needs. To deliver brincidofovir to―6―patients who urgently need this treatment, we will conduct clinical development in Japan ahead of the rest of the world, aiming tosecure approval for the drug. At the same time, we will conduct global clinical trials of BCV IV that extend to Europe and the
U.S targeting a global rollout of the drug. Inspired by its potential wide use throughout the field of surgical transplantation
including hematopoietic stem cell transplantation and other organ transplantation, the Company is currently planning clinicaldevelopment of BCV IV as a treatment for viral infections occurring after kidney transplantation. The Company is currently
looking to expand our business in Europe, the U.S. and Asia (including China), where the organ transplant market is larger thanJapan. Also, the Company is considering forming partnerships that reflect the regional characteristics of target diseases. We will
explore all possible means of maximizing our business value through a variety of measures, including strategically utilizing ourwholly owned subsidiary, SymBio Pharma USA, Inc. (head office: Menlo Park, California, U.S.; established May 2016). As for
BCV Oral, we will discuss a development plan going forward including efforts to improve its formulation. At present, we are
discussing future global development for BCV IV and BCV Oral with prominent overseas researchers in a variety of specialized
fields. These formulations have already been found to have highly active antiviral effects, as well as a wide treatment spectrum,
through clinical trials conducted by Chimerix, Inc. in the U.S. and Europe. Based on these findings, the Company will discuss thedesign of global clinical trials.
(Note 8)

Brincidofovir (BCV) has a structure in which cidofovir (an antiviral drug for the treatment of infectious disease that isalready approved and marketed in the U.S. and Europe, but unapproved in Japan; “CDV”) is bound to a lipid chain(hexadecyloxypropyl; “HDP”). It is quickly absorbed into the lipid bilayer membrane and efficiently transfers into
cells, and then the bound lipid chain is metabolized and separated from the structure by intracellular phospholipases.
This process generates an activator (CDV-PP; CDV diphosphate) that is retained in the cells for a long period of time,
dramatically raising the compound’s antiviral activity. Furthermore, BCV avoids nephrotoxicity, a fundamental issue
plaguing CDV, since HDP conjugation prevents the accumulation of the compound in renal tubular epithelial cells
through organic anion transporter 1 (OAT1) and CDV is released at low levels in the bloodstream.

(Note 9)

Viral hemorrhagic cystitis (vHC): Among viral infections that frequently occur following hematopoietic stem celltransplantation, hemorrhagic cystitis caused by the BK virus or the adenovirus accompanies particularly severe
symptoms, including frequent urination, abdominal pain and pain experienced during urination. This type ofhemorrhagic cystitis is especially likely to occur in transplantation between unrelated donors and in umbilical cord
blood transplantations, which are relatively common in Japan. Its extreme refractory nature is further complicated by
the length of time required for reconstruction of the immune system, which hinders treatment in many cases. In severecases, it can cause disseminated infection and become fatal. There have also been reports of fatal kidney failure cases
caused by these viral infections. Drugs currently used in treatment, including cidofovir (CDV), are either unapproved
or off-label.

[Patient-controlled pain management drug: SyB P-1501]
In October 2015, the Company entered into an agreement with Incline Therapeutics, Inc., a wholly owned subsidiary of USbased The Medicines Company (head office: New Jersey, U.S.) for an exclusive license to develop and commercialize SyB P1501 in Japan. The Company, acting in the best interests of patients, temporarily suspended new patient enrollment for SyB P1501 from April 21, 2017 due to the concern of the continuity of The Medicines Company’s business regarding the product.
The Company initiated arbitration against The Medicines Company on October 11, 2017 under the rules of the International
Chamber of Commerce, seeking damages of 82 million U.S. dollar (approximately 9.0 billion yen) arising from The Medicines
Company’s repudiation of the license agreement. The Company claims that The Medicines Company was not able to provide theCompany with adequate assurance of its performance of obligations under the license agreement in light of its decision to
discontinue commercialization activities regarding the product and withdraw from markets in the U.S. and Europe, and that such
failure by The Medicines Company is a material breach of the license agreement. Furthermore, the Company terminated thelicense agreement on November 30, 2017because the breach of the license agreement by The Medicines Company was not
remedied within the stipulated time and ceased the development of SyB P-1501 on February 9, 2018.
Arbitration proceedings against The Medicines Company are still ongoing. Novartis International AG (head office:
Switzerland) announced on January 6, 2020 that it had completed the acquisition of The Medicines Company .
(ii) Business outside Japan
SyB L-0501 is also marketed in South Korea, Taiwan, and Singapore, and sales of SyB L-0501 in these countries progressedfavorably at a level exceeding the Company’s forecasts.

―7―

(iii) Licensing of new drug candidates
The Company conducts ongoing search and evaluation of multiple new drug candidates for potential in-licensing to expand our
research and development (“R&D”) pipeline. Our aim is to create long-term business value as a profitable biopharmaceuticalcompany with growth potential.
Additionally, the Company will proceed with the transformation into a global specialty pharmaceutical company with thecapacity to develop and commercialize new drugs in the U.S., Japan, Europe, and other major global markets by actively
acquiring rights to new drug candidates using wholly owned subsidiary SymBio Pharma USA, Inc. as a global business base.
(iv) Business results
Net sales totaled 2,837,753 thousand yen for the fiscal year ended December 31, 2019, primarily reflecting product sales of
TREAKISYM®, and overall net sales fell 26.0% year on year.
Selling, general and administrative expenses totaled 5,166,366 thousand yen (+34.9% year on year), including R&D expenses
of 2,441,552 thousand yen (+33.2% year on year) primarily due to upfront payments for the licensing agreement of brincidofovir,
an antiviral drug for the treatment of infectious disease and a new product under development, and expenses associated withclinical trials for the intravenous formulations of TREAKISYM® and the intravenous and oral formulations of rigosertib, as wellas other selling, general and administrative expenses of 2,724,814 thousand yen (+36.5% year on year).
As a result, an operating loss of 4,301,615 thousand yen was recognized for the fiscal year ended December 31, 2019 (anoperating loss of 2,656,072 thousand yen for the previous fiscal year). In addition, non-operating income was 4,331 thousand
yen, primarily consisting of insurance claim income of 2,736 thousand yen. Meanwhile, non-operating expenses were 79,372
thousand yen and primarily comprised foreign exchange losses of 54,755 thousand yen, share issuance cost of 13,932 thousand
yen, and commission expenses of 10,457 thousand yen. Consequently, ordinary loss totaled 4,376,655 thousand yen (compared toan ordinary loss of 2,748,730 thousand yen in the same period of the previous fiscal year) and bottom-line loss in the fiscal year
ended December 31, 2019 totaled 4,376,258 thousand yen (compared to a loss of 2,752,533 thousand yen for the same period of
the previous fiscal year).
Segment information is omitted since the Company operates within a single segment, which includes the R&D, manufacturing,and marketing of pharmaceutical drugs and other related activities.

―8―(2) Overview of financial position for the fiscal year under review(Analysis of assets, liabilities, net assets, and cash flow)
Total assets as of December 31, 2019 stood at 5,273,955 thousand yen, a decrease of 965,467 thousand yen from the previous
fiscal year end. This was primarily due to the increase of 150,469 thousand yen in consumption taxes receivable, 137,554 thousand
yen in accounts receivable–trade, 125,120 thousand yen in software in progress, 44,028 thousand yen in software, 21,513 thousand
yen in construction in progress, 10,644 thousand yen in advances paid, and 10,629 thousand yen in prepaid expenses that wereoffset by decreases of 910,525 thousand yen in cash and deposits and 533,824 thousand yen in merchandise and finished goods.
Total liabilities stood at 873,838 thousand yen, a decrease of 463,784 thousand yen, owing mainly to rises of 135,845 thousand yen
in accounts payable–other and 16,506 thousand yen in income taxes payable that were offset by decreases of 605,187 thousand yen
in trade payable and 16,427 thousand yen in forward exchange contracts.
Under net assets, increases of 1,898,059 thousand yen in capital stock, 1,898,059 thousand yen in legal capital surplus, and91,016 thousand yen in share acquisition rights were offset by a decrease of 4,376,258 thousand yen in retained earnings that wasdue to the recording of bottom-line loss and an increase of 15,059 thousand yen in treasury shares. As a result of these factors, total
net assets fell by 501,683 thousand yen from the previous fiscal year end, to 4,400,116 thousand yen. The equity ratio
consequently rose 1.6 percentage points from the previous fiscal year end, to 71.7%.
Despite a boost from the issuance of new shares, cash and cash equivalents (“cash”) as of December 31, 2019 stood at 3,910,830
thousand yen, a decrease of 910,525 thousand yen from the previous fiscal year end. This was mainly due to the recording of loss
before income taxes.
(Cash flows from operating activities)
Net cash used in operating activities amounted to 4,350,738 thousand yen, compared with 2,324,547 thousand yen in cash usedby these activities in the previous fiscal year. Factors having a positive effect on cash included a decrease of 533,824 thousand yen
in inventories, the recording of 127,144 thousand yen in share-based compensation expenses, an increase of 124,233 thousand yen
in accounts payable—other and the recording of 83,370 thousand yen in foreign exchange losses, 38,085 thousand yen in
depreciation, 13,932 thousand yen in share issuance cost, and 10,457 thousand yen in commission expenses. Principal factors
having a negative effect on cash were the recording of 4,372,458 thousand yen in loss before income taxes, a decrease of 605,187
thousand yen in accounts payable–trade, an increase of 150,469 thousand yen in consumption taxes receivable, an increase of
137,554 thousand yen in notes and accounts receivable–trade, an increase of 18,649 thousand yen in prepaid expenses, and anincrease of 10,644 thousand yen in advances paid.
(Cash flows from investing activities)
Net cash used in investing activities amounted to 216,462 thousand yen, compared with 26,180 thousand yen used in these
activities in the previous fiscal year. Principal contributing factors included 192,013 thousand yen in purchase of intangible assets
and 24,498 thousand yen in purchase of property, plant and equipment.
(Cash flows from financing activities)
Net cash provided by financing activities was 3,740,045 thousand yen, compared with 4,272,056 thousand yen provided bythese activities in the previous fiscal year. This result occurred despite 20,871 thousand yen in purchase of treasury shares and11,582 thousand yen in payments for issuance of shares and was primarily the result of 3,771,476 thousand yen in proceeds fromissuance of shares resulting from the exercise of share acquisition rights.

(3) Overview of cash flows for the fiscal year under review
11th Term
12th Term
13th Term
14th Term
15th Term
Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended
December 2015 December 2016 December 2017 December 2018 December 2019
Equity ratio (%)

82.9

73.5

63.6

70.1

71.7

Equity ratio on a fair market value
basis (%)

150.8

165.1

278.4

250.9

304.0

Debt redemption period (years)

―

―

―

―

―

Interest coverage ratio

―

―

―

―

―

Equity ratio: Equity (total shareholders’ equity)/total assets
Equity ratio on a fair market value basis: Total market value of common stock/total assets―9―Debt redemption period: Interest-bearing debt/cash flows from operating activities
Interest coverage ratio: Cash flows from operating activities/interest payments(Notes) 1. Total market value is calculated based on the number of shares issued, excluding treasury shares.
2. Debt redemption period and interest coverage ratio are not available due to negative cash flows from operating
activities.

(4) Future outlook
The Company expects net sales of 3,404 million yen in the fiscal year ending December 31, 2020, a 20.0% increase from thefiscal year ended December 31, 2019, mainly as a result of growth in sales of TREAKISYM® in Japan. Meanwhile, in R&D, theCompany will continue to pursue the development of TREAKISYM® for recurrent/refractory diffuse large B-cell lymphoma (r/r
DLBCL); the RTD and RI liquid formulations of TREAKISYM®; intravenous and oral formulations of rigosertib; and a newpipeline product, brincidofovir, an antiviral drug for the treatment of infectious disease.
With the aim of further enhancing corporate value over the long term, the Company will continue to consider in-licensing new
drug candidates and will continue to advance the development of its current pipeline as a whole. Simultaneously, it will earnestly
promote the construction of its own salesforce and preparations for global business expansion while targeting profitability in thefiscal year ending December 31, 2021 and continued expansion in earnings afterward. To this end, the Company anticipates R&D
expenses of 2,679 million yen (2,441 million yen in the fiscal year ended December 31, 2019) and selling, general andadministrative expenses of 6,236 million yen (5,166 million yen in the fiscal year ended December 31, 2019), including R&D
expenses.
Key development milestones for the Company’s current pipeline are as follows:[TREAKISYM®]
Regarding recurrent/refractory diffuse large B-cell lymphoma (r/r DLBCL), the Company will proceed with the preparation of
approval applications.
The Company is making steady progress on both the RTD and RI liquid formulations of TREAKISYM®, which was in-licensed
from Eagle Pharmaceuticals, Inc. In the case of the former, the Company has completed approval applications and is undergoing
preparations to launch sales in the first three months of the fiscal year ending December 31, 2021. In the case of the latter, clinical
trials aimed primarily at confirming formulation safety are underway.
[Intravenous and oral formulation of rigosertib]
As for the intravenous formulation of rigosertib, the Company is currently accumulating patient enrollments in Japan as part of
the global Phase III clinical trial, and will continue to pursue development jointly with Onconova Therapeutics, Inc.
As for the oral formulation of rigosertib, the Company will make preparations in step with Onconova to ensure that it can
promptly participate in a joint global Phase III clinical trial for combination therapy with azacytidine.
[Brincidofovir, an antiviral drug for the treatment of infectious disease]
The company plans to conduct clinical development in Japan using the intravenous formulation of brincidofovir (BCV IV)
before embarking on global development. We will initially target viral hemorrhagic cystitis occurring after hematopoietic stem celltransplantation, which represents a niche market with high unmet medical demand. Setting our sights on global rollouts and futurebusiness expansion for the intravenous and oral formulations of brincidofovir (BCV oral), we will hold discussions with prominent
researchers from a number of specialties and review clinical trial designs based on the knowledge we gain from these discussions.
As a result of these planned activities, the Company anticipates net sales of 3,404 million yen, an operating loss of 5,090 million
yen, an ordinary loss of 5,134 million yen, and a loss of 4,803 million for the fiscal year ending December 31, 2020.

(5) Basic policies concerning profit distribution and dividends
The Company has not distributed dividends to date.
Although the Company has recorded product sales of its first product, TREAKISYM®, other pipeline products are still at theinvestment stage. Therefore, it is our policy to prioritize allocation of funds to strengthen our financial position and continue R&D
activities rather than to distribute dividends. However, we recognize that the return of profit to shareholders is an importantmanagement issue and will continue to consider the distribution of profits based on future business performance and financial―10―

conditions.
The articles of incorporation state that the Company can pay an interim dividend, based on a corporate resolution by the Boardof Directors, on June 30 every year as the record date. The Company can also distribute surplus by designating a record date inaddition to year-end and interim dividends. The decision-making body for the interim dividend is the Board of Directors, and forthe year-end dividend the shareholders’ meeting.

(6) Business risks
Described below are major issues that may lead to potential risks in the Company’s business activities. Issues that are notnecessarily considered significant by the Company are also disclosed in view of our commitment to actively provide information toinvestors and shareholders as these issues may carry weight in making investment decisions or in understanding our businessactivities. The Company is fully aware of the potential risks, and will make utmost efforts to prevent such risks from materializing,but should they occur, we intend to take appropriate action. However, we realize that investment decisions regarding our stock
should be made carefully by evaluating the following matters, as well as other matters mentioned in other sections of thisdocument. We would add that the following descriptions do not purport to cover all possible risks associated with investment inour stock. The future perspectives mentioned below reflect our understanding of our business circumstances as of the date of
publication of this document.
(i) Risks associated with pharmaceutical development in general
The Company’s main business is to in-license new drug candidate compounds created by pharmaceutical and bio venturecompanies, and to develop these into pharmaceutical products. The R&D field of pharmaceuticals is replete with strong
competition, including pharmaceutical giants. In addition, specialty pharmaceutical companies, including the Company, emulate
each other in quality and speed within the sector. The process from development to manufacturing and marketing involves many
regulatory hurdles, necessitating a vast amount of capital input over a long period of time in business operations. Their future
prospects involve uncertainty and these risk factors are associated with the Company’s present and future business activities.
a) Uncertainty involved in pharmaceutical development
The pharmaceutical development process leading up to the launch of a drug generally requires a large amount of expenditure
over a prolonged period. The probability of success is low. At each stage of development, it is not uncommon to makedecisions on discontinuing or delaying product development. In pharmaceutical development, the different stages ofdevelopment have to be conducted in phases, and at each phase a decision is made regarding whether or not development
should continue. It is not unusual for a decision to be made to stop development in mid-process. The probability is low for
development to progress successfully through to product launch. Even after a product is successfully developed and launched,reevaluation is conducted periodically or irregularly to confirm efficacy and safety of the product in light of academic
standards in medical and pharmaceutical areas at the time of reevaluation. In cases where efficacy is not confirmed or serious
side effects could lead to further damage to the health of patients, there remains a risk that approval for the product may be
revoked due to concerns over efficacy and side effects (see (f): “risk associated with side effects”). To reduce and disperse
these risks, the Company aims to have several drug candidates in its development pipeline and to prioritize insofar as possible
the in-licensing of drug candidates with confirmed proof of concept (POC) (Note 10) in human subjects. For small specialty
pharmaceutical business such as the Company, the impact of removing a single drug candidate from the development pipeline
is highly material and could have a significant impact on the Company’s financial position, business performance, and cash
flow.
(Note 10) Proof of concept (POC) means confirming the efficacy and safety of a new drug candidate in clinical trials andverifying its practical potential.
b) Uncertainty of income
In order to generate income from the drugs in development, the Company must succeed at all stages of new drug candidate
development, obtain the requisite approvals from regulatory authorities, and successfully manufacture and market the producteither on our own or in partnership with a third-party. It is not assured that the Company will succeed in these activities, oreven if we do succeed, we may not be able to ensure the margin of profitability needed to continue the business. A Phase III
clinical trial is underway for the lyophilized powder formulation of TREAKISYM®, a product currently in the development
pipeline that is designed to treat recurrent/refractory diffuse large B-cell lymphoma (r/r DLBCL). The Company has completed―11―

approval applications for the TREAKISYM® RTD liquid formulation and is preparing to launch it for sale during the first threemonths of the fiscal year ending December 31, 2021. We are also conducting clinical trials primarily aimed at confirming thesafety of the TREAKISYM® RI liquid formulation. With respect to rigosertib, we are currently handling clinical development
in Japan and are conducting a global Phase III clinical trial with the intravenous formulation for the target indication ofrecurrent/refractory higher-risk MDS. We are also responsible for the domestic clinical development of the oral formulation ofrigosertib and are conducting preparations to enable participation in a global clinical trial regarding its combination withazacitidine as a first-line treatment of higher-risk MDS. Furthermore, we have acquired exclusive rights for the global
development, marketing, and manufacture of brincidofovir, an antiviral drug for the treatment of infectious disease. Theserights cover all human indications other than smallpox. Moving forward, we will formulate plans aimed at maximizing
business value for rollouts in Japan and worldwide. We are promoting the development of these compounds, seeking tosuccessfully launch the products onto the market to obtain income. In some cases, we may consider entering into an alliancewith other pharmaceutical companies in development and marketing so as to expedite the inflow of income. Notwithstanding
our efforts, the drug candidates in our pipeline will require a considerable amount of time under development before they reachthe marketplace. There is no guarantee that they will make it onto the market as viable products, or that an alliance agreement
can be signed with other pharmaceutical companies. We are of the opinion that the selection of indications and the methods ofalliance and marketing identified thus far promise sufficient future profitability after considering the market size and marketing
performance of approved drugs. However, should we prove to be wrong in our assessment, or should there be any change inthe conditions on which the assessment is based and we fail to promptly adapt to such changes, there could be a significant
impact on our financial position, business performance, and cash flow.
c) Uncertainty in legislation and regulations requiring compliance, and the health insurance system
The pharmaceutical industry, the Company’s core business, is subject to various regulatory restrictions in individual
countries, which are imposed by laws and administrative guidance related to pharmaceutical drugs as well as other relevant
legislation regarding all aspects of business operations (research, development, manufacturing, and marketing). We formulate
our business plans in accordance with the Pharmaceuticals and Medical Devices Act (PMD Act) of Japan and other current
legislative regulations as well as the health insurance system, together with drug pricing guidelines that derive from thislegislation. Notwithstanding, there is a possibility that these regulations, regulatory systems, and pricing will change before theproducts that we are developing reach the marketplace. If any major change does occur, there may be a significant impact on
our financial position, business performance, and cash flow.
d) Risk concerning development and marketing overseas
We conduct our pharmaceutical business in Asian and other countries globally, not exclusively in Japan, where we anticipate
the expansion of healthcare needs in accordance with economic growth in these strategic business areas. Currently, thelyophilized powder formulation of TREAKISYM® is being sold in South Korea, Taiwan and Singapore, and we areformulating global business expansion plans related to the future worldwide development, sale, and manufacture ofbrincidofovir, an antiviral drug for the treatment of infectious disease, including in Asia, Europe, and the United States. In
overseas markets, as in Japan, pharmaceutical development and marketing generally require very large expenditure and areassociated with various business risks. To reduce investment expenditure and business risk, we out-license the development
and marketing rights of some of our drug candidates to other overseas companies. Before out-licensing the rights we possess,
we select a licensee after careful due diligence; we conduct monitoring when necessary after out-licensing the rights. The
development and sales of out-licensed products are subject to business conditions of the licensee or any changes in theregulatory and competitive environment in respective countries, and may fall below initial expectations, resulting in lower than
anticipated milestone revenue or royalty income. In such cases, there may be an impact on our financial position, businessperformance, and cash flow. Similarly, we regularly consider strategically utilizing partnerships with other pharmaceuticalcompanies through methods such as joint development and sales or insourcing or outsourcing agreements. However, theCompany acknowledges the possibility that actual earnings may not reach target levels if development or sales do not progress
according to projections due to factors such as economic conditions at partner companies, regulations in various countries, orcompetitive environments. Such cases could potentially affect the Company’s financial position, business performance, andcash flow.
e) Competition in the pharmaceutical industry
The pharmaceutical industry is an intensely competitive sector. A large number of both Japanese and foreign pharmaceutical―12―

companies and research institutions, including giant multinational pharmaceuticals, compete in the arena. Technologicalinnovation is progressing rapidly. Many competitors have a comparative advantage over the Company in terms of technology,
marketing, and financial position. Thus, these companies may more efficiently produce and sell competitor products, which are
more effective than the Company’s developed products. This means that what transpires in the competitive landscape withregards to development, manufacturing, and marketing operations may have a significant impact on our financial position,business performance, and cash flow.
f) Risk associated with side effects
Unexpected side effects may occur from the use of pharmaceutical products, from their clinical trial stage to post-marketingstage. If serious and unexpected side effects occur, compensation claims may be brought against the Company, or dependingon the situation, there is the risk of a delay in clinical trial timelines or even discontinuation of product development. In thecase where such side effects could lead to further damage to the health of patients, there is the risk of cancellation of approvalor discontinuation of sales. Regarding compensation claims, the Company has in place the liability insurance necessary tominimize the financial damage should such claims arise. However, this does not exclude the possibility that the compensation
awarded exceeds the amount insured. If this should occur, it could have a significant impact on the Company’s financial
position, business performance, and cash flow.
g) Product liability
The development and manufacturing of pharmaceutical products involves product liability risk. If in the future any productsthat the Company developed causes damage to health or any adverse events are discovered during clinical trials,
manufacturing, sales, or marketing of the drug, the Company will be subject to product liability. This may have a significant
impact on the Company’s financial position, business performance, and cash flow. If a product liability suit is filed against theCompany, the Company’s corporate image could be damaged, leading to a loss of confidence in the Company and the drugs it
develops, impacting future business.
h. Risks related to manufacturing and supply stability
After bringing products under development to market, the Company must ensure a stable supply of those products.
However, technological or legal issues at a business partner to whom the Company has outsourced production could interrupt
or substantially delay the supply of products, as could a fire or other disaster that causes a suspension of operations. Suchsituations could have a significant impact on the Company’s financial position, business performance, and cash flow.
(ii) Risk in business operationsa) Risk concerning the Company’s business model
The Company does not own research and manufacturing facilities. Instead, the Company has adopted a business model toraise income and profit from such activities, mainly targeting orphan drugs (Note 11) in the areas of oncology and hematology, inlicensing drug candidates from pharmaceutical and bio venture companies with POC established through human subjects, anddeveloping and marketing pharmaceutical products in Japan, Asia (China, Hong Kong, South Korea, Taiwan, Singapore, etc.),
and other countries globally. Furthermore, we have acquired exclusive rights for the worldwide development, sale, andmanufacture of brincidofovir (BCV; an antiviral drug for the treatment of infectious disease) for all human indications, except
smallpox, through an exclusive global licensing agreement with Chimerix Inc. Utilizing these rights, we will promote our own
transformation into a specialty pharmaceutical company that is capable of expanding its business into global markets and isequipped with an integrated system for supplying high-quality pharmaceutical products.
In developing and marketing the pipeline products, the Company plans to engage in alliances with other pharmaceuticalcompanies. However, there is no guarantee that the Company can continuously in-license drug candidate compounds thatsatisfy in-house criteria and secure these partner companies. In addition, as the Company mainly targets orphan drugs for inlicensing (Note 12), it may not be able to generate expected sales turnover. Furthermore, in the event that development at alicensor is delayed or fails, there may be impact on the corresponding development in Japan. The Company also acknowledges
the possibility that global business expansion may not proceed according to initial projections due to uncontrollable factors that
affect the progress of development, sales, and manufacturing plans of either the Company or its corporate partners. These
factors could impact the Company’s financial position, business performance, and cash flow. Needless to say, intensecompetition within the pharmaceutical sector and changes in the Company’s financial position may force the Company torevise its business model. Should this occur, there may be a significant impact on the Company’s business.

―13―

(Note 11) The rare-disease field is one in which the number of patients requiring drugs is small. Drugs for this field are termed“orphan drugs.” The Japanese Ministry of Health, Labour and Welfare has established an orphan drug designation
system for drugs meeting the criteria of (1) a drug to treat a serious disease that affects less than 50,000 people inJapan, and (2) for which there is a great need for medical treatment. Once designation is obtained, the drug will enjoy
various advantages including shortening of the time from regulatory submission for review of the drug to approval andthe extension of the re-examination period for up to 10 years.
(Note 12) “In-licensed drug candidates” are compounds or products for which obtaining the rights of development andcommercialization from other companies is under consideration.
b) Dependency on specific partners and suppliers
The Company holds exclusive rights to manufacture brincidofovir (antiviral drug for the treatment of infectious disease) forall human indications except for smallpox. As a specialty pharmaceutical company without production facilities, the Company
currently needs to depend on the supply of product from other companies when conducting clinical trials and marketing
approved drugs. Given this fact, the financial position and production conditions of the product supplier may have a significant
impact on the Company’s financial position, business performance, and cash flow. With regard to the development andmarketing of pipeline products, while the Company plans to launch sales on its own in the fiscal year ending December 31,
2021, its current business plan focuses on forming alliances with pharmaceutical companies. However, if the partnercompany’s management situation deteriorates substantially or if management policies change, which are matters beyond theCompany’s control, initial business plans may not be realized. Also, if any breach of contract occurs that necessitates thetermination of the license agreement as stipulated, the alliance may also end prior to reaching the expiration date. In suchcases, there may be a significant impact on the Company’s financial position, business performance, and cash flow. Typically,
in-license agreements with partner companies, revenues to be gained before the drug reaches the marketplace will include an
upfront payment upon signing the contract, funding for co-development, and milestone payments. Of these, milestone
payments are extremely unstable and unpredictable income as they are based on the attainment of predefined results. If
development progress is delayed, there may be a significant impact on the Company’s financial position, businessperformance, and cash flow.
c) Risk concerning intellectual property rights
During drug development activities, the Company makes use of various intellectual property rights which generally havebeen licensed to the Company by other companies such as pharmaceutical and bio venture companies. In relation to in-licensed
drug candidates, there is a risk that patent applications by licensors relating to an out-licensed drug are not approved or are
declared invalid. Moreover, it is difficult to completely avoid the possible creation of an intellectual property right by a thirdparty that supersedes the intellectual property right of the Company’s in-licensed drug candidate. These situations could lead toa significant impact on the Company’s financial position, business performance, and cash flow. As of the submission date ofthis document, no lawsuit has been filed by a third-party against the Company concerning intellectual property rights,
including patents in connection with product development. When in-licensing a drug candidate, the Company will seek advice
from lawyers and conducts a thorough due diligence investigation through patent firms in order to prevent such intellectual
property risks. Nevertheless, it is difficult to realize full protection from the occurrence of intellectual property right disputes
involving the infringement of third-party rights, and these may have a significant impact on the Company’s financial position,business performance, and cash flow. The candidate compounds that the Company in-licenses are not necessarily protected bypatents. On the other hand, even if a drug candidate is not protected by a patent, the assignment of the compound for reexamination review by the regulatory authorities would restrict the entry of generic drugs during the review period, giving rise
to a limited period of marketing exclusivity.
d) Information protection
To reduce the risk of significant confidential information relating to pipeline development and other business activities
leaking outside the Company, the Company engages in rigorous information protection. The Company requires directors andemployees, Scientific Advisory Board (SAB) members, outsourcing partners, and other business partners to sign confidentiality
agreements. Even with the agreement in place, directors and employees, SAB members, outsourcing partners, and otherbusiness partners may not adhere to confidentiality, and should this occur, significant confidential information may be divulged
elsewhere, which may impact the Company’s business, financial position, business performance, and cash flow.

―14―e) Risk concerning important contracts
If any contracts that may have a significant impact on conducting the Company’s business operations are terminated due toexpiration, cancellation, or for any other reason, there may be a significant impact on the Company’s financial condition,business performance, and cash flow.
(iii) Risk associated with organizationa) Risk of being a young company
SymBio is a young company founded in March 2005. Since inception, the Company has engaged in in-licensing activities ofdrug candidates for development. The founding President and CEO built up the pharmaceutical development business fromscratch, and the Company recorded income from product sales in August 2010, for the first time in its history. There is thepossibility that business issues that SymBio has never encountered arise in the future. At the moment, however, there are
difficulties associated with accurately predicting any changes in the external environmental factors that may affect theCompany’s business results. Therefore, the Company considers business results for the past several years to be an inadequate
reference to pass judgment on whether or not the Company can continue to grow.
b) Risk of being a small corporation
The Company uses contract research organizations (CROs (Note 13)) in conducting R&D, thereby forming a development
framework requiring relatively small staff numbers. With progress in the development of the pipeline (including global
expansion) already in place and with newly in-licensed drug candidates coming on line, the Company may need growth in
R&D human resources. However, for whatever reason should an alliance with a CRO terminate, or should the Company fail tosecure the planned number of staff, or should existing staff decide to leave, the Company’s business operations may behampered, leading to a possible impact on the Company’s financial position, business performance, and cash flow.
(Note 13) A contract research organization (CRO) is an organization that provides research and other services to pharmaceuticalcompanies, supporting pharmaceutical companies in their efforts to conduct development activities without delay. The
details of the commissioned activities may include monitoring to ensure that clinical studies are carried out in fullaccordance with study protocols and clinical data management.
c) Dependency on a specific person
Fuminori Yoshida, the Representative Director, founding President and CEO, has played a key role since the Company’s
foundation in the implementation and execution of all operations in the Company’s business management. Thus, in the eventthat he cannot continue to perform his corporate responsibilities for some unforeseen reason, this could have a significant
impact on the Company’s business operations.
d) Scientific Advisory Board (SAB)The Scientific Advisory Board (“SAB”) is an advisory panel to the Company’s president on the potential in-licensing of new
drug candidates. The Company invites members of the panel from clinicians and scientists engaged in basic research who arehighly regarded in the healthcare industry due to their successful track records and wealth of experience. The SAB meets twoor three times a year to engage in active discussion and debate, with each member giving his/her own perspective on an inlicensed drug candidate in the aim of building a pipeline portfolio with a balanced risk–return trade-off, while taking into
consideration the degree of healthcare needs and profitability of in-licensed drug candidates, which are gathered from all over
the world. The Company will continue in its efforts to acquire members of excellence for the SAB. However, if difficulty
should arise in procuring members for reasons such as the cancellation, expiration, or renewal refusal of contracts with existing
members, there may be an impact on the Company’s ability to evaluate and in-license quality drug candidates.

―15―

(iv) Business resultsa) Business performance in previous years
The Company's key business indicators are given below:
Term

11th Term

12th Term

13th Term

14th Term

15th Term

Fiscal Year Ended

December 2015

December 2016

December 2017

December 2018

December 2019

1,933,241

2,368,112

3,444,206

3,835,530

2,837,753(2,551,662)(2,127,049)(3,947,061)(2,656,072)(4,301,615)(2,630,386)(2,316,806)(3,976,784)(2,748,730)(4,376,655)

Net sales(thousands of yen)
Operating profit (loss)(thousands of yen)
Ordinary profit (loss)(thousands of yen)

To date, with the exception of the 4th Term, the Company’s total R&D expenses and other general and administrative
expenses exceeded the Company’s income, resulting in the posting of an operating loss, an ordinary loss, and a bottom-line
loss. For this reason, the Company does not consider the financial statements and indicators of previous years to provide
adequate reference data in making period comparisons of business performance or in forecasting future business performance.
b) Expected increase in R&D expenditures
The Company’s R&D expenses for the past five fiscal years are provided below:
Term

11th Term

12th Term

13th Term

14th Term

15th Term

Fiscal Year Ended

December 2015

December 2016

December 2017

December 2018

December 2019

2,034,714

1,667,098

3,017,812

1,832,746

2,441,552

R&D expenses(thousands of yen)

The Company intends to continue R&D activities and cumulative loss is currently trending upward. Utilizing our own
salesforce, we aim to achieve profitability as a business objective in the fiscal year ending December 31, 2021 throughexpansion of product sales revenue from additional indications of TREAKISYM®. However, the achievement of this objective
could potentially be hampered by a variety of factors. Through the recording of product sales revenue upon early approval forthe intravenous and oral formulations of rigosertib and brincidofovir, an antiviral drug for the treatment of infectious disease,and the income from alliances with pharmaceutical companies, the Company aims to collect early return on its R&D
investment and continuously improve business performance as soon as possible; however, there is no guarantee that theCompany will be able to achieve these aims as forecast.
c) Negative retained earnings (accumulated deficits) brought forward
SymBio is a specialty pharmaceutical company. Until products under development at the clinical stage reach themarketplace so that the Company can continuously earn stable income through product sales revenue and royalty income, theCompany will continue to carry significant upfront outlay of R&D expenditure. Due to this situation, with the exception of the
4th Term, the Company has posted losses since its foundation. At the end of the 15th Term, the fiscal year ended December 31,
2019, the Company recorded a negative balance of 25,919,496 thousand yen as accumulated deficits brought forward. SymBio
aims to become profitable at the earliest possible date by advancing its pipeline development in a rapid, precise, and efficientmanner and shifting toward implementing its own internal salesforce. However, the possibility still exists that profits may not
be generated in the planned timeframe. Should the Company’s business fail to develop and fail to generate profits as planned,
the timing of negative retained earnings brought forward becoming positive may considerably be delayed.
d) Fundraising
As a bio venture aiming to transform into a global specialty pharmaceutical company, the Company requires a large amountof funds to cover business expansion, including funds for R&D expenses. If SymBio’s business plan does not take shape asplanned and it suffers a shortfall in funding, the Company will endeavor to procure funds by changing strategic alliances,
securing new alliance contracts, or issuing new shares. However, if the Company fails to generate funds when they are
required, there may be serious doubt over the continuation of its business operations.
e) Tax losses carried forward―16―

The Company currently has tax losses carried forward. For this reason, the Company is not subject to corporate income tax,
local inhabitant tax, or enterprise tax at the standard rates and expects this to continue for several years into the future.
However, if accumulated deficits are written off earlier than expected and can no longer be used as an offset to taxable income
due to such reasons as the revision to current tax treatment of losses carried forward, the Company would become liable for thepayments of corporate income tax, local inhabitant tax, and enterprise tax at standard rates, which may have an impact on abottom-line profit (or loss) and cash flow currently planned.
(v) Other risksa) Profit distribution to shareholders
Since the foundation of the Company, dividends have not been distributed. SymBio is currently at the business stage ofmaking upfront investment for the development and commercialization (including global rollout) of pharmaceutical drugs, aswell as continuous growth achieved through the application of its own internal salesforce. The Company plan to continue toprioritize using funds to strengthen its financial position, continue its R&D activities, and support in-licensing of new drugcandidates. Thus, the Company has at present no plans for making dividend payouts. However, the Company recognizes thatthe return of profit to shareholders is an important management issue and will consider profit distribution based on futurebusiness performance and financial condition.
b) Procurement of funds
The Company may face increases in its capital requirements due to rises in necessary expenses accompanying businessexpansion through in-licensing of new drug candidates or unpredictable changes in external environment. Fluctuations inestimated earnings may also cause capital requirements to greatly exceed predictions in the Company forecast for the fiscal
year ending December 31, 2020 or in the medium- to long-range plan. In either of these cases, the Company may obtain
additional financing through means such as the issue of new shares. By doing so, the number of issued shares will increase,potentially diluting the per share value of the Company’s stock.
c) Dilution of the Company’s shares by the exercise of potential shares
The Company adopted a stock option plan in order to motivate and encourage higher business performance of directors andemployees, and to attract human resources of excellence. In accordance with the Commercial Code of 1890 Article 280-19,
280-20, and 280-21, and the Companies Act Article 236, 238, 239, and 240, share acquisition rights are granted to directors
and employees.
Additionally, the Company made a resolution at the Board of Directors meeting held on April 6, 2016 to issue the 3rd
unsecured convertible bonds with share acquisition rights (total issue price: 3 billion yen) and the 39th warrant (total issue
price: 9,776 thousand yen; total issue price of shares when issued through the exercise of share acquisition rights: 943,592
thousand yen) by way of third-party allotment. The Company also made a resolution at the Board of Directors meeting held on
August 9, 2017 to issue the 42nd warrant (total issue price: 32,560 thousand yen; total issue price of shares when issued
through the exercise of share acquisition rights: 1,892,000 thousand yen) by way of third-party allotment. Furthermore, on
April 9, 2018, the Board of Directors resolved to issue the 45th through 47th warrants (total issue price: 23,100 thousand yen;
total issue price of shares when issued through the exercise of share acquisition rights: 10,440,000 thousand yen) by way ofthird-party allotment. Among these warrants, as of December 31, 2019, the following remained unexercised: 1,675,000 shares
to be issued upon the exercise of the 47th warrant.
As of December 31, 2019, potential dilutive shares from the abovementioned warrants (“number of potential shares”) totaled
1,675,000 shares and comprised 6.3% of total shares issued. There is the possibility that per share value of the Company’s
stock will be diluted if these potential shares are exercised in the future. To attract talent, the Company may continue to offer
similar incentives. This means that if these share acquisition rights are exercised in the future, per share value of theCompany’s stock may be diluted.
d) Stock holding by venture capitals
In general, venture capitals and investment partnerships own shares for the purpose of realizing capital gains by sellingshares after IPO. If venture capitals and investment partnerships that own SymBio shares sell all or a portion of such shares, it
could have an impact on the market price of the Company’s shares.
e) Risk of loss on foreign exchange―17―

The Company, which does not currently have a production facility, receives its supply of products from other companies andassumes that it will make one-off payments when in-licensing drug candidates to expand its pipeline. Suitable financing forthese payments is obtained in advance through the arrangement of deposits denominated in foreign currency or foreignexchange forward contracts. Where such assets denominated in foreign currency are stated at market value in financial
statements at every year end, there is a risk of loss on valuation due to foreign currency fluctuations in the future and this may
have an impact on the Company’s financial position, business performance, and cash flow.
f) Risk associated with natural disasters
Any disasters (earthquake, typhoon, fire, etc.) and pandemic that occur in the Company’s geographic business domain could
lead to the occurrence of human and material damage, or suspension and delay in business. In such cases, social credibility andcompensation issues may have an impact on the Company’s financial position, business performance, and cash flow.

2. Status of Corporate Group
SymBio owns one unconsolidated subsidiary. However, because its impact on financial results is insignificant, it is omitted.

3. Management Policies(1) Basic policy of company management
SymBio Pharmaceuticals Limited was established in March 2005 by Fuminori Yoshida, who previously served concurrently as
Corporate VP of Amgen Inc. (Note 14) (United States) and President of Amgen K.K., a wholly owned subsidiary of Amgen Inc., (nowpart of Takeda Pharmaceutical Company Limited) for 12 years since its establishment.
The Company aims to achieve social and management responsibilities by responding to unmet medical needs (Note 15) based on
the guiding principle of mutual harmony, creating an intricate symbiotic relationship between patients, physicians, scientists,
regulators, and investors.
The Company regards underserved therapeutic areas with extremely significant medical needs as a business opportunity andremains focused on the areas of oncology and hematology, where high entry barriers exist due to the high degree of specialization
required. In this sense, SymBio is the first specialty pharmaceutical company in Japan. Rather than exploring opportunities to inlicense and develop new “blockbuster” drugs (drugs with sales exceeding 100 billion yen), the Company channels its resources
into the development of drugs in underserved markets where medical needs are high despite limited patient numbers. Holding
multiple drug approvals and new drug candidates in these key therapeutic areas, the Company aims to build a solid pipeline
portfolio, achieve high profitability with high-value products and services, and operate sustainable businesses.
(Note 14) Applied Molecular Genetics, or Amgen Inc., the world’s largest company in the biopharmaceutical field, was foundedin Thousand Oaks, California, in 1980, and started business in Japan as Amgen K.K. on May 1, 1993. After Takeda
Pharmaceutical Company Limited (“Takeda”) acquired 100% of Amgen K.K.’s stock in February 2008, its operations
were merged into Takeda.
(Note 15) “Unmet medical needs” means requirements for medical treatment that have not yet been fulfilled. It refers to asituation in which no effective drugs or treatments are currently available, despite strong demand by patients and/or
physicians.

(2) Key performance index
As a pharmaceutical company, SymBio believes that launching new drugs onto the market on an ongoing basis through its own
salesforce is an important element of securing higher corporate value. Accordingly, we plan to move ahead with building an
integrated sales system that includes a salesforce, as well as logistics and distribution. At the same time, the Company intends tocontinue in-licensing drug candidates for development and aggressively investing management resources into R&D activities.
Earnings have continued to grow, mainly due to product sales, since SyB L-0501 was approved for manufacture and sale inJapan and Singapore in 2010. Going forward, the Company will continue collaborating with Eisai to expand sales of
TREAKISYM® in Japan until our business partnership agreement expires in December 2020. From 2021, we aim to switch to ourown salesforce and expand earnings further. By obtaining approval for the intravenous and oral formulations of rigosertib andputting this product on the market; launching development of and commercializing brincidofovir, an antiviral drug for thetreatment of infectious disease, in Japan and overseas; and working to in-license, promote the development of, and acquire―18―

approval for new pipeline products, we will establish a high level of stable profitability as soon as possible. We will not set
performance index targets such as ROE or ROA until profits are recorded in a single year through the transition to our own
salesforce in the fiscal year ending December 31, 2021.

(3) Pipeline
The Company currently has the following pipeline products under development: SyB L-0501, SyB L-1101, SyB C-1101, SyB L1701, SyB L-1702, and SyB V-1901. The Company will continue to in-license candidate drugs to further expand and build its
pipeline portfolio with a balanced risk–return trade-off.
(i) [Anticancer agents: SyB L-0501 (lyophilized powder formulation), SyB L-1701 (RTD formulation), SyB L-1702 (RI
formulation), (generic name: bendamustine hydrochloride; trade name: TREAKISYM®)]
Bendamustine hydrochloride (the generic name), the active pharmaceutical ingredient of TREAKISYM®, is an anticancer
agent that has been in use for a number of years in Germany under the trade name of Ribomustin® for the treatment of nonHodgkin’s lymphoma, multiple myeloma, and chronic lymphocytic leukemia. The Company decided to in-license this productbecause there is currently no effective medication for the indications of recurrent/refractory low-grade non-Hodgkin’s lymphoma
and mantle cell lymphoma. These are underserved therapeutic areas aligned with the Company’s corporate mission and also fallwithin one of SymBio’s targeted therapeutic fields (hematologic cancer). Astellas Deutschland GmbH, a German subsidiary of
Astellas Pharma Inc., is the worldwide licensor of bendamustine hydrochloride. Cephalon, Inc. (Pennsylvania, United States), a
subsidiary of Teva Pharmaceutical Industries Ltd. (Israel), in-licensed rights to bendamustine hydrochloride for North America
from Astellas Pharma GmbH and obtained approvals from the U.S. Food and Drug Administration (FDA) to use the drug for thetreatment of chronic lymphocytic leukemia and refractory B-cell non-Hodgkin’s lymphoma in March 2008 and October 2008,
respectively. Mundipharma International Corporation Limited (United Kingdom) and Janssen-Cilag Limited (United Kingdom)
are also licensed from Astellas Pharma GmbH and have obtained exclusive rights for the development and commercialization of
bendamustine hydrochloride in Europe and other regions, respectively.
The Company is licensed from Astellas Deutschland GmbH with exclusive rights for the development and commercializationof bendamustine hydrochloride in Japan, China, Hong Kong, South Korea, Singapore, and Taiwan. In Japan, the drug hasreceived approval for the indications of recurrent/refractory low-grade non-Hodgkin’s lymphoma and mantle cell lymphoma(October 27, 2010), and was launched under the trade name TREAKISYM® on December 10, 2010. For additional indications, in
December 2015, the Company filed applications for manufacturing and marketing approval in Japan for the target indications offirst-line treatment of low-grade non-Hodgkin’s lymphoma and mantle cell lymphoma, and chronic lymphocytic leukemia. The
Company received manufacturing and marketing approval for the indication of chronic lymphocytic leukemia in August 2016
and of first-line treatment of low-grade non-Hodgkin’s lymphoma and mantle cell lymphoma in December 2016. TREAKISYM®
achieved primary endpoints in its Phase III clinical trial as a treatment for recurrent/refractory diffuse large B-cell lymphoma (r/r
DLBCL), and the Company is currently preparing to apply for its approval. In order to maximize the business value of
TREAKISYM® by further promoting product life cycle management, the Company concluded an exclusive license agreementwith Eagle Pharmaceuticals, Inc. (head office: New Jersey, U.S.) (“Eagle”) in September 2017 to develop, market, and sell
Eagle’s ready-to-dilute (“RTD”) and rapid infusion (“RI”) liquid formulation injection products in Japan. Presently, the Company
is applying for approval of the RTD formulation, and is proceeding with clinical trials aimed primarily at verifying the safety of
the RI formulation.
Eisai has signed an agreement on TREAKISYM® with SymBio for the rights of joint development and exclusive sales inJapan, and is currently selling TREAKISYM®.
In Asia, SyB L-0501 received the approval for the indication of low-grade non-Hodgkin’s lymphoma and chronic lymphocytic
leukemia in Hong Kong in December 2009. In Hong Kong, Cephalon, Inc. has the exclusive right to develop and sellbendamustine hydrochloride, and is currently selling the product. In Singapore, approval for the indications of low-grade nonHodgkin’s lymphoma and chronic lymphocytic leukemia was obtained in January 2010. In South Korea, approval for theindications of chronic lymphocytic leukemia and multiple myeloma was obtained in May 2011, approval for the indication ofrecurrent/refractory low-grade non-Hodgkin’s lymphoma was achieved in June 2014, and approval for the first-line treatment of
CD20 positive follicular lymphoma was obtained in August 2017.
In South Korea and Singapore, Eisai has agreements in place with SymBio for exclusive development and selling rights.
Eisai’s subsidiaries launched the product in Singapore and South Korea in September 2010 and October 2011, respectively.
In China, SymBio’s business partner Cephalon, Inc. received approval in December 2018 for the treatment of recurrent B-cell
non-Hodgkin lymphoma following treatment with rituximab. In Taiwan, SymBio’s business partner InnoPharmax Inc. (Taiwan)―19―

achieved approval for the indications of low-grade non-Hodgkin’s lymphoma and chronic lymphocytic leukemia in October
2011, followed by product launch in February 2012. In November 2017, InnoPharmax Inc. obtained approval for the first-line
treatment of low-grade non-Hodgkin’s lymphoma and mantle cell lymphoma.
(ii) [Anticancer agents: SyB L-1101 (intravenous formulation) and SyB C-1101 (oral formulation) (generic name: rigosertib
sodium)]Rigosertib is an anticancer agent with a unique type of multikinase inhibitory activity (Note 16). It is currently being developed in
the U.S., Europe, and elsewhere by a U.S. company, Onconova Therapeutics, Inc. (“Onconova”), for the target indications of
myelodysplastic syndromes (“MDS”). MDS is the pre-pathological state for malignant tumors of blood cells, which has shown
increasing numbers of patients in recent years; it frequently affects elderly people; and it is a refractory disease, with a highprobability of developing into leukemia.
No effective medication is available yet, especially for recurrent/refractory MDS, and it therefore constitutes an underserved
therapeutic area. In July 2011, the Company signed a license agreement with Onconova, obtaining the exclusive right to develop
and commercialize rigosertib in Japan and South Korea. Based on this agreement, the Company continues to develop theintravenous rigosertib formulation for the target indication of recurrent/refractory higher-risk MDS and the oral formulation for
the target indication of first-line higher-risk MDS (in combination with azacitidine).
As for the intravenous formulation of rigosertib, the Company is participating in a global Phase III clinical trial with clinical
trial sites in more than 20 countries worldwide, for higher-risk myelodysplastic syndromes (HR-MDS) which do not respond tothe current standard treatment with hypomethylating agents, which relapse after treatment under the current standard of care, or
which are intolerant to hypomethylating agents. The Company is conducting its own clinical trial to participate in the global
Phase III clinical trial from Japan.
As for the oral formulation of rigosertib, Onconova has been conducting a Phase II clinical trial for the target indication oftransfusion-dependent lower-risk MDS and a clinical trial for the indication of first-line higher-risk MDS (in combination withazacitidine).
The Company has completed its domestic Phase I clinical trial of the oral formulation of rigosertib as a monotherapy for thetarget indication of lower-risk MDS, and is currently conducting a domestic Phase I clinical trial to confirm the safety of highdose monotherapy for the target indication of first-line higher-risk MDS. The Company is considering participating in global
clinical trials after completing the Phase I clinical trial. The development for the target indication of transfusion-dependent lowerrisk MDS will be considered based on the development progress made by Onconova.
While Onconova is making steady progress with development, we will look into the option of developing rigosertib forindications other than MDS. By allocating development of the intravenous and oral formulations to different indications, theCompany aims to make progress with development of treatment methods that are easy for patients to use, and that placesufficient importance on patient compliance.
(Note 16) Multikinase inhibitors impede the proliferation, infiltration, and metastasis of cancer cells, thereby eradicating them.
(iii) [Antiviral drug and treatment for infectious disease: SyB V-1901 (generic name: brincidofovir)]
On September 30, 2019, the Company entered into an exclusive global licensing agreement for brincidofovir (“BCV”; anantiviral drug for the treatment of infectious disease) with Chimerix Inc. Under this agreement, the Company acquired theexclusive rights for the worldwide development, marketing, and manufacture of BCV for all human indications, excluding
smallpox. With the global rights to BCV, the Company will transition into a global specialty pharmaceutical company with an
integrated system for supplying high-quality pharmaceutical products.
The Company will initially develop BCV for the treatment of viral hemorrhagic cystitis (vHC) occurring after hematopoietic
stem cell transplantation, which are niche markets with high unmet medical demand. To deliver BCV to patients requiring
treatment as promptly as possible, we will conduct clinical development in Japan ahead of the rest of the world and secure
approval for the drug. At the same time, we will conduct global clinical trials that extend to Europe and the United States whiletargeting a global rollout of the drug. Additionally, we are currently planning clinical development of BCV as a treatment forviral infections occurring after kidney transplantation. We are also looking to expand our business in Europe, the U.S. and Asia
(including China), where organ transplant markets are large, and are considering forming partnerships that reflect the regional
characteristics of target diseases. We will explore all possible means of maximizing our business value by applying a variety ofmeasures, including the strategic utilization of wholly owned subsidiary SymBio Pharma USA, Inc.

―20―

(4) Medium- to long-term strategy
The Company is pursuing primarily the following five strategies in order to achieve its mid-range plan.
(i) De-risking by post-POC strategy
We in-license drug candidates for which proof of concept (POC) is already confirmed in human subjects in principle.
Accordingly, they should be drugs that are in a relatively late stage of clinical development or already on the market overseas.
The advanced development is already conducted overseas for these drug candidates and their efficacy and safety are alreadyconfirmed in human subjects, thereby reducing the development risk. We utilize existing clinical data available overseas so as tocompress development timelines, reduce the development costs, and increase the likelihood of regulatory approvals in Japan andAsian markets.
(ii) Building a high-quality pipeline with exceptional search and evaluation capabilities
Our new drug search engine is connected to the diverse network of pharmaceutical and bio venture companies, and enables us
to select promising drug candidates from the vast number of chemical compounds after the careful review by internal experts.
Using their wealth of experience at the forefront of R&D, Scientific Advisory Board (SAB) members carefully evaluate andrender final judgment on each drug candidate. The highly established screening process up to the final selection of drugcandidates, coupled with the post-POC strategy (in which we in-license drug candidates whose efficacy and safety are alreadyconfirmed overseas), alleviates development risk and reduces development timelines. It also helps to understand how
satisfactorily the drug candidates meet the healthcare needs and to improve the accuracy of revenue projections after the productlaunch.
(iii) Containment of fixed costs by labless/fabless strategy
The Company does not own any research or production facilities, which are often regarded as the main cause of fixed costs.
Once drug candidates are searched and in-licensed, we focus on value-added activities such as the formulation andimplementation of development strategy and outsource other necessary routine procedures. This enables us to reduce
development costs of pharmaceutical drugs and secure a flexible financial strategy.
(iv) Realization of high business efficiency by “Blue Ocean strategy” (Note 17)
There are many cases that the standard drug used overseas cannot be prescribed in Japan or a new drug is launched in Japan
five years behind its initial approval overseas. This problem is called “drug lag” and is becoming aggravated, while the term
“cancer patient refugee” has been created. This drug lag is particularly conspicuous in our strategic drug development areas ofrefractory cancer and hematological diseases. There is a large market of anticancer agents that continues to grow with the aging
population. However, anticancer agents have a wide range of indications and they are fragmented by the type of tumor, and insome therapeutic areas there are a limited number of patients. Although an extremely high degree of specialization is required
and developing new agents in these therapeutic areas is highly difficult, it is often financially unattractive for larger
pharmaceutical companies to pursue due to the small size of the potential market. This is part of the cause of the delay in drugs
coming to market. On the other hand, obtaining approval and launching a new drug in one of these less competitive therapeuticareas creates an opportunity to achieve superior growth and profitability by continuous indication expansion and bringing new
products into the market.
(Note 17) “Blue Ocean strategy” means a strategy of redefining the market, avoiding marketplaces with fierce competition inwhich competitors seek to gain limited market shares (termed “red oceans”), and instead creating a “blue ocean,” anunexploited market with reduced competition, enabling profits to be maximized while providing customers with highvalue products and services.
(v) Going global beyond Asia
The Company has thus far been operating its businesses in Asia centered on Japan. However, major development isunachievable if we remained in Asia, as the environment surrounding Japanese healthcare is changing drastically. Moving
forward, the Company will carry out search and evaluation activities to advance new drug candidates with a view to global
development. On September 30, 2019, the Company entered into an exclusive global licensing agreement for the antiviral drug
brincidofovir with Chimerix Inc. (head office: North Carolina, U.S.). Under this agreement, the Company acquired the exclusive―21―

rights for the worldwide development, marketing, and manufacture of brincidofovir, an antiviral drug for the treatment of
infectious disease, for all human indications, excluding smallpox.

(5) Issues to be addressed by the Company
The Company is committed to focusing on the following key management objectives.

(i) Further expansion of the pipeline
In order to enhance the enterprise value as a specialty pharmaceutical company, we need to expand the pipeline throughongoing in-licensing of new drug candidates for development.
The Company is conducting or planning development of the following anticancer agents: SyB L-0501, SyB L-1101, SyB C1101, SyB L-1701, SyB L-1702, and SyB V-1901, an antiviral drug for the treatment of infectious disease. Currently we are indiscussion with counterparties regarding the in-licensing of several new drug candidates, and will continue with active efforts toin-license new drug candidates for development in order to further expand our pipeline.
(ii) Life cycle management of products in the existing pipeline
In order to enhance the enterprise value, not only in-licensing new drug candidates but also promoting product life cycle
management is important. Therefore, it is critical to maximize returns from each drug under development through indication
expansion after the in-licensed drugs’ initial approval.
TREAKISYM® is approved for manufacturing and marketing in Japan for the indications of recurrent/refractory low-grade
non-Hodgkin’s lymphoma and mantle cell lymphoma, chronic lymphocytic leukemia, and first-line treatment of low-grade nonHodgkin’s lymphoma and mantle cell lymphoma. TREAKISYM® also achieved primary endpoints in its Phase III clinical trial
for the indication of recurrent/refractory diffuse large B-cell lymphoma (r/r DLBCL), and the Company is currently preparing toapply for its approval. In addition, the Company intends to maximize the business value of TREAKISYM® by promoting the
product life cycle management of the product and is developing the TREAKISYM® liquid formulation (RTD and RI liquid
formulations) in-licensed from Eagle Pharmaceuticals, Inc. (head office: New Jersey, U.S.).
The development of intravenous and oral formulations of rigosertib for the indication of myelodysplastic syndromes (MDS) is
currently progressing. Few useful therapeutic agents are currently available for MDS, so it is an area with very high unmet
medical need. With respect to the global Phase III clinical trial of the intravenous formulation for the target indication ofrecurrent/refractory higher-risk MDS conducted by Onconova, the Company is conducting its clinical trial in Japan. As for theoral formulation, the Company has completed a domestic Phase I clinical trial as a monotherapy for the target indication oflower-risk MDS, and is currently conducting a domestic Phase I clinical trial to confirm the safety of high-dose monotherapy forthe target indication of first-line higher-risk MDS. The Company is considering participating in global clinical trials after
completing the Phase I clinical trial. The development for the target indication of transfusion-dependent lower-risk MDS will beconsidered based on the status of development by Onconova.
The Company is focused on maximizing the business value of TREAKISYM® and rigosertib by promoting product life cycle
management through further indication expansion. Furthermore, we will aim to maximize earnings by pursuing life cycle
management related to brincidofovir, an antiviral drug for the treatment of infectious disease, while transforming into a specialty
pharmaceutical company with the capacity to expand into global markets.
(iii) Preparation for the establishment of the Company’s own salesforce
Domestic sales of TREAKISYM® are currently handled through Eisai, in accordance with the business partnership agreement
the Company concluded in August 2008. This agreement is set to expire in December 2020 and, looking ahead to the fiscal year
ending December 31, 2021, the Company is planning to transition to its own salesforce.
Providing specialized medical drugs information will enable the Company to more accurately understand the needs of themarket and respond more swiftly, allowing it to contribute to the benefit of patients while aiming to maximize the business valueof TREAKISYM®. Furthermore, the Company strives to build a consistent salesforce with a high level of specialization in thefield of hematological diseases. Through this effort, the Company aims to achieve high business efficiency, ensure sustainableearnings growth, and maximize shareholder value once the intravenous and oral formulations of rigosertib, which are currently
under development to treat myelodysplastic syndromes (MDS), join TREAKISYM® in the product lineup.
With regard to brincidofovir, an antiviral drug for the treatment of infectious disease, we will not only pursue domestic sales,―22―but also consider global business development in all parts of the world, including Europe and the United States.
(iv) Global expansion for further growth
In addition to Japan, the Company identifies China, Hong Kong, South Korea, Taiwan, and Singapore as strategic regions andhas moved forward with business development in Asia.
However, with expanding medical expenditures due to the aging population in Japan, and the advent of the “era of genericdrugs comprising 80% of all drugs dispensed” as a governmental policy of Japan, the business environment for innovative drug
developers is expected to remain extremely challenging. Such a policy may also be implemented by other Asian countries.
Under these circumstances, the Company will promote global expansion aiming for further growth. Utilizing its experience
fostered through its business in Asia, the Company will search, evaluate, and negotiate concerning new drug candidates that canfollow brincidofovir, an antiviral drug for the treatment of infectious disease, in order to acquire their rights on a global scale.
(v) Securing personnel
The Company places the highest priority on personnel as the Company’s principal management resource. Without talent, wecannot make superior achievements in terms of exploring, developing, and providing information concerning new drugs; nor can
we roll out these new drugs on a global scale. We have been continually recruiting talented people; especially after being listed,
we have recruited the best and brightest people in order to strengthen the management organization. Going forward, we plan tocontinue to further strengthen our human resources by providing on-the-job training and employee development programs.
(vi) Financial issue
It is necessary for the Company to raise funds required for business activities such as R&D expenditures as pipeline
development and global business expansion progress and as drug candidates increase in number.
Therefore, we make every effort to further strengthen the financial base by continually diversifying the method of fund raisingand curtailing costs through tight budget control.

(6) Other important matters concerning the Company’s management
Issuance of 45th through 47th warrants
In order to secure the funds necessary for R&D, construction of its own internal salesforce, and licensing of new drug candidates,
the Company made a resolution at the Board of Directors meeting held on April 9, 2018 to issue the 45th through 47th warrants(with Exercise Price Revision Clauses) by way of third-party allotment, and completed the payment of 6,383,225 thousand yen as ofDecember 31, 2019.

4. Basic Views on Selection of Accounting Standards
Over the near term, the Company will prepare its financial statements based on Japanese generally accepted accounting principles(GAAP), taking into account the inter-period comparability of financial statements and comparability across companies.
In terms of the application of International Financial Reporting Standards (IFRS), the Company will take appropriate measures inlight of the existing circumstances in Japan and overseas.

―23―

5. Financial Statements and Primary Notes(1) Balance sheet(Unit: thousands of yen)
FY 2018(as of December 31, 2018)

FY 2019(as of December 31, 2019)

4,821,355
411,720533,824
589
83,372
31,147
124,855
31,624
6,038,490

3,910,830
549,275—640
94,002
41,791
275,324
15,626
4,887,491

46,198(9,427)
36,77159,541(39,361)
20,180—56,951

47,486(12,751)
34,734
66,241(46,998)
19,242
21,51375,49150,946
20,43071,376

94,974
145,551
240,52501,225
71,37872,604200,932
6,239,423

0—70,44670,446
386,463
5,273,955

726,100
503,637
71,24916,42718,926
1,336,342

120,913639,482
87,756—24,066872,219

1,281
1,281
1,337,623

1,619
1,619
873,838

AssetsCurrent assets
Cash and deposits
Accounts receivable–trade
Merchandise and finished goods
Supplies
Prepaid expenses
Advances paid
Consumption taxes receivable
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Construction in progress
Total property, plant and equipment
Intangible assets
Software
Software in progress
Total intangible assets
Investments and other assets
Shares of subsidiaries
Long-term prepaid expenses
Lease and guarantee deposits
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable–trade
Accounts payable–other
Income taxes payable
Forward exchange contracts
Other
Total current liabilities
Non-current liabilities
Provision for retirement benefits
Total non-current liabilities
Total liabilities―24―

(Unit: thousands of yen)
FY 2018(as of December 31, 2018)

FY 2019(as of December 31, 2019)

12,972,579

14,870,639

12,942,579—
12,942,579

14,840,639
2,498
14,843,137(21,543,238)(21,543,238)(17)
4,371,902
529,897
4,901,799
6,239,423(25,919,496)(25,919,496)(15,077)3,779,202
620,9134,400,116
5,273,955

Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Total capital surplus
Retained earnings
Other retained earnings
Retained earnings brought forward
Total retained earnings
Treasury shares
Total shareholders’ equity
Share acquisition rights
Total net assets
Total liabilities and net assets―25―

(2) Statement of income
FY 2018(from January 1, 2018
to December 31, 2018)
Net sales
Net sales of goods
Rights income
Total net sales
Cost of sales
Beginning merchandise inventory
Cost of purchased goods
Purchase allowance and returns
Total
Ending merchandise inventory
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Operating profit (loss)
Non-operating income
Interest income
Insurance claim income
Dividend income of insurance
Interest on tax refund
Other
Total non-operating income
Non-operating expenses
Commission expenses
Share issuance costs
Foreign exchange losses
Other
Total non-operating expenses
Ordinary profit (loss)
Extraordinary income
Gain on reversal of share acquisition rights
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Total extraordinary losses
Profit (loss) before income taxes
Income taxes–current
Total income taxes
Profit (loss)

3,809,874
25,656
3,835,530

2,811,272
26,481
2,837,753

362,5142,968,586
134,614
3,196,486*1
533,824
2,662,661
1,172,869*2 *3
3,828,941(2,656,072)

533,824
1,684,453
245,276
1,973,002*1—
1,973,002
864,751*2 *3
5,166,366(4, 301,615)

525
—

235
2,736

1,501
116
54
2,196

1,282
76
0
4,331

11,10029,65054,103—
94,854(2,748,730)

10,457
13,93254,755
227
79,372(4,376,655)

9,826
9,826

4,197
4,197

9,829
9,829
(2,748,733)
3,800
3,800
(2,752,533)——(4,372,458)
3,800
3,800
(4,376,258)

*4

―26―

(Unit: thousands of yen)
FY 2019(from January 1, 2019
to December 31, 2019)

(3) Statement of changes in equity
FY 2018 (from January 1, 2018 to December 31, 2018)(Unit: thousands of yen)
Shareholders’ equity
Capital surplus
Retained earnings
Other retained
earnings
Capital stock Legal capital Other capital Total capital
Total retained
Retainedearnings
surplussurplussurplusearnings brought
forwardBalance at beginningof current period
Changes of items
during period
Issuance of newshares (exercise ofshare acquisitionrights)Profit (loss)
Net changes of
items other thanshareholders’ equity
Total changes of
items during period
Balance at end ofcurrent period

10,761,676

10,731,676

2,210,903

2,210,903

10,731,676(18,790,705)(18,790,705)

2,210,903(17)

1,626,756(2,752,533)(2,752,533)

2,210,903

2,210,903—

2,210,903(2,752,533)(2,752,533)—

12,972,579

12,942,579—

12,942,579(21,543,238)(21,543,238)(17)

Shareholders’equityShareacquisition
Total
rightsshareholders’equityBalance at beginningof current period
Changes of items
during period
Issuance of newshares (exercise ofshare acquisitionrights)Profit (loss)
Net changes of
items other thanshareholders’ equity
Total changes of
items during period
Balance at end ofcurrent period－

Treasury shares

2,702,629

536,772

Total net
assets3,239,402

4,421,806

4,421,806(2,752,533)(2,752,533)(6,875)(6,875)

1,669,273(6,875)

1,662,397

4,371,902

529,897

4,901,799―27―

FY 2019 (from January 1, 2019 to December 31, 2019)(Unit: thousands of yen)
Shareholders’ equity
Capital surplus
Retained earnings
Other retained
earnings
Capital stock Legal capital Other capital Total capital
Total retained
Retainedearnings
surplussurplussurplusearnings brought
forwardBalance at beginningof current period
Changes of items
during period
Issuance of newshares (exercise ofshare acquisitionrights)Profit (loss)
Purchase oftreasury shares
Disposal of treasury
sharesNet changes of
items other thanshareholders’ equity
Total changes of
items during period
Balance at end ofcurrent period

12,972,579

12,942,579

1,898,059

1,898,059

12,942,579(21,543,238) (21,543,238)(17)

1,898,059(4,376,258)(4,376,258)(20,871)

2,498

2,498

5,811

1,898,059

1,898,059

2,498

1,900,558(4,376,258)(4,376,258)(15,059)

14,870,639

14,840,639

2,498

14,843,137(25,919,496)(25,919,496)(15,077)

Shareholders’equityShareacquisition
Total
rightsshareholders’equityBalance at beginningof current period
Changes of items
during period
Issuance of newshares (exercise ofshare acquisitionrights)Profit (loss)
Purchase oftreasury shares
Disposal of treasury
sharesNet changes of
items other thanshareholders’ equity
Total changes of
items during period
Balance at end ofcurrent period―

Treasury shares

4,371,902

529,897

Total net
assets4,901,799

3,796,119

3,796,119(4,376,258)(4,376,258)(20,871)(20,871)

8,310

8,310
91,01691,016(592,699)

91,016(501,683)

3,779,202

620,9134,400,116―28―

(4) Statement of cash flows
FY 2018(from January 1, 2018
to December 31, 2018)
Cash flows from operating activities
Profit (loss) before income taxes
Depreciation
Amortization of guarantee deposits
Share-based remuneration expenses
Increase (decrease) in provision for retirement
benefits
Interest income
Insurance claim income
Foreign exchange losses (gains)
Commission expenses
Share issuance cost
Gain on reversal of share acquisition rights
Loss on retirement of non-current assets
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease (increase) in prepaid expenses
Decrease (increase) in advances paid
Decrease (increase) in consumption taxes refund
receivable
Decrease (increase) in other current assets
Decrease (increase) in long-term prepaid expenses
Increase (decrease) in notes and accounts payable–
trade
Increase (decrease) in accounts payable–other
Increase (decrease) in other current liabilities
SubtotalInterest and dividends received
Proceeds from insurance income
Commitment fee paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Payments of leasehold and guarantee deposits
Proceeds from refund of leasehold and guarantee
deposits
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from issuance of shares resulting fromexercise of share acquisition rights
Proceeds from issuance of share acquisition rights
Payments for issuance of shares
Purchase of treasury shares
Proceeds from disposal of treasury shares
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period―29―(Unit: yen in thousands)
FY 2019(from January 1, 2019
to December 31, 2019)(2,748,733)
34,6991,186
122,944(4,372,458)
38,085881
127,144

(111)

338

(525)
—
47,032
11,10029,650(9,826)
9,829
78,154(171,310)(9,696)(12,386)(235)(2,736)
83,37010,457
13,932(4,197)—(137,554)
533,824(18,649)(10,644)(26,414)(150,469)

30,366
4,928

15,946
1,225

121,718(605,187)

155,185
13,935(2,318,271)
524—(3,000)(3,800)(2,324,547)

124,233
5,219(4,347,472)
235
2,736
(2,438)(3,800)(4,350,738)(31,932)(7,837)(159)(24,498)(192,013)—

13,74750(26,180)(216,462)

4,278,712

3,771,476

23,100(29,755)——
4,272,056—(11,582)(20,871)(1,022)3,740,045(47,032)(83,370)

1,874,296
2,947,059(910,525)
4,821,355

Cash and cash equivalents at end of period

FY 2018(from January 1, 2018
to December 31, 2018)*1
4,821,355(Unit: yen in thousands)
FY 2019(from January 1, 2019
to December 31, 2019)*1
3,910,830(5) Notes to going concern assumptions
None to be reported.

(6) Significant accounting policies
1. Valuation basis and method of marketable and investment securities(1) Shares of subsidiaries
Shares of subsidiaries are stated at cost determined by the moving-average method.
(2) Other marketable and investment securities
Available-for-sale securities with determinable market value
Available-for-sale securities with a determinable market value are stated at fair value based onmarketable value on the closing date and other premises. Any valuation differences are included directly
in shareholders’ equity. Cost of securities sold is calculated by the moving-average method.
Available-for-sale securities without determinable market value
Available-for-sale securities without determinable market value are stated at cost determined by themoving-average method.
2. Valuation basis and method of derivative transactions
Derivative financial instruments are stated at fair value.
3. Valuation basis and method of inventories
Inventories are stated at cost determined by the weighted-average method. The amount on the balance sheet
is calculated by reducing book value when the contribution of inventories to profitability declines.
4. Depreciation and amortization of non-current assets(1) Property, plant and equipment (excluding lease assets)
Depreciation of property, plant and equipment is computed by the straight-line method.
The useful lives of major property, plant and equipment are summarized as follows:
Buildings
3 to 18 years
Tools, furniture and fixtures
4 to 20 years(2) Intangible assets (excluding lease assets)
Amortization of intangible assets is computed by the straight-line method.
Capitalized software costs are being amortized over the period of the internal use of five years.
(3) Lease assets
Depreciation of lease assets is computed by the straight-line method over the lease term with no residual
value.
5. Deferred assets
Share issuance costs and bond issuance costs are recorded as expenses in full at the time of expenditure.
6. Basis for translating assets and liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the spot
exchange rates prevailing on the closing date, and resulting gains or losses are credited or charged to income.
7. Basis for reserves and provisions(1) Allowance for doubtful accounts―30―

The allowance for doubtful accounts is provided at an amount determined based on the historicalexperience of bad debt with respect to ordinary receivables and an estimate of uncollectible amounts
determined by reference to specific doubtful receivables from customers which are experiencing financial
difficulties.
For the fiscal year ended December 31, 2018, no allowance for doubtful accounts is provided due to no
historical experience of bad debt and no receivable balances that are deemed uncollectible.
(2) Provision for retirement benefits
The provision for retirement benefits is provided based on an estimated amount for retirement benefit
obligations as of December 31, 2018.
The Company applies the simplified method to calculate amounts of provision for retirement benefits andretirement benefit expenses. That is, the amount of retirement benefit obligations are the payments requiredfor voluntary retirement as of each fiscal year end.
8. Cash and cash equivalents in the statement of cash flows
Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time, andshort-term investments with a maturity of three months or less that can easily be converted to cash and are
subject to little risk of change in value.
9. Other significant basis for the preparation of financial statements
Accounting for consumption tax
Transactions are recorded at amounts exclusive of consumption tax.

(7) Notes to financial statements(Balance sheet)
The Company has overdraft and commitment line contracts with three banks in a business relationship to efficiently
procure working capital. The status of the bank overdraft and loan commitments based on these contracts at the endof each fiscal year is as follows:(Unit: thousands of yen)
FY 2018
FY 2019(as of December 31, 2018)(as of December 31, 2019)
Total amounts of bank overdraft limit
1,350,000
1,350,000
and loan commitment line
Balance of borrowing outstanding——
Unused balance
1,350,000
1,350,000(Statement of income)* 1 Inventories at fiscal year-end are stated after writing down based on the decrease in profitability. The following
amount is included within cost of sales as loss on valuation of inventories.
(Unit: thousands of yen)
FY 2018
FY 2019(from January 1, 2018(from January 1, 2019
to December 31, 2018)
to December 31, 2019)(Note 1)
121,317
187,840 (Note 2)(Note 1) A certain batch of TREAKISYM® 25 mg was determined to be unsalable due to its poor external appearance,
which resulted in an inventory valuation loss.
(Note 2) A batch of TREAKISYM® 100 mg was determined to be unsalable due to quality issues, resulting in an
inventory valuation loss.

―31―

* 2 The selling expenses ratio is roughly 10.6% and 14.2% for the fiscal years ended December 31, 2018 and 2019,respectively, and the general and administrative expenses ratio is roughly 89.4% and 85.8% for the fiscal years
ended December 31, 2018 and 2019, respectively.
Major expense items and amounts are as follows:(Unit: thousands of yen)
FY 2018
FY 2019(from January 1, 2018(from January 1, 2019
to December 31, 2018)
to December 31, 2019)
Remuneration for directors (and other
163,971
166,833
officers)
Salaries and allowance
339,859
338,543
Retirement benefit expenses
663
555
R&D expenses
1,832,746
2,441,552
Depreciation
18,787
19,362
Fee expenses
443,679
711,781
Promotion expenses
405,467
733,688* 3 Total amounts of R&D expenses included in general and administrative expenses
FY 2018(from January 1, 2018
to December 31, 2018)
1,832,746(Unit: thousands of yen)
FY 2019(from January 1, 2019
to December 31, 2019)
2,441,552

FY 2018(from January 1, 2018
to December 31, 2018)
9,829—(Unit: thousands of yen)
FY 2019(from January 1, 2019
to December 31, 2019)—* 4 Details of loss on retirement of non-current assets

Facilities attached to buildings―32―

(Statement of changes in equity)
FY 2018 (from January 1, 2018 to December 31, 2018)
1. Type and number of shares issued and treasury shares(Unit: number of shares)
At beginning ofcurrent period
Shares issued
Common stock
Total
Treasury shares
Common stock
Total

Increase

At end of current
periodDecrease

54,049,224
54,049,224

28,349,700
28,349,700——

82,398,924
82,398,924

75
75

—
—

—
—

75
75

(Note) Increase of 28,349,700 issued shares of common stock is due to the exercise of share acquisition rights.
2. Share acquisition rights
Number of shares to be issued
Company

Description

The 39th warrant
The 42nd warrant
The 45th warrant
SymBioPharmaceuticals
The 46th warrant
LimitedThe 47th warrant

Type ofshares to beissuedCommonstock
Commonstock
Commonstock
Commonstock
Commonstock

Balance
as ofDecember31, 2018(thousandsof yen)At
beginningof current
periodIncrease

Decrease

At end ofcurrent
period4,171,000—

4,171,000——

3,765,200—

3,765,200——— 20,000,000 20,000,000——— 15,000,000— 15,000,000

6,600— 15,000,000— 15,000,000

5,700

Share acquisitionrights as stock
—
—
—
—
—
517,597
options
Total
7,936,200 50,000,000 27,936,200 30,000,000
529,897(Note) The information about the type and number of shares to be issued pertaining to share acquisition rights as
stock options is described in “Stock options.”(Main reasons for increase/decrease)
Decrease due to exercise of the 39th warrant: 4,171,000 shares
Decrease due to exercise of the 42nd warrant: 3,765,200 shares
Increase due to issuance of the 45th warrant: 20,000,000 shares
Decrease due to exercise of the 45th warrant: 20,000,000 shares
Increase due to issuance of the 46th warrant: 15,000,000 shares
Increase due to issuance of the 47th warrant: 15,000,000 shares
3. Dividends
None to be reported.

―33―

FY 2019 (from January 1, 2019 to December 31, 2019)
1. Type and number of shares issued and treasury shares(Unit: number of shares)
At beginning ofcurrent period

Increase

At end of current
periodDecrease

Shares issued
82,398,924
17,126,800
73,088,043
26,437,681
Common stock
82,398,924
17,126,800
73,088,043
26,437,681
Total
Treasury shares
Common stock75
31,0508,532
22,593
Total
75
31,0508,532
22,593(Notes)
1. Increase of 17,126,800 issued shares of common stock is due to the exercise of share acquisition rights
2. Decrease of 73,088,043 issued shares of common stock is due to the 1-for-4 reverse stock split of commonshare conducted on July 1, 2019.
3. Increase of 31,050 issued shares of common stock is due to the purchase of fractional shares.
4. Of the decrease of 8,532 common treasury shares, 57 were due to the 1-for-4 reverse stock split of commonshare conducted on July 1, 2019, 6,775 were due to exercise of share acquisition rights, and 1,700 were soldto owners of fractional shares.
2. Share acquisition rights
Number of shares to be issued
Company

Description

The 46th warrant

Type ofshares to beissuedCommonstock
Commonstock

Atbeginningof current
period15,000,000

Decrease

At end ofcurrent
period— 15,000,000—

Increase

Balance
as ofDecember31, 2018(thousandsof yen)—SymBioThe 47th warrant
15,000,000— 13,325,000 1,675,000
2,546Pharmaceuticals
LimitedShare acquisitionrights as stock
—
—
—
—
—
618,367
options
Total
30,000,000— 28,325,000 1,675,000
620,913(Note) The information about the type and number of shares to be issued pertaining to share acquisition rights as
stock options is described in “Stock options.”(Main reasons for increase/decrease)
Decrease due to exercise of the 46th warrant: 15,000,000 shares
Decrease due to the 1-for-4 consolidation of the common shares of the 47th warrant conducted on July 1, 2019:11,250,000 shares
Decrease due to exercise of the 47th warrant: 2,075,000 shares
3. Dividends
None to be reported.

―34―

(Statement of cash flows)*1. Cash and cash equivalents as of the fiscal year end are reconciled to the accounts reported in the balance sheet as
follows:(Unit: thousands of yen)
FY 2018
FY 2019(from January 1, 2018(from January 1, 2019
to December 31, 2018)
to December 31, 2019)
Cash and deposits
4,821,355
3,910,830
Cash and cash equivalents
4,821,355
3,910,830―35―

(Financial instruments)
1. Financial instruments(1) Policies for financial instruments
The Company procures the funds necessary in light of the pipeline development plan (primarily by third-party
allotment and offering by new share issuance). A temporary surplus fund is invested in financial instruments which
are highly safe and liquid.
As a principle, the Company does not enter into derivative transactions for speculative trading purposes but uses
them within the scope prescribed in the Company’s internal rules.
(2) Types of financial instruments and related risks
Operating receivables such as accounts receivable–trade and advances paid in connection with joint development
are exposed to the credit risk of customers and joint development partners. Operating receivables denominated inforeign currencies are exposed to foreign exchange fluctuation risk.
The Company intends to invest in marketable and investment securities which have a relatively low risk of falling
below initial investments, however, it might entail a finite risk.
Operating payables such as accounts payable–trade and accounts payable–other are mostly due within 75 days.
Operating payables denominated in foreign currencies are exposed to foreign exchange fluctuation risk.
The Company uses derivative transactions to avoid foreign exchange fluctuation risks and enters into forward
exchange contracts within the scope prescribed in the internal rules based on balances of receivables and payables
denominated in foreign currencies as well as the actual volume of export and import transactions denominated inforeign currencies.
Lease and guarantee deposits are mostly security deposits related to leased office premises and their refunds are
subject to the credit risk of the lessor.
(3) Risk management for financial instruments(i) Monitoring of credit risks (the risk that customers or counterparties may default on obligations)
In accordance with the Company’s internal credit policies for managing credit risk arising from operatingreceivables, the Company’s marketing department periodically monitors the creditworthiness of major customers
and monitors due dates and outstanding balances by individual customers. In addition, the Company is making
efforts to promptly identify and mitigate risks of bad debts from customers who are having financial difficulties.
The Company enters into derivative transactions only with financial institutions which have a sound credit
profile in order to mitigate the counterparty risk.
(ii) Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates, interest rates, and others)
The Company deposits cash primarily with financial institutions with high credit ratings.
For marketable and investment securities, the Company intends to avoid risks of falling below initialinvestments by investing in securities with a satisfactory credit rating and investment period in accordance with
the Company’s internal investment policies.
The Company enters into forward exchange contracts in order to avoid foreign exchange fluctuation risks inconnection with receivables and payables denominated in foreign currencies.
Followed by appropriate authorization procedures prescribed in the Company’s internal rules, the Finance &Accounting department executes and monitors derivative transactions. Monthly transaction performances arereported to the executive management committee.
(iii) Monitoring of liquidity risks (the risk that the Company may not be able to meet its obligations on the scheduled
due date)
Based on the report from each department, the responsible department of the Company prepares and updates its
cash flow plans on a timely basis and ensures to maintain the liquidity on hand to manage liquidity risk.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted
market price available, fair value is reasonably estimated. Since various assumptions and factors are reflected in―36―estimating the fair value, different assumptions and factors could result in different fair value. In addition, thenotional amounts of derivatives in notes to “Derivative transactions” are not necessarily indicative of the actual
market risk involved in derivative transactions.
(5) Concentration of credit risk
As of December 31, 2018, all operating receivables are from one particular major customer.
2. Fair value of financial instruments
The carrying value on the balance sheet, fair values, and their differences are as follows. The financial instruments
whose fair value is extremely difficult to determine are not included. (See Note 2.)
FY 2018 (as of December 31, 2018)(Unit: thousands of yen)
Carrying value on the
Fair value
Differencesbalance sheet(1) Cash and deposits
4,821,355
4,821,355―(2) Accounts receivable–trade411,720
411,720―(3) Advances paid
31,14731,147―
Assets, total
5,264,223
5,264,223―(1) Accounts payable–trade726,100
726,100―(2) Accounts payable–other503,637
503,637―(3) Income taxes payable
71,24971,249―Liabilities, total
1,300,988
1,300,988―(*)
Derivative transactions, total(16,427)(16,427)―(*) Receivables and liabilities arising from derivative transactions are presented on a net basis and net liabilities areshown in parentheses.
FY 2019 (as of December 31, 2019)(Unit: thousands of yen)
Carrying value on the
Fair value
Differencesbalance sheet(1) Cash and deposits
3,910,830
3,910,830―(2) Accounts receivable–trade549,275
549,275―(3) Advances paid
41,791
41,791―
Assets, total
4,501,897
4,501,897―(1) Accounts payable–trade120,913
120,913―(2) Accounts payable–other639,482
639,482―(3) Income taxes payable
87,75687,756―
Liabilities, total
848,153
848,153―(*)
Derivative transactions, total―――(*) Receivables and liabilities arising from derivative transactions are presented on a net basis and net liabilities areshown in parentheses.
(Notes)1. Fair value measurement of financial instruments and other matters related to securities and derivative transactions
Assets(1) Cash and deposits, (2) Accounts receivable–trade, and (3) Advances paid
The carrying value is deemed as the fair value since these are scheduled to be settled in a short period of time.
Liabilities(1) Accounts payable–trade, (2) Accounts payable–other, and (3) Income taxes payable―37―

The carrying value is deemed as the fair value since these are scheduled to be settled in a short period of time.
Derivative transactions
See notes to “Derivative transactions.”
2. Financial instruments whose fair value is extremely difficult to determine
FY 2018(as of December 31, 2018)
71,378

Lease and guarantee deposits(Unit: thousands of yen)
FY 2019(as of December 31, 2019)70,446

Lease and guarantee deposits are not included in the above table since no market quote is available and their fairvalue is extremely difficult to determine.
3. The redemption schedule for monetary assets and securities with maturities after the closing date
FY 2018 (as of December 31, 2018)(Unit: thousands of yen)Due in one year or
less

Due after one year Due after five years
Due after ten years
through five years through ten years

4,821,265―――

Accounts receivable–trade411,720―――

Advances paid

31,147―――

5,264,133―――

Deposits

Total

FY 2019 (as of December 31, 2019)(Unit: thousands of yen)Due in one year or
less

Due after one year Due after five years Due after ten years
through five years through ten years

3,910,739―――

Accounts receivable–trade549,275―――

Advances paid

41,791―――

4,501,806―――

Deposits

Total

―38―

(Derivative transactions)
1. Derivative transactions to which hedge accounting is not applied
Currency-related transactions
FY 2018 (as of December 31, 2018)(Unit: thousands of yen)Classification

Type

Notional amountPortion due after
one year included
hereinFair value

Unrealized gain
(loss)

Forward exchange
contract
OTC
Buytransactions
Euro
578,438―(16,427)(16,427)
Total
578,438―(16,427)(16,427)(Note) Fair value measurement
The fair value is measured based on the quoted prices obtained from financial institutions with which theCompany has a business relationship.
FY 2019 (as of December 31, 2019)
None to be reported.
2. Derivative transactions to which hedge accounting is applied
None to be reported.

―39―

(Retirement benefits)
1. Outline of retirement benefit plans
The Company has adopted a defined contribution pension plan. A lump-sum payment plan (non-contributory plan) is
applied for certain employees based on the Company’s internal rules for retirement benefits.
The simplified method is applied to calculate amounts of provision for retirement benefits and retirement benefit
expenses.
2. Retirement benefit plan under the simplified method(1) The reconciliation of provision for retirement benefits at the beginning and the end of the fiscal year under thesimplified method is as follows:(Unit: thousands of yen)
FY 2018
FY 2019(from January 1, 2018(from January 1, 2019
to December 31, 2018)
to December 31, 2019)
Provision for retirement benefits at beginning of period
1,392
1,281
Retirement benefit expenses
325
431
Paid amount of retirement benefits
(436)
(93)
Provision for retirement benefits at end of period
1,281
1,619
(2) The reconciliation of retirement benefit obligations or pension assets at the end of the fiscal year and provision for
retirement benefits and the prepaid pension cost on the balance sheet is as follows:(Unit: thousands of yen)
FY 2018
FY 2019(as of December 31, 2018) (as of December 31, 2019)
Retirement benefit obligations under non-contributory
1,281
1,619
plan
Net defined benefit liability or asset on the balance sheet
1,281
1,619
Provision for retirement benefits
Net defined benefit liability or asset on the balance
sheet(3) Retirement benefit expenses
Retirement benefit expenses calculated under the simplified method

1,281

1,619

1,281

1,619

FY 2018: 325 thousand yen
FY 2019: 431 thousand yen

3. Defined contribution pension plan
The amount of the Company’s contribution to the defined contribution pension plan for the fiscal years ended
December 31, 2018 and 2019 were 1,942 thousand yen and 1,024 thousand yen, respectively.

―40―

(Stock options)
1. The account title and the amount of stock options charged as expenses

Selling, general and administrative expenses

FY 2018(from January 1, 2018
to December 31, 2018)
122,944(Unit: thousands of yen)
FY 2019(from January 1, 2019
to December 31, 2019)
127,144

2. The account title and the amount of income recognized for vested shares that expired unexercised(Unit: thousands of yen)
FY 2018
FY 2019(from January 1, 2018(from January 1, 2019
to December 31, 2018)
to December 31, 2019)
Gain on reversal of share acquisition rights
9,826
4,197
3. Description of stock options and changes in the size of stock options
The following information is based on stock options that were available in the fiscal year ended December 31, 2019.
The number of stock options is converted into the number of shares.
On July 1, 2019, we conducted a 1-for-4 reverse stock split of common sharereverse stock split of common share, andfigures below reflect its impact.
(1) Description of stock options

Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

The 17th Warrant
Directors of the Company
Audit & Supervisory Board
member of the Company
Total
Common stock

The 19th Warrant
3
1
4

18,000 shares

March 18, 2009
1. A person to whom these stock
options are granted (hereinafter,“Person Granted”) must havethe status as the Company’s
director, Audit & Supervisory
Board member, advisor, or
employee at the time of
exercise. However, this is notnecessarily the case if the Person
Granted retires due to the expiryof her/his term or compulsory
retirement; if otherwise theBoard of Directors approves; orif the Person Granted is anexternal collaborator.
2. The Company’s stock must be
listed on a stock exchange.
The vesting period is not fixed.
From March 19, 2011 to March 18,
2019

―41―

External collaborators

Common stock2

3,125 shares

March 18, 2009Same as on the left

Same as on the left
From March 19, 2011 to March 18,
2019Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

The 20th Warrant
Directors of the Company
Audit & Supervisory Board
member of the Company
Total
Common stock

The 21st Warrant
6
1
7

90,250 shares

March 31, 2010
1. The Person Granted must havethe status as the Company’s
director, Audit & Supervisory
Board member, advisor, or
employee at the time of
exercise. However, this is notnecessarily the case if the Person
Granted retires due to the expiryof her/his term or compulsory
retirement; if otherwise theBoard of Directors approves; orif the Person Granted is anexternal collaborator.
2. The Company’s stock must be
listed on a stock exchange.
The vesting period is not fixed.
From April 1, 2012 to March 31,
2020
The 22nd Warrant

Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

External collaborators

Common stock

Common stock50

81,625 shares

March 31, 2010Same as on the left

Same as on the left
From April 1, 2012 to March 31,
2020
The 23rd Warrant

13

38,250 shares

March 31, 2010
1. The Person Granted must havethe status as the Company’s
director, Audit & Supervisory
Board member, advisor, or
employee at the time of
exercise. However, this is notnecessarily the case if the Person
Granted retires due to the expiryof her/his term or compulsory
retirement; if otherwise theBoard of Directors approves; orif the Person Granted is anexternal collaborator.
2. The Company’s stock must be
listed on a stock exchange.
The vesting period is not fixed.
From April 1, 2012 to March 31,
2020

―42―

Employees of the Company

Employees of the Company

Common stock9

8,000 shares

October 15, 2010Same as on the left

Same as on the left
From October 15, 2012 to October
14, 2020

The 24th Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

The 25th Warrant
5

48,000 shares

March 31, 2011
1. The Person Granted must havethe status as the Company’s
director, Audit & Supervisory
Board member, advisor, or
employee at the time of
exercise. However, this is notnecessarily the case if the Person
Granted retires due to the expiryof her/his term or compulsory
retirement; or if otherwise theBoard of Directors approves orif the Person Granted is anexternal collaborator.
2. The Company’s stock must be
listed on a stock exchange.
The vesting period is not fixed.
From March 31, 2013 to March 30,
2021

The 26th Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

Common stock59

48,750 shares

March 31, 2011

Same as on the left

Same as on the left
From March 31, 2013 to March 30,
2021

The 27th Warrant
4

90,625 shares

May 2, 2012
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1) to (6).
The period that fulfills therequirement of the exercise
conditions *(2) and (5).
From April 18, 2014 to April 17,
2022

―43―

Employees of the Company

Employees of the Company

Common stock70

107,675 shares

May 2, 2012Same as on the left

Same as on the left
From April 18, 2014 to April 17,
2022

The 30th Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

The 31st Warrant
5

29,000 shares

May 29, 2013
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1) to (6).
The period that fulfills therequirement of the exercise
conditions *(2) and (5).
From May 15, 2015 to May 14,
2023
The 32nd Warrant

Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

Common stock

68

31,000 shares

May 29, 2013Same as on the left

Same as on the left
From May 15, 2015 to May 14,
2023
The 33rd Warrant

5

63,000 shares

April 30, 2014
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(7).
From April 16, 2017 to April 15,
2024

―44―

Employees of the Company

Employees of the Company

Common stock68

82,500 shares

April 30, 2014

Same as on the left

Same as on the left
From April 16, 2017 to April 15,
2024

The 35th Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

The 36th Warrant
6

51,050 shares

April 10, 2015
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(7).
From March 27, 2018 to March 26,
2025

The 37th Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

Common stock61

78,000 shares

April 10, 2015

Same as on the left

Same as on the left
From March 27, 2018 to March 26,
2025

The 38th Warrant
659,125 shares

April 14, 2016
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(7).
From March 31, 2019 to March 30,
2026

―45―

Employees of the Company

Employees of the Company

Common stock73

98,750 shares

April 14, 2016

Same as on the left

Same as on the left
From March 31, 2019 to March 30,
2026

The 40th Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

The 41st Warrant
6

70,000 shares

April 24, 2017
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(7).
From March 30, 2020 to March 29,
2027

The 43rd Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

Common stock71

112,800 shares

April 24, 2017Same as on the left

Same as on the left
From March 30, 2020 to March 29,
2027

The 44th Warrant
6

76,250 shares

April 26, 2018
No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(7).
From March 30, 2021 to March 29,
2028

―46―

Employees of the Company

Employees of the Company

Common stock74

116,200 shares

April 26, 2018

Same as on the left

Same as on the left
From March 30, 2021 to March 29,
2028

The 48th Warrant
Individuals covered by the plan andnumber of persons granted stock
options
Class and number of shares to beissued upon the exercise of thestock options
Grant date

Vesting conditions

Vesting period
Exercise period

Directors of the Company

Common stock

The 49th Warrant
6

78,750 shares

April 22, 2019No specific conditions areprescribed in the allotment
agreement for share acquisitionrights entered into between the
Company and the Person Granted,
except for certain vesting
conditions stipulated in the exercise
conditions. The exercise conditions
are described in *(1), (3), (4), (7),and (8).
The period that fulfills therequirement of the exercise
condition *(7).
From March 30, 2022 to March 29,
2029

Employees of the Company

Common stock

92

179,125 shares

April 22, 2019

Same as on the left

Same as on the left
From March 30, 2022 to March 29,2029*(1) Fractions less than one unit of a share acquisition right shall be unexercisable.
(2) The Person Granted may exercise all or part of the rights in accordance with the following classifications:
The 26th and the 27th warrants(a) Those who were granted the share acquisition rights may exercise the rights within the limit of one-fourth (1/4) from April
18, 2014 to April 17, 2015.
(b) Those who were granted the share acquisition rights may exercise the rights within the limit of one-half (1/2) from April 18,
2015 to April 17, 2016.
(c) Those who were granted the share acquisition rights may exercise the rights within the limit of three-fourths (3/4) from
April 18, 2016 to April 17, 2017.
(d) Those who were granted the share acquisition rights may exercise all the rights from April 18, 2017 to April 17, 2022.
The 30th and the 31st warrants(a) Those who were granted the share acquisition rights may exercise the rights within the limit of one-fourth (1/4) from May
15, 2015 to May 14, 2016.
(b) Those who were granted the share acquisition rights may exercise the rights within the limit of one-half (1/2) from May 15,
2016 to May 14, 2017.
(c) Those who were granted the share acquisition rights may exercise the rights within the limit of three-fourths (3/4) from May
15, 2017 to May 14, 2018.
(d) Those who were granted the share acquisition rights may exercise all the rights from May 15, 2018 to May 14, 2023.
(3) The Person Granted shall exercise the rights starting from the date of resolution by the below-mentioned shareholders’ meetingor the Board of Directors’ meeting until one day before the effective date of the Organizational Restructuring as followed,
regardless of the conditions of the exercise period originally stipulated, when the Organizational Restructuring is approved by
the resolution of the Company’s shareholders’ meeting (including the case where resolution of a shareholders’ meeting isdeemed to exist pursuant to the provision of Article 319 of the Companies Act) or the Board of Directors’ meeting (limited tothe case where no shareholders’ meeting is required for the said Organizational Restructuring) before the exercise period of theshare acquisition rights comes into effect: an absorption-type merger or an incorporation-type merger where the Company
becomes a dissolving company and an absorption-type split or an incorporation-type company split where the Company
becomes a split company, or a share exchange or a share transfer where the Company becomes a wholly-owned subsidiary(collectively, “Organizational Restructuring” as mentioned above).
(4) The share acquisition rights shall not be offered for pledge or disposed of in any other way.
(5) A person to whom these stock options are granted (“Person Granted”) must have the status as the Company’s director, Audit &Supervisory Board member, or employee of the Company or its affiliates at the time of exercise. However, this is notnecessarily the case where:(a) The Person Granted is a director or Audit & Supervisory Board member of the Company or its affiliates and retires due tothe expiry of her/his term.

―47―

(b) The Person Granted is an employee of the Company or its affiliates and retires due to compulsory retirement.
(c) The Person Granted is a director, Audit & Supervisory Board member, or employee of the Company or its affiliates and theBoard of Directors resolves that he/she has resigned or retired with honorable recognition.
(6) In the event that:(a) The Person Granted dies before the exercise period comes into effect, the beneficiary/ies shall exercise the rights of up to
one-half (1/2) within six (6) months from the date of inheritance, or(b) The Person Granted dies during the exercise period, the beneficiary/ies shall exercise all the rights within six (6) months
from the date of inheritance. However, in the event that the beneficiary/ies dies, the rights shall be discarded and shall not
be exercised by his/her beneficiary/ies.
(7) The Person Granted must have the status as a director or employee of the Company or its affiliates at the time of exercise.
However, this is not necessarily the case where:(a) The Person Granted is a director of the Company or its affiliates and retires due to the expiry of her/his term.
(b) The Person Granted is an employee of the Company or its affiliates and retires due to compulsory retirement.
(c) The Person Granted is a director or employee of the Company or its affiliates and the Board of Directors resolves thathe/she has resigned or retired with honorable recognition.
(8) In the event that the Person Granted dies, the beneficiary/ies shall be able to succeed and exercise the share acquisition rights asprescribed in the allotment agreement for share acquisition rights entered into between the Company and the Person Granted.
However, in the event that the beneficiary/ies dies, the rights shall be discarded and shall not be exercised by his/her
beneficiary/ies.

―48―

(2) Changes in the size of stock options(a) Number of stock options

Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

(Unit: number of shares)
The 20th Warrant The 21st Warrant
March 31, 2010
March 31, 2010

The 17th Warrant
March 18, 2009

The 19th Warrant
March 18, 2009

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

1,000
—
—
1,000
—

625
—
—
625
—

86,125———
86,12533,375——750
32,625The 22nd Warrant
March 31, 2010

The 23rd Warrant
October 15, 2010

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

38,250———38,250

2,500
—
—
—
2,500

48,000———48,00020,875——375
20,500―49―(Unit: number of shares)
The 24th Warrant The 25th Warrant
March 31, 2011
March 31, 2011

Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

(Unit: number of shares)
The 30th Warrant The 31st Warrant
May 29, 2013
May 29, 2013

The 26th Warrant
May 2, 2012

The 27th Warrant
May 2, 2012

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

90,625———90,62548,825——
2,625
46,20029,000———29,00013,500——700
12,800The 32nd Warrant
April 30, 2014

The 33rd Warrant
April 30, 2014

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

17,250—22,025—

14,050—33,750
—

—

1,275

―

6,875

—
17,250—20,750—14,050—26,875―50―(Unit: number of shares)
The 35th Warrant The 36th Warrant
April 10, 2015
April 10, 2015

(Unit: number of shares)
The 40th Warrant The 41st Warrant
April 24, 2017
April 24, 2017

The 37th Warrant
April 14, 2016

The 38th Warrant
April 14, 2016

46,750——48,675——60,000——68,550—9,500

46,75048,67523,750―——36,25059,05012,375

9,625

10,0006,500

46,75048,67523,750―Exercised
Expired

4,125

7,450

—

—

―

450

—

—

At the end of the year

55,00050,40033,7506,500

The 43rd Warrant
April 26, 2018

The 44th Warrant
April 26, 201876,250——93,575—
15,250Grant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedGrant dateNon-vested shares:
At the beginning of the year
GrantedExpired
VestedAt the end of the year
Vested shares:
At the beginning of the year
VestedExercised
ExpiredAt the end of the year

(Unit: number of shares)
The 48th Warrant The 49th Warrant
April 22, 2019
April 22, 2019—78,7505,000—
179,125
24,50033,750―――42,50078,32573,750154,625

―

7,500

―

―

33,750

―

―

―

—
—

—
—

—
—

—
—

33,750

7,500

―

―

―51―

(b) Per share prices
The 17th Warrant
March 18, 2009

The 19th Warrant
March 18, 2009

The 20th Warrant
March 31, 2010

The 21st Warrant
March 31, 2010

4,676

4,676

2,340

2,340

—

—

—

—

0

0

0

0

The 22nd Warrant
March 31, 2010

The 23rd Warrant
October 15, 2010

The 24th Warrant
March 31, 2011

The 25th Warrant
March 31, 2011

2,340

2,340

2,728

2,728

—

—

—

—

0

0

0

0

The 26th Warrant
May 2, 2012

The 27th Warrant
May 2, 2012

The 30th Warrant
May 29, 2013

The 31st Warrant
May 29, 2013

2,220

2,220

3,196

3,196

Average stock price atthe time of exercise
(yen)

—

—

—

—

Fair value price at
grant date (yen) (Note 2)(a) 716(b) 748(c) 780(d) 808(a) 716(b) 748(c) 780(d) 808(a) 2,344(b) 2,408(c) 2,468(d) 2,524(a) 2,344(b) 2,408(c) 2,468(d) 2,524

The 32nd Warrant
April 30, 2014

The 33rd Warrant
April 30, 2014

The 35th Warrant
April 10, 2015

The 36th Warrant
April 10, 2015

1

1

1

1

—

656

—

705

916

916

1,224

1,224

The 37th Warrant
April 14, 20161

The 38th Warrant
April 14, 20161

The 40th Warrant
April 24, 20171

The 41st Warrant
April 24, 2017
1

728

674

—

—

1,088

1,088

812

812

Grant date
Exercise price (yen)(Note 1)

Average stock price atthe time of exercise(yen)
Fair value price at
grant date (yen)Grant date
Exercise price (yen)(Note 1)

Average stock price atthe time of exercise(yen)
Fair value price at
grant date (yen)Grant date
Exercise price (yen)(Note 1)

Grant date
Exercise price (yen)(Note 1)

Average stock price atthe time of exercise(yen)
Fair value price at
grant date (yen) (Note 2)

Grant date
Exercise price (yen)Average stock price atthe time of exercise(yen)
Fair value price at
grant date (yen)―52―Grant date
Exercise price (yen)Average stock price atthe time of exercise(yen)
Fair value price at
grant date (yen)The 43rd Warrant
April 26, 20181

The 44th Warrant
April 26, 20181

The 48th Warrant
April 22, 20191

The 49th Warrant
April 22, 2019
1

—

—

—

—

792

792

776

776

(Notes) 1. The Company increased its capital through the public offering on December 4, 2013 and through the third-party allotment on
December 25, 2013, at the per share amount less than the exercise price of options. Thus, the exercise amounts above arestated after applying the price adjustments clause.
2. (a), (b), (c), and (d) above correspond to each of (a), (b), (c), and (d) of the exercise periods as previously described in 3. (1)*(2).

4. Method for estimating the fair value of the stock options
The fair value of the stock options that were granted during this fiscal year is estimated based on the following method:(1) Estimate technique used: Black-Scholes Option Pricing Model(2) Major assumptions and estimate method
The 48th Warrant

The 49th Warrant

Volatility of stock price (Note 1)

58.09%

58.09%

Estimated remaining period (Note 2)

2.9 years

2.9 years

Estimated dividend (Note 3)

0 yen per share

0 yen per share

Risk-free interest rate (Note 4)(0.154)%(0.154)%(Notes) 1. The volatility was calculated based on the actual stock prices from May 14, 2016 to April 22, 2019.
2. The period from the allotment date to the start date of the exercise period is used.
3. The Company estimates dividends to be zero since no dividends have been paid in the past.
4. This represents yields of Japanese government bonds corresponding to the estimated remaining outstanding period.

5. Estimate of the number of stock options vested
The number of expired shares is estimated based on the historical turnover ratio.

―53―

(Asset retirement obligations)
The Company has future restoration obligations related to leasehold contracts for office premises. Carrying the balanceof lease and guarantee deposits as an asset, the Company reasonably estimates non-recoverable amounts of lease andguarantee deposits under lease contracts and records the amount attributable to the respective fiscal year as expenses,
instead of accounting for asset retirement obligations by recognizing a liability and an associated asset.

(Segment information)[Segment information]
FY 2018 (from January 1, 2018 to December 31, 2018) and FY 2019 (from January 1, 2019 to December 31, 2019)
Segment information is omitted since the Company operates within a single segment, which includes the R&D,
manufacturing, and marketing of pharmaceutical drugs and other related activities.
[Related information]
FY 2018 (from January 1, 2018 to December 31, 2018)
1. Information by product and service
Information by product and service is omitted since external sales of a single service category account for morethan 90% of net sales stated in the statement of income.
2. Information about geographical areas(1) Net sales
Net sales information about geographical areas is omitted since external sales to Japanese customers accountfor more than 90% of net sales stated in the statement of income.
(2) Property, plant and equipment
None to be reported as all property, plant and equipment are located in Japan.
3. Information by the major customer(Unit: thousands of yen)
Name of customer

Net sales

Eisai Co., Ltd.

3,648,493

Name of related segment
Pharmaceutical businesses including the
research and development, manufacturing,and marketing of pharmaceutical drugs andother related activities

FY 2019 (from January 1, 2019 to December 31, 2019)
1. Information by product and service
Information by product and service is omitted since external sales of a single service category account for morethan 90% of net sales stated in the statement of income.
2. Information about geographical areas(1) Net sales
Net sales information about geographical areas is omitted since external sales to Japanese customers accountfor more than 90% of net sales stated in the statement of income.
(2) Property, plant and equipment
None to be reported as all property, plant and equipment are located in Japan.
3. Information by the major customer(Unit: thousands of yen)
Name of customer
Eisai Co., Ltd.

Net sales
2,831,272

Name of related segment
Pharmaceutical businesses including the
research and development, manufacturing,and marketing of pharmaceutical drugs andother related activities[Information about impairment loss on non-current assets by reportable segment]
FY 2018 (from January 1, 2018 to December 31, 2018) and FY 2019 (from January 1, 2019 to December 31, 2019)
Information by segment is omitted since the Company operates within a single segment.
―54―

[Information about the amortization and unamortized balance of goodwill by reportable segment]
FY 2018 (from January 1, 2018 to December 31, 2018) and FY 2019 (from January 1, 2019 to December 31, 2019)
None to be reported.
[Information about the gain on bargain purchase by reportable segment]
FY 2018 (from January 1, 2018 to December 31, 2018) and FY 2019 (from January 1, 2019 to December 31, 2019)
None to be reported.

(Affiliated party information)
Transactions with affiliated parties
Officer(s) and major individual shareholder(s) of the Company
FY 2018 (from January 1, 2018 to December 31, 2018)
Category

Name ofcompany or
personExecutive

Fuminori
YoshidaRatio of voting
Capital or
rights and other Relationships
investment Business details orwith affiliatedforms of
Location(thousands
profession
parties
ownershipof yen)(ownership) (%)——

Representative
Director, President
and Chief
Executive Officerof the Company(Ownership)
Direct: 4.18—

Transaction
details

Transaction
amount(thousandsof yen)Exercise ofshareacquisitionrights87,526(331
thousandshares)Year-end
Accountbalance(thousands
title
of yen)——(Note) This information describes the exercise during the fiscal year under review of share acquisition rights
granted based on resolutions at Board of Directors meetings on April 15, 2014 and March 26, 2015.
FY 2019 (from January 1, 2019 to December 31, 2019)
None to be reported.

(Per share information)
FY 2018
FY 2019(from January 1, 2018(from January 1, 2019
to December 31, 2018)
to December 31, 2019)
Net assets per share
212.23 yen Net assets per share
143.07 yen
Loss per share(165.54) yen Loss per share(189.03) yen(Notes) 1. While having potential dilutive shares, diluted earnings per share is not provided since the Company
reported loss per share.
2. The Company conducted a 1-for-4 consolidation of common shares on July 1, 2019. Net assets per shareand loss per share have been calculated based on the assumption that this consolidation was conducted at
the beginning of FY 2018.
3. The basis for calculating loss per share is as follows:

Loss (thousands of yen)Amount not attributable to the shareholders of common
stock (thousands of yen)
Loss attributable to the shareholders of common stock(thousands of yen)
Average number of shares outstanding during the year
(shares)

FY 2018(from January 1, 2018
to December 31, 2018)(2,752,533)

FY 2019(from January 1, 2019
to December 31, 2019)(4,376,258)――(2,752,533)(4,376,258)

16,627,779

23,150,655

Description of potential dilutive shares not included in 24 types of share―55―

2 types of sharethe earning-per-share calculation due to anti-dilution

acquisition rights(33,758,300 units) inaccordance with theCommercial Code of1890 Article 280 (20) and(21), and the Companies
Act Article 236, 238, and239.

acquisition rights(228,375 units) inaccordance with theCommercial Code of1890 Article 280 (20) and(21), and the Companies
Act Article 236, 238, and239.

4. The basis for calculating net assets per share is as follows:

Net assets (thousands of yen)Amount to be deducted from net assets (thousands ofyen)(Of which, share acquisition rights herein [thousandsof yen])Net assets attributable to the shareholders of common
stock (thousands of yen)
Number of shares used in the calculation of net assets
per share (shares)

FY 2018
FY 2019(as of December 31, 2018) (as of December 31, 2019)
4,901,799
4,400,116
529,897

620,913(529,897)(620,913)

4,371,902

3,779,202

20,599,713

26,415,088(Significant subsequent events)
None to be reported.

6. Other(1) Change in officers
For information regarding change in officers, see the “Notice of Appointment of Corporate Officer” released on
December 19, 2019.

(2) Other
None to be reported.

―56―