2020 ANNUAL REP RT
Year ended March 31, 2020

Corporate MarkThe corporate mark consists of three curved linesthat form a heart-shaped apricot. The lines
represent the smiles of patients, their families, andworkers in medical services, as well as Kyorin’s
three core businesses, namely prevention, treatment,
and prognosis.
Orange: Honesty and warmth
Violet: The technology that brings conﬁdence
Light Green: Free and lively creativity

6, Kanda Surugadai 4-chome, Chiyoda-ku, Tokyo 101-8311, Japan
Corporate Planning Division
TEL +81-3-3525-4707
URL https://www.kyorin-gr.co.jp/en/

This report was printed using vegetable oil ink.
Printed in JapanKYORIN Holdings, Inc.

Following our corporate philosophy, the Kyorin Group is working to realize

C O N T E N T S

its long-term vision, HOPE100, in 2023 to coincide with the centenary of theGroup’s core subsidiary, KYORIN Pharmaceutical Co., Ltd.

To Our Stakeholders

2

The overall vision comprises the Statement and Five HOPEs.

History of the Kyorin Group

4The Kyorin Group’s Business

6

The Kyorin Group’s Vision andValue Creation Process

8

Transformation of the Medium-TermBusiness Plan and Overview of
HOPE100–Stage 3–
New Medium-Term Business Plan

10Interview with the President

12

New Drugs Business:
Drug Discovery

18

Development

20

Marketing

22

TOPICSThe Kyorin Group’s Initiatives
to Combat Infectious Disease24

Long-Term VisionCorporate Philosophy of the Kyorin GroupKyorin continues to fulfill its mission ofcherishing life and benefiting society bycontributing to better health.

HOPE100(Aim for Health Of People and our Enterprises)

Statement
The Kyorin Group will promote diversiﬁed healthcare businessexpansion and by 2023 be recognized both within and outside
as a company that supports sound and healthy lifestyles.

Corporate Message

Your Health is Kyorin’s Mission

Subcontracted Drug Manufacturing Business:
Manufacturing
Generic Drugs Business:
Generics

Five HOPEs• Be a company that maintains positive
business results and excellent financial
standing• Be a company that contributes to people’s healththrough the Consumer Healthcare Business• Be a company that promotes businessexpansion overseas

An International
Company that Supports
Healthy Lifestyles
Around the WorldA Company that
Sustains Growth

KyorinLegendLong ago, a Chinese physician named Dong Feng treated the sick free of charge, and asked those who recovered from serious illness to plant five apricot tree
saplings and those cured of minor illness to plant one.
As time went by, a thick forest of apricot trees was formed in the area. (A story that comes from a Chinese legend named Shinsen-den) “Kyorin” is a compound of“kyo,” the Chinese word for “apricot,” and “rin,” the Chinese word for “woods.” Praising the virtue of Dong Feng, the characters were transported from China toJapan as those representing medicine and medical treatment in general.

Editorial Policy

Annual Report 2020 integrates financial reports with information on the Group’s environmental, social, and governance (ESG) activities. In line with the framework established by theInternational Integrated Reporting Council, the report combines results and other financial data with nonfinancial information relating to value creation by the Kyorin Group, including
business processes and strategies. Through this approach, we aim to help stakeholders gain a deeper understanding of the Group’s activities.

An Innovative
Company that
Customers Trust

A Company that
Seeks to Co-Exist
with Society

Origin of the Name “Kyorin”
The name Kyorin originated from two Chinese characters that represent a truly virtuous way of practicing
medicine. It is derived from Chinese folklore, and embodies the Kyorin Group’s aspirations to continuously
contribute to the betterment of people’s health in any day and age.

The Leading
Company for Career
Fulfillment• Be a company employees
can be proud of, havetrust in, and make unitedefforts for• Be a company that works to foster
positive relationships with society• Be a company that acts with the social
good in mind

• Be a company that is well-regarded
for its products and services and practices
excellent Monozukuri• Be a company with a positive brand image

Target Readers

Shareholders, investors, and other stakeholders

Period Covered
by Report

Fiscal 2019 (April 1, 2019 to March 31, 2020); some information also relates to fiscal 2020 activities.

26
28

ESG Highlights

30

Corporate Governance32

A Message from an Outside Director

35

Compliance/Risk Management

36

Kyorin’s Reliability Assurance System

37

CSR Activities through Business38

Initiatives to Respect Human Rights,
Implement Work-Style Reforms,
and Develop Human Resources

40

In Harmony with the Environment

43

Living in Harmony with Society

44

Ten-Year Consolidated
Financial Highlights

46

Performance Highlights

48

Directors, Corporate Auditors,
and Corporate Officers

50

Financial Analysis

52

Consolidated Financial Statements

56

Notes to Consolidated
Financial Statements

61

Independent Auditor’s Report

79

Corporate Overview/Stock Information82

2020 A N N U A L REPORT 1

To Our Stakeholders

Achieving the HOPE100 long-term vision by
putting the Group on a growth trend throughaccelerated growth of the new drugs group
Under Stage 1 (fiscal 2010–2015), the first step of the HOPE100 long-term vision, the Kyorin Group
achieved a degree of success as we strove to expand the ethical drugs business’s development
pipeline and maximize the promotion of major pharmaceutical products, while at the same time building
and moving forward with a new pharmaceutical business model based on the statement “To bolster
the forward momentum of its businesses by reorganizing them and building a framework for promoting
each business.”
Stage 2 (fiscal 2016–2019) was guided by the statement “Promoting sustainable growth throughinnovative changes (changes and innovations),” and we focused on responding to the patent expiry of
the major product Kipres and setting a course for medium- to long-term growth through the new drugs
group, thus laying the path for the final stage.
The ethical drugs business is currently facing an increasingly challenging external environment in
the face of stepped-up government measures to contain costs for medical treatment and drugs, ahigher degree of difficulty in new drug creation, and changes in activities of providing information.
At the same time, internally we are creating the new drugs group that we expect to drive growth,and businesses including diagnostics are beginning to produce results, allowing us to view fiscal 2020

Minoru Hogawa
Representative Director andChairmanas the beginning of a period of growth. Against this backdrop, we are looking beyond previous concepts

Yutaka Ogihara

and ways of doing things and have formulated the new HOPE100–Stage 3– (fiscal 2020–2023)

Representative Director,
President andChief Executive Officer

medium-term business plan to pursue “originality (unique competitive strength)” as we shift to a
growth trend. In the form of a statement, the plan seeks to “realize a growth trend through the
pursuit of originality,” as we move forward by pursuing our business strategy and organizational
strategy to achieve the targets we have set.
We ask for the continued understanding and support of all our stakeholders.
August 2020

The Kyorin Group has formulated the HOPE100 long-term vision for 2023, which will mark the100th anniversary of the founding of our core subsidiary, KYORIN Pharmaceutical Co., Ltd.
The period covered (fiscal 2010–2023) is divided into three stages, and from fiscal 2020, weare embarking on the new HOPE100–Stage 3– medium-term business plan, which will mark thecompletion of the long-term vision. To achieve this long-term vision, we will strive for continuous
growth as a company and the medium- to long-term enhancement of corporate value based on
this medium-term business plan.

2 2020 A N N U A L REPORT

Minoru Hogawa

Yutaka Ogihara

Representative Director and Chairman
KYORIN Holdings, Inc.

Representative Director, President andChief Executive Officer
KYORIN Holdings, Inc.

2020 A N N U A L REPORT 3

History of the Kyorin Group
Ninety-seven years have passed since the establishment of the Group’s core subsidiary, KYORIN Pharmaceutical Co., Ltd. Duringthat time, under our corporate philosophy of “benefiting society by contributing to better health,” we have made contributions to thetreatment and prevention of diseases and the maintenance and improvement of health. As the Company approaches its centenary,
guided by our long-term vision, HOPE100, we are working to make progress on being recognized both within and outside as acompany that supports sound and healthy lifestyles.

Management-related events•1923

Toyo Shinyaku Sha, the predecessor of
KYORIN Pharmaceutical Co., Ltd., wasfounded.
•1931
Kyorin Chemical Laboratory wasestablished.
•1940
Kyorin Chemical Laboratory was
renamed KYORIN Pharmaceutical Co., Ltd.
Kyorin Yakuhin Co., Ltd. was organized
as an independent marketing division.
•1947
The Okaya Plant was started.

•1967

The Nogi Plant was opened.
•1977
Central Research Laboratories wereopened.
•1992
KYORIN Pharmaceutical Co., Ltd. and Kyorin
Yakuhin Co., Ltd. were merged, and the
new KYORIN Pharmaceutical Co., Ltd. wasfounded.
•1995
The Noshiro Plant was opened.
•1996
The Research Center was established.

•1999

Listed on the Tokyo Stock Exchange, Second
Section.
•2000
Listed on the Tokyo Stock Exchange, First Section.
•2002
A subsidiary company, Kyorin Europe GmbH
(Germany), was established.
•2004
ActivX Biosciences, Inc. (U.S.A.) became a wholly
owned subsidiary.
•2005
The stock of Toyo Pharma Co., Ltd. (present
KYORIN Rimedio Co., Ltd.) was acquired, making
it into a subsidiary company.

•2006

The Kyorin Group shifts to a holding company structure through a shareexchange with KYORIN Co., Ltd.
The Nogi Plant was closed.
•2010
KYORIN Co., Ltd. changed its name to KYORIN Holdings, Inc.
•2012
The Shiga Plant of MSD K.K. was acquired (conversion into subsidiary) andKYORIN Pharmaceutical Facilities Co., Ltd. (head office: Shiga Prefecture)
was established.
•2013
The Head Office was moved to Ochanomizu sola city in Kanda Surugadai.
•2015
Establishment of the WATARASE Research Center of KYORIN PharmaceuticalCo., Ltd. through consolidation of the Drug Discovery Center (the former Central
Research Laboratories) and the R&D Center (the former Research Center).

•2016

The Okaya Plant was closed.

•2017

KYORIN Rimedio Co., Ltd.’s Takaoka Pharmaceutical Technology Innovation
Center was established.
•2018
New manufacturing subsidiary, KYORIN Pharmaceutical Group Facilities Co., Ltd.
(head office: Tokyo), commences operations.
•2020
KYORIN Pharmaceutical Group Facilities Co., Ltd. and KYORIN Medical Supply
Co., Ltd. merge.

2020

1923
Vision•1961

Behyd, a diuretic and antihypertensive agent,
was launched.
•1965
KYORIN AP-2, an analgesic, was launched.
Deamelin-S, an oral hypoglycemic agent,
was launched.

•1971

Infectious disease initiatives

Product history

Cholexamin, a lipid metabolism and peripheral
circulation improving agent, was launched.

•1974

Hespander, a plasma substitute and extracorporeal
circulation flow improver, was launched.
•1981
Mucodyne, a mucoregulant, was launched.
•1989
Ketas, for bronchial asthma and cerebrovasculardisorders, was launched.
•1996
Pentasa, a treatment for ulcerative colitis andCrohn’s disease, was launched.

KYORIN Pharmaceutical Co., Inc. has long pursued basic research in infectious
diseases. One infectious disease treatment it researched was a newquinolone agent, which led to the production of the oral antibacterial agent
Norfloxacin (Baccidal). This preparation was licensed to Merck & Co. (U.S.A.)
in 1980 as the world’s first oral new quinolone synthetic antibacterial agent,
and was sold in around 140 countries. This was followed by the developmentof Fleroxacin (Megalocin) and Gatifloxacin (Gatiflo), and the current saleof Lascufloxacin (Lasvic Tablets). In addition to therapeutic drugs, we have
expanded into prevention and diagnosis and the field of infection countermeasures through products such as the multipurpose disinfectant cleaner
Rubysta, the disinfectant brand Milton, and the proprietary microchannel-based
genetic measurement device GeneSOC®. For details P.24

4 2020 A N N U A L REPORT•2001

Kipres, a leukotriene receptor antagonist
and bronchial asthma treatment medicine,
was launched.
•2007
Uritos, an overactive bladder drug, was launched.
A business transfer agreement was made with
the Fresenius Kabi AG Group in Germany
concerning Hespander and Salinhes, plasma
substitutes and hemodilution agents.
•2013
Flutiform, a combination drug for asthma
treatment, was launched.
•1980
Norfloxacin (NFLX), an antibacterial agent,
was licensed to Merck & Co. (U.S.A.).
•1982
Norfloxacin (NFLX) was licensed to Astra(Sweden, present AstraZeneca) and Liade(Spain, present Abbott).
•1983
Norfloxacin (NFLX) was licensed to American
Home Products (U.S.A., present Pfizer).
•1984
Baccidal (NFLX), a broad-spectrum oral
antibacterial agent, was launched.

2023

HOPE100 Long-Term Vision (FY2010–FY2023)•2015

FPR2 Agonist Program was licensed to Bristol-Myers Squibb Company(U.S.A.).
•2016
Desalex, an antiallergic agent, was launched.
•2018
Acquired the exclusive distribution rights in Japan for NASONEX®,a therapeutic agent for allergic rhinitis using a metered-dose manual
pump spray unit, from MSD K.K.
Beova, an overactive bladder drug, was launched.

•1986
Fleroxacin (FLRX), an antibacterial agent, was licensed to F. Hoffmann-La
Roche (Switzerland).
•1989
Baccidal Eyedrops, a broad-spectrum ophthalmic antibacterial agent, waslaunched.
•1993
Megalocin (FLRX), a long-acting new quinolone agent, was launched.
•1996
Gatifloxacin (GFLX) was licensed to Bristol-Myers Squibb (U.S.A.).
•1998
Milton, an effervescent disinfectant business, was acquired from P&G.
•2000
Gatifloxacin eyedrops was licensed to Allergan (U.S.A.).

Corporate Vision for 2023
Medium-TermBusiness Plan
FY2010 – FY2015

Stage 1

Medium-TermBusiness Plan
FY2016 – FY2019

Stage 2Medium-TermBusiness Plan
FY2020 – FY2023

Stage 3•2002
Gatiflo (GFLX), a broad-spectrum oral antibacterial agent, was launched.
•2012
RUBYSTA, a multipurpose disinfectant cleaner, was launched.
•2017
KYORIN Pharmaceutical Co., Ltd. acquired all of the outstanding shares of jTAS
Inc., and carried out an absorption-type merger of jTAS (entry to diagnosis
business).
•2019
GeneSoC ®, a microchannel-based genetic measurement device, was launched.
•2020
Lasvic Tablets, an oral quinolone antibacterial agent, was launched.

2020 A N N U A L REPORT 5

Healthcare Business¥6.4 billion

Ethical Drugs Business¥103.6 billion

5.8%

94.2%

The Kyorin Group’s Business
The Kyorin Group’s main business is the development of ethical

Generic drugs

28.1%

drugs under the guidance of holding company KYORIN Holdings Inc.
The ethical drugs business is proactively engaged in proprietary drug

New drugs in Japandiscovery, while at the same time developing, manufacturing, and64.7%

selling new drugs and generic drugs. It also handles environmental
hygiene-related products and over-the-counter drugs.

New drugs overseas

1.4%(Fiscal 2019)

Respiratory and Otolaryngology

Otolaryngology

Urology

Inflammatory Bowel Disease

Generic Drugs
One of the Group’s strengths is
its handling of both new drugs
and authorized generics, which
gives it a high-quality, stableproduct supply.

Main Products
in Ethical Drugs

Flutiform

LasvicDesalexUritos

Beova

Pentasa

Combination drug for asthma treatment
General name: Fluticasone/Formoterol
Released: 2013

Oral new quinolone synthetic
antibacterial agent
General name: Lascufloxacin
Released: 2020

Antiallergic agent
General name: Desloratadine
Released: 2016

Therapeutic agent for overactive bladder
General name: Imidafenacin
Released: 2007

Therapeutic agent for overactive bladder
General name: Vibegron
Released: 2018

Co-promotion with Kaken Pharmaceutical Co.,
Ltd., in field of dermatology

Co-development and co-marketing with Ono
Pharmaceutical Co., Ltd. (sold by Ono
Pharmaceutical under the name Staybla)

Co-development and co-marketing with Kissei
Pharmaceutical Co., Ltd.

Ulcerative colitis and Crohn’s disease
treatment
General name: Mesalazine
Released: 19962015 (granules)

ICS/LABA: ¥123 billion
Market share in FY2019: 13%

Net sales

Antibacterial agent (oral): ¥96 billion*

14.6(Billions of yen)

11.9

13.1

*

Antihistamine: ¥156 billion
Market share in FY2019: 2%

Net sales

Net sales(Billions of yen)(Billions of yen)*

OAB:¥96 billion
Market share in FY2019: 7% (Uritos)
5% (Beova)

IBD: ¥42 billion
Market share in FY2019: 35%

Net sales

Net sales
nUritos nBeova(Billions of yen)

4.9

(Billions of yen) nTopical preparation nTablets nGranules

10.1
3.7

10.1

7.5

7.5

2.6

7.2

7.2

7.3

0.7

4.3

16.1
0.5
12.1

1.1

2015

2016

2017

2018

*

*

2019

2019

(FY)

(FY)

6.6

1.0

2016

2017

2018

2019
(FY)

2015

2016

2017

2018

5.8

2019

15.5

15.3

3.6

5.0

8.5

6.9

13.5

13.3

5.5

6.0

5.1

4.4

3.5

3.4

3.4

3.0

3.0

2015

2016

2017

2018

2019

(FY)

(FY)

* Source: Copyright© 2020 IQVIA. JPM. Kyorin’s own analysis based on MAT March 2020. Unauthorized copying prohibited.

6 2020 A N N U A L REPORT

2020 A N N U A L REPORT 7

Under the corporate philosophy “KYORIN continues to fulfill its mission of cherishing life, and benefiting society bycontributing to better health,” the Kyorin Group has established a long-term vision, HOPE100 (FY2010–FY2023).
The Group aims to be recognized both within and outside as a company that supports sound and healthy lifestyles.
In the new medium-term business plan that forms the final stage of this vision, HOPE100–Stage 3–, its goal is tobecome a globally recognized company by creating innovative new drugs. To that end, it will provide a wide variety ofassistance to people’s health through multidisciplinary development across the new drugs business, the generic drugs
business, and the infectious disease-related business (prevention, diagnosis, and treatment of infectious diseases).
In addition to responding to diverse medical needs, the Group works to find solutions to social issues from an ESG(environment, social, and governance) perspective. The Group’s value creation process is to share the results of these
efforts with all its stakeholders. By continuing this value creation process, it strives to realize a sustainable society and togrow the Company to raise corporate value.

The Kyorin Group’s Vision andValue Creation Process

Group-Related
Social Issues
New drugs business

Nurturing next-generation,
work-style reform
Addressing the increasing
sophistication of medical
technologies in areas including
artificial intelligence (AI), theinternet of things (IoT),
and life sciences

P.18, 20• The main focus areas of KYORIN Pharmaceutical Co., Ltd.’s proprietary drug discovery efforts are
fibrosis and kinase research. It applies to these areas the low molecular weight drug discovery technologyof the WATARASE Research Center, and the broad and quantitative analysis technology for kinase/proteaseof ActivX Biosciences’ research facilities. In addition to using open innovation for proprietary discovery,
the Group engages in original new drug discovery by activating existing platforms and utilizing newtechnologies.
• By identifying value in medical areas and implementing strategic development plans, we pursue efficient
clinical development operations.

P.22

A competitive marketing system and the creation of
new supplementary products

Generic drugs
business

P.28• KYORIN Rimedio Co., Ltd. develops products that can be used with peace of mind through its Takaoka
Pharmaceutical Technology Innovation Center, which has strong generic-drug development capabilities.
• As a new drug-related generics company, it supplies products through a marketing structure that traverses
the entire Group.

Promotion of diagnostic business using GeneSoC ®

Infectious
disease-related
business

P.24• The Group pursues the development of reagents for research (for respiratory infections and sexuallytransmitted diseases) and the development of the GeneSoC ® mini, an automatic pretreatment system
device, aiming to realize point-of-care testing (POCT: testing carried out by healthcare professionals at
the patient’s bedside).

Combating infectious
diseases

Existing in harmony
with local communities

Innovative new drug discovery and ethical drug development

New Medium-Term Business Plan
“HOPE100–Stage 3–”• Information is supplied under a franchise customer (FC) strategy that centers on marketing activities by
medical representatives (MRs) targeted toward doctors and medical institutions in specific fields. The Grouphas built a strong presence by forging bonds of trust with doctors in FC fields (respiratory, otolaryngology,
and urology).

Increasing medical costs

Diversifying medical needs

The Kyorin GroupA strong presence in specific fields

Rapidly aging population

Unmet medical needs

The Kyorin Group’s Business Activities

Subcontracted
drug manufacturingbusiness

Creating a more cost-effective production system of three plants

P.26• The Group is creating an optimized overall production system by combining the characteristics of theNoshiro Plant, with its low-cost, high-volume capabilities, the Shiga Plant, which is compliant with global
GMP, and the Inami Plant, which handles small-lot manufacturing of numerous types of products, focusing
on generic drugs.

P.11

Statement
Realization of a growth trend through the pursuit of originality
VisionTo become a globally recognized company by creating
innovative new drugs

1. Strategy
Shift to business based on the proposal of solutions andaccelerate the growth of new drugs groups
Enhance pipeline to support medium-term growth
Strengthen drug discovery capability to realize thecreation of innovative new drugs
Improve cost competitivenessExpand overseas revenue

2. Organization
3. Performance• Achievement of sustainable results• Shareholder returns

Kyorin’s strengths
Development potential(possession of know-how,personal connections,networks) for specific fields

A strong presence in specific fields
Precise responses that use area
management and a team structure

Social contribution

Creation of new
innovative products

Responding tounmet medical
needs

Enhancing thequality of life ofpatients andtheir families

To become the leading company for career fulfillment

Reliability Assurance

Ability to discover novel drug compounds(original drug discovery capabilities)
Drug discovery competitiveness through alliances

Value Provided
to Stakeholders

A manufacturing structurecompatible with diverse needs
Secure manufacturing capacity
for sterilized formulations(for injections, etc.)

Stable supply of high-quality generic drugs(combining development, manufacturing, andsales functions)A new drug-related generics company that
handles AG

Contributing to
infectious disease
countermeasuresthrough prevention,
diagnosis, and treatment

Corporate
Vision for2023
Long-Term
Vision

HOPE
100

Living together withlocal communities

Constructive dialogue
with shareholders
and sustained returnof profits

Environmental, Social, and Governance (ESG) Activities
Targeting sustainable societal development and medium- to long-term increases in corporate value• ESG Highlights P.30 • Corporate Governance P.32 • CSR Activities through Business P.38

8 2020 A N N U A L REPORT• In harmony with the environment P.43 • Co-existing in harmony with society P.44

2020 A N N U A L REPORT 9

Transformation of the Medium-Term Business Plan and Overview of
HOPE100–Stage 3– New Medium-Term Business Plan
The Group is pursuing a long-term vision, HOPE100, that is split into three stages, each with a corresponding medium-term businessplan. Fiscal 2020 sees the beginning of the final stage of the vision through a new medium-term business plan, HOPE100–Stage 3–.
While making progress on being recognized both within and outside as a company that supports sound and healthy lifestyles, the Groupwill strive to create sustainable growth and raise corporate value.
(Billions of yen)
150

(%)

20

Net Sales/Operating Income Margin Trends
100

Overview of HOPE100–Stage 3– New Medium-Term Business Plan
The statement of the new medium-term business plan
HOPE100–Stage 3– is “Realization of a growth trend
through the pursuit of originality.” We aim to achieve
performance targets through various business strategies
and organizational strategies.

Become a globally recognizedcompany through the creation of
innovative new drugs

Vision in Stage 3
Aim to become a globally recognized company throughthe creation of innovative new drugs. To this end, expand
the new drugs business, GE business, infection-related
business (prevention, diagnosis, and treatment of infections)in an integrated manner to widely support people’s health.

GEbusiness

New drugs
business

Infectionrelated
business

Subcontracted drug manufacturing business

10
50

0

Stage 1
Statement
Improvement of the ability to reorganize and establish
a system to promote individual businesses

2010

2011

2012

2013

2014

Stage 2
Statement
Commitment to change(reform and renovation) andmaintain sustainable growth2015

nEthical drugs business nHealthcare business

2016

2017

2018

Stage 3
Statement
Realization of a growth trend
through the pursuit of originality

2019

Strategy02023 (FY)Operating income margin (%)

Overview of HOPE100–Stage 2– Medium-Term Business Plan

Strategy1234Priority strategies

Enhancing drug discovery
capabilities:
Initiatives for ﬁrst-in-classnew drug discovery
Increasing the ratio of new
drugs group:
Signiﬁcantly increase the ratio of
new drugs group by promoting thegroup to the greatest extent possible

Promoting generic drugs
business by making the mostof its characteristics

Enhancing cost reductions:
Change of cost structure
by ensuring optimization
within the Group

Results•Selecting drug discovery

programs and focusing on• Fibrosis/Kinase•Ratio of the new drugs group:
34.9%•Growth of Flutiform•Open Innovation• Established the Department of Drug Discovery for Lung Diseases
with Kyoto University• Started joint research with Institute of Microbial Chemistry• Started collaboration with Hebrew University as Strategic partnership•Launch three new drugs• Desalex (November 2016)• Beova (November 2018)• Lasvic Tablets (January 2020)•Proactively address authorized generics (AG)
•Established the Takaoka• Released Kipres AG (September 2016)
Pharmaceutical Technology
Innovation Center (whose operations • Released Nasonex AG (August 2019)began in July 2017)• Obtained manufacturing and marketing approval of Uritos AG(August 2019)•Consolidation of the Group’s production functions• Established KYORIN Pharmaceutical Group Facilities Co., Ltd. (Commenced operation on April 1, 2018)• Leveling the rate of plant operation and efficient use of assets

1
2
3
4
5

Priority strategies

Shift to business based on the
proposal of solutions and accelerate
the growth of new drugs groups

Enhance pipeline to support
medium-term growth

Priority items• Shift to business based on the proposal of solutions to problems by combining ethical drugs businessand infection-related business and make Kyorin’s unique contribution to healthcare workers.
• Accelerate the growth of new drugs groups as much as possible (Flutiform, Desalex, Beova, Lasvic, etc.).
• Streamline the healthcare business into business focused on infection-related fields.

• Actively invest in enhancements to the pipeline that will contribute to business performance in themedium term, with diseases surrounding the three specialities (respiratory medicine, otolaryngology,
and urology) of franchise customers, infections, and rare and intractable diseases the domains forin-licensing.

Strengthen drug discovery
capability to realize the creationof innovative new drugs• Continue adding new layers to existing priority research domains and technologies and taking on new
research domains and technologies.
• Pursue R&D based on clarification of healthcare value of new drug candidates.
• Achieve proof of concept ourselves, as a general rule, and aim for early global out-licensing.
• Increase diversity by actively acquiring drug discovery seeds.

Improve cost competitiveness• Increase cost competitiveness of the GE business by improving the efficiency of the GE sales structure.
• Strengthen the ability to create new generics.
• Establish a manufacturing structure to achieve stable supply and low cost while also enabling
expansion of subcontracted manufacturing.

Expand overseas revenue• Expand overseas revenue through the promotion of global out-licensing.
• Steadily take steps toward direct entry into the Asian market.

Organization
Aim to be the leading company
for career fulﬁllment• Train and attract human resources to support our development as a next-generation company,
aiming to be the leading company for career fulfillment.

Development strategies

Overseas expansion

Enhancing healthcare business•Market research and data collection in Asia

Performance•Strengthening the environmental hygiene business•Entry to diagnosis business: Released microchannel-based

Numerical targets (consolidated basis)

Capital policy and shareholder returns

Growth potential: Net sales—CAGR of at least 5%
Profitability: Operating income before deduction of R&D
expenses (operating income + R&D expenses)—At least 20%of net sales

Maintaining a sound financial base while raising capital efficiency through investments for growth andreturns to shareholders
Maintaining stable dividends taking into account the dividend on equity (DOE) ratio

genetic measurement device GeneSoC ® (November 2019)

Organization
10 2020 A N N U A L REPORT

Establishment and operation of human resources management systemaiming to be the leading company for career fulﬁllment

2020 A N N U A L REPORT 11

Interview with the President

Pursuing Kyorin’s originality andachieving a growth trend based on
the new HOPE100–Stage 3–
medium-term business plan
Yutaka Ogihara
Representative Director, President and Chief Executive Officer

12 2020 A N N U A L REPORT

Q

Please tell us about Kyorin’s
business results for fiscal 2019.

A

Revenue and profit declined on lower
domestic sales of new drugs.

Under a basic policy of drastically overhauling the NHI drug
pricing system, the government has been promoting theuse of generic drugs and implementing other measures tocontain the costs of drugs. Because of that and the drug
price revisions carried out in October in connection with theconsumption tax increase (an industrywide 2.4% average),
the Japanese pharmaceutical industry continued to face a
difficult market environment during fiscal 2019.
For the Kyorin Group, fiscal 2019 was the final year of the
HOPE100–Stage 2– medium-term business plan. With
unwavering determination in the pursuit of transformation,
under the management policy for the plan’s final year of“mobilizing the Group’s collective strengths to bring abouttransformation,” we moved forward toward achieving ourtargets and setting a trajectory for continuous growth. At
our core ethical drugs business, we prioritized creating
original, globally competitive new drugs, continuous drug
discovery, and opening markets with new drugs. We also
made a Groupwide effort to accelerate the growth of peripheral businesses and achieve low-cost operations, as we
strove to achieve our targets and gain greater recognition
from stakeholders.
In terms of domestic sales of new drugs, sales of ourmain products Flutiform and Beova grew, and there wasalso a contribution to sales from the release of Lasvic
Tablets, but lower sales of long-listed products including
Nasonex, Kipres, and Mucodyne, and a delay in the restartof supplies of Desalex after a temporary stop, resulted insales declining ¥6.5 billion from those of the previous year.
Overseas sales of new drugs rose ¥0.7 billion over thoseof the previous year, with increased revenue related to
Gatifloxacin and upfront payment from the conclusion of alicensing agreement with the South Korean company JEIL
Pharmaceutical Co., Ltd. for Vibegron (Beova). Sales ofgeneric drugs grew ¥1.7 billion over those of the previous
year on a contribution from the release of Nasonex AG(authorized generic), and the healthcare business recorded¥0.6 billion sales growth on increased sales of Rubysta
and Milton brand products from increased demand fordisinfectants and cleaning agents associated with the spreadof the novel coronavirus.
As a result, consolidated net sales for fiscal 2019 declined
3.2% from those of the previous year, to ¥109,983 million.
In terms of profit, despite a decline in the cost of sales
ratio, the decline in sales of new drugs resulted in lower
gross profit, and with an increase in research and development expenses, operating income declined 16.4% from thatof the previous year, to ¥7,503 million.

Q

What are your reflections
on the HOPE100–Stage 2–
medium-term business plan?

A

Although we did not achieve thenumerical targets, we have set a
course for the next stage of growth.

To realize our corporate philosophy that “Kyorin continues
to fulfill its mission of cherishing life and benefiting society
by contributing to better health,” in 2010, the Kyorin Group
formulated the HOPE100 long-term vision with a view toward
2023, the 100th anniversary of the founding of our coresubsidiary, KYORIN Pharmaceutical Co., Ltd. The period
through 2023 was divided into three stages (Stage 1: fiscal
2010–2015; Stage 2: fiscal 2016–2019; and Stage 3: fiscal
2020–2023), and medium-term business plans have beenformulated for each stage with the aim of evolving into a
company that is recognized internally and externally as ahealthy “Company that supports sound and healthy lifestyles.”During Stage 1, which was guided by the statement “Tobolster the forward momentum of its businesses by reorganizing them and building a framework for promoting eachbusiness,” we achieved a degree of success in expanding
the development pipeline at the ethical drugs business,
maximizing the promotion of major products to the greatest
extent possible by deepening our franchise customer
strategy, and taking steps to build and promote a newpharmaceutical business model.
Under Stage 2, we aimed to deal with the patent
expiry of our main product Kipres and secure a path for
medium- to long-term growth under the statement “Promoting sustainable growth through innovative changes(changes and innovations) to realize our long-term vision.”2020 A N N U A L REPORT 13

We focused on strengthening our drug discovery capabilities,
increasing the ratio of the new drugs group in our productmix, promoting the generic drugs business by making themost of its characteristics, and strengthening our ability toachieve low costs. We strove to strengthen our drug
discovery capabilities by creating proprietary new drugs incollaboration with the WATARASE Research Center in Japanand ActivX Biosciences in the United States, and throughopen innovation with domestic and overseas pharmaceutical companies, academic institutions, and venture capital
start-ups. We also strove to revitalize existing drug discovery
platforms and utilize new technologies (nucleic acids,
peptides, gene therapy, etc.). Along with creating a structure
for drug discovery, we pursued selection and concentrationin drug discovery themes as we worked to develop multilayered programs in fibrosis research and kinase research.
We also expanded our pipeline through the in-licensed
interstitial lung disease treatment KRP-R120 (ATYR1923)
from aTyr Pharma, Inc. of the United States. With the aim ofincreasing the ratio of the new drugs group to more than
50%, we released three new products—Desalex, Beova, andLasvic Tablets. In terms of promoting the generic drugs
business by making the most of its characteristics, we
commenced operations at the Takaoka Pharmaceutical
Technology Innovation Center in July 2017, and are using
this facility to strengthen our drug development capabilities
and increase the number of attractive products developed
in-house. In September 2016, we released Kipres AG as theGroup’s first authorized generic product. Our successes inthis area also include the subsequent release of Nasonex
AG, and we obtained approval to manufacture and sell
Uritos AG. To strengthen our ability to achieve low costs, weconsolidated the Group’s manufacturing functions at the new
manufacturing subsidiary, KYORIN Pharmaceutical Group
Facilities Co., Ltd., which commenced operations on April 1,
2018. This has led to steady progress in cost reductions byequalizing plant capacity utilization and using assets more
efficiently. We continue to aim to create a competitive Group
manufacturing structure that provides a stable supply ofhigh-quality products at low cost. Under our development
strategies, we are strengthening our businesses related
to environmental hygiene and are entering the new businessof diagnostics, where we are developing extracorporeal
diagnostic agents targeting pathogenic bacteria and viruses
for infectious diseases, and released the GeneSoC® device
for use in research.

14 2020 A N N U A L REPORTWith regard to numerical targets, with dramatic changes
in the external environment and special factors including
the temporary suspension of supplies of Desalex and delaysin the market launch of Lasvic Tablets, we were unable toachieve our targets of average annual growth of at least
3% in consolidated net sales and a consolidated operating
income margin of at least 15%. Nevertheless, we haveassembled a lineup of new drugs that we expect to become
major products and view fiscal 2020, the first year under
the new HOPE100–Stage 3– medium-term business plan,as the beginning of a period of business growth. We havetherefore set even higher numerical targets that we will
strive to achieve.

Q

Please give us an overview
of the HOPE100–Stage 3–(fiscal 2020–2023) medium-termbusiness plan, and tell us
what you hope to achieve.

A

We will pursue originality to achieve a
growth trend despite the increasingly
challenging external environment.

cuts across the Group, to make a uniquely Kyorin Group
contribution to healthcare workers. In the area of prevention,
diagnosis, and treatment of infectious diseases, for example,
I hope to provide doctors, pharmacists, nurses, infection
control teams (ICTs), and antimicrobial stewardship teams(ASTs) with comprehensive solutions in the field of infectious
disease based on products including the preventive Milton
and Rubysta, the GeneSoC® diagnostic device, and Lasvic
for disease treatment.
We will strive to accelerate the growth of the new drugs
group by placing a maximum focus on products including
Flutiform, Desalex, Beova, and Lasvic so that they areprescribed as much as possible.

We have begun operating under the HOPE 100–Stage 3–
medium-term business plan, but with measures to containcosts for drugs being tightened further, a growing degreeof difficulty in new drug discovery, and changes in activities
of providing information, we expect the current external
environment to become increasingly challenging. At thesame time, as I previously mentioned, internally we have alineup of new drugs to drive growth, including Flutiform,
Desalex, Beova, and Lasvic, and with our diagnostics
business beginning to bud as well, I believe we haveentered a period of business growth. Against this backdrop,
during this stage we will pursue originality (using our uniquecompetitiveness) without being bound by conventional
methods and ways of thinking, to achieve a growth trend
under the statement “Realization of a growth trend throughthe pursuit of originality.” With the aim of being a company
that is globally recognized for its innovative new drug
discovery, we will expand the new drugs business, thegenerics business, and the infection-related business(prevention, diagnosis, and treatment of infections) in an
integrated manner to become a company that widely supports people’s health, focusing on the following Business
Strategy and Organization Strategy.

Business Strategy
Shift to business based on the
proposal of solutions and accelerate
the growth of the new drugs group
We will transform into a provider of solutions that integrate
the ethical drugs business and the infection-related businessto solve problems and create a marketing structure that

Enhance pipeline to support
medium-term growth
The Kyorin Group to date has focused on franchise customers (FC) for in-licensing in three areas (respiratory,
otolaryngology, and urology), but we will also address thefields of infectious disease and rare and intractable diseases,
proactively investing to expand our pipeline to contribute tobusiness results over the medium term.

2020 A N N U A L REPORT 15

Strengthen drug discovery capability torealize the creation of innovative new drugs
To create innovative new drugs, we will continue to pursue
the challenges of adding layers of research in our priority
research domains of fibrosis research and kinase research,
and add new fields of research and technology. We will
also promote research emphasizing the clarification of thehealthcare value of new drug candidates and realize early
global out-licensing based on a general rule of achieving
proof of concept (POC) ourselves, while also actively
acquiring drug discovery seeds as we work to strengthen
our drug discovery capabilities.

Improve cost competitivenessWe will increase the cost competitiveness of the genericdrugs business by improving the efficiency of the business’s
sales structure, while also strengthening the ability of the
Takaoka Pharmaceutical Technology Innovation Centerto create new generic drug candidates. In addition, by
optimizing our manufacturing structure and improving
operational efficiency, we aim to achieve stable supplies andenhance our cost competitiveness, and create a structure tofacilitate expanded subcontracted manufacturing.

Performance Targets
I believe that the achievement of continuous growthrequires that we set targets in terms of both growth andprofitability. For growth, we have set a target of an averagecompound annual growth rate of at least 5% in consolidated net sales, and for profitability, we are targeting
consolidated operating income before the deduction of
R&D expenses (operating income + R&D expenses) of atleast 20% of net sales.
Our fundamental capital policy is to maintain a soundfinancial base while improving capital efficiency throughinvestments for growth and returns to shareholders. With
regard to returns to shareholders, we will maintain a stabledividend while taking the dividend on equity (DOE) ratio
into account.

Q

What are your management
policies and initiatives forfiscal 2020?

A

We will pivot to a solid growthtrend under the management policy“Accept the challenge of pursuing originality.”

With the new drugs group assembled, I believe fiscal 2020
will be the “make-or-break” year for escaping from ourdownward trend. For the main points of our businessstrategy, we will shift to a business based on proposing
solutions and accelerate the growth of the new drugs
group, enhance our pipeline, expand drug discovery
projects, and improve our cost competitiveness. Group
employees will take up repeated challenges in the pursuitof originality as we work to ensure that the transformation
to a growth trend is solid.

Q

Regarding a current topic,
please tell us about your initiatives
related to the novel coronavirus.

A

We are contributing to the diagnosis
of infectious diseases with the
GeneSoC ® microchannel-based genetic
measurement device.

Expand overseas revenue
We aim to expand our overseas revenue by promoting
global out-licensing through enhanced drug discovery
capabilities. We will also steadily move forward in our thinking to directly enter the Asian market.

Organization Strategy
Aim to be the leading company forcareer fulfillment
Under our long-term vision, the Kyorin Group values its
employees, executing a business strategy that energizes
people and organizations and achieving concrete results
as our most important issues. We are working to train andattract human resources to support our development as anext-generation company, following the basic policy of ourhuman resources management system with the aim ofbeing the leading company for career fulfillment.

16 2020 A N N U A L REPORT

Jointly developed with the National Institute of Advanced
Industrial Science and Technology and based on superfast
quantitative PCR technology, we released the GeneSoC ®
microchannel-based genetic measurement device as a
research instrument in November 2019. Designed for practicality as an instrument for the rapid detection of infectious
diseases that can be used for point-of-care testing (POCT,
testing performed by medical practitioners at the bedsideof patients), the device has received a great deal of attention
for the speed at which it can detect the novel coronavirus.
Development is also currently under way for its use as a
medical device, and it is making a unique contribution in
the field of diagnosing infectious diseases including thenovel coronavirus and resolving issues concerning thecorrect use of drugs and ways to address the growinginternational problem of antimicrobial resistance (AMR).

Q

Would you please provide amessage to stakeholders.

A

As we approach our 100th anniversary,
we want to look ahead to the next 100 years
and increase corporate value by developing
uniquely Kyorin businesses.

The Kyorin Group’s corporate message—“Your Health isKyorin’s Mission”—expresses our strong desire to contributeto people’s health, an ideal that has been carried oncontinuously throughout our almost 100-year history.
Since our founding, our business has been based on theprecept of contributing to people’s health, an idea consistent
with the concepts underlying the international targets for asustainable world set forth in the Sustainable Development
Goals, which have recently been receiving a great deal ofattention. To date, the Group has pursued research in
infectious disease, immunity, and inflammation, while atthe same time developing highly specialized businesses
that seek to establish a presence in specific fields, focusing
on respiratory, otolaryngology, and urology. Going forward,
we will develop businesses in areas where we are able todeploy our strengths, as we strive to enhance our corporate
value by continuously pursuing the challenge of evolving
into “a company that supports sound and healthy lifestyles”
and supports people’s health.
I ask for the continued support of all stakeholders.

2020 A N N U A L REPORT 17

Drug Discovery

New Drugs
Business

With the medical needs for people’s health today becoming increasingly diverse and complex, the degree of difficulty increating innovative new drugs is higher than ever. In this environment, although the scientific and technological development
efforts of drug manufacturers are resulting in many new drugs, numerous unmet medical needs still exist. Through our
corporate activities, the Kyorin Group is using innovation to develop and provide safe products and services that benefit society,enabling the Company to continue to grow and contribute to resolving social issues. Under the new HOPE100–Stage 3–
medium-term business plan, we are focusing on strengthening our drug discovery capabilities to the greatest extent possible,
aiming to become a company that is globally recognized as a company of innovative new drugs.

Strengths

Opportunities

Risks• Working with the WATARASE Research Center and its
disease model analytical technologies and low molecularweight drug discovery technologies, and ActivX
Biosciences (ActivX) in the United States, which has
broad and quantitative kinase analysis technologies,
we are able to identify targets and create novelcompounds. (Unique drug discovery capabilities)•W e are working with academic institutions and venture
capital start-ups in research areas including fibrosis,
infectious diseases, and inflammation. (Competitivenessthrough alliances)• Using the low molecular weight drug
discovery technologies we have developed
over the years, we are not only acquiring
multiple pharmacophores for newly identified
discovery targets and pursuing optimal
research with different basic structures,
we are also pursuing simultaneousdevelopment with new modalities (nucleic
acids, etc.), thereby diversifying the seeds
to increase our likelihood of success.

• Increased use of artificial
intelligence in drug discovery
could make low molecularweight drug discovery more
efficient (through major cost
reductions and shorter development periods), which could
weaken our advantageous
position in drug discovery.

New HOPE100–Stage 3– Medium-Term Business Plan
Business strategy  Strengthen drug discovery capability to create innovative new drugs
Continue to add new layers to existing priority
research domains and technologies and takeon new research domains and technologies

Review ofprevious
medium-termbusiness plan

Pursue R&D based on clarification ofhealthcare value of new drug candidates

Increase diversity by actively acquiring drug
discovery seeds

We strove to strengthen our drug discovery capabilities with a reorganized drug discovery structure, which involved
consolidating exploratory research and development research at the WATARASE Research Center and strengthening
cooperation with ActivX. In kinase research and fibrosis research, our priority research areas, we were able to carryout multilayered drug discovery activities by strengthening our themes for initial-stage exploration both quantitatively
and qualitatively, and evaluate compounds with different basic structures while simultaneously strengthening our
backup structure.

Initiatives under the new medium-term business plan
Continue to add new layers to existing priority research domains and technologies
and take on new research domains and technologies
KYORIN Pharmaceutical’s WATARASE Research Center has
technologies for analyzing disease models and low molecularweight drug discovery technologies, while ActivX has the KiNativ(broad and quantitative kinase analysis technology) platform.
We have quantitatively and qualitatively reinforced our themes
for initial-stage research and exploration in our priority researchareas of fibrosis research and kinase research to make maximum
use of the potential of these technologies and identify novel drug

18 2020 A N N U A L REPORT

discovery targets. In terms of fibrosis research, we are working
with academic institutions in proactive exploration of candidate
compounds that have pharmacological activity for identified
discovery targets using iPS cells and human tissue. In addition
to our existing drug discovery platform based on low molecularweight, we are using new modality technologies (nucleic acids,etc.) to pursue the challenge of innovative new drug discovery.

Pursuing open innovation
To supplement and build on KYORIN Pharmaceutical’s proprietary
drug discovery, we are proactively investigating external
early-exploratory-stage drug discovery themes and candidate
compounds, and using our evaluation technology platforms inareas including auditory function, bladder function, and infectious
diseases to create a structure that can carry out speedy evaluations.
This includes open innovation with academic institutions, venture
capital start-ups, and domestic and overseas pharmaceuticalcompanies, enabling us to approach drug discovery targets fromvarious perspectives. We established the Department of Drug
Discovery for Lung Diseases as a joint research program at theGraduate School of Medicine Kyoto University in fiscal 2017,
integrating the academic institution’s pathological research andbasic research capabilities with KYORIN Pharmaceutical’s drug
discovery capabilities to search for new targets for drug discovery.
KYORIN Pharmaceutical also concluded a strategic partnershipwith the technology transfer company of the Hebrew Universityof Jerusalem for drug discovery in the respiratory field in fiscal
2018, and began joint research with the Microbial Chemistry
Research Foundation’s Institute of Microbial Chemistry to search
for antibacterial drugs effective against multidrug resistantbacteria in fiscal 2018.
We are also acquiring early-stage drug discovery seeds fromoutside the Group to build new platforms for drug discovery,
which will increase and expand our drug discovery seeds,
diversify disease areas and modalities, and disperse risks.

Initiatives for innovative new drug discovery
KYORIN Pharmaceutical will take the following three approaches in its drug discovery activities:• Search for novel targets
We are strengthening our early-exploration-stage research to search quickly
for novel drug discovery targets andcreate innovative new drugs effective
against those targets. To strengthen
our early-stage drug discovery researchboth quantitatively and qualitatively,
we are using human (patients), diseasemodel animal tissue or cells, andapplying technologies including KiNativand genome editing to enhance thequality of our target identification andvalidation. We are also stepping up our
fibrosis research as a priority researcharea. Working with academic institutions with strengths in basic research,
we are making maximum use of
cutting-edge technologies like humandisease-specific iPS cells for anenhanced level of drug discovery
evaluation to select candidate
compounds.
• Expand modalities
In addition to our existing low molecularweight drug discovery, we are using
new technologies to explore compounds
including medium molecular weightcompounds and nucleic acid medicines,
and building on our work on fusion
protein formulations begun in fiscal
2019 to pursue possibilities in newmodalities and create new drugs with
global potential that help address
medical needs that cannot be met
with low molecular weight drugs.

• Restructure drug discovery research centers
All research centers, covering earlyexploration-stage research to researchand development, have been consolidated at the WATARASE ResearchCenter, which is carrying out drug
discovery research with a structurethat is effective and cooperative in theareas of pharmacology, chemistry,safety, and pharmacokinetics, as well
as formulation and analysis. Experts
in all these fields work in teams thatcross organizational divisions to conduct
research and complete developmentwith greater quality and speed for drug
discovery research that is consistent
with global standards.

System for Continuous Creation of Innovative New Drugs

WATARASE Research Center

ActivX, USA

Partnership

Receptor technology

KiNativ technology

Open innovation

Open innovation

Academia and ventures

Global and domestic pharmaceutical companies

Selection and concentration

Research Focuses
Fibrosis

KinaseExternal drug
discovery
programs(Diversity)

Multilayered approach

New Drug Discovery Target

Creation of World-Class Innovative New Drugs

2020 A N N U A L REPORT 19

New Drugs
Business

Development

Products under development (As of May 12, 2020)
Ph Ⅲ–approval
Compound/CodeStrengths

Opportunities

Risks• E xpertise, personal connections, and networks for product development in the fields ofrespiratory, otolaryngology, and urology(development capabilities in designateddisease fields)• A n organizational structure that can
carry out clinical trials effectively
and promote the development of
new drugs• Significantly higher development costs fromstricter standards for clinical trials and new
drug approvals• Increasingly severe effect on business viability
from reform of the drug pricing system

In principle, achieve proof of concept (POC)* ourselves andaim for early global out-licensing* Proof of concept: Confirmation of the effectiveness and safety to humans ofcandidate substances for new drugs in the research and development stage

Clinical trials were carried out for products in development including the oral quinolone antibacterial agent KRPAM1977X (product name: Lasvic Tablets) and the overactive bladder drug KRP-114V (product name: Beova), anddespite some delays, both products were successfully released. We will use the valuable experience gained
developing these products in our development activities going forward.

acquired the exclusive rights for development and sales inJapan, we will carry out development for interstitial lungdiseases (including pulmonary sarcoidosis) in Japan.
Going forward, we will proactively work to expand the productpipeline to support the Group’s medium-term growth throughworldwide partnering activities with the aim of establishing astrong presence in the Group’s priority fields of respiratory,
otolaryngology, and urology.
Allergan (U.S.A.)

Partnering with Companies in Japan and Overseas

Bristol-Myers Squibb (U.S.A.)
MediciNova (U.S.A.)

Handok (Korea)

Merck & Co. (U.S.A.)

R-Pharm (Russia)

aTyr (U.S.A.)

Vectura (U.K.)
Ferring International Center (Switzerland)
AstraZeneca (U.K.)

Kissei Pharmaceutical
Sato Pharmaceutical
Eisai

Kaken Pharmaceutical
Ono PharmaceuticalFaes Farma (Spain) SPIMACO* (Saudi Arabia)

Nichi-Iko Pharmaceutical
Nisshin Pharma

ROHTO Pharmaceutical
MSD

Shinlin Sinseng (Taiwan) Synmosa (Taiwan)
Senju PharmaceuticalOut-licensed

Ph Ⅲ

NDA

KRP-AM1977Y(Injection)

New quinolone
synthetic
antibacterial agent

In-house

KRP-116D

Interstitial cystitis―

Dimethyl sulfoxide (DMSO), an unapproved and off-label drug withhigh medical needs

Mar 2020

KRP-108P

Bronchial asthma

Vectura (U.K.)

Additional indication of pediatric use for Flutiform combination
drug for asthma treatment

Jul 2019

Oct 2019

POC project (PhⅠ–Ph Ⅱ)
Compound/Code

Therapy area/Action

OriginFeatures

Stage

Ph Ⅰ

Ad-SGE-REIC

Malignant pleural
mesothelioma

Okayama
University

A gene therapy drug that uses the new cancer-inhibiting gene
REIC that was discovered at Okayama University. It is expected toinduce the active development of cancer cell selective apoptosis
and anticancer immunity.

Ph Ⅱ

Ph Ⅲ

NDA

Jun 2018

Development of KRP-N118 discontinued on the basis of difficulty realizing preconfigured product profiles (February 2020)

Licensing agreement concluded for KRP-R120 (ATYR1923) (January 2020)• aTyr is in PhaseⅠb / Ⅱ a in the United States• Fusion protein drug having the action to suppress, by binding to neuropilin-2 (NRP2) receptor, the excessive activation of immune cells, while being a potential first-in-class therapy to treat
inflammatory diseases including pulmonary sarcoidosis

Promotion of proactive partnering activities

LG Chem (Korea)
JEIL (Korea)

Stage

Ph Ⅱ

New quinolone injection developed to target lower respiratory
tract infections
1. Highly distributed in lungs shows strong antibacterial activity
against pathogenic bacteria for respiratory tract infections
2. Effective against both aerobic bacteria and anaerobic bacteria,
and able to administer once a day
3. Effectiveness against aspiration pneumonia, pulmonary
suppuration, and lung abscesses confirmed

Status of in-licensed products

Business strategy  Enhance pipeline to support medium-term growth

As per its management strategy, KYORIN PharmaceuticalCo., Ltd. expanded its product lineup through the in-licensingof the allergy treatment Desalex from an affiliate of MSD andthe overactive bladder treatment Beova from Merck & Co. of
the United States.
In January 2020, we concluded a licensing agreementwith aTyr Pharma, Inc. of the United States for KRP-R120(ATYR1923), a treatment for interstitial lung diseases. Having

Features

MK-7264 drug for chronic coughing: Concluded a memorandum of understanding for marketing collaboration (May 2019); Merck Overseas Phase Ⅲ

New HOPE100–Stage 3– Medium-Term Business Plan

Review ofprevious
medium-termbusiness plan

OriginPh Ⅰ

The Kyorin Group views the expansion of our pipeline to support medium-term growth as an important management issue.
In addition to expanding our development pipeline in specific fields (respiratory, otolaryngology, and urology) as well as thefields of infectious diseases and rare and intractable diseases, we aim to globally roll out at an early stage compounds that
we have created in-house.

Proactively invest in pipeline expansion to contribute to medium-term earnings
through in-licensing for disease field including and peripheral to the three
specialties of franchise customer fields (respiratory, otolaryngology, andurology), and infectious disease and rare and intractable diseases

Therapy area/Action

In-licensed

In- and out-licensed

Out-licensed productCompound/CodeLicensee/Collaborative
research

Therapy area/Action

OriginFeatures

Comments

Stage

Preclinical

FPR2 agonist
program

Bristol-Myers
Squibb Company(U.S.A.)

KRP-203

Under consideration
Graft-versus-hostfor licensing activities
disease (GvHD)
to be implemented

Non-disclosure

Increasing overseas earnings

FPR-2 agonists that mainly
Ininhibit the migration ofhouse neutrophils and exhibit
anti-inflammatory action
Sphingosine-1-Phosphate
Receptor Agonist

Ph Ⅰ

Ph Ⅱ

Ph Ⅲ

NDA

License agreement with
Bristol-Myers Squibb(December 2015)
Development rights returned
after Novartis ceased
development as part of its
development strategy

Overseas out-licensing

Promoting global out-licensing to increase overseas earnings
In November 2019, KYORIN Pharmaceutical Co., Ltd. concluded a licensing agreement with JEIL Pharmaceutical Co.,
Ltd. of South Korea for the overactive bladder therapeutic agent Vibegron (sales name in Japan: Beova), giving JEIL
Pharmaceutical the development, manufacturing, and commercialization rights for the drug in South Korea. Going forward,
we will continue to work proactively for the out-licensing of Vibegron in the ASEAN region and other countries.
KYORIN Pharmaceutical Co., Ltd. is also currently engaged in activities for the out-licensing of its original oral newquinolone synthetic antibacterial agent, Lascufloxacin (sales name in Japan: Lasvic).

Initiatives toward direct entry into Asia
In tandem with our licensing activities, we conducted market surveys and collected information on Southeast Asia, aiming
to lay the foundation for a direct entry into overseas markets in the future, focusing on Asia.
We have also been selling our multipurpose disinfectant cleaner Rubysta since 2017 through PT. Meiji Indonesian
Pharmaceutical Industries (PT. Meiji Indonesia), a subsidiary of Meiji Seika Pharma Co., Ltd., and continue to promote theproduct to local medical institutions as an environmental surface disinfectant.
In Vietnam, we concluded a licensing agreement for generic drug manufacturing technologies with BinhDinh
Pharmaceutical and Medical Equipment JSC in 2017, and in Mongolia, we concluded an agreement giving generic drug
sales rights in that country to Monospharm Trade Co., Ltd. in 2019.
Going forward, we will continue to consider directly entering overseas markets on the basis of locally collected informationand take steady steps in that direction.

* SPIMACO: Saudi Pharmaceutical Industries & Medical Appliances Corporation

20 2020 A N N U A L REPORT

2020 A N N U A L REPORT 21

New Drugs
Business

MarketingAchieving a growth trend in the new drugs groupJapan’s pharmaceutical industry is undergoing structural market changes, caused by moves to curtail drug costs throughpromotion of the use of generics, a review of the price maintenance premium system, and price revisions for long-listed drugs.
The Kyorin Group formulated the new HOPE100–Stage 3– medium-term business plan in the face of this challenging market
environment. Fiscal 2020, the first year under the plan, is being positioned as the beginning of a period of growth, and we will
work to accelerate promotion of the new drugs group as much as possible. As a new marketing style, in fields related to
infectious disease, we will move beyond medical treatment alone and develop activities that provide total solutions including
prevention and diagnosis. In addition, to keep up with the needs of the times, we will provide information by proactively adding
digital formats and artificial intelligence to our core format of face-to-face interaction.

Strengths

Opportunities

Risks• Strong presence in designated fields (respiratory, otolaryngology, and urology) (franchisecustomer (FC) strategy)• Product portfolio in FC fields for continuous
growth• Tailored responses to medical institutions
through area management and team structure• An infection-related business with productsthat contribute to prevention (Milton, Rubysta),diagnosis (GeneSoC ®), and treatment (Lasvic)(solution-based approach)• With Flutiform, Desalex, Beova, andLasvic, a lineup for the new drugs groupis in place to drive growth, presenting asignificant opportunity for sales growth• With the GeneSoC ® microchannel-based
genetic measuring device, which enables
quick, accurate, and simple identification of pathogenic microorganisms, andthe development of diagnostic agents,
the capability to provide solutions inaddition to prevention and treatment in
the infection-related business• Along with progress in control of
medical representative visits andsystems for them by appointment
only, methods for providing information to physicians are shifting fromtraditional face-to-face interaction tointernet-based methods• With the drastic overhaul of the drug
pricing system, sales of long-listed
products will decline. Ability to respondto structural changes being sought in
the domestic market for ethical drugs

New HOPE100–Stage 3– Medium-Term Business Plan

totaled ¥4.3 billion, with the pace of prescriptions surpassing
our initial estimate. Sales of Lasvic Tablets, which commenced
in January 2020, have been solid, totaling ¥1.1 billion.
We are forecasting a sales increase of more than ¥10 billion
for these four products in fiscal 2020 compared with fiscal 2019.
We will place a maximum focus on these products as Stage 3
growth drivers, aiming for the new drugs group to account for
more than 50% of our net sales target in the plan’s final year.

We believe the new drugs group, which includes Flutiform, thecombination drug for asthma treatment, Desalex, the treatmentof allergic diseases, Beova, the treatment of overactive bladder,and Lasvic, an oral quinolone antibacterial agent, will be thegrowth drivers for Stage 3, which starts with fiscal 2020.
Fiscal 2019 sales of Flutiform grew to ¥14.6 billion. After a
temporary stop of supplies, sales of Desalex resumed in
November 2019 and totaled ¥2.6 billion. With the limit on theprescription period for Beova lifted in December 2019, sales

Establishing a presence in the franchise customer fields
marketing team structure whereby multiple medical representatives are responsible for a designated area. With this structure,entire teams cultivate an area, for swift and systematic responses
to increasingly diverse medical needs. Going forward, we willbuild on this initiative to foster a culture in which teams help
each other achieve their targets.

KYORIN Pharmaceutical Co., Ltd. aims to establish a presence
in designated fields focusing on respiratory, otolaryngology, andurology (a franchise customer strategy). We are placing importance on relationships of trust with medical practitioners andcarrying out activities to provide, gather, and transmit information
regarding the proper use of pharmaceutical products.
KYORIN Pharmaceutical Co., Ltd. has also introduced aProviding information using digital channels and artificial intelligencechannels as media for providing, gathering, and transmitting
information, in addition to advances in the media we possess
in-house, we are optimizing the providing of information via
third-party platforms. We are also aggregating our marketing
data to enhance the quality of the information we provide
to physicians.
In addition, we are working to enhance the marketing skills(the ability to grasp needs) of medical representatives, using
artificial intelligence to logically analyze their sales presentations.

With the Guidelines for Prescription Drug Marketing Information
Provision having taken effect from April 2019 and the spread ofnovel coronavirus infections, traditional methods of providing
information are changing drastically, and transformations arebeing sought in the content of information and the ways it isprovided. In response to this major shift, KYORIN PharmaceuticalCo., Ltd. is looking beyond its traditional focus on face-to-faceinteraction with physicians and providing information using
digital channels in various ways. In our proactive use of digital

Business strategy  Shift to business based on the proposal of solutions and accelerate growth of the new drugs group
Make a uniquely Kyorin contribution to medical practitioners byshifting to a solution-based approach that integrates the ethicaldrugs business and the infection-related business

Review ofprevious
medium-termbusiness plan

Accelerate the growth of the new drugs
group as much as possible (Flutiform,
Desalex, Beova, Lasvic, etc.)

Consolidate healthcare
businesses to focus on
infection-related businesses

To overcome the effect of the patent expiry of our main product Kipres and respond to changes in the market environment,
during fiscal 2019, the final year under Stage 2, we worked to strengthen the new drugs business with a target of thebusiness accounting for at least 50% of net sales. As a result of a temporary stop of supplies of Desalex and delays inthe market launch of Lasvic ® Tablets, the percentage of the new drugs group’s sales fell short of this target, at 34.9%.
Nevertheless, we were able to bring new products including Desalex, Beova, and Lasvic to market during Stage 2 andhave new drugs in place to drive growth as we head into Stage 3.

New drugs group (%)

Projected Ratio of New Drugs Group
50

56%• Delays in developmentof Lasvic• Sales decline on temporarystop of supplies of Desalex(Initial forecast)

Growth trend
achieved

41%

40

35%

35%

KRP-AM1977Y (NDA in October 2019)
Lasvic Tablets (Launched in January 2020)

29%

30

Beova (Launched in November 2018)

Shift in marketing style to solution-based approach
We are starting solution-based activities that integrate theinfection-related business to make a uniquely Kyorin contribution
to medical practitioners. Specifically, we aim to make a uniquecontribution that highlights Kyorin’s originality by providing
doctors, pharmacists, and nurses, especially those who are partof infection control teams (ICTs) and antimicrobial stewardship

22 2020 A N N U A L REPORT

teams (ASTs), with complete information including that for
Milton and Rubysta for prevention, GeneSoC® for diagnosis,
and Lasvic® Tablets and KRP-AM1977Y (scheduled for releaseduring fiscal 2020) for treatment. For details, please refer to“Topics: The Kyorin Group’s Initiatives to Combat Infectious
Disease” on page 24.

DesalexTemporary stop of supplies

Flutiform
Pentasa granules
0

April 2015

Uritos
FY2015FY2016
April 2016

FY2017
April 2017

FY2018
April 2018

FY2019April 2019

HOPE100–Stage 2– Medium-Term Business Plan (FY2016–2019)

FY2020April 2020

April 2021

HOPE100–Stage 3– Medium-Term Business Plan (FY2020–2023)

2020 A N N U A L REPORT 23

TOPICSThe Kyorin Group’s Initiatives to
Combat Infectious Disease

Striving to play a part with asense of mission in treating
infectious disease
KYORIN Pharmaceutical, the company that created Baccidal, is a pioneerin new quinolone agents. With a sense of pride and responsibility, we
believe that with Lasvic, we have a mission to promote the appropriate
use of antimicrobial drugs. We want to treat infectious diseases in thisage of antimicrobial resistance and put smiles on patients with Lasvic, theembodiment of our mission.

Under the new HOPE100–Stage 3– medium-term business plan, the Kyorin Group aims to build an infection-related
business model around prevention, diagnosis, and treatment. We will build a marketing structure that cuts
across the Group and address the international issue of antimicrobial resistance by proactively promoting theappropriate use of treatments through a uniquely Kyorin approach that contributes to medical practitioners.

Asako Tabuchi

Infectious Disease Group, Product Planning Division,
KYORIN Pharmaceutical Co., Ltd.

Drug-resistant bacteria

Treatmentthat threaten people’s lives around the world
AMR* – 2050
10,000K people
Tetanus60K people

AMR – 2013
700K people

Cholera100K–120K people

Cancer8,200K people

Measles
130K people

Diabetes
1,500K people

Traffic accidents
1,200K people

Diarrheal disease1,400K people

2013
2050 (if no action is taken)*AMR: antimicrobial resistance

The improper use of antibacterial drugs is leading
to a global increase in drug-resistant bacteria,
while at the same time the development of new
antibacterial drugs is declining, creating a major
problem for international society. Estimates are that
if this situation continues, the annual global
number of deaths from infectious diseasecaused by drug-resistant bacteria could
grow to roughly 10 million people by
2050, from roughly 700,000 in 2013.
Measures to counter antimicrobial
resistance are therefore being
pursued globally.
(Adapted from Antimicrobial Resistance:
Tackling a crisis for the health and wealthof nations; The Review on Antimicrobial
Resistance, Chaired by Jim O’Neill;
December 2014)

for essle
od businmg a latednih
is n-relba
Est nfectioitheGeneSoC ®

enables quick, accurate, and simple
identification of pathogenic
microorganisms, prevents the spreadof infectious disease, and achieves
appropriate use of antimicrobial drugs
Proactive screening for pathogenic microorganisms is needed toaddress problems like the novel coronavirus pandemic and antimicrobial
resistance. We also believe it is important to establish an in-housesystem that can effectively prescribe and discontinue medicines,
including accurate decision making of the necessity of antimicrobial
drug use based on examination results.
The microchannel-based genetic measurement device GeneSoC ®
is a real-time PCR system that enables quick, accurate, and simple
identification of pathogenic microorganisms. SARS-CoV-2 GeneSoC
ER Kyorin is currently being sold as a novel coronavirus detection
reagent used with GeneSoC ®. Going forward, we will develop reagentsfor research and the “GeneSoC ® mini” dedicated automated preprocessing device, and work to commercialize the system for use in
extracorporeal diagnosis at an early date, to contribute to the appropriate
selection of medications through point-of-care testing (POCT), while
also working on further improvements to enable use in hygiene
management including the food field and other fields.

24 2020 A N N U A L REPORTPrevention
Diagnosis

Lasvic Tablets
contributing to the treatmentof respiratory and otolaryngologicalinfectious disease
The oral antibacterial drug Lasvic Tablets was developed as aquinolone antibacterial agent that has sufficient antibacterial
properties against pathogenic bacteria targeted in treatment while
suppressing full-body exposure, and is also unlikely to develop
resistant bacteria. Going forward, the Kyorin Group will strive to
educate and promote the appropriate use of antimicrobial drugs by
sharing information with physicians, pharmacists, clinical technicians,
other members of infection control teams (ICTs), and antimicrobial
stewardship teams (ASTs), while also cooperating with surveillanceof drug-resistant bacteria based on antimicrobial resistance actionplans and academic surveillance programs, and through cooperation
with and support of infectious disease-related academic conferences.

Rubysta and Milton
Working together as a team tomake GeneSoC ® widely usefulfor diagnosis and detection

Contributing to theprevention of infectious disease in
medical institutions by providing
appropriate information

The diagnostics business is one of the core businesses in the Kyorin Group’s
new infection-related business, and at the In Vitro Diagnostics Business
Division, we are working as one to build a foundation for that business.
Going forward, we will further improve the system and develop specialized
reagents with the aim of making GeneSoC ® a widely used tool for diagnosis
and detection.

We believe that we can contribute to the prevention of
infectious disease with Rubysta, for hygiene management inmedical treatment environments, and the Milton brand,
as an appropriate method for immersion disinfection oftools and equipment.
We will continue to provide information to medical
practitioners to contribute to the prevention of infectious
disease at medical institutions.

Kazufumi Kanazaki

Shinya Matsubara

In Vitro Diagnostics Business Division,
KYORIN Pharmaceutical Co., Ltd.

Marketing Promotion Group, Sales & Marketing Management Division,
KYORIN Pharmaceutical Co., Ltd.

contributing to controlling infections
in medical institutions
Many types of microbes are present in medical
institution environments, and in recent years
we have learned that microbes are transmitted
through environments. Because much of thistransmission takes place via fingers, it isimportant to keep environment surfaces clean
and to disinfect fingers.
Kyorin is contributing to the control of
infections with its lineup of the multipurpose
disinfectant cleaner Rubysta and the disinfectant Milton, as infection countermeasures inmedical institutions.

2020 A N N U A L REPORT 25

Subcontracted Drug
Manufacturing Business

Manufacturing

Drug price revisions implemented under the government’s basic policy of comprehensively reforming the NHI’s drug pricing
system have had a major effect on the Kyorin Group’s manufacturing structure. With sales of long-listed drugs declining
and the market for generics growing, the domestic pharmaceutical market is undergoing drastic structural changes that
we expect to impede profitability. The Group has therefore consolidated its three internal manufacturing functions foroverall optimization, creating a manufacturing structure that will be able to pursue low-cost operations with a greater
sense of speed. Under the new HOPE100–Stage 3– medium-term business plan, we will build on initiatives implemented
to date, creating a competitive Group manufacturing structure that will provide a stable supply of low-cost, high-quality
products and also be able to increase subcontracted manufacturing for non-Group customers.

Strengths

Opportunities

Risks• Ability to meet diverse needs with massproduction technologies through labor saving
and automation, the implementation of good
manufacturing practices (GMPs) that meetglobal standards, and the flexibility to
produce many types of products•M anufacturing capabilities for sterilized
formulations for injections, eyedrops, andnose drops• Growing need for subcontracted
manufacturing for non-Japanesecompanies entering the Japanesemarket• A bility to address demand ofgrowing use of generic drug
products• Depressed earnings from frequent NHI drug
price revisions• Increased cost of meeting expectations forhigher levels of quality• Delays and interruptions in receiving raw
materials from vendors due to natural disasters
and other problems, inability to provide stablesupply because of bottlenecks in logistics
functions

Supply chain management
With the aim of establishing solid earnings strength in the faceof environmental changes, the Kyorin Group is working to build
a structure for more efficient manufacturing that offers stablesupplies, with flexibility to address changes in demand, bycomprehensively addressing the Group’s entire supply chain.
We are pursuing supply chain management that manages(makes visible) the entire process—from domestic and overseas

procurement of raw materials to manufacturing (production
management and drug manufacturing), warehousing, andsupply (shipping)—on an individual product basis. By quickly
addressing issues like reducing lead times from orders todelivery as they arise, we are working to ensure stable supplies
and reduce risks, for reliable, stable supplies of products.

Features of KYORIN Pharmaceutical Group Facilities’ PlantsoNoshirtnPla

Low-cost, high-volume manufacturing through automation

The Noshiro Plant uses automated transport of pharmaceutical ingredientsand intermediate products, as well as robotic arms for labor savings.
Automation makes it possible to manufacture large volumes at a low costwith high productivity. In addition to new drugs, the facility is currently using
these strengths to manufacture generic drugs in large volumes, focusing
on tablets and capsules. The plant’s advanced manufacturing activities
have also been approved in GMP inspections carried out by overseas
regulatory authorities and global companies headquartered overseas.

(Noshiro, Akita)

New HOPE100–Stage 3– Medium-Term Business Plan
Business strategy  Enhance cost competitivenessEstablishing a manufacturing structure to achieve stable supply and low cost while also enabling expansion of subcontracted manufacturing

Created a new manufacturing structure through overall optimization
Review ofprevious
medium-termbusiness plan

Under Stage 2, we consolidated the Group’s manufacturing functions being carried out by three plants into a new
manufacturing subsidiary, KYORIN Pharmaceutical Group Facilities Co., Ltd., under a priority strategy of enhancing cost
reductions. This subsidiary commenced operations in April 2018, using the three plants’ respective specializations:low-cost, high-volume manufacturing of new drugs; manufacturing numerous types of generic drugs; andsubcontracted drug manufacturing at global standards. In addition, we implemented an overall optimization of the
manufacturing structure to make effective and efficient use of each plant’s equipment, technologies, and humanresources. We also carried out proactive, systematic capital investment to achieve labor savings and greater efficiency
and to increase our ability to respond to customers’ needs.

Initiatives under new medium-term business plan
Striving for greater cost competitiveness
Under the new medium-term business plan, businesses involvedin pharmaceutical manufacturing will share human resources
and information across plants, while also creating and operatinga human resources management system to cultivate andimplement technologies and a mindset for improvement. They
will also work to pursue a higher level of Good Manufacturing
Practices (GMP), increase manufacturing capabilities (bothcapacity and efficiency), including the construction of a new

26 2020 A N N U A L REPORT

manufacturing center, and create a stable supply structure thatuses outside parties. Through these initiatives, we will establish
a stable manufacturing structure that is highly competitive
and able to provide a stable supply of quality products at a low
cost. We will then focus on increasing subcontracted manufacturing for non-Group customers and establishing a solid
manufacturing base.

Shiga
Plant

Focusing on subcontracted manufacturing incorporating global GMP

For many years the Shiga Plant was a manufacturing base for a non-Japanesepharmaceutical manufacturer, and in addition to manufacturing the Group’s
main products, the plant is unique for its high portion of manufacturingsubcontracted from outside the Group, including for pharmaceuticalproducts to be sold in Japan by overseas manufacturers. The plant is able
to keep pace with the needs of the times, using the latest equipment for
manufacturing that incorporates global GMP, with an awareness of issues
including the prevention of cross contamination. Using its abundant
experience and expertise gained from subcontracted manufacturing for
global companies headquartered overseas, the facility is bolstering its
manufacturing equipment and working aggressively to increase its manufacturing subcontracted from outside the Group.

Inami
Plant

(Koka, Shiga)

Manufacturing numerous types of products with focus on generic drugs

With a focus on generic drugs, the Inami Plant manufactures products ina variety of forms, including solid formulations taken internally, sterilized
formulations for injections, eyedrops, and nose drops. Taking advantage
of flexibility that enables it to manufacture many types of products, thefacility handles various products that newly appear on the drug price list
twice a year, manufacturing more than 200 products including thosesubcontracted from outside the Group. Through frequent visits from drug
manufacturers ordering subcontracting, the facility has gained a wealth ofexpertise in providing a stable supply of high-quality products. In addition
to investing in equipment for new pharmaceutical production, the facility
is proactively pursuing improvement activities to raise productivity andworking to reduce costs.

(Inami, Nanto, Toyama)2020 A N N U A L REPORT 27

Generic
Drugs
Business

Generics

The Kyorin Group’s generic drugs business is primarily carried out by KYORIN Rimedio Co., Ltd. Even in the era whengeneric drugs account for 80% of drugs used, we are addressing changes in our operating environment by using the
combined advantages of our development, manufacturing, and sales functions, while also proactively working to handle
authorized generics as a manufacturer of new and generic drugs, and making our marketing structure more efficient toenhance cost competitiveness.

Strengths

Risks

Opportunities• Ability to carry out integrated development,
manufacturing, and sales functions•C apacity to handle authorized generics as a
new drug-related generics company• Implementation of measures to promoteincreased use of generic drugs• Promotion of the community-based
integrated care system• Implementation of new measures to curtail
medical expenses• E ffect on earnings from annual NHI drug
price revisions

New HOPE100–Stage 3– Medium-Term Business Plan
Business strategy  Enhance cost competitivenessStrengthen ability to create new generics
To provide generic drug products that can be used safely, KYORIN Rimedio has
been carrying out pharmaceutical manufacturing and packaging from theperspectives of medical practitioners and patients, ensuring that products areeasy to use in medical institutions and meet the needs of patients taking drugs.
The Takaoka Pharmaceutical Technology Innovation Center, which commenced
operations in July 2017, is further working to increase the products it develops toimprove the quality and speed of pharmaceutical development, with the aim ofmaking KYORIN Rimedio a generic drug company that provides attractive, distinctive
generic drug products. As of June 2020, the company had launched eight new
ingredients and 15 new products.

Make generics’ marketing structure more efficient to enhance
the business’s cost competitiveness
KYORIN Rimedio has been strengthening its sales through a balanced approach using multiple sales channels, and going forward, it
will build on that strength while also working to make its generics’ marketing structure more efficient, enhancing its sales capabilities
and cost competitiveness through selection and concentration.

Make the generics’ marketing structure more efficient to enhance the generic business’s cost competitiveness Strengthen ability to create new generics

Strengthen overseas business
Review ofprevious
medium-termbusiness plan

Under a business strategy of promoting the generic drugs business by making the most of its characteristics, theTakaoka Pharmaceutical Technology Innovation Center was established in January 2017. In addition to strengthening
our pharmaceutical development capabilities and increasing the number of attractive products developed in-house, thefacility has achieved positive results in its proactive handling of authorized generics, which has led to the releases ofKipres AG, Nasonex AG, and Uritos AG.

To date, KYORIN Rimedio has been exporting finished products, primarily eyedrops, to Taiwan,
Hong Kong, and South Korea. Going forward, in line with economic development and risingincomes across Asia, we anticipate a trend of requests for a higher level of medical care leading
to increased demand for Japanese high-quality drugs. KYORIN Rimedio is working to address
this demand as quickly as possible by strengthening its businesses of providing technologies
and products to countries including Vietnam, Taiwan, Hong Kong, and Mongolia.

Sales of Generic Drugs(Billions of yen)
30

25.0

25
20
15

15.5

27.7

Sleep-improving drugs for the Hong Kong market

29.3

31.0
2.8

Mometasone AG

11.9

11.5

Montelukast AG

8.2

11.7

16.8

16.0

17.4

2016

2017

2018

Over-the-counter drugs

15.5

12.0

10

16.7

Other GE

5
0

2013

2014

2015

2019 (FY)We are addressing diversifying health needs by offering over-the-counter drugs
that can be used safely.

Over-the-counter drugs addressing diversifying health needs

Initiatives under new medium-term business plan
Address authorized generics
The Kyorin Group has achieved a certain degree of recognition
for its steady market penetration using its ability to handle,
within the Group, both original drugs and authorized generics
that meet the diverse needs of medical practitioners andpatients. We released Montelukast Tablets “KM,” our authorized
generic version of Kipres, in September 2016, followed by
Mometasone Nasal 50µg “KYORIN,” our authorized generic

28 2020 A N N U A L REPORT

version of Nasonex, in August 2019, and currently both havegained more than a 50% share of their respective genericmarkets. We also received approval for the manufacture andsales of Imidafenacin Tablets “KYORIN,” OD tablets 0.1 mg,
our authorized generic version of Uritos, in August 2019, andbegan sales in June 2020.

With the Japanese government’s introduction of a “self-medication tax
system” (special tax deductions for medical expenses) in January 2017,
people have become more aware of their health. The Kyorin Group sells the
COOL ONE series of over-the-counter drugs that apply active ingredientsused in ethical drugs. This series is highly regarded because we are able
to provide accurate information regarding the products’ effectiveness andsafety gained at the ethical drugs business. We will continue to work toprovide products that address diversifying health needs.

Designatedsecond-class
OTC drug

Designatedsecond-class
OTC drug

Second-class
OTC drug* COOL ONE Cough Medicine GX tablets and syrup and COOL ONE expectorant capsules are applicable under the self-medication tax system.

2020 A N N U A L REPORT 29

ESG Highlights

By adhering to its corporate philosophy, the Kyorin Grouptargets the sustainable development of society andmedium- to long-term increases in corporate value.

Contribution

Corporate Charter

Trust

Shareholders
andinvestors

The Kyorin Group
Corporate Philosophy
Kyorin continues to fulﬁll its mission ofcherishing life and beneﬁting society
by contributing to better health.

Suppliers

goals (SDGs)” from an ESG perspective. To achieve these goals, we consider it important to build and maintainrelationships of trust with our stakeholders, and to take our Corporate Charter to heart in our business activities.
As a “company that supports sound and healthy lifestyles,” we aim to develop and supply reliable products
and services that are useful to society, while at the same time continuously striving as a good corporate
citizen to contribute to the development of a vibrant society and economy.

ESG Initiatives

Patients andmedicalprofessionals

Local
communities

Under its corporate philosophy, the Kyorin Group works toward the sustainable development of society andmedium- to long-term increases in corporate value through activities based on the “sustainable development

Employees

1

Contribute to sustainable economic growth
and to the resolution of social issues

2

Fair business practices

3

Fair information disclosure and constructive dialogue with stakeholders

4

Relationships of trust with consumers andcustomers

5Work-style reforms and improvement ofwork environments

6

Initiatives to tackle environmental issues

7

Co-exist with society and contribute tosociety’s development

8

Comprehensive crisis management

9

Respect for human rights

GovernanceCorporate Governance P.32
To realize sustained increases in corporate value, the Kyorin Group has recognized theimprovement of corporate governance as a key business issue, and implements initiatives
to expedite decision making, to strengthen oversight functions to guarantee appropriate
management, and to ensure transparent business activities rooted in corporate ethics.

Fair and honest business activities P.36
The Group strives to prevent all forms of corruption by maintaining high ethical standards,
conducting business lawfully and fairly, and by complying with codes of conduct. It also
maintains appropriate relationships with medical institutions and patient groups, andendeavors to build relationships of trust with suppliers and consumers.

CSR activities through business P.38

SocialStringent implementation by Company
10 officers of their responsibilities and thecharter

The Group positions contributing to society through the business of ethical drugs at thecore of its CSR activities. As well as devoting itself to the sale, stable supply, and quality
management (the Reliability Assurance System) of products arising from its research anddevelopment, the Group aims to provide relevant information and promote the appropriate
use of pharmaceutical products to contribute to human health.

Respect for human rights and human resources development P.40
The Group respects the human rights of all people and acts in a highly ethical manner.
To create in employees a sense of pride in their work, we aim to be a company that istrusted and “the leading company for career fulfillment” by working hand in hand with
our fellow employees.

Build relationships of trust with stakeholders

Co-existing in harmony with society P.44
We work to contribute to the development of a vibrant society and local economy byacting as a good corporate citizen and by donating to and supporting employee-ledsocial activities.

SDGs (Sustainable Development Goals)
The SDGs are a series of international goals
targeted for achievement by 2030 adopted atthe 2015 United Nations Summit. The Kyorin
Group has incorporated these goals into its
business practices and efforts to co-exist withsociety, and works to contribute to the realization of a sustainable society.

30 2020 A N N U A L REPORT

Environment

In harmony with the environment P.43, 49
The Group works to protect the sustainable environment by preventing environmental
pollution, reducing the environmental burden, and promoting measures to use resources
more efficiently.

2020 A N N U A L REPORT 31

Corporate Governance
The Kyorin Group will work to improve sustainable corporate value in order to gain the confidence and live up to
the expectations of all stakeholders. As part of these efforts, the Group considers strengthening and enhancing
corporate governance an important management issue.

To oversee business execution, we established a Management
Committee, comprising the president and directors, which
discusses and decides key operational matters concerning theGroup.

Basic policy on corporate governance
The most important management goal for KYORIN Holdings, Inc.
is to continue raising shareholder value. To achieve this goal
requires fostering a management environment that enables us
to build trust with the general public. Therefore, having given
better corporate governance a high priority, we seek to ensure
prompt decision making, strong monitoring of the appropriateness of management, and to secure ethical and transparent
corporate activities. To ensure transparency and fair disclosure,
we release appropriate information without delay for the benefitof shareholders and investors. In the future, we intend to actively
increase our disclosure of information, and expand and improve
our communications with all stakeholders.
KYORIN Holdings, Inc. has appointed three outside directors
to further strengthen the supervision of the business execution of
directors, and to further enhance the transparency and fairnessof management.
Kyorin is a company with a board of corporate auditors basedon the Companies Act of Japan. The Board of Corporate Auditors,
including the three outside corporate auditors, endeavors to
fully demonstrate its auditing and supervising functions and toensure the transparency of the decisions being made by the
Board of Directors. At the same time, corporate auditors carryout a diverse range of activities in fulfilling their auditing function.
In addition to participating in important meetings, including
those of the Board of Directors and the Management Committee,
corporate auditors implement comprehensive audits by checking
documents and other materials relating to important decisions andby inspecting Group companies.

In addition, in recognition of our corporate social responsibility(CSR), for every Kyorin Group company we appoint complianceand risk management promotion officers. We have established aGroupwide compliance and risk management system that is
administered by the Compliance Committee and Risk Management Committee. We have established guidelines for eachaffiliated company based on the Kyorin Compliance Guidelines
and set up a system for employees to report and seek advice
about possible irregularities. As well as the above measures,
we have created management guidelines for affiliated companies
and built a system of governance while securing their autonomy.
Under this system, we receive regular business reports fromthese companies and hold meetings with their management
before deciding important issues. The Internal Audit Officeconducts audits of affiliated companies based on internal audit
guidelines. Following the results of these audits, departmentsthat oversee the operations of the affiliated companies issue
instructions or warnings and provide appropriate guidance.

Corporate governance system
Board of Directors
The Company’s Board of Directors comprises eleven directors,
including three outside directors. The Board of Directors usually
meets once a month, resolving legal matters, formulating anddeciding important management policies and strategies, andoverseeing business execution, etc.

Chairperson: Yutaka Ogihara, Representative Director,
President and Chief Executive Officer
Executive Directors: M inoru Hogawa, Shigeru Ogihara, Kenji Akutsu,
Tomiya Sasahara, Michiro Onota, Koichiro Hagihara,
Masahide Sugibayashi
Outside Directors: Noriyuki Shikanai, Ken Shigematsu, Hiromi Watanabe

32 2020 A N N U A L REPORTBusiness execution system

Board of Corporate Auditors
Following the Companies Act of Japan, Kyorin is a company
with a board of corporate auditors, which comprises two
statutory corporate auditors and three outside corporate
auditors. The Board of Corporate Auditors has established asystem to ensure that the exercise of authority for audits, etc.,
is carried out from an independent and objective standpoint
through the timely and appropriate functioning of outside
corporate auditors.
Chairperson: Tomiharu Matsumoto, Senior Corporate Auditor
Senior Corporate Auditor: Shugo Tamaki
Outside Corporate Auditors: Masaji Obata, Takao Yamaguchi, Naohiro Kamei

Chairperson: Yutaka Ogihara, Representative Director,
President and Chief Executive Officer
Executive Directors: M inoru Hogawa, Shigeru Ogihara, Kenji Akutsu,
Tomiya Sasahara, Michiro Onota, Koichiro Hagihara,
Masahide Sugibayashi

Committee on Remuneration and Nominations
Regarding remuneration and nomination of directors andcorporate auditors, Kyorin has established the voluntary Committee on Remuneration and Nominations, mainly comprising
independent outside directors, to seek appropriate advice inorder to enhance the transparency of decision making.
Chairperson: Kenji Akutsu, Senior Executive Director
Executive Director: Yutaka Ogihara
Outside Directors: Noriyuki Shikanai, Ken Shigematsu, Hiromi Watanabe

In addition to the representative directors and the executive
directors, who are engaged in ordinary business execution, we
actively delegate authority to the corporate officers responsible
for specific areas appointed as necessary, thus establishing aframework that allows prompt decision making and clarificationof responsibility of business execution under the guidance andsupervision of the Board of Directors. As of June 19, 2020, theCompany had three corporate officers.

Corporate Governance System
Key Items

Description

Organizational design

Company with a board of corporate auditors

Number of directors (including outside directors)

11 (3)

Number of corporate auditors (including outside corporate auditors)

5 (3)Number of the Board of Directors’ meetings(held during fiscal 2019)(Average attendance rate of outside directors)(Average attendance rate of outside corporate auditors)

12 times(100%)(88.8%)

Number of the Board of Corporate Auditors’ meetings (held during fiscal 2019)(Average attendance rate of outside corporate auditors)

13 times(92.3%)

Term of office of directors

1 yearAdoption of the corporate officer system

Yes

Voluntary Committee of the Board of Directors

Committee on Remuneration and Nominations

Accounting auditing firm

Ernst & Young ShinNihon LLC

Outside directors and outside corporate auditors
Kyorin has three outside directors and three outside corporate
auditors.
We seek advice from an independent and objective standpointfrom outside directors at Board of Directors’ meetings, etc., andhave established a highly effective management supervisionsystem that maintains a certain degree of independence frombusiness execution.
Outside director Noriyuki Shikanai, as an attorney well versedin corporate law, has also served on the board of Keio University
and in other important positions, and with his high degree of
specialization and rich experience, was deemed well qualified
for appointment to outside director.
Outside director Ken Shigematsu has experience as an officer
of Isetan Mitsukoshi Holdings Ltd. and other companies. With
his wide-ranging insight developed from his rich management

experience, he was deemed well qualified overall for appointment
to outside director.
Outside director Hiromi Watanabe has wide-ranging insightin a medical setting developed from her rich clinical practiceand research experience as a physician, and through nursing
education. Accordingly, she was deemed well qualified forappointment to outside director.
Kyorin has three outside corporate auditors who are neutrally
positioned and not compromised by relationships with management or specified parties having a special interest. These outside
corporate auditors all have a considerable level of knowledge ofcorporate legal matters, and matters of finance and accounting,etc., and perform a monitoring function with wide-ranging insightand from a broader perspective.
Outside corporate auditor Masaji Obata is well versed in2020 A N N U A L REPORT 33

corporate law as a lawyer and has considerable knowledge
concerning finance and accounting.
Outside corporate auditor Takao Yamaguchi has a considerable
level of knowledge in matters of finance and accounting as acertified public accountant and a certified tax accountant.
Outside corporate auditor Naohiro Kamei has considerable
knowledge of finance and accounting from his work experiencein the financial industry.
Kyorin selects outside directors and outside corporate auditors
after reviewing the individuals’ backgrounds and relationships
with Kyorin, and, from a standpoint independent from that ofmanagement, on the assumption that sufficient independence
can be ensured that said individuals are able to adequately
carry out their duties as outside directors and outside corporate
auditors. Outside directors Noriyuki Shikanai, Ken Shigematsu,
and Hiromi Watanabe and outside corporate auditors Masaji
Obata, Takao Yamaguchi, and Naohiro Kamei fulfill the requirements as independent directors/corporate auditors stipulatedby the Tokyo Stock Exchange and have been reported as
independent directors/corporate auditors to the Tokyo Stock
Exchange.

Corporate Governance and Management Structure (As of June 19, 2020)
General Shareholders’ Meeting
Appointment/dismissal

Reports

Accounting
Auditing
Firm(Independent
Auditor)Appointment/dismissal(Board ofCorporate
Auditors)
Corporate Auditor

Appointment/dismissal(Board of
Directors)
Director

AuditsAuditsSelection/dismissal
Cooperation

Accounting
AuditsCooperation

Committee on
Remuneration and
Nominations (voluntary)

Internal audits and audits conducted by corporate auditors
Internal audits are conducted by the Internal Audit Office, whichis staffed by six employees who report directly to the president,
and is independent from other sections. Following yearly auditing
plans, the Internal Audit Office regularly assesses and evaluates
the effectiveness and efficiency of the legal compliance andinternal control systems in the parent and Group companies.
After an audit, the office communicates any problems or areasthat need improvement directly to the president and makes
appropriate recommendations.
Another function of the office is to evaluate the Group’s internal
controls over financial reporting. The office evaluates the development and operation of these internal controls according to apredetermined scope for evaluation, and makes a report to thepresident.
Corporate auditors conduct audits in line with an auditing
policy and plan set by the Board of Corporate Auditors at
the beginning of each fiscal year. In addition to participating inimportant meetings, including those of the Board of Directors
and the Management Committee, corporate auditors implement
comprehensive audits by checking documents and other

Representative Director, President
and Chief Executive Ofﬁcer

materials relating to important decisions and by inspecting
Group companies.
In order to ensure that audits are conducted effectively bycorporate auditors, corporate auditors receive explanations on
the content of accounting audits from the accounting auditing
firm of the Company and exchange information with the firm.
Corporate auditors also cooperate with the Internal Audit Office
to have appropriate communication and to effectively performthe audits.
Under our adopted system, if executives or regular employees
discover that an executive officer or employee is acting incontravention of either laws and regulations, or the Company’s
Articles of Incorporation, they immediately notify the corporate
auditors. We are working to establish an environment conducive
to more efficient audits by corporate auditors by coordinatingclosely with executives and regular employees and by fostering
deeper understanding of audits. We assign one auditing staff
member to assist the duties of the corporate auditors, and suchassignment is carefully checked by directors and corporate
auditors to ensure independence.

A Message from an Outside Director

Management
Committee

Internal Audit
Ofﬁce
Internal
AuditsCorporate Ofﬁcers
Administrative andBusiness Departments

I am very honored to have the opportunity to be involved as anCompliance
Committee
Monitoringoutside director in the management of KYORIN Holdings, Inc.,

Risk Management
Committee

as it strives to develop and expand the healthcare business ina diversified manner. I hope to use my experience as a doctor

Compensation of directors and corporate auditors
There are two forms of compensation for directors and corporate
auditors: basic compensation and stock options. These areprovided as incentives and compensation for the roles that
directors and corporate auditors should play. Under the Kyorin
Group corporate philosophy, the roles of the directors andcorporate auditors include executing management based on
management policy and taking into consideration the value
creation of various stakeholders, and enhancing corporate
value through the sustainable and stable growth of the Group.

with a clinical, research, and teaching background.
However, as outside directors and outside corporate auditors
perform their roles of supervising and overseeing managementfrom an independent position, payment is not linked to performance each year.
The voluntary Committee on Remuneration and Nominations
deliberates in advance on the remuneration system for directors
and basic policies, using industry standards and the Company’s
performance as reference, and the Board of Directors makes adecision based on such deliberations.

T otal compensation paid to each director or corporate auditor, total paid by type of compensation,and number of applicable directors and corporate auditors
Director or
corporate auditor

Total compensation paid
(Millions of yen)

Total paid by type of compensation(Millions of yen)
Basiccompensation

Stock
Options

Number of applicable directors
and corporate auditors(People)Directors(Excluding outside directors)

250

238

11

9

Corporate auditors(Excluding outside corporate auditors)

33

33

—

2

Outside directors or corporate auditors

49

49

—

7

34 2020 A N N U A L REPORT

Hiromi Watanabe
Outside Director
Last year the Group formulated a new medium-term business plan, HOPE100–Stage 3–. During the formulation of theplan, I was able to give advice from the perspective of both an occasional patient and a practicing doctor, using myexperience in clinical and research fields and the varied insights I have accumulated from working in medical educational
posts. In order to achieve the goals of the plan, it is essential that all of us apply our abilities to the fullest. From thestandpoint of promoting the increased participation of women in the workplace, one goal for greater diversity, I will beutilizing my own experience to actively contribute even more proposals.
In light of the COVID-19 global pandemic occurring in the midst of advances the Group is making in infectious
disease-related areas (prevention, diagnosis, and treatment), my hope is that the Kyorin Group will fulfill its “corporatesocial responsibility (CSR)” as a company focused on ethical drugs and also make a major contribution to society throughsustainable development.
I ask for the continued support of all our stakeholders going forward.

2020 A N N U A L REPORT 35

Compliance/Risk Management

Kyorin’s Reliability Assurance System

The Kyorin Group abides by all laws, regulations, codes of conduct, and the spirit thereof, and acts with high ethical standards,
as well as promoting activities to appropriately manage internal and external risk pertaining to the business with a view
toward the ongoing enhancement of corporate value. Each Group company establishes a Compliance Committee and a
Risk Management Committee, which adopt various measures to raise awareness, and promotes compliance and risk
management in each Group company to prevent corruption.

Reliability assurance system

Compliance
Basic policy
An enterprise is required to promote the realization of a sustainable society through the creation of added value and employment thatare useful to society and through autonomous and responsible actions based on fair and free competition. Following our corporate
philosophy, the Kyorin Group conducts its activities in Japan and overseas based on a high standard of corporate ethics, in compliancewith both the letter and the spirit of relevant laws, regulations, and international rules.

Corporate Charter and Compliance Guidelines

Our corporate vision aims to be “a pharmaceutical manufacturer that is trusted by patients and medical professionals, and isrecognized for its presence in society.” To achieve this, we continuously need to provide products and information that are trusted
by broad sectors of society, and we consider this our highest priority. KYORIN Pharmaceutical takes a unified approach to all
operations—from (research and) development to sales—and places a maximum emphasis on compliance with relevant laws andregulations, and on ensuring reliability. The Quality Assurance & Reliability Headquarters has primary responsibility in this area, and isindependent from research and development, manufacturing, and sales divisions, and proactively works to provide products andinformation that patients and medical professionals can use safely.

To ensure that the Kyorin Group’s activities are based on a high standard of corporate ethics, we established the KYORIN Holdings
Corporate Charter and Compliance Guidelines (August 2006). Furthermore, we have also built and promoted a compliance system by
establishing a Compliance Committee, which meets monthly, and other measures.

Patients, Medical professionals

Education and training
Internal training is held to ensure an understanding and familiarity with Kyorin’s corporate philosophy and compliance.
1. F ocusing on departments responsible for compliance and each division’s compliance promotion managers, Companywide level-specific training (newly hired
employees, newly appointed managers, etc.) and functional training are held to teach corporate ethics and compliance, and efforts are made to ensure that anunderstanding and consideration of compliance are reflected in the work performed by directors, corporate auditors and officers, and employees.
2. June and November are designated “compliance enhancement months,” with the Corporate Charter and Compliance Guidelines read out at morning meetings andother activities held to ensure a thorough understanding and familiarity with compliance Groupwide.

Reliable products and information
Development

Manufacturing

Sales

GMP GCPGMP

GQP GVP GPSP

GMP: Good Manufacturing Practice
GCP: Good Clinical Practice
GQP: Good Quality Practice
GVP: Good Vigilance Practice
GPSP: Good Post-Marketing Study PracticeInternal whistleblowing system
The Kyorin Group has established a “Corporate Ethics Hotline” to accept inquiries, consultations, and reports regarding corporate ethics
and responses to laws and regulations, etc. The Group also accepts whistleblower reports of suspected injustice or non-compliance
via internal e-mail, letter, telephone, and facsimile. We strictly maintain the confidentiality of whistleblowers, respect their privacy, andensure that they are not disadvantaged. (Number of reports: nine in fiscal 2019)

Risk management
A management structure is in place to prevent the occurrence of risk events at Kyorin and its Group companies, and a Risk Management
Committee has been established to address events that do occur. The Risk Management Committee oversees risk management
initiatives across the entire Group, while also promoting activities to be implemented as necessary at respective divisions to build astructure to identify potential risks, reduce risks, and prevent risk events from occurring, and to minimize the damage from risk events
that do occur unavoidably. The roles of the committee are as follows:
1. D irect risk assessments to related divisions to identify and understand latent risks.
2. Prepare various guidelines and operation manuals for related divisions, and implement training for employees and other preventive measures as necessary, to ensurethat latent risks do not materialize.
3. P repare procedure manuals and carry out simulated drills at related divisions, and take out insurance and implement other measures as necessary, to minimize losses
if a risk event does occur. Also, a risk management promotion officer has been appointed at each company to raise awareness relating to risk management.

Initiatives related to transparency in relationships with medical institutions and other parties
The mission of a pharmaceutical company is to play an important role in “patient-focused medical care” as a valuable entity that
contributes to the health and well-being of people around the world by continuously developing and providing a stable supply ofoutstanding medicines. To fulfill this mission, partnerships between pharmaceutical companies, research laboratories, and medical
institutions including universities and others are essential, and we are required to properly manage our relationships where there is apotential conflict of interest with pharmaceutical companies.
Under these circumstances, the Kyorin Group established the Guidelines for Transparency of Relationships between Corporate
Activities and Medical Institutions, etc., and the Guidelines on Transparency of Relationships between Corporate Activities and PatientGroups. In accordance with these guidelines, we publish information about funding to medical institutions, patient groups, and otherson our website.

36 2020 A N N U A L REPORT

Quality assurance
Quality assurance is carried out on investigational new drugs based on GMP at the development stage, through compliance with GMP
and GQP after sales, and by confirming that products are manufactured using appropriate equipment and according to designatedprocedure manuals. After-sales inquiries regarding quality collected from patients and medical professionals are given the highest
priority, and are addressed sincerely and quickly.

Safety management
Drugs can be effective for treating patients (benefits) but can have adverse reactions (risks), and side effects that were not foreseen at
the development stage can become apparent after sales. This is why it is important to collect and analyze a wide range of information
regarding benefits and risks after a product is launched, and to provide appropriate information swiftly to medical facilities while taking
into account the balance between benefits and risks. At Kyorin, we strive to ensure safety and promote proper use by carrying out
drug-monitoring activities based on GVP. Post-manufacturing surveillance is carried out adhering to GPSP to collect and evaluate
information regarding a drug’s safety and effectiveness after the product is launched. The analyzed information is provided to medical
professionals and released in professional publications.

The Kyorin Group’s HOPE100 long-term vision includes the statement that it will “Promote diversified healthcare businessexpansion and by 2023 be recognized both within and outside as a company that supports sound and healthy lifestyles.”To achieve this, we consider it important to build a sophisticated system for ensuring the reliability of drugs handled by theGroup and products sold by the healthcare business. By working to ensure the consistent reliability of Kyorin products andproviding users with high-quality products that can be used “with safety and security,” we are gaining the trust of broad
sectors of society.

2020 A N N U A L REPORT 37

CSR Activities through Business

Main initiatives (KYORIN Pharmaceutical Co., Ltd.)

Throughout this process (the value chain that stretches from research and development through the disclosure of
product information), KYORIN Pharmaceutical Co., Ltd., the core subsidiary of the Kyorin Group, is committed torespecting human rights and abiding by all relevant laws and regulations including the Act on Pharmaceuticals
and Medical Devices.

Ethical considerations for human drug research

Research

Following our corporate philosophy, the Kyorin Group endeavors to develop and supply useful and safe products
and services to society with a view toward creating sustainable economic growth and solving social issues.

Clinical development

GLP

Provision of product information
Promotion of the appropriate use of drugs

Response to inquiries

GVP
GPSP

Technological development
and productionCompliance with all
relevant laws andregulations andmaintenance of trustQuality assurance
Safety management

Disclosure of information related to clinical trials and trial results

Stable supply
The pharmaceutical supply chain includes a wide variety of diverse items, including raw materials, intermediates, and pharmaceutical ingredients,
and is supported by a large number of suppliers in Japan and overseas. To maintain a stable supply, it is essential to strengthen ties with individual
suppliers and ensure close alliances and information sharing. The company has created a stable supply structure based on demand forecasts for eachregion of the world and the unified management of inventory information and supply plans, making it possible to globally manage every stage of theprocess from ingredients manufacturing to supply of finished products. Moreover, as one of its risk-hedging policies, it strives to identify multiple
alternative suppliers to supplement existing suppliers and different types of transportation routes.

Promotion of the appropriate use of drugs
Provision of productinformation

Reliability
assurance

GMP
GQP
GDP

The company conducts clinical trials in line with the Declaration of Helsinki* and relevant laws and regulations governing clinical trials of pharmaceuticals, including good clinical practice (GCP), while fully taking into consideration the human rights and personal information of trial subjects.
Its clinical trial plans are approved after inspection for ethicality and scientific validity by internal and external committees. Moreover, it must give
sufficient explanation of items such as the objectives of trials and the methods used, the expected merits and demerits, and compensation in case ofdamage to the health of subjects, and confirmation is needed that subjects understand the details and have given their consent to participate. In
addition, checks are made to ensure that employees involved in trials have been properly educated and trained, that trial institutions respect GCP,
and that trials are conducted appropriately.

The company strives to use clinical trial databases to publicly disclose and improve the transparency of the clinical trial plans that it leads. Goingforward, the company will promote the creation of appropriate data access environments for those involved in utilizing clinical trial data, including
researchers, and promote the disclosure of information that is useful in scientific progress and innovation.

GCP

Technological development and production
Stable supply and quality management
Quality assurance
Stable supplyPrevention of medical malpractice and improvement ofdrug discrimination

Relations with local communities

Ethical considerations for the use of animals in trials

Respect for subjects’ human rights, security of personal information, and maintenance of trust during clinical trials

Clinical developmentRespect for subjects’ human rights, security of personal
information, and maintenance of trust during clinical trials
Disclosure of information related to clinical trials andtrial resultsIncreased access to investigational new drugs*The Declaration of Helsinki is a set of ethical principles regarding human experimentation that governs doctors and other professionals involved in medical research.

To conduct appropriate animal trials from a scientific perspective while taking into consideration the protection and welfare of animals, thecompany promotes strict adherence to the 3R principles—refinement (reduction of animal distress), replacement (substitution of animal experimentswith alternatives), and reduction (decrease in the number of laboratory animals used)—and has established rules based on various policies toprotect animals.

Research
Ethical considerations for human drug researchEthical considerations for the use of animals in trials
Biotechnology and countermeasures against biohazards
Use of genetic resources
Handling of intellectual property

The company conducts research on humans and research that obtains or applies materials derived from humans with their full consent and in line with
the Declaration of Helsinki,* and the relevant laws, regulations, and guidelines of each country. It also conducts ethical education and training for
researchers into bioethics and genome research and clinical research, and endeavors to respect the human rights and protect the personal informationof research participants. It has created a human tissue research ethics investigation committee, which includes outside experts, to inspect the ethicality
and scientific validity of research plans impartially and fairly.

Mistakes in the use of drugs can damage a patient’s health, while side effects can also occur even when drugs are used correctly. The company’s
medical representatives (MR) work to accurately and swiftly provide information such as relevant documentation on appropriate product usage toallow medical professionals to use drugs more effectively and safely. In addition, we collect, analyze, and review information on efficacy and safety
gleaned from the use of our drugs, and transmit the results to medical professionals.

Response to inquiries
To promote the safe and effective use of drugs, the company believes it has a responsibility to respond to inquiries from patients and medical
professionals by providing highly reliable drug information that is both fair and impartial. With this understanding, it has established the Drug
Information Center to handle various questions. The center responded to around 4,000 inquiries in fiscal 2019.

Initiatives to ensure sustainable procurement
On-site supplier investigations

GLP: Good Laboratory Practice, pharmaceutical safety-related standards for non-clinical trials; GCP: Good Clinical Practice, standards for pharmaceutical clinical trials; GMP: Good Manufacturing Practice,standards for production management and product quality management of pharmaceuticals and other items; GQP: Good Quality Practice, standards for product quality management of pharmaceuticals and otheritems; GDP: Good Distribution Practice, standards for proper distribution of pharmaceuticals; GVP: Good Vigilance Practice, standards for post-production marketing safety management of pharmaceuticals andother items; GPSP: Good Post-Marketing Study Practice, standards for post-production marketing survey and study practices of pharmaceuticals

38 2020 A N N U A L REPORT

Procurement

Procurement

On-site supplier investigations
When selecting a new supplier, we begin transactions only after confirming through an on-site investigation that the supplier has measures in place forlegal and regulatory compliance, labor safety, and environmental protection. For existing suppliers, we make regular visits to preserve and improve
product quality and maintain a stable supply. In addition, we conduct risk assessments of work environments (including ones to prevent employee
exposure to chemical substances) and take measures to reduce waste and lessen the environmental burden from wastewater and exhaust emissions.

2020 A N N U A L REPORT 39

Initiatives to Respect Human Rights, Implement Work-Style Reforms,
and Develop Human Resources
The Kyorin Group believes it is important for employees to respect the human rights of all people and to act with highethical standards. To that end, we endeavor to create work environments that respect the diversity, character, andBasicindividuality of each and every employee, where they can work in health and safety. At the same time, we aim to be a
stancecompany that offers strong career fulfillment and encourages all employees to enhance their ethical values and personal
growth. Our corporate actions are rooted in this basic stance.

Mental health
The Kyorin Group provides mental-health education to managers and employees. Our manager training focuses on prevention andearly detection of mental illness, by encouraging managers to pay attention to their subordinates and promoting understanding of thespecific symptoms of mental disorders. We also encourage employees to gain knowledge about maintaining mental health via our
intranet and other means, and have created a system for employees and their families to feel free to ask for help. When a mental
health issue arises, the employee’s department, industrial psychiatrists, public health nurses, and Human Resources Department work
together to help the employee recover, return to work, and prevent relapse.

Industrial safety and hygiene

Respect for human rights
The Kyorin Group is managed with respect for the human rights of all people, and our Compliance Guidelines clearly state, “Alongwith understanding international norms regarding universally recognized human rights, we will respect the values and character of
each individual, and will not engage in any form of discrimination in any situation, regarding each individual as being equal with allothers, regardless of position or function.” The Company also respects the individuality of each employee, and has formulated
guidelines to prevent harassment, to create a comfortable workplace environment where employees feel at ease. These guidelines
cover sexual and power harassment, as well as harassment related to pregnancy, childbirth, and childcare and nursing care leave.

Promoting organization: becoming “the leading company for career fulfillment”
The Group positions valuing employees and empowering people/organizations as the most important challenge under the HOPE100
long-term vision for executing business strategy and realizing achievements. We therefore aim to be “the leading company for career
fulfillment,” where employees take pride in their work, have trust in the Company and its organizations, and work in solidarity with theircoworkers. We promote the creation and appropriate operation of the human resources management system (hiring, assigning, training,
evaluation, transfers, compensation, social welfare, etc.) at each Group company under the basic concepts of our human resourcesmanagement system.

The Kyorin Group places the highest priority on the “safety” and “health” of our employees, and we are proactively pursuing activities
related to industrial safety and hygiene. One of our EHS activities has been to formulate an industrial safety and hygiene system, andwe have set a goal of having zero workplace accidents. As a result of the activities being implemented at workplaces across the Group,
the frequency and extent of workplace accidents as measured by rate and severity are well below industry average levels.

Support for employees’ childcare and nursing care
KYORIN Pharmaceutical Co., Ltd. supports employees’ daily lives throughout their life cycle, including when they require childcare or
nursing care, with the aim of providing an environment in which they are easily able to balance their lives between work and family.
We strive to maintain an environment in which employees can feel fulfilled in their work, backed by a healthy home life.
n Legal standards
Pregnancy

6 weeks
before birthChildbirth

8 weeks
after birthStartselementary school

Limit on after-hours work
Nursing time –30 minutes each,
twice a day
MRs may use company (marketing) vehicles to drop off and pick up child at nursery, day care, etc.

Child-rearing

Company

3 years old

Exemption from late-night work

Work

By continuously fulfilling the responsibilities expected of each other over the long term, the Company and its employees share a common understanding that they
are partners for mutual benefit. As employees contribute to the Company’s development, the Company will contribute to rich and rewarding lives for employees.
Employees are considered assets (drivers of growth) of the Company, which values
them and supports their growth.
• Each employee is assigned duties that conform to abilities and work style.
• Each employee’s contribution is comprehensively understood, and employees areevaluated and treated fairly and consistently.
• The Company provides a comfortable and rewarding work environment that fosters
a “desire to work” among employees.

2 years old

Exemption from after-hours and holiday work

Long-Term Reciprocal PartnershipBy carrying out their duties, contribute to achieving the Company’s(organization’s) goals and targets.
• Carry out duties by performing operations proactively with a senseof initiative.
• Strive to maintain and enhance their own humanity and ability incarrying out their duties.
• Cooperate with coworkers for the success of the organization.

18 months old

Shortened work hours for childbirth and child-rearing – Up to 2 hours per day (in 30-minute units) until the child starts elementary school

Basic concepts of the human resources management system

Employees

12 months oldn Kyorin’s own standards or additional provisions

End April
after 1st birthday

Maternity leave
after birth –Can be taken
for 8 weeks
after birthMaternity leave
before birth –6 weeks beforedue date

Leave,
Time off

Special vacation of
2 days for spouse

Childcare leave – can be taken until child is
18 months old or until the end of April
after child’s 1st birthday

Permission granted
for up to 2ndbirthday if unable
to enter nursery,
day care, etc.

Leave for care of children (5 days per year for one child up to 6th grade, 10 days for 2 children, half-day units)

Hourly based paid leave*
Childbirth and childcare
support money

Initiatives for Health Management
The Kyorin Group has enacted the “Kyorin Group Health Declaration,” a statement recognizing that our employees are the foundationof our corporate philosophy and long-term vision, and that their physical and mental health is paramount.

As a company that supports sound and healthy lifestyles, the Kyorin Group views the health of its employees as a vital management issue,
and is committed as an organization to promoting the health management of each and every employee.
1. T o ensure that our employees and their families can live active lives, we pursue the maintenance of their sound physical and mental
health by working hand in hand with a health insurance association.
2. We proactively support our employees’ efforts to maintain and improve their health and to further their health awareness.
3. W
 e implement measures to maintain and improve our employees’ health and create safe and comfortable work environments as we
aim to build business operations that allow us to fulfill our social mission of contributing to better health.

The general view is that “Health Management ®”* is a strategic practice that sees the health management of employees from abusiness perspective. The Kyorin Group also implements a variety of initiatives to invigorate its organization, including improving theactivity and productivity of employees, with an eye toward raising earnings and corporate value from a medium- to long-term
perspective. Specific examples include giving health guidance to employees based on regular health examinations and stresschecks, controlling long working hours, offering health improvement activities (a combination of walking and social contribution
efforts), expanding health management structures, and totally banning smoking in all work spaces.
* “Health Management ®” is a registered trademark of the nonprofit organization Kenkokeiei.

40 2020 A N N U A L REPORT

Matriculation
support money
Job return system: Preferential rehiring of employees who have resigned for pregnancy, childbirth, child-rearing, nursing care, etc.*

Other* Hourly based paid leave and the job return system are also available for nursing care support
Nursingcare

The Kyorin Group Health Declaration—Your Health is Kyorin’s Mission.—

Financial subsidies for the use of nurseries and preschools

Financialsupport, etc.

n Expanded nursing care leave and breaks(186 days vs. legally stipulated 93 days)n Support system for remote nursing caren Nursing care seminars

Promoting the use of paid leave
KYORIN Pharmaceutical Co., Ltd. proactively encourages the taking of paid leave, going over and above our legal obligations for paid
leave under the Related Acts to Promote Work Style Reform (which requires companies to allow employees entitled to at least 10 daysof annual paid leave to take five days). We also promote the taking of three additional days of leave for employees to maintain a goodwork-life balance to maximize their capabilities.

Job return system
KYORIN Pharmaceutical Co., Ltd. has created a job return system that provides opportunities for employees who still have a strong
desire to work and are seen as vital by their colleagues to come back to their jobs. This system covers employees who have left theGroup due to various major life events such as marriage, the job transfer of a partner, pregnancy, childbirth, child-rearing, nursing care,volunteer activities, and overseas study.

2020 A N N U A L REPORT 41

Initiatives on disability hiring

In Harmony with the Environment

As part of its social responsibilities, KYORIN Pharmaceutical Co., Ltd. strives to provide suitable work environments for employees withdisabilities to enable them to give full play to their abilities and live independent lives like able-bodied people. We also endeavor tocreate work spaces that are easy for employees with disabilities to operate in, such as using apps for employees with impaired hearing.

Human resources development
KYORIN Pharmaceutical Co., Ltd. supports the growth of its employees by creating structured and systematic educational programs
that provide opportunities for both solo learning (autonomous improvement of one’s personality and abilities) and joint learning (mutual
growth and support). The structure and mechanisms for solo learning include correspondence courses, referrals for businessmagazine subscriptions, support for language learning, individual overseas study, support for the acquisition of qualifications, andsubsidized external seminars. In joint learning, we offer 10 different types of tiered programs ranging from new employee training totraining for management. Functional training is provided by each department to give employees the knowledge and skills requiredin their roles.

Overall structure of solo learning/joint learning
Solo learning

Joint learning (tiered programs)
Program for experienced directors

Correspondence courses

Referrals for businessmagazine subscriptions

Program for new directors

For
managers

Program for middle managers

Support for
language learning

Program for new managers(two years from six months before appointment)
Second-year managers
First-year managers
Preappointment managers

Individual overseas study

Core skills program One principle of the Kyorin Group’s Charter of Corporate Conduct details its understanding that “the tackling of environmental
issues is a mission for all humankind and an imperative component of the very existence of corporations to which it remains
voluntarily committed,” and that as a company dedicated to life, it will always use its EHS activity to conduct business
operations with due regard for their impact on the global environment and local communities.
In all business operations, the Group promotes the effective use of our limited resources through energy and resource saving, waste
reduction, and less use of substances that place a burden on the environment. It has established objectives and targets for these initiatives,
reviews them as needed, and remains voluntarily and proactively committed to environmental protection and pollution prevention.

BasicstanceEnvironmental conservation initiatives
We are actively committed to environmental conservation, focusing on the following major themes: preventing global warming, protecting
resources, and living in harmony with the natural environment. We are working to reduce the environmental burden and promote
effective use of limited resources by conserving energy and resources, reducing waste, and strengthening our management of chemical
substances. KYORIN Pharmaceutical Group Facilities Co., Ltd. has obtained ISO 14001 certification, an international standard forenvironmental management systems, at all its plants.
In our efforts to combat global warming by reducing
KYORIN Group material flow (fiscal 2019)
CO 2 emissions, we set a target of cutting emissions
Materials
Water
EnergyRaw materials
by at least 4% from the level of fiscal 2015 (30,444
Total
heat:
506,110GJtons) by fiscal 2019 (29,163 tons or below). In fiscal
830 t
Total: 1,908 t
Total: 239,900 t(crude oil equivalent: 13,065 ㎘ )Electricity: 33,735(PRTR substances: 14.2 t)Materials: 1,855 t
Drinking water: 156,600 t
2019, as our CO2 emissions were 27,477 tons, we
thousand kWh
Paper usage: 53 t
Groundwater: 83,300 t
achieved our objective. We are now working toward
Heavy oil: 1,504 ㎘
Kerosene: 2,748 ㎘
a new target of reducing CO 2 emissions from thelevel of fiscal 2019 by a further average 1.5% annually
INPUT
by fiscal 2023.
Research

Sales

CO2 emissions
27,477 t

Core skills program Support for acquisitionof qualifications
Subsidized externalseminarsFor
generalemployees

Core skills program Manufacturing

Management

Waste

Wastewater

Packaging recycled

Amount: 727 t
Amount recycled: 432 t
Amount landfilled: 56 t

136,000 t

Total: 745 t

OUTPUT

Third-year employee program
Second-year employee program
New graduate and career guidance program

In harmony with the environment

Reducing the environmental burden through solar power generation
In a move to lessen its environmental burden, KYORIN Pharmaceutical Co., Ltd. operates facilities for generating solar power,
one form of renewable energy, on its premises. The company currently has two sites in operation in the town of Nogi in Tochigi
Prefecture, one installed in fiscal 2013 and the other in fiscal 2017.

Introducing hybrid cars to reduce CO2 emissions
The Kyorin Group is proactively introducing low-emission cars, hybrid cars, and otherenvironmentally friendly vehicles for its sales force as a way of preventing global
warming. As of March 2020, all 963 vehicles used by the sales force met the standard
for having low emission (a 75% reduction in emissions from the 2005 standard), andof these, 615 (approximately 64%) are hybrid vehicles, which were introduced in 2004.
In addition, these vehicles adhere to the Ministry of the Environment’s “Eco-Driving”
guidelines regarding their impact on the environment and traffic safety.

Environmentally friendly R&D Center
Biodiversity
KYORIN Pharmaceutical Group Facilities Co., Ltd.’s Noshiro Plant participates in acitizens’ volunteer activity to protect the Kaze-no-Matsubara pine forest near the plant,
to provide local residents with a place to relax. In fiscal 2019, 24 plant employees
removed dead brush as part of an activity to preserve local biodiversity.
In addition, KYORIN Pharmaceutical’s WATARASE Research Center has installed
birdhouses in trees adjacent to the Watarase Yusuichi wetlands and confirmed thelocation of nests as a way to enhance the environment for wild animals in theCenter’s grounds.

42 2020 A N N U A L REPORTIn May 2017, the ReHP* technology installed at KYORIN Pharmaceutical’s WATARASE
Research Center was awarded an honorable mention in the Kanto chapter of theJapanese Association of Building Mechanical and Electrical Engineers’ carbon neutral
prize category for construction equipment that contributes to achieving a low-carbon
society. In addition, the energy conservation activities related to this system wereawarded the Grand Prize in the Kanto Region Energy Saving Committee’s 2019
Chairman’s Awards. During fiscal 2019, this system reduced electric power
consumption by 66,500 kWh and CO 2 emissions by roughly 31 tons comparedwith conventional heat pumps for air conditioning and heating, for approximately
32% in energy savings.
* A Renewable Energy Heat Pump (ReHP) is a highly efficient heat pump that uses renewable energy, and the ReHP installed at two adjacent buildings (CS and L AB1) at the WATAR ASE
Research Center uses geothermal heat and unused waste heat from a water chiller as a heat source, and circulates heated water in a single loop, which is used by air-conditioning andwater-heating equipment, to increase energy efficiency.

2020 A N N U A L REPORT 43

Living in Harmony with Society
The Kyorin Group’s Charter of Corporate Conduct calls for it to “actively co-exist with society as a good corporate citizen
and to contribute to society’s development.” The Kyorin Group is engaged in a variety of social contributions to achieve
its goal of living in harmony with society.
As a manufacturer of new drugs, we aim to contribute to society by developing and supplying useful pharmaceuticals(products and services including clearly superior drugs), while at the same time using our business activities to aid in the resolution andimprovement of medical and welfare issues, issues faced by senior citizens, and environmental issues.
We also engage in educational activities to support the health of young people. A healthy next generation will be able to power thecreation and sustainable development of the highly livable and vibrant local communities that form the basis of our business activities.
We pursue social contribution activities that are in keeping with our mission of being a company that supports sound and healthy
lifestyles in a wide variety of ways.

BasicstanceHealth education activities

Local cleanup activities
As a responsible member of the local community, the Group actively participates in cleanups of local districts, including the areas
around its business facilities.
•G roup companies (head offices, branches, plants, research centers): cleanup activities around business facilities•K YORIN Pharmaceutical Group Facilities Co., Ltd. Noshiro Plant: participated in COK20 (cleanup of area formerly named
Kaneyu), Noshiro cleanup, and beach cleanup•K YORIN Pharmaceutical Group Facilities Co., Ltd. Shiga Plant: participated in Lake Biwa cleanup

Donations to areas affected by natural disasters
As useful support for those affected by disasters, the Group provided relief goods as detailed below:• Support for those affected by Typhoon Hagibis in 2019: environmental hygiene supplies (Milton, Rubysta, etc.), daily necessities(drinking water, towels), etc.
•S
 upport for those affected by heavy rains in western Japan in 2018: environmental hygiene supplies (Milton, Rubysta, etc.),
daily necessities (drinking water, towels), etc.

Classroom visits
Since fiscal 2017, the Kyorin Group has planned and organized visits to schools by
employees to teach and demonstrate the correct ways of using medicine and washinghands to elementary and junior high school students, to nurture the next generation.
During fiscal 2019, head office and Group company employees visited 18 elementaryand junior high schools in the communities of our workplaces around Japan. This is oneof our social contribution activities that embody our corporate philosophy of “Contributing
to better health.”

Each Group facility offers internships, provides workplace tours and hands-on workshops for junior and senior high school students,and sends staff to teach in classrooms. In fiscal 2019, these programs were held at the head offices of KYORIN PharmaceuticalCo., Ltd., the WATARASE Research Center, and the three plants of KYORIN Pharmaceutical Group Facilities Co., Ltd.

As part of KYORIN Pharmaceutical Co., Ltd.’s CSR activities, the Company’s approximately
750 medical representatives receive first-aid training covering the necessity of first aid,
CPR, the use of AEDs, and ways to stop bleeding. The same lessons were offered ateach Group company's head office and at the WATARASE Research Center.

URL: http://www.karada-kyorin.com (Japanese only)

The Kyorin Group has supported the “Kyorin Group Presents the Great Adventure for the Body’s Secrets” program since 2016, with
the idea of supporting healthy lives for the children of the next generation. During fiscal 2018, we launched a portal site related to thisprogram, “Teach Me about the Body’s Secrets!” which shows videos of impure things in the body to deepen the understanding of
diseases and how the body works to children from nursery school through early elementary school.
We will continue to work to enable children to have an interest in and enjoy learning about their own bodies.

Contributing to local communities
Health Challenge Program
The Kyorin Group launched the Health Challenge Program in 2017 as a new activity to promote employees’
health and contribute to local communities by donating items that are useful for maintaining health.
All Group employees form teams at their workplace and count how many steps they take, competingin terms of points based on the number of steps taken, and health equipment is donated to a social
welfare center near the workplaces of the two top teams. In fiscal 2019, 261 teams and 19 workplaces
participated, enabling the donation of health equipment such as automated blood pressure meters,
cordless bicycles, and elliptical trainers to facilities in Chiyoda Ward in Tokyo and the town of Nogi in
Tochigi Prefecture, where the two top teams are located.

Sponsoring sporting events
The Kyorin Group supported the Shimotsuke Soccer Workshop in Nogi for the 20th time infiscal 2019 with the aim of providing local children an easily accessible opportunity to think
about and experience their own health management and improve their skills. Coached byformer J.League professional soccer player and current sports journalist Tetsuo Nakanishi,
many children enjoy playing soccer energetically each year. Donations are also solicited at
the workshop and used to hold events to support the local community.

44 2020 A N N U A L REPORT

Since fiscal 2011, KYORIN Pharmaceutical Co., Ltd. has supported the Sunflower Project,which brings smiles and cheer to regions affected by the Great East Japan Earthquake.
In fiscal 2019, the program’s ninth year, 95 employees of the WATARASE ResearchCenter cultivated 300 pots of sunflower seedlings and donated them to the city of Natori
in Miyagi Prefecture.

First-aid and lifesaving courses for employees

Work experience programs

Health information website for children

Support for Great East Japan Earthquake recovery

Activities with patients and medical professionals (KYORIN Pharmaceutical Co., Ltd.)
Providing information via “Doctor Salon”
We sponsor “Doctor Salon,” a radio program for physicians on Radio NIKKEI (shortwave) that answers
questions related to day-to-day clinical practice from general practitioners across Japan. In addition,
the program’s content is distributed as a brochure, with back issues available via a website, and the audio
of “Doctor Salon” is distributed as a podcast. “Doctor Salon” is extremely popular with physicians,
especially primary-care doctors.

Publishing websites for medical professionals and patients
We strive to meet medical professionals’ needs for information by postingproduct-related information, the latest academic information, and useful
information for day-to-day clinical practice on websites for medical professionals
including Kyorin Medical Bridge. We also launched a website for patients in July
2019. This site endeavors to raise patients’ adherence by providing informationon the correct ways to take medications and information on illnesses.

Kyorin Medical Bridge, a website for
medical professionals

Website for patients

Providing ailments information
We create ailment information tools to be used when a medical professional obtains a patient’s informed consent, with the aim ofhelping patients correctly understand their ailments and improve their quality of life.

Support for the Department of Drug Discovery Medicine
To cultivate innovative human resources for Japan’s drug discovery in the post-genome era through cooperation with industry andacademia, we helped establish and provide assistance to the Department of Drug Discovery Medicine at Kyoto University Graduate
School of Medicine.

2020 A N N U A L REPORT 45

Ten-Year Consolidated Financial Highlights
KYORIN Holdings, Inc. and Its Consolidated Subsidiaries
Fiscal years ended March 31/As of March 31

Millions of yen

3/20113/20123/20133/20143/20153/20163/20173/2018*3

3/20193/2020¥ 104,069¥ 103,232¥ 107,031¥ 111,400¥ 113,121¥ 119,483¥ 115,373¥ 110,640¥ 113,620¥ 109,983

Ethical drugs business*1

101,271

100,654

105,162

109,678

111,771

113,970

109,566

104,703

107,859

103,599

Healthcare business*2

2,797

2,577

1,869

1,721

1,349

5,512

5,807

5,937

5,761

6,383

Operating income

16,443

14,464

17,94817,607

14,737

19,636

10,413

8,822

8,972

7,503

Profit attributable to shareholders of
KYORIN Holdings, Inc.

10,927

9,231

12,422

12,025

12,064

13,639

7,305

6,574

6,869

6,149

Net cash provided by operating activities

6,805

8,913

11,544

19,293

6,391

11,137

16,386

10,456340

7,739

Net cash provided by (used in) investing activities(1,806)(4,926)(7,187)(2,477)(1,364)650(13,142)(6,038)14,939(2,943)

Net cash provided by (used in) financing activities

201(7,412)(5,132)(3,704)(5,233)(2,245)(5,721)(3,735)(27,315)(5,117)

Free cash flow

4,999

3,987

4,357

16,816

5,027

11,787

3,244

4,418

15,2794,796

R&D expenses

12,495

13,964

11,05911,35913,51413,01913,56914,243

10,79010,987

Capital expenditures

1,668

1,952

6,576

6,500

2,655

7,218

3,051

2,885

2,306

3,590

Depreciation and amortization

2,458

2,363

2,738

3,153

3,053

3,730

3,619

3,644

2,940

3,221

Total assets

147,234

145,673

154,968

169,378

183,383

197,825

192,668

196,736

173,034

171,160

Total net assets

111,706

118,201

129,099

137,821

148,600

157,049

157,837

163,297

123,395

122,710

Net sales

Per Share Informationyen

Net assets¥ 1,494.83¥ 1,581.94¥ 1,727.86¥ 1,844.61¥ 2,009.45¥ 2,131.67¥ 2,146.83¥ 2,214.13¥ 2,154.05¥ 2,142.07

Basic profit

146.21123.54166.25160.95161.63184.28

99.45

89.28

104.68107.35

Cash dividends

45.00

45.00

50.00

52.00

52.00

58.00

58.00

58.00

75.00

75.00

Operating income margin (%)

15.8

14.0

16.8

15.8

13.0

16.4

9.0

8.0

7.9

6.8

Profit attributable to shareholders of
KYORIN Holdings, Inc. / Net sales ratio (%)

10.5

8.9

11.6

10.8

10.7

11.4

6.3

5.9

6.0

5.6

R&D expenses / Net sales ratio (%)

12.0

13.5

10.3

10.2

11.9

10.9

11.8

12.9

9.5

10.0

Total shareholders’ equity ratio (%)

75.9

81.1

83.3

81.4

81.0

79.4

81.9

83.0

71.3

71.7

ROE (%)

10.1

8.0

10.0

9.0

8.4

8.9

4.6

4.1

4.8

5.0

Consolidated payout ratio (%)

30.8

36.4

30.1

32.3

32.2

31.8

59.3

65.9

72.6

70.9

PER (times)

9.68

12.68

13.82

12.25

17.78

11.63

23.64

22.39

20.64

20.48

2,294

2,297

2,444

2,452

2,445

2,420

2,382

2,348

2,297

2,271

Key Performance Indicators

Non-Financial Information
Number of employees*1 F rom fiscal 2016 (ended March 31, 2017), the pharmaceutical business was renamed the ethical drugs business. Until fiscal 2015 (ended March 31, 2016), the pharmaceutical businesscomprised new drugs, generic drugs, and over-the-counter drugs, but from fiscal 2016 over-the-counter drugs were included in the healthcare business.
*2 With the transfer of the skin care business effective April 1, 2017, from fiscal 2017 (ended March 31, 2018), the healthcare business consisted of environmental hygiene products andover-the-counter drugs and others.
*3 Figures shown are adjusted to retroactively apply certain revisions to accounting standards related to tax-effect accounting.

46 2020 ANNUAL REPORT

2020 ANNUAL REPORT 47

Performance Highlights

Financial Information

Non-Financial Information
Human Resources

Net sales

Basic profit per share/Consolidated payout ratio
Ethical drugs business(Millions of yen)
125,000

Healthcare business

Basic profit per share

(Yen)
200

72.6

120,000

59.3

160

5,512

80

70.9

65.9

Waste volume

Number of employees

Consolidated payout ratio (%)

184.28Environment

60(Persons)
2,500

2,420

2,382

2,348

2,297

(t/millions of yen)
100

2,271

2,000

80

5,807
110,000

5,761
5,937

6,383

113,970

105,000

109,56603/20163/20173/2018Operating income

Operating income margin (%)
18

16.4

19,636

12,00010,413

8.0

7.9

8,822

8,972

6.8
7,503

6

3/202003/20163/20173/20183/20193/2020Total net assets

0

1,000

40

500

20

3/2016

1.20

197,825

192,668

163,297

157,837

3/20190

3/202067

66

173,034

1.02

0.96

171,160
122,710

0.81

0.72

0.81

0.48

0.41

3/20183/20190.00

3/20203/20163/20163/20173/20183/20193/2020CO2 emissions from factories and research laboratories
Entire manufacturing industry

1.15
1.06

0.24

3/20173/2018Chemical industry

196,736

123,395

3/20163/2017KYORIN Pharmaceutical

100,000

060

050,000

4,000

1,500

Rate of work accidents

150,000

8,000

03/2019Total assets

157,04912

9.0

3/2018(Millions of yen)
250,000
200,000

16,0003/2017

Total assets/Total net assets

24,00020,0003/2016

70

40

89.28

20

0

3/2020Operating income/Operating income margin(Millions of yen)
28,000107.3540

103,5993/2019104.68

99.45
31.8

80

107,859

104,703

100,000

120

73
64

115,000

1.20

1.20
0.90

0.94

0.88

(t)
35,00030,44429,19629,432

28,8233/20173/20183/201927,47728,00021,00014,000

0.31

0.22

0.20

0.21

3/20173/20183/20197,000

3/202003/20163/2020Rate of work accidents: Number of deaths and injuries due to industrial accidents per total working hours x 1,000,000(indicates frequency of accidents)
C alculation method: Number of deaths and injuries due to industrial accidents (excluding accidents while commuting) /Total working hours x 1,000,000

Profit attributable to shareholders of
KYORIN Holdings, Inc./ROE(Millions of yen)
20,00016,000R&D expenses/R&D expenses/Net sales ratio

Profit attributable to shareholders of KYORIN Holdings, Inc.

ROE (%)
98.9

16,00013,63912,000

4.6
7,305

8,000

4.8

5.0

R&D expenses/Net sales ratio
12.9

10.9
13,0196

11.8
13,56914,243

12,000

6,574

6,869

6,149

9.5
10,7904.1

10.0
10,9878,000

3/20163/20173/20183/20193/2020KYORIN Pharmaceutical

14

0.20

0

10
8

2

3/20163/20173/20183/20193/2020Volume of water used

Chemical industry

Entire manufacturing industry

0

240,000

0.15

0.09

0.10

0.06
0.05

0

Total drinking water(t)

Total groundwater

300,000

12

4
4,000

0

(%)

6

3

4,000
0

R&D expenses(Millions of yen)
20,000

Severity of work accidents

0.04
0.000

3/2016

0.07
0.08
0.03

180,000

3/201969,00079,00077,00083,000161,000

157,000

157,000

180,000
120,000

0.02
0.001

3/2018

0.10

0.06

0.023

0.016

3/20170.10

74,000177,000

60,0000.002

3/202003/20163/20173/20183/20193/2020

Severity of work accidents: Number of lost working days per total working hours x 1,000 (indicates magnitude of accidents)
Calculation method: Number of lost working days (excluding accidents while commuting) / Total working hours x 1,000

48 2020 ANNUAL REPORT

2020 ANNUAL REPORT 49

Directors, Corporate Auditors, and Corporate Officers (As of June 19, 2020)
Representative Director, Chairman

Representative Director, President and Chief Executive Officer

Executive Directors

Minoru Hogawa

Yutaka Ogihara

Shigeru Ogihara

Kenji Akutsu

Representative Director, Chairman

Representative Director, President andChief Executive Officer

Senior Managing Director

Senior Executive Director

KYORIN Pharmaceutical Co., Ltd.
Representative Director, President and Chief Executive Officer

General Affairs & Human Resources
Finance & Accounting
Corporate Planning
Product Strategy
Information System Management

KYORIN Pharmaceutical Co., Ltd.
Representative Director, Chairman

Auditing

December 1976 Joined Kyorin Yakuhin Co., Ltd.
June 2004	Corporate Officer, General Manager of Management Planning
Department of KYORIN Pharmaceutical Co., Ltd.
June 2005	Executive Director, Senior Executive Officer, Management Strategy
Office of KYORIN Pharmaceutical Co., Ltd.
January 2006	Executive Director, Management Strategy Office, General Manager
of Management Planning Department, in charge of Accounting of
KYORIN Holdings, Inc.
April 2010	Executive Director, Senior Executive Officer, General Manager ofManagement Planning Department, in charge of Finance &Accounting Department of KYORIN Holdings, Inc.
June 2010	Senior Executive Director, General Manager of Management
Planning Department, in charge of Finance & Accounting
Department of KYORIN Holdings, Inc.
June 2012	Senior Managing Director, General Manager of Management
Planning Department, in charge of Finance & Accounting
Department of KYORIN Holdings, Inc.
June 2015	Representative Director, President and Chief Executive Officer, incharge of Auditing Office of KYORIN Holdings, Inc.
June 2017	Representative Director, President and Chief Executive Officer of
KYORIN Pharmaceutical Co., Ltd.
June 2019	Representative Director, Chairman of KYORIN Holdings, Inc.
(current)
June 2019	Representative Director, Chairman of KYORIN Pharmaceutical Co.,
Ltd. (current)

April 1990	Joined KYORIN Pharmaceutical Co., Ltd.
June 2011	Executive Director, President’s Office, in charge of Corporate
Communication Department and Information System
Management Department of KYORIN Holdings, Inc.
June 2015	Executive Director, President’s Office of KYORIN Holdings, Inc.
June 2016	Senior Executive Director, President’s Office of KYORIN
Holdings, Inc.
June 2016	Senior Executive Director of KYORIN Pharmaceutical Co., Ltd.
April 2019	Senior Executive Director, Management Strategy Office, incharge of Information System Management Department of
KYORIN Holdings, Inc.
June 2019	Representative Director, President and Chief Executive Officer
of KYORIN Holdings, Inc. (current)
June 2019	Executive Director of KYORIN Pharmaceutical Co., Ltd. (current)

April 1979	Joined Kyorin Yakuhin Co., Ltd.
June 2009	Corporate Officer of KYORIN Pharmaceutical Co., Ltd.
June 2011	Representative Director, President and Chief Executive
Officer of KYORIN Rimedio Co., Ltd.
June 2011 Corporate Officer of KYORIN Holdings, Inc.
April 2012 Senior Corporate Officer of KYORIN Holdings, Inc.
June 2013 Executive Director of KYORIN Holdings, Inc.
June 2015	Executive Director, in charge of Drug Discovery Strategy of
KYORIN Holdings, Inc.
June 2016	Senior Executive Director, Head of Discovery Research
Headquarters and WATARASE Research Center of KYORIN
Pharmaceutical Co., Ltd.
June 2016	Senior Executive Director, in charge of Intellectual Property
Department of KYORIN Holdings, Inc.
June 2017	Senior Executive Director, in charge of Intellectual Property
Department and Research and Development of KYORIN
Holdings, Inc.
June 2019	Senior Managing Director of KYORIN Holdings, Inc. (current)
June 2019	Representative Director, President and Chief Executive
Officer of KYORIN Pharmaceutical Co., Ltd. (current)

Tomiya Sasahara

Michiro Onota

Executive Director

Executive Director

Koichiro Hagihara

Masahide Sugibayashi

Promotion Compliance & External Relations
Quality Assurance & Reliability

Generic Drugs Business
KYORIN Pharmaceutical Group Facilities Co., Ltd.
Representative Director, President and Chief Executive Officer

Executive Director

Executive Director

Intellectual Property
Research and Development

Legal
Sales & Marketing
Healthcare Business

April 1978	Joined KYORIN Pharmaceutical Co., Ltd.
June 2009	Corporate Officer, Product Strategy Office of KYORIN
Pharmaceutical Co., Ltd.
April 2014	Corporate Officer, General Manager of Discovery Research
Management Department of KYORIN Pharmaceutical Co., Ltd.
April 2015	Representative Director, President and Chief Executive
Officer of KYORIN Medical Supply Co., Ltd.
April 2015 Corporate Officer of KYORIN Holdings, Inc.
June 2016 Executive Director of KYORIN Holdings, Inc.
June 2017	Executive Director, General Manager of General Affairs &Human Resources Department, in charge of Human
Resources and Healthcare Business of KYORIN Holdings, Inc.
June 2017	Executive Director, General Manager of Human Resources
Department of KYORIN Pharmaceutical Co., Ltd.
June 2018	Executive Director, General Manager of General Affairs &Human Resources Department, in charge of Finance &Accounting Department, and Healthcare Business of KYORIN
Holdings, Inc.
June 2019	Senior Executive Director of KYORIN Holdings, Inc. (current)
June 2019	Senior Executive Director of KYORIN Pharmaceutical Co., Ltd.
(current)

Executive Directors

April 1986	Joined KYORIN Pharmaceutical Co., Ltd.
April 2013	Corporate Officer, Quality Assurance & Reliability Office of
KYORIN Pharmaceutical Co., Ltd.
April 2015	Corporate Officer, Head of Quality Assurance & Reliability
Headquarters of KYORIN Pharmaceutical Co., Ltd.
June 2016	Executive Director, Head of Quality Assurance & Reliability
Headquarters of KYORIN Pharmaceutical Co., Ltd. (current)
June 2017	Executive Director, in charge of Quality Assurance &Reliability of KYORIN Holdings, Inc.
June 2018	Executive Director, in charge of Quality Assurance &Reliability and Promotion Compliance & External Relations
Department of KYORIN Holdings, Inc. (current)

April 1983
Joined Nisshin Flour Milling Inc.
April 1998	Dispatched to Nisshin KYORIN Pharmaceutical Co., Ltd.
October 2008 Joined KYORIN Pharmaceutical Co., Ltd.
April 2013	Corporate Officer, General Manager of Discovery
Research Department of KYORIN Pharmaceutical Co., Ltd.
April 2016	Senior Corporate Officer, Head of Clinical Development
Center, General Manager of Discovery Research
Management Department of KYORIN Pharmaceutical Co.,Ltd.
April 2017	Senior Corporate Officer, Deputy General Manager ofDiscovery Research Headquarters, Head of ClinicalDevelopment Center of KYORIN Pharmaceutical Co., Ltd.
June 2018	Executive Director, in charge of Legal Department andClinical Development of KYORIN Holdings, Inc.
June 2018	Executive Director, Deputy General Manager of Discovery
Research Headquarters, Head of Clinical Development
Center of KYORIN Pharmaceutical Co., Ltd.
June 2019	Executive Director, in charge of Intellectual Property
Department and Research and Development of KYORIN
Holdings, Inc. (current)
June 2019	Executive Director, General Manager of Discovery
Research Headquarters, Head of Clinical Development
Center of KYORIN Pharmaceutical Co., Ltd. (current)

April 1985	Joined KYORIN Pharmaceutical Co., Ltd.
April 2015	Representative Director, President and Chief Executive Officer of
KYORIN Rimedio Co., Ltd.
April 2015	Corporate Officer of KYORIN Holdings, Inc.
June 2017 Executive Director of KYORIN Holdings, Inc.
April 2018	Representative Director, President and Chief Executive Officer of
KYORIN Pharmaceutical Group Facilities Co., Ltd. (current)
June 2018	Executive Director of KYORIN Pharmaceutical Co., Ltd. (current)
June 2019	Executive Director, in charge of Generic Drugs Business of
KYORIN Holdings, Inc. (current)

Outside Directors
Noriyuki Shikanai

Ken Shigematsu

Hiromi Watanabe

Outside Director

Outside Director

Outside Director

October 1971 Passed the National Bar Examination
April 1974	Registered with Daini Tokyo Bar Association
March 1977	Established Shikanai Law Office (currently Kyobashi Law
Office) (current)
October 2002 Councilor of Keio University (current)
October 2010 Trustee of Keio University (current)
Auditor of J. F. Oberlin University (current)
April 2012
June 2013	Outside Director of KYORIN Holdings, Inc. (current)

April 1971
Joined Mitsukoshi, Ltd.
March 1999	Executive Officer, General Manager of Product Planning
Division, Sales Headquarters of Mitsukoshi, Ltd.
May 2002	Director, Executive Officer, Deputy General Manager of Sales
Headquarters of Mitsukoshi, Ltd.
March 2004	Director, Managing Executive Officer, General Manager ofMerchandising Headquarters of Mitsukoshi, Ltd.
March 2005	Director, Managing Executive Officer, Store Manager of
Mitsukoshi Ginza of Mitsukoshi, Ltd.
April 2008	Managing Executive Officer of Isetan Mitsukoshi Holdings Ltd.
Director of Mitsukoshi, Ltd.
April 2009	Director, Senior Managing Executive Officer, Special
Appointive Officer of Mitsukoshi, Ltd.
April 2010	Senior Managing Executive Officer of Isetan Mitsukoshi
Holdings Ltd.
Representative Director, President and Chief Executive Officerof Nagoya Mitsukoshi Ltd.
October 2011	Representative Director, President and Chief Executive Officer
of Endo Manufacturing Co., Ltd.
October 2015	Representative Director, President and Chief Executive Officerof MFSJ Co., Ltd.
June 2017
Outside Director of KYORIN Holdings, Inc. (current)

April 1972	Joined Internal Medicine Department of Tokyo Women’s
Medical University Hospital
April 1998	Assistant Professor of Internal Medicine, School of
Nursing of Tokyo Women’s Medical University
April 2007	Professor and Dean of Medical Science, College ofNursing of Shukutoku University
April 2010	Member of the Board of Daijo Shukutoku Gakuen
April 2011	Professor of Medical Science, College of Nursing andNutrition of Shukutoku University
November 2014	President of Tokyo Branch of Japan Medical Women’s
Association (current)
April 2016	Professor of Graduate School of Nursing Division of
Nursing of Shukutoku University
April 2018	Neurology Department of Yokufukai Hospital of Total
Health and Medical Care Center for Seniors (social welfare
corporation) (current)
June 2018	Member of the Board of 3.11 Fund for Children with
Thyroid Cancer (NPO) (current)
June 2019	Outside Director of KYORIN Holdings, Inc. (current)

April 1981
Joined Kyorin Yakuhin Co., Ltd.
April 2006	General Manager of Saitama-Chiba Branch, Sales & Marketing
Headquarters of KYORIN Pharmaceutical Co., Ltd.
April 2009	General Manager of Tokyo Branch I, Sales & Marketing
Headquarters of KYORIN Pharmaceutical Co., Ltd.
April 2010	Corporate Officer, General Manager of Tokyo Branch, Sales &Marketing Headquarters of KYORIN Pharmaceutical Co., Ltd.
April 2012	Corporate Officer, Head of Sales & Marketing Headquarters of
KYORIN Pharmaceutical Co., Ltd.
April 2013	Senior Corporate Officer, Head of Sales & Marketing
Headquarters of KYORIN Pharmaceutical Co., Ltd.
April 2015	General Manager of General Affairs & Human Resources
Department of KYORIN Holdings, Inc.
April 2015	Senior Corporate Officer, General Manager of Human
Resources Department of KYORIN Pharmaceutical Co., Ltd.
April 2017	Senior Corporate Officer, Head of Sales & Marketing
Headquarters of KYORIN Pharmaceutical Co., Ltd.
June 2018	Executive Director, Head of Sales & Marketing Headquarters of
KYORIN Pharmaceutical Co., Ltd. (current)
June 2019	Executive Director, in charge of Legal Department, Sales &Marketing, and Healthcare Business of KYORIN Holdings, Inc.
(current)

Senior Corporate Auditors

Senior Corporate Officer

Tomiharu Matsumoto

Yoh Ito

Shugo Tamaki
Outside Corporate Auditors

Corporate Officers

Masaji Obata

Hiroshi Hashizume

Takao Yamaguchi

Yasuyuki Shimokawa

Naohiro Kamei

Major Activities of Outside Directors and Outside Corporate Auditors (Year ended March 31, 2020)
Position
OutsideDirectors

Name

Major Activities

Attendance at Meetings

Noriyuki
Shikanai

Utilizing his high degree of specialization and rich experience as an attorney,
he makes appropriate comments to perform the monitoring function.

Attended 12 out of 12 Board of Directors’
meetings

Ken
Shigematsu

Utilizing his rich experience and wide-ranging insight in corporate management,
he makes appropriate comments to perform the monitoring function.

Hiromi
Watanabe

Utilizing her wide-ranging insight in a medical setting as a physician,she makes appropriate comments.

Position
OutsideCorporate
Auditors

Name

Major Activities

MasajiObata

He makes comments as necessary based mainly on his specialist understanding as an
attorney.

Attended 12 out of 12 Board of Directors’
meetings

Takao
Yamaguchi

He makes comments as necessary based mainly on his specialist understanding of financeand accounting as a certified public accountant and a certified tax accountant.

Attended 9 out of 9 Board of Directors’
meetings*

NaohiroKamei

He makes comments appropriately to ensure accurate decision making by the Board of
Directors. In addition, he makes appropriate comments based on his experience and insightat meetings of the Board of Corporate Auditors.

Attendance at Meetings
Attended 12 out of 12 Board of Directors’
meetings and 13 out of 13 Board of Corporate
Auditors’ meetings
Attended 10 out of 12 Board of Directors’
meetings and 11 out of 13 Board of Corporate
Auditors’ meetings
Attended 10 out of 12 Board of Directors’
meetings and 12 out of 13 Board of Corporate
Auditors’ meetings*Achievements since assumption of office in June 201950 2020 ANNUAL REPORT

2020 ANNUAL REPORT 51

Financial Analysis
Industry Trends in Japan

Cash Flows

During fiscal 2019, the market environment for Japan’s

net sales declined ¥3,637 million from the previous year,

Operating activities during fiscal 2019 generated net

accelerating the growth of the new drugs group, expanding

ethical drugs industry remained difficult, resulting inor 3.2%, to ¥109,983 million.

cash in the amount of ¥7,739 million, with major items

the development pipeline, building on drug creation

low single-digit market growth. This stemmed from the

In terms of profit, despite a decline in the cost of sales

including ¥8,255 million in profit before income taxes,

projects, and enhancing our cost competitiveness, as wegovernment’s policy of comprehensively reforming theratio, lower sales of new drugs resulted in a ¥377 million

depreciation and amortization of ¥3,221 million, a ¥5,185

move forward in setting a growth trend.

NHI drug pricing system, the introduction of measuresdecrease in gross profit. With a ¥1,092 million increase

million decrease in notes and accounts receivable, a

In terms of net sales for fiscal 2020, although we antici-

to contain costs for drugs including the promotion of

in SG&A expenses (including a ¥196 million increase in¥7,863 million increase in inventories, a ¥1,664 million

pate an effect from the drug price revisions implemented

generic drugs and drug price revisions in October (anR&D expenses), operating income declined ¥1,469 million,

decrease in notes and accounts payable, and ¥1,513

in April 2020 (the 2% range for KYORIN Pharmaceuticalindustrywide average 2.4%) associated with the raisingor 16.4%, to ¥7,503 million. Profit attributable to share-

million in income taxes paid.

Co., Ltd.), we also expect a contribution to sales fromof Japan’s consumption tax.

holders of KYORIN Holdings, Inc. declined 10.5%, toGiven this situation, the Kyorin Group pursued trans-¥6,149 million.

formation under the HOPE100–Stage 2– medium-termbusiness plan (fiscal 2016–2019) with unwavering determination, under a management policy for the plan’s final

Investing activities used net cash in the amount of ¥2,943

new products released in fiscal 2019 and growth frommillion, primarily reflecting ¥2,624 million of outlays forthe removal of the limit on the prescription period for a

the purchase of property, plant and equipment.

major product, and are forecasting a large increase in

Financing activities used net cash in the amount ofdomestic sales of new drugs. With regard to generic¥5,117 million, with major items including ¥10,000 million

drugs, we plan to release an authorized generic drugfor repayments of short-term bank loans, ¥10,180 million

and expect sales to grow, and are forecasting significant
sales growth for the ethical drugs business.

year of “mobilizing the Group’s collective strengths toAssets, Liabilities, and Net Assets

bring about transformation,” as we moved forward in the

Current assets as of March 31, 2020, increased by ¥2,154

in proceeds from long-term debt, and ¥4,346 million paidachievement of our targets and in setting a course formillion from the previous fiscal year-end, with increases

as cash dividends.

continuous growth. At our core ethical drugs business, wein merchandise and finished goods and work in process

As a result, cash and cash equivalents at the end of

focused on the management issues of creating original,and decreases in notes and accounts receivable andfiscal 2019 totaled ¥30,509 million, marking a ¥404 million

globally competitive new drugs, discovering drugs contin-

other current assets. Fixed assets decreased ¥4,028

decrease from the previous fiscal year-end.

uously, and creating markets through new drugs. We also

million, with an increase in machinery and vehicle, netvirus, many elements of uncertainty remain. We will

made a Companywide effort to accelerate the growth ofand decreases in investment securities and deferred tax

therefore closely follow developments going forward, andperipheral businesses and achieve low-cost operations, asassets. As a result, total assets decreased ¥1,873 million

should a revision to our forecasts be deemed necessary,

we strove to achieve our targets and gain greater support

from the end of the previous fiscal year, to ¥171,160 million.

and recognition from stakeholders.

Consolidated Operating Results
As for consolidated net sales for fiscal 2019, although

Outlook for Fiscal 2020

Total liabilities decreased by ¥1,189 million from the

The operating environment for the Group’s core ethicalprevious fiscal year-end, to ¥48,449 million, reflecting

drugs business is expected to be even more challenging

increases in accrued income taxes, other current liabilities,

in fiscal 2020, as various policies are implemented tolong-term debt, and liability for retirement benefits, andcurtail medical expenses and drug costs. Against thisdecreases in notes and accounts payable, short-term

backdrop, the Kyorin Group has formulated the newbank loans, and deferred tax liabilities.

HOPE100–Stage 3– medium-term business plan (fiscal

growth in major products and newly released products

Net assets decreased ¥684 million from the end of

2020–2023) for the achievement of the HOPE100 long-contributed to growth in domestic sales of new drugs,

the previous fiscal year, to ¥122,710 million, including

term vision. Under the plan’s statement of “Realization ofa decrease in prescription of long-listed drugs and aan increase in retained earnings and decreases in thea growth trend through the pursuit of originality,” wedelay in the restart of supplies of a major product resulted

unrealized holding gain on other securities and retirement

will move ahead boldly with our business strategy andin an overall decline from the previous year in domestic

benefits liability adjustments.

organizational strategy to achieve our targets and gain

sales of new drugs. On the other hand, overseas sales

As a result, the shareholders’ equity ratio as of the fiscal
year-end was 71.7%, a 0.4 percentage-point increase

management policy for the first year under the plan,

the ethical drugs business declined overall. Sales at thefrom the end of the previous fiscal year.

ending in March 2021, is to “Take up the challenge of

52 2020 ANNUAL REPORTa large increase in net sales.
Although we foresee a negligible impact on businessresults from the spread of infection of the novel corona-

we will promptly release that information.

greater support and recognition from stakeholders. Ourof new drugs and generic drug sales rose, but sales athealthcare business rose, but on a consolidated basis,

We are also forecasting profit growth underpinned bypursuing originality,” which we will do by proactively

2020 ANNUAL REPORT 53

Business Risks

should the Group’s business activities infringe on the

The Group promotes its operations within the framework of pharmaceutical administration, in compliancepatents of another company or otherwise violate its

with legal regulations regarding pharmaceutical development, production, and distribution in Japan, such as
the Pharmaceutical and Medical Device Act, as well as various regulatory frameworks of other countries.
However, we are aware of the existence of risks that could materially affect our business performance andfinancial condition, due to various factors including substantial changes in relevant laws, healthcare system
reforms, drastic changes in the market environment, and large-scale natural disasters.
Among such risks, those that could materially affect the decisions of investors are described below. Although
the Group has taken organizational and systematic measures to minimize risk, the outline does not include
every risk or variable that could affect its business.
The forward-looking statements contained therein represent the Group’s judgment as of March 31, 2020.

1. Risks Associated with R&D
Ethical drug development requires substantial R&D investment over lengthy periods, and the success rate forbringing a drug development candidate to market as apharmaceutical product is low. KYORIN PharmaceuticalCo., Ltd., the Company’s subsidiary, has clarified its priority
research areas and has been making efforts to expand
its pipeline, by engaging in proprietary drug discovery
through cooperation with the WATARASE ResearchCenter and ActivX Biosciences, Inc., in addition to R&D
based on open innovation with pharmaceutical companies,
academic institutions, and venture start-ups in Japan andoverseas. However, should development be delayed or
terminated due to the emergence of unforeseeable side
effects, a failure to achieve intended clinical results, orother reasons, our business performance and financial
condition could be materially affected.
2. Risks Associated with Stable Supply
The supply of certain products and raw materials to theGroup depends on having specific business partners.
The Group has secured a certain amount of products andraw materials to ensure a stable supply of its products,
and has been striving to secure multiple suppliers of its
essential raw materials. However, should manufacturing
activities or procurement be delayed or terminated due
to unforeseeable circumstances, the stable supply of our
products could be adversely affected. Furthermore, while
our pharmaceutical products are manufactured withinvarious regulatory frameworks, should quality-related orother problems occur, and recalling our products become
necessary, our business performance and financial condition could be materially affected.

54 2020 ANNUAL REPORT

3. Risks Associated with Healthcare System Reforms
Japan’s healthcare system, including NHI drug prices, isbeing revised. In terms of sales, the Group is working toincrease the ratio of new pharmaceuticals by maximizing
their availability, while in terms of production, it is engaged
in initiatives including reforms of the cost structure througha consolidation of its production functions and Groupwide
optimization. However, should greater-than-expected
NHI drug price revisions be made or changes to the NHI
system occur, our business performance and financial
condition could be materially affected.
4. Risks Associated with Competition from Other Drugs
In the new drugs business, the Group has been concentrating its management resources in the specific fields ofrespiratory, otolaryngology, and urology, and working toenhance its presence there by giving priority to activities
that provide information to doctors specializing in thesefields. In addition, in the generic drugs business, the Grouphas been engaged in business development that makes
the most of its characteristics by proactively pursuing
the market launch of authorized generics. However, shouldcompetition from peer products in these fields intensify
and the entry of generic drugs after the patent expirationof the original drugs increase, our business performanceand financial condition could be materially affected.

intellectual property rights, the Group could become
involved in legal disputes and have to terminate somebusiness operations, and our business performanceand financial condition could be materially affected.

6. Risks Associated with Lawsuits
The Group, on the advice of experts, manages the litigation risks that occur in its business activities both in Japanand overseas, including those associated with intellectual
property rights such as patents, violations of the Product
Liability Act, environmental protection issues, and labor
disputes. However, should such lawsuits be brought
against the Group, our business performance and financial
condition could be materially affected.
7. Risks Associated with Alliances
The Group promotes strategic alliances to make efficientuse of external capital. Through tie-up agreements withother pharmaceutical companies inside and outside Japan,
the subsidiary allocates sales rights for some of its
products and collaborates in sales, R&D, and otheractivities. In addition, the Group strives to maintain anddevelop ongoing alliance relationships, enhancing these
relationships in light of the sales strategies and R&D trendsof the tie-up partners. However, should these alliancerelationships be ended, our business performance andfinancial condition could be materially affected.
8. Risks Associated with IT Security and Information
Management
Given that numerous IT systems are utilized in business
operations, the Group strives to establish IT security

10. Risks Associated with Side Effects
Clinical trials in the development phase of ethical drugs
are conducted on only a limited number of subjects.
Therefore, should unforeseeable side effects occur after
the launch of a drug, its usage could be restricted or, insome cases, its sale could be discontinued, and ourbusiness performance and financial condition could bematerially affected.
11. Risks Associated with Large-Scale Disasters
The Group prepares various manuals and conducts drills
to prepare for large-scale and other disasters. However,should natural disasters beyond our expectations suchas earthquakes or typhoons, accidents such as fires, or
pandemics such as influenza occur, these events could
result in the closure of plants and the suspension ofoperations at KYORIN Pharmaceutical Group Facilities
Co., Ltd., the Company’s production subsidiary, the Group’s
suppliers, or other locations. While the Group has secured
a certain amount of inventory to ensure a stable supply,
should such plant closings or suspensions extend for alengthy period, our business performance and financial
condition could be materially affected.

measures and a framework for information management
by implementing security software and periodic data
back-ups, and establishing various information management rules and thoroughly communicating them to ouremployees. However, should unforeseeable businessdisruptions or leakages of information occur due to factors

5. Risks Associated with Intellectual Property Rights
The Group strictly manages its intellectual property rights
and continuously pays close attention to any infringements
by third parties. However, should a third party exploit
the Group’s technologies and infringe on our intellectual
property rights in our market or in a related market, or

9. Risks Associated with Volatility in the Financial Markets
The Group’s business performance and financial condition
could be materially affected during import and exporttransactions due to fluctuations in exchange rates. In
addition, should fluctuations occur in the amounts ofpension assets, retirement benefit obligations, the valuation of shares held, etc., due to fluctuations in exchange
rates, in interest rate levels, or on the stock market, ourbusiness performance and financial condition could bematerially affected.

such as system faults or computer viruses, and society’s
trust in the Group become seriously damaged, ourbusiness performance and financial condition could bematerially affected.

12. Risks Associated with Environmental Issues
The Group strives to not only comply with relevant laws
and regulations but also to achieve even higher voluntarystandards in terms of the environment, health, and safety.
It also promotes Groupwide EHS activities that integrate
the environmental management system and the industrial
safety and hygiene management system. However, shoulda violation of relevant laws or regulations occur due to
unexpected accidents or other events in business operations, our business performance and financial condition
could be materially affected.

2020 ANNUAL REPORT 55

Consolidated Balance Sheet
KYORIN Holdings, Inc. and Consolidated Subsidiaries
As of March 31

Assets2020

Millions of yen

Thousands of
U.S. dollars(Note 3)

2019

2020

Current assets:

Liabilities and net assets

Millions of yen

Thousands of
U.S. dollars(Note 3)

2020

2019

2020

Current liabilities:

Cash and cash in banks (Notes 4 and 10)¥ 31,925¥ 32,007$ 293,347

Notes and accounts payable (Note 10)¥ 9,776¥ 11,441$ 89,828

Notes and accounts receivable (Note 10)

47,44952,635435,992

Short-term bank loans (Notes 6 and 10)

10,40020,932

95,562

Short-term investments (Notes 5 and 10)

993

501

9,124

141

80

1,296

Accrued income taxes (Note 12)

1,414

815

12,993Merchandise and finished goods

17,913

12,924

164,596

Accrued bonuses to employees

2,334

2,241

21,446Work in process

6,190

3,198

56,878Reserve for sales returns

25

48

230

Raw materials and supplies

9,179

9,297

84,343

Other

7,235

5,919

66,480

3,446

4,384

31,66431,32841,480287,862

(40)

(45)

(368)

117,058

114,904

1,075,604
12,514

2,634

114,987

Lease obligations (Note 6)

538

376

4,943

Deferred tax liabilities (Note 12)

201

2,064

1,847

Provision for stock-based payments

36

11

331

3,140

2,485

28,852

690

587

6,340

17,121

8,159

157,319

Inventories:

Other
Less allowance for doubtful accounts
Total current assets

Lease obligations (Note 6)

Total current liabilities

Long-term liabilities:
Long-term debt (Notes 6 and 10)

Liability for retirement benefits (Note 11)
Other

Property, plant and equipment:
Land

2,104

2,093

19,333

Buildings and structures

32,391

31,877

297,629

Machinery and vehicle

23,511

21,846

216,034

Leased assets

926

635

8,509

Construction in progress

915

644

8,408

9,120

8,731

83,800(46,248)(44,035)(424,956)

22,721

21,792

208,775

Other
Less accumulated depreciation and impairment loss
Property, plant and equipment, net

Total long-term liabilities

Net assets:
Shareholders’ equity (Note 7):
Common stock, no par value:
Authorized – 297,000,000 shares in 2020 and 2019

700

700

6,432

Capital surplus

4,752

4,752

43,664Retained earnings

130,788

128,999

1,201,764(17,706)(17,707)(162,694)

118,534

116,744

1,089,167

6,922

8,925

63,604

36

56

331

Issued – 64,607,936 shares in 2020 and 2019

Treasury stock, at cost (Note 16):
7,321,870 shares in 2020
7,322,490 shares in 2019

Investments and other assets:

25,86829,799237,692

Long-term loans

3

4

28

Asset for retirement benefits (Note 11)

—

88

—

Deferred tax assets (Note 12)

714

1,529

6,561

Translation adjustments

4,838

4,961

44,455Retirement benefits liability adjustments(2,782)(2,331)(25,563)

(44)

(44)

(404)

Total accumulated other comprehensive income

4,176

6,651

38,372

Investment securities (Notes 5 and 10)

Other
Less allowance for doubtful accounts
Total investments and other assets
Total assets

31,38036,338288,340¥171,160¥173,034$1,572,728

Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain on other securities

Total net assets

122,710

123,395

1,127,538

Total liabilities and net assets¥171,160¥173,034$1,572,728

See notes to consolidated financial statements.

56 2020 ANNUAL REPORT

2020 ANNUAL REPORT 57

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets

KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2020

KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2020

Millions of yen
2020

2019

2020

Net sales¥109,983¥113,620$1,010,595

Cost of sales

52,95057,032
49,528
7,503

56,21057,40948,436
8,972

486,539
524,047455,095
68,942Gross profit
Selling, general and administrative expenses (Note 8)
Operating income
Other income (expenses):

428
(75)
19
106
(24)
104
—
—
108
85
752
8,255

Interest and dividend income
Interest expense
Equity in gains of affiliates
Foreign exchange gain
Losses on sales and retirement of property, plant and equipment, net (Note 9)
Gain on sales of investment securities, net (Note 5)
Loss on devaluation of investment securities
Commission for purchase of treasury stock
Subsidy income
Other, net
Other income, net
Profit before income taxes

3,933
(689)
175
974
(221)
956
—
—
992
781
6,910
75,852

415
(64)
36
54
(107)
28
(0)
(245)
138
131
386
9,359

Income taxes (Note 12):Current
Deferred
Total income taxes
ProfitProfit attributable to shareholders of KYORIN Holdings, Inc.

2,085
20
2,106
6,149
¥ 6,149

2,004
485
2,490
6,869
¥ 6,869

Millions of yen

Thousands of
U.S. dollars(Note 3)$

19,158184
19,35156,50156,501Millions of yen

ProfitThousands of
U.S. dollars(Note 3)

2020

2019

2020

¥6,149¥6,869$56,501(1,982)(19)(1,169)(27)(18,212)
(175)

(451)
(21)
(2,474)¥3,67446(6)(1,157)¥5,711(4,144)(193)(22,733)$33,759¥3,674—¥5,711—$33,759—

Other comprehensive loss (Note 13):
Unrealized holding loss on other securities
Translation adjustments
Retirement benefits liability adjustments
Share of other comprehensive income of affiliates accounted for using equity method
Total other comprehensive income
Comprehensive loss

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at costTotal
shareholders’equityUnrealized
holding
gain (loss)
on othersecurities

Translation
adjustments

Retirement
benefits
liability
adjustments

Total
accumulated
othercomprehensive
incomeTotal
net assets

74,947,628¥700¥4,752¥152,542¥ (2,506)¥155,489¥10,101¥83¥(2,377)¥7,808¥163,297———(5,081)—(5,081)

—

—

—

—

(5,081)

Profit attributable to shareholders
of KYORIN Holdings, Inc.

—

—

6,869

—

6,869

—

—

—

—

6,869

Purchase of treasury stock

—

—

—

—

(40,838)(40,838)

—

—

—

—

(40,838)

Disposals of treasury stock

—

—

—

—

306

306

—

—

—

—

306

Retirement of treasury stock

10,339,692——(25,330)

25,330

—

—

—

—

—

—

—

—

—

—

—

—

(1,175)(27)

46(1,157)(1,157)

Other changes

—

—

—

—

(23,542)(15,201)(38,744)(1,175)(27)

46(1,157)(39,902)64,607,936

700

4,752

128,999(17,707)

116,744

8,925

56(2,331)

6,651

123,395

Cash dividends

—

—

—

(4,361)—(4,361)

—

—

—

—

(4,361)

Profit attributable to shareholders
of KYORIN Holdings, Inc.

—

—

—

6,149

—

6,149

—

—

—

—

6,149

Purchase of treasury stock

—

—

—

—

(0)

(0)

—

—

—

—

(0)

Disposals of treasury stock

—

—

—

—

1

1

—

—

—

—

1

Retirement of treasury stock

—

—

—

—

—

—

—

—

—

—

—

Other changes

—

—

—

—

—

—

(2,003)

(19)

(451)

(2,474)(2,474)

Net changes during the year
Balance as of April 1, 2019

Net changes during the year

—

—

—

1,788

1

1,789

(2,003)

(19)

(451)

(2,474)(684)

Balance as of March 31, 2020

64,607,936¥700¥4,752¥130,788¥(17,706)¥118,534¥ 6,922¥36¥(2,782)¥4,176¥122,710

Thousands of U.S. dollars (Note 3)
Accumulated othercomprehensive income

Shareholders’ equity

Number ofshares issued(Common stock)

Commonstock

CapitalsurplusTreasurystock,
at costTotal
shareholders’equityUnrealized
holding
gain (loss)
on othersecurities

Translation
adjustments

Retirement
benefits
liability
adjustments

Total
accumulated
othercomprehensive
incomeTotal
net assets$1,185,326 $(162,703)

Retainedearnings

64,607,936$6,432$43,664$1,072,719$82,009$515$(21,419)$61,114$1,133,833

Cash dividends

—

—

—

(40,072)—(40,072)

—

—

—

—

(40,072)

Profit attributable to shareholders
of KYORIN Holdings, Inc.

—

—

—

56,501—56,501————56,501

Purchase of treasury stock

—

—

—

—

(0)

(0)

—

—

—

—

(0)

Disposals of treasury stock

—

—

—

—

9

9

—

—

—

—

9

Retirement of treasury stock

—

—

—

—

—

—

—

—

—

—

—

Other changes

—

—

—

—

—

—

(18,405)(175)(4,144)(22,733)(22,733)

Net changes during the year

—

—

—

16,429916,438(18,405)(175)(4,144)(22,733)(6,285)

Balance as of March 31, 2020

64,607,936$6,432$43,664$1,201,764 $(162,694)$1,089,167$63,604$331$(25,563)$38,372$1,127,538

Balance as of April 1, 2019

KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2020

Number ofshares issued(Common stock)

Cash dividends

Balance as of April 1, 2018

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income

Accumulated othercomprehensive income

Shareholders’ equity

See notes to consolidated financial statements.

Total comprehensive income attributable to:Shareholders of KYORIN Holdings, Inc.
Non-controlling interests
See notes to consolidated financial statements.

58 2020 ANNUAL REPORT

2020 ANNUAL REPORT 59

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2020

KYORIN Holdings, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2020

Millions of yen

Thousands of
U.S. dollars(Note 3)

2020

2019

2020

¥ 8,255
3,221
(5)
94
199
(106)
(19)
—
(428)
75
—
24
(104)
—
5,185
(7,863)(1,664)
(101)
2,129
8,892
436
(75)
(1,513)
7,739¥ 9,359
2,940
(1)
(139)
599
(139)
(36)
(428)
(415)
64
245
107
(28)
0
(4,773)(2,112)
1,175
349(3,309)
3,459
422
(64)
(3,476)340$ 75,852
29,597
(46)
864
1,829
(974)
(175)
—
(3,933)
689
—
221
(956)
—
47,643(72,250)(15,290)(928)
19,56381,705
4,006(689)(13,902)
71,111

Operating activities
Profit before income taxes
Depreciation and amortization
Decrease in allowance for doubtful accounts
Increase (decrease) in accrued bonuses to employees
Decrease in asset for retirement benefits
Decrease in liability for retirement benefits
Equity in gains of affiliates
Decrease in provision for loss on guarantees
Interest and dividend income
Interest expense
Purchase of treasury stock
Losses on sales and retirement of property, plant and equipment, net
Gain on sales of investment securities, net
Loss on devaluation of investment securities
Decrease (increase) in notes and accounts receivable
Increase in inventories(Decrease) increase in notes and accounts payable(Decrease) increase in consumption taxes payable
Other, net
SubtotalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities

1. Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of KYORIN Holdings, Inc. (the “Company”) and consolidated
subsidiaries are prepared in accordance with accounting principles generally accepted in Japan (“Japanese GAAP”),
which are different in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as
required by the Financial Instruments and Exchange Act of Japan.
Certain reclassifications have been made in the 2019 consolidated financial statements to conform to the 2020
presentation. These reclassifications have no effect on consolidated profit and net assets. Amounts of less than one
million yen and thousand U.S. dollars have been rounded down to the nearest million yen and thousand U.S. dollars,
respectively, in the presentation of the accompanying consolidated financial statements. As a result, the totals in yen
and U.S. dollars do not necessarily agree with the sum of the individual amounts.

2. Summary of Significant Accounting Policies(a) Basis of Consolidation and Accounting for Investments in Unconsolidated Subsidiaries and Affiliates
The accompanying consolidated financial statements include the accounts of the Company and significant companies
controlled directly or indirectly by the Company. Companies over which the Company exercises significant influencein terms of their operating and financial policies are included in the consolidated financial statements on an equity
basis. As of March 31, 2020, the numbers of consolidated subsidiaries and affiliates accounted for by the equity
method were 6 and 1 (7 and 1 in 2019). During the year ended March 31, 2020, the Company deconsolidated
Kyorin USA, Inc. which resolved to dissolve and has insignificant effect on the consolidated financial statements of
the Company. All significant inter-company balances and transactions are eliminated in consolidation.
Investments in subsidiaries and affiliates, which are not consolidated or accounted for by the equity method, arecarried at cost or less. Where there has been a permanent decline in the value of such investments, the Company
has written down the investments.
Among the consolidated subsidiaries, Kyorin Europe GmbH and ActivX Biosciences, Inc. close their books ofaccount at December 31 for financial reporting purposes. Their financial statements are used for preparing theconsolidated financial statements, and necessary adjustments are made to the consolidated financial statements
for any significant transactions between their balance sheet date (December 31) and the consolidated balance
sheet date (March 31).

Investing activities
Payments for time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Other, net
Net cash (used in) provided by investing activities

(954)
622
(2,624)
26
(593)
(100)
804
(123)
(2,943)(622)
659(2,170)23(2,199)(620)
19,997(129)
14,939(8,766)
5,715(24,111)239(5,449)(919)
7,388(1,130)(27,042)(b) Foreign Currency Translation
The revenue and expense accounts of the foreign consolidated subsidiaries are translated into yen at the average
rates of exchange in effect during the year. The balance sheet accounts, except for the components of net assets
are translated into yen at the exchange rates in effect at the balance sheet date. The components of net assets
are translated at their historical exchange rates. Differences arising from the translation are presented as translation
adjustments, which are presented as a component of net assets in the accompanying consolidated balance sheet.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposit with banks withdrawable on demand, and short-term

Financing activities(Decrease) increase in short-term bank loans, net
Repayments of lease obligations
Proceeds from long-term debt
Repayments of long-term debt
Net increase in treasury stock
Cash dividends
Net cash used in financing activities
Effects of exchange rate changes on cash and cash equivalents
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Decrease in cash and cash equivalents due to the exclusion of consolidation
Cash and cash equivalents at end of year (Note 4)

investments which are readily convertible into cash and are subject to an insignificant risk of any changes in their value(10,000)(118)
10,180(832)(0)(4,346)(5,117)(22)(343)
30,914(61)¥30,509

19,975(104)
303(1,582)(40,839)(5,068)(27,315)(22)(12,057)
42,971—¥30,914(91,886)(1,084)93,540(7,645)(0)(39,934)(47,018)(202)(3,152)
284,058(561)$280,336

and which were purchased with original maturities of three months or less.
(d) Short-Term Investments and Investment Securities
Securities other than equity securities issued by subsidiaries and an affiliate are classified into other securities.
Marketable securities classified as other securities are carried at fair value with changes in unrealized gain or loss,
net of the applicable income taxes, directly included in net assets. Non-marketable securities classified as othersecurities are stated at cost. Cost of securities sold is determined by the moving average method.
(e) Inventories
Merchandise and finished goods, work in process, raw materials, and some supplies (samples) are mainly stated atcost determined by the gross average method. These inventories with lower profitability are written down to their net
realizable value. Supplies except for samples are stated at the last purchase price method.

See notes to consolidated financial statements.

60 2020 ANNUAL REPORT

2020 ANNUAL REPORT 61

(f) Depreciation and Amortization (Except for Leased Assets)financial statements, which is one of benefits of maintaining consistency with IFRS 15, and to add alternative

Depreciation of property, plant and equipment is calculated by the straight-line method based on the estimated usefulaccounting treatments to the extent that they do not impair comparability in cases where common practices andlives of the respective assets. The useful lives of property, plant and equipment are summarized as follows:others in Japan should be considered.

Buildings and structures

3 to 50 years

Machinery and vehicle

4 to 17 years

Intangible assets are amortized by the straight-line method over their estimated useful lives. Computer software for(2) Date of application
From the beginning of the fiscal year ending March 31, 2022.

internal use is capitalized and amortized by the straight-line method over the useful life of three to five years.
(3) Effect of application(g) Leases

The effect of applying the “Accounting Standard for Revenue Recognition,” etc. on the consolidated financial

Leased assets are depreciated over the lease term by the straight-line method with no residual value. All financestatements is currently under assessment.

leases are accounted for in the same manner as sales transactions.
“Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, issued on July 4, 2019)(h) Research and Development Expenses“Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9, revised on July 4, 2019)

Research and development expenses are expensed as incurred.

“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, revised on July 4, 2019)“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31,(i) Income Taxes

issued on July 4, 2019)

Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax“Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19,

bases of the assets and liabilities and are measured using the effective tax rates and laws which will be in effect whenrevised on March 31, 2020)

the differences are expected to reverse.
(1) Overview(j) Accounting Method for Retirement Benefits

The ASBJ promoted an initiative to enhance comparability of the requirements between the Japanese accounting

The retirement benefit obligation is calculated by allocating the estimated retirement benefit amount to period of service

standards and international accounting standards, primarily in the areas of guidance on the fair values of financial

on the benefit formula basis.

instruments and their disclosures, and issued “Accounting Standard for Fair Value Measurement,” etc., considering

Prior service cost is amortized as incurred by the straight-line method over the average remaining years of service ofthe employees in the year such cost occurs (10 years).
Actuarial gain or loss is amortized from the year following the year in which such gain or loss is recognized primarily
by the straight-line method over the average remaining years of service of the employees in the year such gain or loss
occurs (10 years).
Unrecognized actuarial loss and unrecognized prior service costs are, after adjusting for tax effects, recorded as
retirement benefits liability adjustments under accumulated other comprehensive income in net assets.

the circumstance where the IASB and the FASB have prescribed almost the similar detailed guidance (IFRS 13 “Fair
Value Measurement” issued by IASB and Accounting Standard Codification Topic 820 “Fair Value Measurement”
issued by FASB).
The ASBJ’s fundamental policies adopted for developing the “Accounting Standard for Fair Value Measurement,”
etc. are, in principle, to implement all the requirements of IFRS 13 from the viewpoint of enhancing the comparabilityof the financial statements of domestic and overseas companies by prescribing unified measurement methods, andalso to prescribe exceptional treatments for individual matters so that comparability would not be impaired while theaccounting practices that have conventionally been adopted in Japan are taken into account.

(k) Appropriation of Retained Earnings
Appropriation of retained earnings with respect to a given financial period is made by resolution of the Board of(2) Date of application

Directors’ meeting for dividend and resolution of the ordinary general shareholders’ meeting for other appropriations

From the beginning of the fiscal year ending March 31, 2022.

(see Note 7).
(3) Effect of application(l) Accounting Standard Issued but Not Yet Effective

The effect of applying the “Accounting Standard for Fair Value Measurement,” etc. on the consolidated financial“Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (“ASBJ”) Statement

statements is currently unknown.

No. 29, issued on March 30, 2018)“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30,(m) Additional Information

issued on March 30, 2018)

Employee Stock Delivery Trust (the “J-ESOP”)
At a meeting of the Board of Directors held on February 23, 2016, the Company resolved that KYORIN Pharmaceutical(1) Overview

Co., Ltd. (“KYORIN Pharmaceutical”), a subsidiary of the Company introduces an incentive plan referred to as the

The International Accounting Standards Board (“IASB”) and the Financial Accounting Standards Board of the United

Employee Stock Delivery Trust (the “J-ESOP”) (hereinafter, the “ESOP Plan”) under which the Company’s shares will

States of America (“FASB”) jointly developed a comprehensive accounting standard for revenue recognition and issued

be delivered to employees of KYORIN Pharmaceutical.

“Revenue from Contracts with Customers” (IFRS 15, issued by the IASB and Topic 606, issued by the FASB) in May

The Company is accounting for the Plan in line with the guidelines set out in “Practical Solution on Transactions of2014. Considering that IFRS 15 has become applicable from fiscal years beginning on or after January 1, 2018 and

Delivering the Company’s Own Stock to Employees etc. through Trusts” (ASBJ Practical Issues Task Force (“PITF”)

Topic 606 from fiscal years beginning after December 15, 2017, the ASBJ developed a comprehensive accounting

No. 30, March 26, 2015).

standard for revenue recognition and issued it together with implementation guidance.
The ASBJ’s basic policy in developing the accounting standard for revenue recognition was to establish accounting
standards as a starting point in accordance with basic principles of IFRS 15 from the viewpoint of comparability of

62 2020 ANNUAL REPORT

2020 ANNUAL REPORT 63

(1) Outline of transactions

3. U.S. Dollar Amounts

Under the ESOP Plan, the Company’s shares will be delivered to eligible employees of KYORIN Pharmaceutical who

The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic

satisfy certain requirements, based on the share delivery rules prescribed by KYORIN Pharmaceutical in advance.

computation only, at the rate of ¥108.83 = U.S.$1.00, the approximate rate of exchange on March 31, 2020. The

KYORIN Pharmaceutical will award its employees a set number of points based on business performance and hisor her personal contribution and deliver or pay the Company’s shares and cash to its employees who attained rights

translation should not be construed as a representation that yen have been, could have been, or could in the future
be, converted into U.S. dollars at the above or any other rate.

to receive such delivery or payment under certain conditions. The Trust will acquire the Company’s shares to bedelivered including future delivery portion using the entrusted money, and separately manage as trust assets.
Through introduction of the ESOP Plan, it is expected to contribute to employees’ work motivation, by increasing
interest in improvement of business performance and the Company’s share price. In addition, it is expected that various

4. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2020 and 2019 for the consolidated statements of cash flows consistedof the following:stakeholders including shareholders will receive shared benefits from improvement in the Company’s corporate value.
(2) Company shares remaining in trust
Treasury shares remaining in the Trust are presented as treasury stock in net assets with carrying value in the Trust(excluding ancillary expenses). As of March 31, 2020 and 2019, the carrying amounts of the treasury shares were
¥1,645 million ($15,115 thousand) and ¥1,645 million, respectively, and the total numbers of treasury shares were
754 thousand shares and 754 thousand shares, respectively.
Performance-Linked Stock Compensation PlanAt the 58th Ordinary General Meeting of Shareholders held on June 24, 2016, the Company resolved to introduce a
performance-linked stock compensation plan (hereinafter, the “Plan”) for directors (excluding outside directors) of

Cash and cash in banks
Time deposits with a maturity over three months
Cash and cash equivalents

funds contributed by the Company, and the Company’s shares and the amount of cash equivalent to the Company’s
shares at their fair value (hereinafter, the “Company’s Shares, etc.”) are paid to eligible Group Directors based on the

Corporate bonds

stock benefit rules for directors prescribed by the Company and its subsidiary.

Other bonds

The Company adopts a Board Benefit Trust system when introducing the Plan. In principle, the Group Directors
shall receive the Company’s Shares, etc. on a certain date during the trust period set out by the stock benefit rules
for directors or upon their retirement, whichever is earlier.
(2) Company shares remaining in trust
Treasury shares remaining in the Trust are presented as treasury stock in net assets with carrying value in the Trust(excluding ancillary expenses). As of March 31, 2020 and 2019, the carrying amounts of the treasury shares were ¥224
million ($2,058 thousand) and ¥226 million, respectively, and the total numbers of treasury shares were 99 thousand
shares and 100 thousand shares, respectively.

¥32,007(1,093)¥30,914$293,347(13,011)$280,336

Marketable other securities

Securities whose carrying value
exceeds their acquisition cost:
Equity securities
Debt securities:
Government bonds

The Plan is a stock-based compensation plan whereby the Company’s shares are acquired through a trust with the¥31,925(1,416)¥30,509

Information regarding marketable securities classified as other securities as of March 31, 2020 and 2019 is as follows:

The Company is accounting for the Plan in line with the guidelines set out in “Practical Solution on Transactions of(1) Outline of transactions

Thousands of
U.S. dollars
2020

5. Short-Term Investments and Investment Securities

Acquisition
cost

Carrying
value

Millions of yen
2020
Unrealized
gain (loss)¥ 8,652¥18,755¥10,102$ 79,500$172,333$92,824

900
—
—
9,552

900
—
—
19,6550——
10,1038,270——
87,7708,270——
180,6030——
92,833

2,034

1,858

(175)

18,69017,072(1,608)

3,100
—
1,000
6,134
¥15,686

3,098
—
993
5,950
¥25,605

(1)
—
(6)
(184)
¥ 9,919

28,485—9,189
56,363$144,133

28,466—
9,124
54,672$235,275

(9)
—
(55)
(1,691)$91,142KYORIN Holdings, Inc. and KYORIN Pharmaceutical (hereinafter, the “Group Directors”).
Delivering the Company’s Own Stock to Employees etc. through Trusts” (PITF No. 30, March 26, 2015).

2020

Millions of yen
2019

Subtotal
Securities whose carrying value
does not exceed their acquisition cost:
Equity securities
Debt securities:
Government bonds
Corporate bonds
Other bonds
Subtotal
Total

Acquisition
cost

Thousands of U.S. dollars
2020
Carrying
Unrealized
value
gain (loss)

Accounting treatments in relation to the implementation of the consolidated taxation system
The Company and its domestic consolidated subsidiaries will apply the consolidated taxation system from the
beginning of the year ending March 31, 2021.
As a result, treatments from the beginning of the year ended March 31, 2020 are based on the application of aconsolidated taxation system in accordance with “Practical Solution for Tentative Treatment of Tax Effect Accounting
Under Consolidated Taxation System (Part 1)” (PITF No.5, January 16, 2015) and “Practical Solution for Tentative
Treatment of Tax Effect Accounting Under Consolidated Taxation System (Part 2)” (PITF No.7, January 16, 2015).

64 2020 ANNUAL REPORT

2020 ANNUAL REPORT 65

Acquisition
cost

Carrying
value

Millions of yen
2019
Unrealized
gain (loss)

Long-term debt from Japan Science and Technology Agency (National Research and Development Agency),
amounting to ¥1,277 million ($11,734 thousand) and ¥1,096 million as of March 31, 2020 and 2019, respectively,
bears no interest.
The annual maturities of long-term debt (excluding long-term debt from Japan Science and Technology Agency

Securities whose carrying value exceeds their acquisition cost:
Equity securities¥10,673

Debt securities:
Government bonds
Corporate bonds
Other bonds
Subtotal
Securities whose carrying value does not exceed their acquisition cost:
Equity securities
Debt securities:
Government bonds
Corporate bonds
Other bonds
Subtotal
Total¥23,460¥12,787

1,500
200
—
12,3731,501
200—
25,162

1
0—
12,789

13

11

(1)

2,900
—
1,000
3,913
¥16,286

2,898
—
989
3,900
¥29,062

(1)
—
(10)
(13)
¥12,775(National Research and Development Agency)) and lease obligations are summarized as follows:Year ending March 31,

Thousands of
U.S. dollars

Millions of yen

¥

441
334
317
302
10,257

2021
2022
2023
2024
2025

$ 4,052
3,069
2,913
2,775
94,248The annual maturities of long-term debt from Japan Science and Technology Agency (National Research andDevelopment Agency) are excluded from the above table because authorization date of success in development
and other matters are not determinable.

7. Shareholders’ Equity
Japanese companies have been subject to the Companies Act of Japan (the “Companies Act”). The significant

Unlisted securities and other non-marketable securities are not included in the above schedules as their fair

provisions in the Companies Act that affect financial and accounting matters are summarized below:

market values are extremely difficult to be determined. The amounts of these securities were ¥640 million ($5,881
thousand) and ¥612 million as of March 31, 2020 and 2019, respectively.

(a) Dividends

Sales amounts of securities classified as other securities and the related aggregate gain and loss for the years
ended March 31, 2020 and 2019 are summarized as follows:

Proceeds from sales
Gains on sales
Losses on sales

dividend upon resolution at the shareholders’ meeting. The board of directors may declare dividends (except for

2020

Millions of yen
2019

Thousands of
U.S. dollars
2020

¥200
0
—

¥19,59752
24$1,8380—

Short-term bank loans and the current portion of long-term debt and lease obligations as of March 31, 2020 and 2019consisted of the following:

Current portion of long-term debt
Current portion of lease obligations
Total

dividends-in-kind) if the company has prescribed so in its articles of incorporation for companies that meet certain
criteria such as:(1) having the board of directors,(2) having independent auditors,(3) having a board of corporate auditors, and(4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles
of incorporation.

6. Short-Term Bank Loans, Long-Term Debt and Lease Obligations

Short-term bank loans

Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end

2020

Millions of yen
2019

Thousands of
U.S. dollars
2020¥10,100
300
141¥10,541¥20,100
832
80¥21,012$92,805
2,757
1,296$96,857

The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject
to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the board of directors if the articles ofincorporation of the company so stipulate. The Companies Act also provides certain limitations on the amounts available
for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve(a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on

The average interest rates applicable to short-term bank loans outstanding as of March 31, 2020 and 2019 are
0.3% and 0.3%, respectively.

and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount ofLong-term debt and lease obligations as of March 31, 2020 and 2019 consisted of the following:

Long-term debt, due through 2027 at average interest rate of 0.2%
and 0.3% in 2020 and 2019, respectively
Lease obligations due through 2030 in 2020 and 2019
Current portion of long-term debt and lease obligations due within one year
Total

66 2020 ANNUAL REPORT

the equity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve
additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that

Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥12,814679(441)¥13,052¥3,466456(913)¥3,010$117,743
6,239(4,052)$119,930

common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferredamong the accounts under certain conditions upon resolution of the shareholders.

2020 ANNUAL REPORT 67

Operating payables and loans and debts are exposed to liquidity risk. The Company and its consolidated subsid-(c) Treasury Stock and Stock Option
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock byiaries manage the risk by preparing and updating the cash management plan periodically.

resolution of the board of directors. The amount of treasury stock purchased cannot exceed the amount available for
distribution to the shareholders, which is determined by specific formula. Under the Companies Act, stock acquisition(c) Supplemental Information on Fair Value of Financial Instruments

rights, which were previously presented as a liability, are now presented as a separate component of net assets.

As well as the values based on market prices, fair values of financial instruments include values, which are reasonably

The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury

calculated in case market prices do not exist. As the calculation of those values includes variable factors, those values

stock. Such treasury stock acquisition rights are presented as a separate component of net assets or deducted

may vary in case different assumptions are applied.

directly from stock acquisition rights.

Carrying values, fair values, and their differences of financial instruments as of March 31, 2020 and 2019 are as follows:
Millions of yen

8. Research and Development Expenses
Research and development expenses included in general and administrative expenses for the years ended March 31,
Cash and cash in banks

2020 and 2019 were ¥10,987 million ($100,956 thousand) and ¥10,790 million, respectively.

9. Gain or Loss on Sales and Retirement of Property, Plant and Equipment, Net
Significant components of the gain or loss on sales and retirement of property, plant and equipment, net for the years
ended March 31, 2020 and 2019 are as follows:
Millions of yen

Thousands of
U.S. dollars

2019

2020

2
3
7
0
¥ 14

$ —
175
—
0
$ 175

2020

Gain:
Machinery and vehicles
Land
Other
Loss:
Buildings and structures
Machinery and vehicles
Other
Total

¥—
19
—
0
¥ 19
¥ (7)
(2)
(34)
(43)
¥(24)

¥

¥ (29)
(3)
(87)
(121)
¥(107)$ (64)
(18)
(312)
(395)
$(221)

10. Financial Instruments(a) Investment Policy of Financial Instruments

Short-term investments and investment
securities
Total assets

2020

Carrying value

Fair value

Difference

Carryingvalue¥ 31,925¥ 31,925¥—$293,347$293,347$ —

47,44947,449—435,992

435,992—

25,605¥104,980

25,605¥104,980—¥—

235,275$964,624

235,275$964,624—$ —Notes and accounts receivable

Buildings and structures

Thousands of U.S. dollars

2020
Fair value

Difference

Notes and accounts payable¥ 9,776¥ 9,776¥—$ 89,828$ 89,828$ —Short-term bank loans¥ 10,400¥ 12,514¥ 32,691¥ 10,400¥ 12,512¥ 32,689

¥—
¥ (2)
¥ (2)

$ 95,562$114,987$300,386$ 95,562$114,968$300,368$ —$ (18)$ (18)

Long-term debt
Total liabilities

Millions of yen
2019

Cash and cash in banks
Notes and accounts receivable
Short-term investments and investment securities
Total assets
Notes and accounts payable
Short-term bank loans
Long-term debt
Total liabilities

Carrying
value

Fair value

Difference¥ 32,007
52,63529,062¥113,705¥ 32,007
52,63529,062¥113,705

¥—
—
—
¥—

¥ 11,441¥ 20,932¥—¥ 32,374¥ 11,441¥ 20,932¥—¥ 32,374

¥—
¥—
¥—
¥—

The Company and its consolidated subsidiaries mainly operate funds by the highly secured financial instruments

Unlisted securities and others of ¥1,255 million ($11,532 thousand) and ¥1,238 million whose fair values are

such as deposits and highly rated bonds, ensuring the security and liquidity. The Company and its consolidated

extremely difficult to determine as of March 31, 2020 and 2019, respectively, are not included in the above tables.

subsidiaries use bank loans as the prime source of financing, and no derivatives are used.

Calculation method of fair value of financial instruments and information about securities are as follows:(b) Details of Financial Instruments, Associated Risks and Risk Management

Cash and cash in banks and Notes and accounts receivable

Operating receivables such as notes and accounts receivable are exposed to credit risk. The Company and its

The carrying value is deemed as the fair value since it is scheduled to be settled in a short period of time.

consolidated subsidiaries, in accordance with internal rules, keep track of the adverse financial conditions of thecustomers in the early stage to mitigate the bad debt by monitoring the major customers’ credit conditions periodically

Short-term investments and Investment securities

and managing the due date and balance per each customer. The Company and its consolidated subsidiaries mitigate

Fair value of equity securities is based on the price on stock exchanges and that of bonds is based on the priceforeign currency risk by utilizing foreign currency deposits for operating receivables denominated in foreign currencies

on bond markets or the price presented by the counterparty financial institutions. Please see Note 5, Short-Termand settling payables denominated in the same currencies through the deposits.

Investments and Investment Securities, for securities by classification.

Short-term investments and investment securities mainly consist of highly rated bond securities and equity
securities of companies with business relationships and are exposed to market risk and credit risk. The Company

Notes and accounts payable and Short-term bank loans

and its consolidated subsidiaries regularly review the fair value and issuers’ financial condition to mitigate the risks.

The carrying value is deemed as the fair value since these are scheduled to be settled in a short period of time.

Operating payables such as notes and accounts payable are mainly due within six months. Certain operating
payables are denominated in foreign currencies.
Bank loans and debts are mainly used for the operating fund, fund for capital investments and the funding support
for development expenses from Japan Science and Technology Agency (National Research and Development Agency).

68 2020 ANNUAL REPORT

Long-term debt
The fair value of long-term debt is determined by discounting the amount of the total principal and interest at theinterest rate assumed when new, similar loans are made.

2020 ANNUAL REPORT 69

The redemption schedule for monetary receivables and securities with maturities subsequent to March 31, 2020

(2) The changes in plan assets for the years ended March 31, 2020 and 2019 are as follows:

is as follows:

Millions of yen

Millions of yen
2020
Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Cash and cash in banks¥31,925

¥

—

¥—

¥—

Notes and accounts receivable

47,449———

Short-term investments and investment securities:

Other
Total

Expected return on plan assets
Actuarial loss
Contributions paid by the employer
Retirement benefits paid
Plan assets at the end of the year

Other securities with maturities:
Government bonds

Plan assets at the beginning of the year—
1,000
¥80,374

4,000—¥4,000

—
—
¥—

—
—
¥—

2020

2019

2020

¥33,315
666
(22)
985
(1,694)¥33,249¥33,955
679
(633)
1,011
(1,696)¥33,315$306,120
6,120
(202)
9,051
(15,566)$305,513(3) The changes in liability (asset) for retirement benefits for consolidated subsidiaries applying the simplified method
for the years ended March 31, 2020 and 2019 are as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥212
113
(51)
(95)

¥191
47
(14)
(12)

$1,948
1,038
(469)
(873)

¥178

¥212

$1,636

Thousands of U.S. dollars
2020
Due after five years
through ten years

Due after
ten years

—

$—

$—

—

—

—

Due in one
year or lessDue after one year
through five years

Cash and cash in banks$293,347$

Notes and accounts receivable

435,992

Liability (asset) for retirement benefits at the beginning of the year
Retirement benefits costs
Retirement benefits paid
Contributions to the plans
Liability (asset) for retirement benefits at the end of the year

Short-term investments and investment securities:

Thousands of
U.S. dollars

Other securities with maturities:
Government bonds
Other
Total

—
9,189
$738,528

36,755—$36,755

—
—
$—

—
—
$—

(4) The reconciliation between the liabilities recorded in the consolidated balance sheet and the balances of defined
benefit obligations and plan assets as of March 31, 2020 and 2019 are as follows:

11. Retirement Benefit Plans

Funded defined benefit obligation

The Company and its consolidated subsidiaries have defined benefit pension plans, defined contribution pension

Plan assets

plans, and annuity in advance retirement severance plans, and certain domestic consolidated subsidiaries adopt
Unfunded retirement benefit obligation

lump-sum retirement plans.

Net liability (asset) for retirement benefits

Certain domestic consolidated subsidiaries apply a simplified method that uses the amount that would be

Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥36,611(33,586)
3,024
115¥ 3,140¥35,622(33,525)2,096
300¥ 2,397$336,405(308,610)
27,786
1,057$ 28,852¥ 3,140—¥ 3,140¥ 2,485(88)¥ 2,397$ 28,852—$ 28,852

required to be paid at the year-end for voluntary termination as the retirement benefit obligation in computing
Liability for retirement benefits

liability for retirement benefits and retirement benefits costs.

Asset for retirement benefits
Net liability (asset) for retirement benefits

Defined benefit plans(1) T he changes in the retirement benefit obligation for the years ended March 31, 2020 and 2019 are as follows:

Retirement benefit obligation at the beginning of the year
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Decrease due to transfer
Retirement benefit obligation at the end of the year

Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥35,500
1,196
177
1,031
(1,694)—¥36,211¥35,767
1,245
178
62
(1,696)(56)¥35,500$326,197
10,9901,626
9,473(15,566)—$332,730

The above table includes defined benefit plans applying the simplified method.
(5) The components of retirement benefits costs for the years ended March 31, 2020 and 2019 are as follows:
Millions of yen

Service costs
Interest costs
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service costs
Retirement benefits costs based on the simplified method
Retirement benefits costs

70 2020 ANNUAL REPORT

Thousands of
U.S. dollars

2020

2019

2020

¥1,196
177
(666)
430
(27)

¥1,245
178
(679)
809
(46)

$10,990
1,626(6,120)
3,951
(248)

113
¥1,22447¥1,555

1,038$11,2472020 ANNUAL REPORT 71

(6) Prior service costs and actuarial gain or loss included in other comprehensive income (before tax effect) for theyears ended March 31, 2020 and 2019 are as follows:Significant components of deferred tax assets and liabilities as of March 31, 2020 and 2019 are as follows:
Millions of yen

Prior service costs
Actuarial gain or loss
Total

12. Income Taxes

Thousands of
U.S. dollars

2020

2019

2020

¥ 27
622
¥650

¥ 46
(113)
¥ (66)$ 248
5,715$5,973Liability for retirement benefits
Accrued bonuses to employees

Unrecognized prior service costs
Unrecognized actuarial loss
Balance at the end of the year

Accrued enterprise tax
Loss on retirement of inventories

income (before tax effect) as of March 31, 2020 and 2019 are as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥ (61)
4,072¥4,011¥ (89)
3,449¥3,360$ (561)
37,416$36,856

Foreign debt securities
Foreign equity securities
General accountShort-term assets
Other
Total

Loss on retirement of property, plant and equipment
Amortization of deferred assets
Loss on closure of plant
Other
Subtotal
Total deferred tax assets

The breakdown of plan assets is as follows:
Domestic equity securities

Loss on devaluation of investment securities

Valuation allowance(8) Plan assets
2020

2019

3.4%
51.4
4.9
16.7
4.4
19.2
100.0%

4.8%
19.6
11.1
16.8
25.5
22.2
100.0%In determining the long-term expected rate of return on plan assets, the Company and its consolidated subsidiaries
consider the current and projected asset allocations, as well as current and future long-term rates of return for various

Reserve for reduction entry of property, plant and equipment
Unrealized holding gain on other securities
Prepaid pension cost
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

Entertainment expenses and others that are not tax deductible permanently
Inhabitants’ per capita taxes

Expected rate of return on plan assets

2019

0.5%
2.0%

Defined contribution plans
The Company and its consolidated subsidiaries contributed ¥295 million ($2,711 thousand) and ¥290 million to thedefined contribution plans for the years ended March 31, 2020 and 2019, respectively.

Tax credits for research and development expenses
Valuation allowanceInternal profit elimination
Dividends income that is not taxable permanently
Distribution amount of residual assets of Trust-Based Employee
Shareholding Incentive Plan that is tax deductible
Difference on disposals of treasury stock of Trust-Based Employee
Shareholding Incentive Plan
Effect of tax audit
Other
Effective tax rate

72 2020 ANNUAL REPORT

2020¥1,274
697
27
53
164
149
38
514
602
1,608
5,130
(62)
5,068

¥1,108
668
28
23
145
140
38
661
602
1,677
5,094
(57)
5,037

$11,706
6,404
248
487
1,507
1,369
349
4,723
5,532
14,775
47,138(570)
46,568(1,091)(3,037)(313)(112)(4,554)¥ 513(1,162)(3,912)(374)(123)(5,572)¥ (535)(10,025)(27,906)(2,876)(1,029)(41,845)$ 4,714

Taxes on income consist of corporate, inhabitants and enterprise taxes. A reconciliation of the statutory tax rate(9) Actuarial assumptions
2020

2019

to the effective tax rate for the years ended March 31, 2020 and 2019 are as follows:
Statutory tax rate

0.5%
2.0%

2020

Deferred tax liabilities:

categories of plan assets.

Discount rate

Thousands of
U.S. dollars

Deferred tax assets:

Allowance for doubtful accounts(7) Unrecognized prior service costs and unrecognized actuarial loss included in accumulated other comprehensive

Millions of yen

2020

2019

30.6%
1.2
1.2
(6.0)
0.1
(0.4)
(0.8)

30.6%
1.1
1.1
(4.3)
(1.5)
(0.2)
(0.3)

—

(0.3)

—

1.5

0.1
(0.5)
25.5%

(0.4)
(0.7)
26.6%

2020 ANNUAL REPORT 73

13. Comprehensive Income(c) Information about Net Sales, Profit, Assets and Other Items by Reportable Segment
Millions of yen

Reclassification adjustments and income tax effects on other comprehensive income (loss) for the years ended

2020

March 31, 2020 and 2019 are as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥(2,856)(0)(2,856)874(1,982)¥(1,657)(27)(1,685)516(1,169)$(26,243)(0)(26,243)
8,031(18,212)

(19)

(27)

(175)

(1,053)
403
(650)
(199)
(451)

(696)
762
66
20
46

(9,676)
3,703(5,973)(1,829)(4,144)(21)¥(2,474)(6)¥(1,157)(193)$(22,733)

Unrealized holding loss on other securities:
Loss arising during the year
Reclassification adjustments
Before income tax effects
Income tax effects
Unrealized holding loss on other securities
Translation adjustments:
Adjustments arising during the year
Retirement benefits liability adjustments:
Loss arising during the year
Reclassification adjustments
Before income tax effects
Income tax effects
Retirement benefits liability adjustments
Share of other comprehensive income of affiliates accounted
for using equity method:
Loss arising during the year
Total other comprehensive loss

Reportable segment
EthicalPharmaceuticalBusiness

Consumer
Healthcare
Business

Total¥103,599¥ 6,383¥109,983

3

—

3

Total

¥103,603¥ 6,383¥109,986

Segment profit¥ 6,619¥736

Segment assets¥182,072¥ 2,941

Adjustments

Consolidated¥—¥109,983

(3)

—

¥

(3)

¥109,983¥ 7,355¥147¥ 7,503¥10,158¥192,230¥(21,070)¥171,160¥66¥ 3,007¥214¥ 3,221Net sales:
Sales to third parties
Inter-segment sales or transfers

Other items:
Depreciation and amortization
Investments in affiliates accounted
for using equity method

615

—

615

—

615

Increase in property, plant andequipment and intangible assets

2,295

39

2,334

374

2,709

Thousands of U.S. dollars

14. Segment Information(a) Overview of Reportable Segments

2020
Reportable segment

Sales to third parties

examination by the board of directors is performed in order to decide how resources are allocated among theInter-segment sales or transfers

The Company has two reportable segments, the Ethical Pharmaceutical Business and the Consumer Healthcare
Business, which are classified based on similarities in terms of products and services.
The Ethical Pharmaceutical Business mainly produces, sells, and purchases ethical drugs and generic drugs.
The Consumer Healthcare Business mainly produces, sells, and purchases environmental hygiene products andConsumer
Healthcare
Business

Total$ 951,934$58,651$1,010,595

Adjustments

Consolidated

Net sales:

The Company’s reportable segments are those for which separate financial information is available and regularCompany and consolidated subsidiaries and evaluate their performance.

EthicalPharmaceuticalBusiness$—$1,010,595

28

—

28

(28)

—

$ 951,971$58,651$1,010,622

$

(28)

$1,010,595

Segment profit$

60,820$ 6,763

$

$

1,351

Segment assets$1,672,995$93,338$1,766,333$(193,605)$1,572,728

$

$

$

$

$

Total

67,582$

68,942Other items:

27,024606

27,6301,966

29,597over-the-counter drugs.

Depreciation and amortization(b) Method of Calculating Net Sales, Profit, Assets and Other Items by Reportable Segment

Investments in affiliates accounted
for using equity method

5,651

—

5,651

—

5,651

Increase in property, plant andequipment and intangible assets

21,088358

21,446

3,437

24,892

Accounting policies of the reportable segments are consistent to those described in Note 2, Summary of Significant
Accounting Policies.
Segment profit is based on operating income.
Inter-segment transactions are based on prevailing market price.

74 2020 ANNUAL REPORT

2020 ANNUAL REPORT 75

Millions of yen(c) Information by Major Customer for the Years Ended March 31, 2020 and 20192019

Millions of yen

Reportable segment

2020

EthicalPharmaceuticalBusiness

Consumer
Healthcare
Business

Total

Sales to third parties¥107,859¥5,761¥113,620¥—¥113,620

Inter-segment sales or transfers

12¥107,872¥ 8,316¥184,188

0¥5,761¥ 199¥9,592

13¥113,633¥ 8,515¥193,780

(13)
¥
(13)
¥ 457
¥(20,745)—¥113,620¥ 8,972¥173,034¥ 2,654¥37¥ 2,691¥249¥ 2,940

625

—

625

—

625

4,316

46

4,362

55

4,418

Adjustments

Consolidated

Net sales:

Total
Segment profit
Segment assets
Other items:
Depreciation and amortization
Investments in affiliates accounted
for using equity method
Increase in property, plant andequipment and intangible assets

1.“Adjustments” for “Segment profit” of ¥147 million ($1,351 thousand) and ¥457 million for the years ended March
31, 2020 and 2019, respectively, were mainly eliminations of inter-segment transactions.
2.“Adjustments” for “Segment assets” of ¥(21,070) million ($(193,605) thousand) and ¥(20,745) million as of March
31, 2020 and 2019, respectively, were the Company’s assets and offset of inter-segment receivables andpayables.

Name of customer

Sales amount

Alfresa Holdings Corporation¥20,242

Ethical Pharmaceutical Business,
Consumer Healthcare Business

SUZUKEN CO., LTD.

17,372

Ethical Pharmaceutical Business,
Consumer Healthcare Business

MEDIPAL HOLDINGS CORPORATION

16,889Ethical Pharmaceutical Business,
Consumer Healthcare BusinessToho Pharmaceutical Co., Ltd.

13,098

Ethical Pharmaceutical Business,
Consumer Healthcare BusinessThousands of U.S. dollars
2020
Name of customer

Sales amount

Related segments

Alfresa Holdings Corporation$185,997

Ethical Pharmaceutical Business,
Consumer Healthcare Business

SUZUKEN CO., LTD.

159,625

Ethical Pharmaceutical Business,
Consumer Healthcare Business

MEDIPAL HOLDINGS CORPORATION

155,187

Ethical Pharmaceutical Business,
Consumer Healthcare BusinessToho Pharmaceutical Co., Ltd.

120,353

Ethical Pharmaceutical Business,
Consumer Healthcare Business

3.“Adjustments” for “Depreciation and amortization” of ¥214 million ($1,966 thousand) and ¥249 million for the years
ended March 31, 2020 and 2019, respectively, were depreciation of property, plant and equipment and intangible

Related segments

assets of the Company.
4.“Adjustments” for “Increase in property, plant and equipment and intangible assets” of ¥374 million ($3,437 thousand)and ¥55 million for the years ended March 31, 2020 and 2019, respectively, were increases in property, plant andMillions of yen

equipment and intangible assets of the Company.
5.“Segment profit” is adjusted to operating income disclosed in the accompanying consolidated statement of income.
(Related Information)

2019
Name of customer

Related segments

Alfresa Holdings Corporation¥21,025

Ethical Pharmaceutical Business,
Consumer Healthcare Business

SUZUKEN CO., LTD.

19,020

Ethical Pharmaceutical Business,
Consumer Healthcare Business

MEDIPAL HOLDINGS CORPORATION

16,979Ethical Pharmaceutical Business,
Consumer Healthcare BusinessToho Pharmaceutical Co., Ltd.

14,369Ethical Pharmaceutical Business,
Consumer Healthcare Business(a) Information by Product and Service
Information by product and service is omitted since the classification by product and service was the same as theSales amountreportable segment for the years ended March 31, 2020 and 2019.
(b) Information by Geographical Area
(1) Sales
Information about sales by geographical area is omitted for the years ended March 31, 2020 and 2019, since(d) Information about Amortization and Unamortized Balance of Goodwill by Reportable Segment

domestic sales were more than 90% of net sales on the consolidated statement of income.

There was no unamortized balance of goodwill as of March 31, 2020 and 2019.

(2) Property, plant and equipment
Information about property, plant and equipment by geographical area is omitted for the years ended March
31, 2020 and 2019, since property, plant and equipment in Japan constituted more than 90% of property,
plant and equipment on the consolidated balance sheet.

76 2020 ANNUAL REPORT

2020 ANNUAL REPORT 77

Independent Auditor’s Report
15. Amounts per Share
Amounts per share for the years ended March 31, 2020 and 2019 are as follows:
Yen

Basic profit
Cash dividends
Net assets

U.S. dollars

2020

2019

2020

¥ 107.35
75.00
2,142.07¥ 104.68
75.00
2,154.05$ 0.990.69
19.68

Basic profit per share was computed based on the profit attributable to common shareholders of KYORIN Holdings,
Inc. and the weighted average number of shares of common stock outstanding during the year. Diluted profit per shareis omitted because no potentially dilutive shares were outstanding during the years ended March 31, 2020 and 2019.
Cash dividends per share represent the cash dividends applicable to the year.
The amount per share of net assets is computed based on the net assets attributable to common shareholders of
KYORIN Holdings, Inc. and the number of shares of common stock outstanding at the year-end.
The treasury shares remaining in trust and recorded as treasury stock in shareholders’ equity are included in thetreasury shares excluded from the calculation of the average number of shares during the fiscal year, which is used to
calculate the amount of profit per share. Furthermore, these treasury shares are included in the number of treasury
shares excluded from the total number of issued shares at the end of the fiscal year, which is used to calculate net
assets per share.
The average numbers of treasury shares during the fiscal year that were excluded from the calculation of the amountof profit per share were 854,090 and 875,683 for the years ended March 31, 2020 and 2019, respectively.
The numbers of these treasury shares at the end of the fiscal year that were excluded from the calculation of net
assets per share were 853,877 and 854,700 as of March 31, 2020 and 2019, respectively.

16. Related Party Information
There were no applicable matters for the year ended March 31, 2020.
Material transactions of the Company with related parties for the year ended March 31, 2019 are as follows:
Category

Name of the related party

Location

Paid-in capital

Principal business

Principal shareholder

TEIJIN LIMITED

Osaka city

¥71,833 million

Research, manufacturing
and sales of synthetic
fibers and chemical
products

Share of voting rights
in the Company

Relationships with therelated party

Description of the transactions

Transaction amount

Balance as ofMarch 31, 2019

Directly owned:19.2%

Sales of the Company’s
stock

Purchase of treasury
stock¥35,304 million—

The Company purchased treasury stock through Off-Auction Own Shares Repurchase Trading (ToSTNeT-3) of theTokyo Stock Exchange the September 26, 2018 closing price. As a result of this transaction, the TEIJIN LIMITED’s
ownership ratio in the Company was reduced to 0%.

78 2020 ANNUAL REPORT

2020 ANNUAL REPORT 79

80 2020 ANNUAL REPORT

2020 ANNUAL REPORT 81

Corporate Overview/Stock Information (As of March 31, 2020)

Head Office

With a corporate vision of aiming to be “a pharmaceutical manufacturer that is trusted by patientsand medical professionals, and is recognized forits presence in society,” KYORIN Pharmaceuticalworks to establish its presence in the specificfields of respiratory, otolaryngology, and urology,
and create innovative new drugs that can be
deployed on a global level.

KYORIN Holdings, Inc.
6, Kanda Surugadai 4-chome, Chiyoda-ku, Tokyo 101-8311
Phone: +81-3-3525-4700
URL: https://www.kyorin-gr.co.jp/en/

Establishment

1958

Common Stock¥700 million

KYORIN
Pharmaceutical Co., Ltd.

Capital: ¥4,317 million
Percentage of ownership: 100%
Head office:	6, Kanda Surugadai 4-chome, Chiyoda-ku,
Tokyo 101-8311
Operations:	Drug discovery business, manufacture andsales of drugs (ethical drugs, over-thecounter drugs, and others)

Outstanding Shares 64,607,936
Shareholders

16,752

Listing

Tokyo Stock Exchange, First Section

Transfer Agent

Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku, Tokyo 103-0028
Phone: +81-3-3278-8111

Major Shareholders

As the Kyorin Group subsidiary responsible for thegeneric drugs business, KYORIN Rimedio aims tobecome “a highly reliable generic drug manufacturer.” To contribute to the health of patients, andrecognizing critical social issues in reducing
healthcare costs and helping maintain social
security infrastructure, KYORIN Rimedio willcontinue to ensure a stable supply of high-quality
products and information, as it works to deliver
distinctive products to the market.

Major Shareholders

10.0%
Percentage of shares held

Mykam Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
Banrina Co., Ltd.
Archans Co., Ltd.
Kyorin Group Stock Ownership Association
Yutaka Ogihara
Mariko Ogihara
KAKEN PHARMACEUTICAL CO., LTD.
Akira Ogihara

8.32%
6.00%
5.81%
3.35%
3.35%
3.24%
3.21%
3.02%
2.75%
2.74%

30.2%

21.0%

16,752KYORIN Holdings, Inc.

1.8%

Shareholders

KYORIN
Rimedio Co., Ltd.

23.8%

As a new pharmaceutical manufacturingsubsidiary, KYORIN Pharmaceutical Group
Facilities was created through the merger of
KYORIN Pharmaceutical’s Noshiro Plant,
KYORIN Rimedio’s Manufacturing Division,and the former KYORIN Pharmaceutical Facilities(Koka City, Shiga Prefecture), and commenced
operations on April 1, 2018. By consolidating
the Group’s manufacturing functions, the company
provides a stable supply of high-quality, low-cost
pharmaceuticals, and aims to be an independent
pharmaceutical manufacturing subcontractor
that is relied upon by other companies both insideand outside the Kyorin Group.

KYORIN
Pharmaceutical Group Facilities Co., Ltd.

13.2%

■ Financial institutions■ Financial instruments firms■ Other corporations■ Foreign corporations■ Individuals and other■ Treasury stock

21.0%
1.8%
23.8%
13.2%
30.2%

Capital: ¥1,200 million
Percentage of ownership: 100%
Head office:	287-1, Shimocho Moroe-cho,Kanazawa-shi, Ishikawa 920-0017
Operations:	Manufacture and sales of drugs(generic drugs, over-the-counter
drugs, and others)

Capital: ¥350 million
Percentage of ownership: 100%
Head office:	6, Kanda Surugadai 4-chome,
Chiyoda-ku, Tokyo 101-8311
Operations:	Subcontracted manufacturingof drugs

10.0%

Kyorin Group Website
Please visit the Kyorin Group website for the latest information about the Group and earnings-related materials.

KYORIN Pharmaceutical Co., Ltd. Subsidiaries

Equity-Method Affiliate

Kyorin Europe GmbH
Capital: €50,000
Percentage of ownership: 100%
Head office: Kaiserstrasse 8, 60311 Frankfurt am Main, Germany
Operations:	Research and analysis of other companies’ technologies and collectionof information concerning clinical trials

Nippon Rika Co., Ltd.
Capital: ¥411 million
Percentage of ownership: 29.9%
Head office: 2-2, Nihonbashi Honcho 4-chome, Chuo-ku, Tokyo 103-0023
Operations:	Production and sales of pharmaceuticals, reagents, intermediates,and other products

ActivX Biosciences, Inc.
Capital: US$1
Percentage of ownership: 100%
Head office: 11025 N. Torrey Pines Rd., La Jolla, California 92037, United States
Operations: Discovery and evaluation of candidate compounds

Disclaimer Regarding Forward-Looking Statements

https://www.kyorin-gr.co.jp/en/

82 2020 ANNUAL REPORTIR Site: https://www.kyorin-gr.co.jp/en/ir/

Statements made in this annual report with respect to KYORIN Holdings, Inc.’s forecasts, plans, strategies, and other statements other than those of historicalfacts are forward-looking statements about the future performance of the Company and its consolidated subsidiaries and are based on management’s rational
assumptions and beliefs in light of information currently available. As a consequence, readers should understand that, for a variety of reasons, actual results could
differ materially from projections presented in this report. Key factors that could impact our results include, but are not limited to, economic conditions, social
trends, competition from rival companies, laws and regulations, uncertainties in drug development, and exchange rate fluctuations.

2020 ANNUAL REPORT 83