Annual Report
Year ended 31 December 2023

1 May 2024 | Nxera Pharma Co., Ltd.

1

About Nxera Pharma(formerly Sosei Heptares)
Nxera Pharma is a technology-powered biopharma company,
in pursuit of new specialty medicines to improve the lives ofpatients with unmet needs in Japan and globally.
In addition to several products being commercialized inJapan, we are advancing an extensive pipeline of over 30
active programs from discovery through to late clinicalstage internally and in partnership with leading pharma andbiotech companies. This pipeline is focused on addressing
major unmet needs in some of the fastest-growing areas of
medicine across neurology, GI and immunology, metabolic
disorders and rare diseases, and leverages the power of ourunique and industry leading GPCR-targeted structure-based
drug discovery “NxWaveTM” platform to provide a sustainablesource of best- or first-in-class candidates.
Nxera employs over 350 talented people at key locations inTokyo and Osaka (Japan), London and Cambridge (UK), Basel(Switzerland) and Seoul (South Korea) and is listed on theTokyo Stock Exchange (ticker: 4565)

22

Letter from the
Chief Executive Officer
Dear Stakeholders,

Mr. Chris Cargill
Representative Executive

2023 was a transformational year for Nxera Pharma and the progress
made by our teams across all areas of the business has been exceptional.
This progress is enabling the Group to accelerate its developmentin 2024 as an integrated, technology powered, commercial-stage
biopharmaceutical company focused on applying cutting-edge science
to deliver life-changing medicines for patients in Japan and globally.

Officer, President & CEO
Nxera Pharma Co., Ltd.

Our ambition over time is to become one of the leading pharmaceuticalcompanies in Japan and we are confident that we have strong
foundations on which to build our business towards this goal. We haveestablished a powerful and unique drug discovery platform that cangenerate multiple, innovative programs by design for incorporation into
our pipeline, supported by world-leading technology partners.
Our development pipeline is extensive, with over 30 active programs
advancing from discovery through to late clinical stage and focused onsome of the fastest-growing areas of medicine, which also represent
some of the areas of greatest unmet patient need in Japan and globally.
We are progressing these programs in-house, and also in partnershipwith our global pharma partners, who bring world-class therapeutic areaand development expertise.

IN-HOUSE

Discovery

10+ Programs

Preclinical

Phase 1

Phase 2Phase 3

Filed
APAC

M1 ag.

GPR52 ag.** HTL’149

Cenerimod*

Neurology

Schizophenia

Systemic lupus erythematosus

GPR35 ag. HTL'477

EP4 ant. HTL’732

Lucerastat*

IBD

Advanced solid tumours

Fabry disease

APAC

Daridorexant
Insomnia

Commercial
APAC

PIVLAZ®

APAC

Cerebral vasospasm

Oravi®
Mouth candidiasis

EP4 ag. HTL'744
Inflammatory Bowel Disease15+ Programs

PARTNEREDPrevious and ongoing
discovery collaborations

Ongoing technology
collaborationsCXCR4 mAb KY1051

M1M4 ag. NBI’570

M4 ag. NBI’568

Ultibro® Breezhaler®

Immuno-oncology

Neurology

Schizophrenia

COPD

OX2 ag. ORX750

M4 pref. ag. NBI’569

Seebri® Breezhaler®

Narcolepsy

Neurology

COPD

M1 pref. ag. NBI’567

CCR6 ant. PF’894

Enerzair® Breezhaler®

Neurology

IBD

AsthmaMC4 ant. PF’669
Malnutrition

GLP-1 ag. PF’522
Metabolic diseases

mGlu5 NAM TMP-301
Substance abuse* Exclusive opt-in right** Exclusive out-license option

NXERA PHARMA CO., LTD. - ANNUAL REPORT YEAR ENDED 31 DECEMBER 2023

3

Our late-stage development and commercialization capabilities inJapan – brought in through the acquisition of Idorsia’s Japan and Korea
organizations (IPJ and IPK, now NPJ and NPK, respectively) – add anexciting dimension to the business, including the potential for strategic
development and commercial opportunities to further support ourbusiness in these important markets.
Already, our approved product, Pivlaz®, is having a positive impact
on patients in Japan with cerebral vasospasm, and our late-stage
development candidate, daridorexant, a potential new treatment for
insomnia, is currently under regulatory review by the Japanese regulator(the PMDA). Through our local organization, we aim to advance our own
and externally sourced candidates to patients in Japan and key APAC
markets.
The progress we have made during 2023 and the potential for Nxera
Pharma to become a champion of the growing pharma sector in Japan,
was recognized through the Group receiving the first investment – of
~JPY8 billion (~USD54m) – by the new OPF1 fund operated by JIC Venture
Growth Investments, an affiliate of the government-backed Japan
Investment Corporation. Launched in September 2023, this new fundis part of a government initiative to support the growth and sustainable
development of innovative companies listed on the Tokyo Stock
Exchange.

PIVLAZ®
for cerebral vasospasm

Overall, we believe that the Group has reached a pivotal moment in
its journey, and with the integration of NPJ and NPK well underway, theBoard of Directors has decided that this is the optimal time to adopt a
new, unified corporate brand and corporate name for the Group – Nxera
Pharma. “Nxera” derives from the words “Next” and “Era” to express ourdetermination to be a leader in the next era of science and healthcare,driving advancements in our core disease areas of neurology, GI and
immunology, metabolic disorders and rare diseases in pursuit of new
medicines for patients.
The new name was approved by shareholders at the 34th Ordinary
General Meeting of Shareholders on 27 March 2024 and came into effecton 1 April 2024.
2024 is shaping up to be a strong year with several catalysts thatshould support value creation. We are expecting strong clinical progress,
both by us and our partners, including the anticipated Phase 2 data
for Neurocrine’s muscarinic M4 agonist program by year end. On thecommercial side, we will continue to seek further product approvals inJapan and extend into new APAC territories with partners where it makes
sense.
We hope that you share our excitement and optimism about the future
for the Group as we embark on this next phase of our journey, unified,well-financed and with a clear vision and purpose to deliver lifechanging medicines to patients and in so doing create value for all our
stakeholders.
Chris Cargill, Representative Executive Officer, President & CEO
Nxera Pharma Co., Ltd.

NXERA PHARMA CO., LTD. - ANNUAL REPORT YEAR ENDED 31 DECEMBER 2023

4

Strategy

We have a clear vision and commitment to build a
successful next-generation, technology driven biopharmacompany making a difference for patients worldwide.
Our strategy to achieve our goals has been further refined
following the acquisition of NPJ/NPK to focus on three key
pillars.

Delivering
Life-Changing
Medicines toPatients in Japan

Progressing
High-Value
Programs by Design

NXERA PHARMA CO., LTD. - ANNUAL REPORT YEAR ENDED 31 DECEMBER 2023

Leveraging
Cutting-Edge
Science andTechnology

5Strategy

Delivering Life-Changing
Medicines to Patients in JapanTo leverage our extensive clinical development and commercialization business in Japan
using a lean, agile and scalable model to deliver new medicines to patients in this large
and growing market and provide a platform to expand into broader APAC markets.
One of the Group’s driving ambitions is to become a leading biopharmacompany in Japan applying cutting-edge science to deliver life-changing
medicines for patients. Japan is the third largest pharma market behind
the US and China and has a large aging population and universal healthcare system. This presents a huge opportunity for the Group and onethat we made great strides towards accessing in 2023 through thetransformational acquisition of NPJ and NPK following a rigorous searchand evaluation process.
Through this organization, we have a strong development, regulatory andcommercialization platform to maximize success and provide multiple
options to advance our own and externally sourced candidates topatients in Japan and globally:

In-house development
and commercializationof select wholly owned
programs for Japan/
APAC

Late-stage clinicaldevelopment andcommercialization for
in-licensed assets inJapan/APAC

NXERA PHARMA CO., LTD. - ANNUAL REPORT YEAR ENDED 31 DECEMBER 2023

Partnering assets
with early clinical
POC for global
commercialization,
retaining Japan/APAC
rights6

Delivering Life-Changing Medicines to Patients in Japan

Key progress
The transformational acquisition of Idorsia’s pharmaceutical businesses in Japan and South Korea (IPJ and IPK,
now NPJ and NPK, respectively) achieved a key strategic milestone for the Group to become a fully integrated
biopharmaceutical company:•

Adds complementary late-stage clinical development capability with profitable and fast-growing
commercial operations in Japan.

•

Brings highly experienced team, with proven clinical development and commercial launch track record.

•

Includes Japan and APAC (ex-China) rights to two medicines with significant growth potential (PIVLAZ®
- launched in Japan and approved in South Korea for the prevention of cerebral vasospasm and related
conditions after aneurysmal subarachnoid hemorrhage securing) and daridorexant (a novel dual orexin
receptor antagonist; New Drug Application submitted in Japan for the treatment of adult patients withinsomnia), as well as exclusive options and selected rights to up to seven other products from Idorsia’s
clinical development pipeline.

•

Appointment of Mr. Toshihiro Maeda as Chief Operating Officer to lead the post-acquisition integration of
NPJ and global operations for the enlarged business in Japan and the APAC region. Mr. Maeda joined from
Bristol Myers Squibb where he was instrumental in the post-merger integration of Celgene’s businesses
and commercial strategies for the combined group in Japan.

NXERA PHARMA CO., LTD. - ANNUAL REPORT YEAR ENDED 31 DECEMBER 2023

7

Strategy

Progressing High-Value
Programs by Design
To advance and expand our extensive pipeline of novel and potentially lifechanging medicines in-house and with partners, generating multiple opportunities
for value-creation targeting fast-growing areas of unmet medical need in Japanand globally.
Partnering with global biopharmaceutical companies around specificcandidates/programs that we have developed or for the discovery anddevelopment of candidates against partner-nominated targets haslong been a successful strategy that we have employed. Many of thesepartnerships provide the Group with an economic interest in programs
advancing in some of the most exciting and fastest growing areas of
medicine, such as metabolic disease and neuropsychiatric disorders.
Our partnered pipeline currently includes one program being progressedin discovery stage, eight programs in preclinical and Phase 1 and one
program in Phase 2.
Our success here provides significant industry validation for ourapproach and has generated nearly USD1 billion in revenues to date fromupfront and milestone payments from our partners, with the potential forsignificant ongoing revenues as further milestones are reached.
In parallel, a key objective of the Group has been to transform ourown in-house R&D, applying a program-centric operational model toaccelerate progress of high-quality candidates into and through clinicaldevelopment. This is intended to provide both a pipeline of opportunities
that we can develop through to market ourselves in select indications inJapan and APAC, as well as further and potentially more profitable outlicensing deals.
NXERA PHARMA CO., LTD. - ANNUAL REPORT YEAR ENDED 31 DECEMBER 2023

8

KEY PROGRESS IN 2023

Partner progress
Neurocrine made significant progress in 2023 advancing its licensed portfolio of selective
muscarinic agonists – the largest portfolio of oral small molecule muscarinic agonists for thetreatment of neurological and neuropsychiatric conditions in development globally.
During the year, Neurocrine continued to advance NBI-1117568 (an investigational, selective
muscarinic M4 receptor agonist) through Phase 2 trials for the treatment of adults withschizophrenia, with topline data expected in 2H 2024.
Neurocrine also initiated Phase 1 clinical studies of NBI-1117570 (an M1/M4 selective dual agonist)
and NBI-1117569 (a muscarinic M4-preferring agonist) in 2023 and confirmed that a study with
NBI-1117567 (a muscarinic M1-preferring agonist) is expected to be initiated in 2024. All of thesecandidates have potential to address a range of neurological and neuropsychiatric conditions.
It is important to note that Nxera Pharma retains rights to develop all M1 agonists advancing
under this productive collaboration in Japan in all indications.
Pfizer entered PF-06954522, a new oral small molecule GLP-1 receptor agonist, into a Phase 1
trial targeting metabolic diseases in 2023. PF-06954522 was discovered by Pfizer scientists
during the ongoing collaboration in which Pfizer had access to the Group’s NxStar technology.
PF-06954522 is one of three clinical candidates generated through the collaboration with
the Group that are being progressed in clinical trials: the others being PF-07054894, a CCR6
antagonist targeting Inflammatory Bowel Disease in Phase 1b trials, which are expected to readout data in 2024; and PF07258669, an MC4 antagonist targeting Anorexia, which is in Phase 1
studies and has been shown to be generally safe and well-tolerated.
Tempero Bio received FDA clearance to advance clinical development of TMP-301 for alcoholand substance use disorders – TMP-301 is a selective, orally available mGluR5 negative allostericmodulator (NAM) candidate discovered by and licensed from Nxera Pharma.

Internal pipeline progress
GPR52 agonist
NXE0048149

NXE0048149 is a first-in-class GPR52 agonist designed and developedby Nxera Pharma as a once-daily oral treatment to address positive andnegative symptoms and cognitive impairment in people with schizophrenia
avoiding the adverse effects typically associated with existing
antipsychotic drugs. The first subject was dosed with NXE’149 in a Phase 1
trial in mid-2023.
In March 2024, the Group entered a global collaboration and exclusive
option-to-license agreement with Boehringer Ingelheim to develop andcommercialize NXE’149 and a portfolio of other GPR52 agonists discoveredby Nxera Pharma, in an up to EUR 670m deal plus tiered royalties.

EP4 antagonist
NXE0039732

GPR35 agonist
NXE0027477

EP4 agonist
NXE0033744

The first patient was dosed with cancer immunotherapy candidate
NXE0039732 in a Phase 1/2a trial during 2023 – NXE’732 is an orally
available small molecule EP4 antagonist for advanced solid tumors being
evaluated under an agreement with Cancer Research UK.
In March 2024, Nxera Pharma regained full ownership from GSK of
GSK43814061, a clinic-ready, first-in-class, oral GPR35 agonist targeting
IBD – the Group expects to determine the optimal strategy for further
clinical development of the program, which could include in-housedevelopment and re-partnering. GSK43814061 was renamed NXE0027477
upon reversion.
The first subject was dosed in a Phase 1 trial of NXE0033744, an oral
GI restricted EP4 agonist with potential to treat IBD. HTL’744 has been
designed to bring clinical benefit by accelerating the healing of damaged
epithelial mucosa and suppressing exaggerated gut inflammation, withminimal systemic exposure to avoid adverse events.

NXERA PHARMA CO., LTD. - ANNUAL REPORT YEAR ENDED 31 DECEMBER 2023

9Strategy

Leveraging Cutting-Edge
Science and Technology
To extend and enhance the competitive advantages of our proprietary GPCRfocused, structure-based drug design (SBDD) and discovery platform throughinternal innovation and collaboration – accelerating the identification/selection of
new programs for development inhouse and/or through partnerships.
Our capabilities and leadership in unlocking GPCRs to rational SBDD
approaches are recognized across the industry and have enabled
the generation of a significant number of novel drug candidates andprograms, which are currently being advanced by our global biopharma
partners and internally.
This unique platform provides us with unprecedented access to newtargets and candidates to continuously feed our rich pipeline. We arefocused on doing this through continual internal innovation, including
the broad application of AI and machine learning technologies alongsidecollaboration with global technology leaders from industry and academia.

Key progress in 2023

Identification, validation andnomination of a first GPCR
target to enter a therapeutic
discovery program for
gastrointestinal diseases.

Launching a new discovery
program based on the successful
validation and nomination of
a GPCR target for immunemediated diseases with an initial
indication focus on IBD

NXERA PHARMA CO., LTD. - ANNUAL REPORT YEAR ENDED 31 DECEMBER 2023

Expansion of a collaboration todrive discovery of novel small
molecule drug candidates
against a second neurologicaldisease target.

10

Corporate and Financial Update for 2023
In March 2023, the Group changed the stock market
segment on which its shares are listed from the GrowthMarket segment to the Prime Market segment of theTokyo Stock Exchange (“TSE”). This move was made tohelp us achieve our vision by improving our ability to
attract a broad institutional shareholder base providing
long-term support to the Company and its strategy.
In April 2023, the Group’s shares were included in theTokyo Stock Price Index (“TOPIX”), an important stock
market index for the TSE in Japan.
In November, the Group received a landmark
investment of ~JPY8 billion (~USD54m) from new OPF1
fund operated by JIC Venture Growth Investments, anaffiliate of the government-backed Japan Investment
Corporation. This investment was completed inconjunction with a share offering and convertible bondrestructuring to finance the Group’s strategic growth
initiatives; to extend the maturity profile of its debt; andfurther strengthen its financial base.

NXERA PHARMA CO., LTD. - ANNUAL REPORT YEAR ENDED 31 DECEMBER 2023

Our cash and cash equivalents as at 31 December 2023
amounted to JPY 49 billion (US$347.9 million). This is astrong financial position from which to execute on our
strategy as we look to deliver on our long-term missionof using our delivering life-changing medicines basedon world-leading science to patients worldwide.
As of 31 December 2023, the Group had 350
employees (an increase of 148 employees vs. theend of 2023 primarily due to the acquisition of IPJ
and IPK). These employees are based in Tokyo andOsaka (Japan), London and Cambridge (UK), Basel(Switzerland) and Seoul (South Korea).

Acknowledgements
The progress reported above would not have beenpossible without the hard work and dedication of
all our employees and partners, and the support ofour shareholders. I would like to thank them for theirimportant contributions to our business during 2023
and I am confident that together, as Nxera Pharma, we
can look forward to another important year of progressin 2024.

11

www.nxera.life

TOKYO, JAPANSEOUL, SOUTH KOREA

Group Headquarters

Corporate Office

Midtown East
9-7-2 Akasaka Minato-ku
Tokyo 107-0052
Japan

F17, 410 Teheran-Ro
GangNam-Gu
Seoul 06192
South Korea

CAMBRIDGE, UNITED KINGDOMLONDON, UNITED KINGDOMBASEL, SWITZERLAND

R&D Facilities

Corporate Office

Corporate Office

Steinmetz & Cori Buildings
Granta Park, Great Abington
Cambridge CB21 6DG
United Kingdom

First Floor, Burleigh on the Strand
355-359 Strand
London WC2R 0HS
United Kingdom

Office 1901, Spaces Grosspeter Tower
Grosspeteranlage 294052 Basel
Switzerland
12

Table of Contents
Part 1: Company Information
Section 1. Company Overview .............................................................................................................................. 1
Section 2. Business Review ................................................................................................................................... 8
Section 3. Facilities .............................................................................................................................................47
Section 4. Information about the Filing Company ..............................................................................................49
Section 5. Financial Statements ..........................................................................................................................97
Section 6. Stock-Related Information relating to the Parent Company ............................................................188
Section 7. Reference Information Relating to the Filing Company ................................................................... 189
Part 2: Information about a Company which Provides a Guarantee to the Filing Company
Information about a Company which Provides a Guarantee to the Filing Company ........................................191
Independent Auditor’s Reports
Independent Auditor’s Reports ........................................................................................................................192
Internal Control Report of Management
Internal Control Report of Management .......................................................................................................... 204

Annual Securities Report
Issue date:

March 27, 2024

Accounting period:

The 34th Term (January 1, 2023 – December 31, 2023)

Company name:

Sosei Group Corporation

Representative’s name and title:

Christopher Cargill, Executive Officer, CEO

Location of head office:2-1 Kojimachi, Chiyoda-ku, Tokyo

Phone:+81-3-5210-3290 (main)Contact person:

Kieran Johnson, Executive Officer, CAO

Nearest contact location:

2-1 Kojimachi, Chiyoda-ku, Tokyo

Phone:+81-3-5210-3290 (main)Contact person:

Kieran Johnson, Executive Officer, CAO

Location for public inspection:

Tokyo Stock Exchange, Inc.
(2-1 Nihonbashi Kabutocho, Chuo-ku, Tokyo)

Sosei Group Corporation
Section 1. Company Overview
1. Changes in Key Management Indices1.1 Management Indices on consolidated basis
PeriodFinancial year-end

The 30th Term

The 31st Term

The 32nd Term

The 33rd Term

The 34th Term

December 31,
2019

December 31,
2020

December 31,
2021

December 31,
2022

December 31,
2023

Revenue

¥m

9,726

8,842

17,712

15,56912,766

Profit (loss) before income taxes

¥m

534

1,622

433

1,078

(10,680)

Net profit (loss) attributable toowners of the parent company
Total comprehensive income
attributable to owners of theparent company
Equity attributable to owners of
the parent company
Total assets

¥m

1,432

1,479

1,017

382

(7,193)

¥m

2,367

661

5,623

(255)

(1,121)¥m

45,07552,381

57,46857,936

66,810¥m

56,68076,46596,98599,417

157,198

Equity attributable to owners of
the parent company per share
Basic earnings (loss) per share¥

584.83649.92704.97707.20746.92

¥

18.70

18.77

12.53

4.68

(87.18)

Diluted earnings (loss) per share

¥

18.50

18.59

12.40

4.63

(87.18)

Ratio of equity attributable toowners of the parent company tototal assets
Ratio of profit to equity
attributable to owners of theparent company
Price earnings ratio (PER)

(%)

79.5

68.5

59.3

58.3

42.5

(%)

3.3

3.0

1.9

0.7

(11.5)

116.1095.90

151.96456.84-(Times)Cash flows from operating
¥m
3,441
4,672
7,095
9,952
(5,273)
activities
Cash flows from investing
¥m
(246)
(150)
278
1,043
(63,791)
activities
Cash flows from financing¥m(6,964)
20,278
11,123(4,887)
48,329activities
Cash and cash equivalents at the¥m
15,37540,00860,08766,55749,065end of the year
Number of employees(Employees)
163
190
198
202
350
[Separately, average number of[11.2][12.1][10.8][18.1][69.9]
other workers]
Notes 1. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (hereinafter, “IFRS”).
2. Price earnings ratio (PER) was not provided because a net loss was recorded in the 34th Term.
3. The number of employees presented above represents the number of regular employees at the year end. The annual average number ofother workers (including part-time employees and employees engaged through temp agencies) is provided separately in squareparentheses [ ].
4. The number of employees and the average number of other workers increased by 148 and 51.8, respectively, in the 34th Term. This is
primarily due to the inclusion of Idorsia Pharmaceuticals Japan Ltd. and Idorsia Pharmaceuticals Korea Co., Ltd. in the scope of
consolidation.

-1-

Sosei Group Corporation
Section 1. Company Overview
1 Changes in Key Management Indices (continued)
1.2 Filing Company’s Management Indices
PeriodThe 30th Term

The 31st Term

The 32nd Term

The 33rd Term

The 34th Term

Financial year-end

December 31,
2020
433

December 31,
2021
823

December 31,
2022
1,118

December 31,
2023
5,015

Operating revenue¥m

December 31,
2019
675

Ordinary loss

¥m

(764)

(1,430)(4,720)(1,586)(3,301)

Net loss

¥m

(504)

(1,308)(4,260)(1,497)(3,285)

Capital stock¥m

37,47940,22041,03641,33546,807

77,073,136

80,596,128

81,518,316

81,923,230

89,446,777

Total number of issued shares(Shares)

Net assets¥m

58,08961,50458,47057,54465,200Total assets¥m

59,19778,886

94,34989,385142,011

Net assets per share¥735.13754.79714.03699.45726.29Cash dividends per share[Interim dividends per share]
Net loss per share

¥
¥

[-]
(6.57)[-](16.62)[-](52.47)[-](18.30)[-](39.81)

Diluted net income per share

¥

-

-

-

-

-

Equity ratio

(%)

95.7

77.1

61.7

64.1

45.7

Return on equity (ROE)

(%)

-

-

-

-

-

Price earnings ratio (PER)(Times)

-

-

-

-

-

(%)

-

-

-

-

-

19
[1.7]

23
[2.7]

30
[2.9]

32
[4.2]

41
[0.9]

271.7
[142.7]225.3[149.6]238.3[165.2]267.6[156.8]177.8[196.2]

2,794
780

2,217
1,051

2,418
1,491

2,294
991

3,185
1,296

Dividend payout ratio

Number of employees(Employees)[Separately, average number of otherworkers]
Total shareholder return[Comparative indicator: TSE Mothers(%)
Index]
Highest share price¥
Lowest share price
¥

Notes

1. The filing company’s financial statements are prepared in accordance with Japanese Generally Accepted Accounting Standards (hereinafter,“JGAAP”).
2. Diluted net income per share is not provided despite the existence of residual shares, because a net loss per share was recorded.
3. Return on equity (ROE) and price earnings ratio (PER) are not provided because a net loss was recorded.
4. The number of employees presented above represents the number of regular employees at the year end. The annual average number ofother workers (including part-time employees and employees engaged through temp agencies) is provided separately in parentheses [ ].
5. Due to a review of market classification, the company moved from the Tokyo Stock Exchange Mothers Market to the Tokyo Stock Exchange
Growth Market on April 4, 2022, and changed to the Tokyo Stock Exchange Prime Market on March 15, 2023. Therefore, the comparativeindex used to calculate total shareholder return has been changed from the TSE Mothers index to TOPIX (TSE Stock Price Index).
6. The highest and lowest share prices were those recorded on the Prime market of the Tokyo Stock Exchange on March 15, 2023 andthereafter, and on the Growth market of the Tokyo Stock Exchange before that date.

-2-

Sosei Group Corporation
Section 1. Company Overview
2 History
Date

Event

June 1990

Sosei Co. Ltd. established in Bunkyo-ku, Tokyo, aiming to be a biopharmaceutical R&D andtechnology transfer business company

March 1999

Launched the Drug Reprofiling Platform® (DRP®) project and made a full-scale start in thepharmaceutical development business.

September 2002

Established London office in the U.K.

July 2004

Listed on the Mothers market of the Tokyo Stock Exchange.

June 2005

Moved to a “Company with committees” (Company with Nomination, Compensation and Audit
committees in 2015).

August 2005

Acquired 100% of the shares of Sosei R&D Ltd. (formerly Arakis Ltd., U.K.).

October 2006

Moved to a holding company structure and changed the company name to Sosei Group
Corporation.

July 2009

Relocated Headquarters to Kojimachi, Chiyoda-ku, Tokyo.

May 2011

Concluded an agreement with Onxeo S.A. (formerly BioAlliance Pharma SA) to in-license SO-1105(treatment for oropharyngeal candidiasis).

September 2012

NVA237 received MHLW approval in Japan with the product name of “Seebri® Inhalation Capsules
50 mcg” (world’s first approval for glycopyrronium bromide as a COPD treatment).

September 2013

QVA149 received European Commission approval in Europe with the product name of “Ultibro®
Breezhaler®” (world’s first approval of a LAMA/LABA combination drug).

February 2014

Concluded agreement with FUJIFILM Toyama Chemical Co., Ltd. (formerly FUJIFILM Pharma Co.,
Ltd.) for commercialization of SO-1105.

February 2015

Acquired 100% of the shares of Heptares Therapeutics Ltd.

August 2015

Concluded collaboration agreement with AstraZeneca UK Ltd. for development of immunooncology treatments.

October 2015

Seebri® (NVA237) and Utibron™ Neohaler® (QVA149 received Food and Drug Administration (FDA)
approval in the U.S.).

November 2015

Concluded strategic collaboration agreement with Pfizer Inc. for novel treatments related to up to
10 types of GPCR target.

November 2016

The Company’s subsidiary, Heptares Therapeutics Ltd. acquired 100% of the shares of G7
Therapeutics AG (renamed as Heptares Therapeutics Zurich AG).

May 2017

Acquired a stake in MiNA (Holdings) Ltd., which became an associated undertaking of the Group.

November 2017

International offering of new shares raised ¥21,286m.

September 2018

SO1105 received marketing approval in Japan under the product name of “Oravi®”.

November 2018

UK legal entity reorganization involving the transfer of the trade and assets of Sosei R&D Ltd. to
Heptares Therapeutics Ltd.

July 2019Concluded contract with Genentech Inc. for the worldwide development, manufacturing andcommercialization rights for certain GPCR targets.

August 2019Concluded contract with Millennium Pharmaceuticals Inc. (a 100% subsidiary of Takeda
Pharmaceutical Co., Ltd.) for the worldwide development, manufacturing and commercializationrights for certain GPCR targets.

June 2020

Concluded contract with AbbVie Ireland Unlimited Company for the exclusive worldwide
development and commercialization rights for new drug candidates which Heptares and AbbVie
will jointly develop.

June 2020

Enerzair® Breezhaler® received manufacturing approval and marketing approval for the treatmentof asthma in Japan.

July 2020

Enerzair® Breezhaler® received manufacturing approval and marketing approval in the EU.

July 2020

International offering of new shares raised ¥5,055m and issuance of euro-yen denominatedconvertible bonds due 2025 raised ¥16,000m.

November 2020

Concluded contract with Tempero Bio, Inc. for the exclusive global rights to the Group’s mGlu5
negative allosteric modulator program.

November 2020

Concluded contract with Biohaven Pharmaceutical Holding Company Ltd. for the exclusive rights
to develop, manufacture, and distribute a portfolio of novel, small-molecule CGRP receptor
antagonists.

December 2020

Concluded a contract with GlaxoSmithKline p.l.c. for the exclusive rights to develop, manufactureand distribute a portfolio of GPR35 agonists.

July 2021

Issuance of euro-yen denominated convertible bonds due 2026 raised ¥30,000m and repurchaseand cancellation of euro-yen denominated convertible bonds due 2025 which were issued in July
2020 and raised ¥16,000m.

-3-

Sosei Group Corporation
Section 1. Company Overview
2 History (continued)
Date

Event

July 2021

Agreement to transfer the commercialization rights to sell SO-1105 in Japan from FUJIFILM Toyama
Chemical Co., Ltd. to Hisamitsu Pharmaceutical Co.,Inc

November 2021

Concluded collaboration and license agreement with Neurocrine Biosciences, Inc. to develop Novel
Muscarinic Receptor Agonists for Schizophrenia and Other Neuropsychiatric Disorders.

April 2022

Transferred from the Tokyo Stock Exchange Mothers market to the Growth market following market
restructuring of the Tokyo Stock Exchange.

August 2022

Concluded contract with AbbVie Inc. for new multi-target collaboration to discover, develop andcommercialize novel medicines targeting neurological diseases.

October 2022

MiNA (Holdings) Limited excluded from associates accounted for using the equity method as theGroup no longer exercised significant influence over MiNA (Holdings) Limited.

December 2022

Concluded contract with Eli Lilly and Company for multi-target collaboration and license agreement
in diabetes and metabolic diseases.

March 2023

Listing market changed to the Tokyo Stock Exchange Prime market.

July 2023

Acquired 100% of the shares of Idorsia Pharmaceuticals Japan Ltd. and Idorsia Pharmaceuticals Korea
Co., Ltd., and acquisition of rights including the sales rights to PIVLAZ™ and dalidrexant in Japan and
APAC.

December 2023

Marketing Approval for PIVLAZ™ (clazosentan sodium) 150 mg in South Korea.

Issuance of euro-yen denominated convertible bonds due 2028 raised ¥32,000m and repurchase andcancellation of euro-yen denominated convertible bonds due 2026 which were issued in July 2021
December 2023
and raised ¥30,000m. Issuance of new shares through overseas offering raised ¥2,053m and thirdparty allotment ¥8,000m.
* Seebri®, Ultibro®, Seebri® Breezhaler®, Ultibro® Breezhaler®, Enerzair® and Enerzair® Breezhaler® are registered trademarks of Novartis
International AG (“Novartis”).
* Oravi® is a registered trademark of Vectans pharma SAS.
* PIVLAZ™ is a registered trademark of Sosei Group Corporation.

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Sosei Group Corporation
Section 1. Company Overview
3 Business Description
The Group is a science and technology-led biopharmaceutical business whose core activities are drug
discovery, drug development and the commercialization of pharmaceutical products. Within the Group,
Heptares Therapeutics Ltd (a wholly owned subsidiary based in UK) mainly engages in drug discovery,translational medicine, preclinical and early clinical development; Idorsia Pharmaceuticals Japan Ltd.
(“IPJ”; a wholly owned subsidiary based in Japan), and Idorsia Pharmaceuticals Korea Co., Ltd. (“IPK”;
a wholly owned subsidiary based in South Korea), mainly engage in clinical development and productcommercialization in Japan and South Korea, respectively, with potential to expand into other AsiaPacific (“APAC”) regions.
As at December 31, 2023 the Group comprised the Company (Sosei Group Corporation) and sevenconsolidated subsidiaries (one of which, Heptares Therapeutics Zurich AG, is in the process of being
liquidated as at March 27, 2024). The Group operates in only one segment, the Pharmaceuticalbusiness segment. The Company and its significant consolidated subsidiaries as of December 31, 2023
are as follows:Business segment

Company nameGroup management
and support

Sosei Group Corporation
Sosei Co. Ltd.

Pharmaceutical business

Idorsia Pharmaceuticals
Japan Ltd.

Heptares Therapeutics Ltd.

Nature of business
Strategic management of the entire
Group and administrative duties
performed on behalf of its subsidiaries.
Pharmaceutical R&D and sales.
Research & Development, importation,
packaging and sale of pharmaceuticalproducts
Structural analysis and production ofearly lead compounds targeting GPCRs,
identification of drug candidates using
proprietary StaR® technology.

The Company corresponds to a specified listed company provided in Article 49 paragraph 2 of the
Cabinet Office Ordinance on Restrictions on Securities Transactions. Therefore, the criteria forassessing the materiality of information under the insider trading regulations are determined basedon consolidated figures.

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Sosei Group Corporation
Section 1. Company Overview
4 Status of Subsidiaries and Associates
Consolidated subsidiaries
Company Name
Location

Ratio of
VotingRights (%)
Million JPY
100.0
90

Capital Stock

Sosei Co. Ltd.

Chiyoda-ku, Tokyo

Idorsia Pharmaceuticals
Japan Ltd.
Notes 1,2

Minato-ku, Tokyo

Million JPY
95

100.0

Heptares Therapeutics Ltd. Cambridge, U.K.
Notes 1,2

Thousand GBP
416

100.0

Relationship

Parent company
provides:- centralizedadministrative services- provision of officers- funding assistanceParent company
provides:-product sales-outsourcing ofproduct-related
operations- provision of officers
Parent company
provides:- centralizedadministrative services- provision of officers

Four other companies
Notes:
1. Over 10% of the revenue of the Company relates to the specified subsidiaries.
2. The revenue of Idorsia Pharmaceuticals Japan Ltd. and Heptares Therapeutics Ltd. (excluding internal revenues between consolidated
companies) represents more than 10% of the Group’s consolidated revenue. Major profit/loss information for the year ended
December 31, 2023 is as follows:
Major profit/loss information (IFRS)Revenue

Idorsia
Pharmaceuticals
Japan Ltd
Note 3

Net profit for
the year¥m

Net assets¥mProfit before
income taxes¥mTotal assets

¥m

¥m

8,624

2,835

1,842

1,195

24,023Heptares5,093(4,668)(3,358)31,76741,492
Therapeutics Ltd.
3. Since Idorsia Pharmaceuticals Japan Ltd. was included in the scope of consolidation on July 20, 2023, major profit/loss information
for the fiscal year ended December 31, 2023 after that date is presented.

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Sosei Group Corporation
Section 1. Company Overview
5 Status of Employees
5.1 Consolidated Companies

At December 31, 2023

Segment

Number of employees

Pharmaceutical business

309 (69.0)

Group administration

41 (0.9)350 (69.9)

Notes:
1． The number of employees presented above represents the number of regular employees. The annual average number of otherworkers (including contract employees and employees engaged through temp agencies) is provided separately in parentheses.
2． Pharmaceutical business increased by 139 compared with the end of the previous year. This is primarily due to the acquisitionof IPJ and IPK, and their inclusion in the scope of the consolidation for the year ended December 31, 2023.
3． Group administration increased by 9 compared with the end of the previous year, mainly due to the strengthening of theorganization.

5.2 Filing Company (the Company)

At December 31, 2023

Number of employees(Employees)

Average age(Years old)

Average years of service(Year)

Average annual salary (¥)

41 (0.9)

43.5

3.2

15,417,265

Notes:
1. The number of employees presented above represents the number of regular employees. The annual average number of otherworkers (including contract employees and employees engaged through temp agencies) is provided separately in parentheses.
2. Average annual salary includes bonuses, share-based payments and overtime pay.
3. Employees shown here are part of the Group administration department.

5.3 Status of Labour Union
No labour unions exist. Labour-management relations are regarded as amicable.
5.4 Ratio of female workers in managerial positions, ratio of male workers taking childcare leave, andwage differentials between male and female workers(i) The filing company
The filing company is not subject to the publication obligations under the provisions of the Act
on the Promotion of Women’s Active Engagement in Professional Life (Act No. 64 of 2015) andthe Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers
Caring for Children or Other Family Members (Act No. 76 of 1991), so this information isomitted.
(ii) Subsidiaries
Subsidiaries are not listed as items for publication or are not obligated to make such
publications under the provisions of the Act on the Promotion of Women's Active Engagementin Professional Life (Act No. 64 of 2015) and the Act on Childcare Leave, Caregiver Leave, andOther Measures for the Welfare of Workers Caring for Children or Other Family Members (ActNo. 76 of 1991), so this information is omitted.

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Sosei Group Corporation
Section 2. Business Review

Forward-looking statements in this text were determined by management as at December 31, 2023.
1 Management Policy, Management Environment and Issues to be Addressed
1.1 Management Policy
The Group is a science and technology-led biopharmaceutical business whose core activities are drug
discovery, drug development and the commercialization of pharmaceutical products. Its mission is toinvest in world-leading science to deliver life-changing medicines.
1.2 Management Environment
The development of pharmaceutical products is characterized by fierce competition between
numerous domestic and overseas companies, research institutions, and other entities, including majorinternational corporations. Development requires massive investment and has long lead times, andthe likelihood of success is not high. However, there are still unmet medical needs in the world andexpectations exist about the development of new drugs that will offer value to patients.
1.3 Management Strategy
In drug discovery, the Group’s core scientific focus is to discover new medicines for important unmet
medical needs, including novel small molecules, peptides and therapeutic antibodies, targeting G
Protein-Coupled Receptors (“GPCRs”). Its proprietary StaR® (“stabilized receptor”) technology andstructure-based drug design (“SBDD”) platform have enabled the Group to become a world leader indiscovering new drugs to target GPCRs and to develop an extensive pipeline of over 30 active in-houseand partnered discovery and development programs across important therapeutic areas, including
neurology, gastroenterology, and immunology and inflammation.
In late-stage development and commercialization, the Group owns the Japan and APAC (ex-China)
territory rights to PIVLAZ® (launched in Japan in 2022 to treat cerebral vasospasm) and daridorexant(filed in Japan in 2023 to treat insomnia), as well as exclusive options to license Japan and APAC (exChina) rights from Idorsia Pharmaceuticals to its Phase 3 cenerimod (autoimmune diseases) andlucerastat (Fabry disease) programs.
In addition, the Group generates royalty revenues from the global sales of respiratory disease products
Seebri® Breezhaler®, Ultibro® Breezhaler® and Enerzair® Breezhaler® from Novartis International AG("Novartis”). These royalties provide the Group with a significant, stable source of capital to support
the investment required to achieve its strategic objectives.

-8-

Sosei Group Corporation
Section 2. Business Review
1 Management Policy, Management Environment and Issues to be Addressed (continued)
1.3 Management Strategy (continued)
During 2023, management has focused on implementing an evolved strategy to more effectively
leverage the Group’s proprietary platform, pipeline and capabilities to grow its business in Japan andinternationally. This strategy, designed to apply cutting-edge science to create pipeline programs bydesign and deliver life-changing medicines to patients, has been based on four key strategic pillars:(i)

Extending and enhancing the competitive advantages of the Group’s world-leading
StaR®/SBDD discovery capabilities through continued investment and internal innovation
combined with external collaborations that provide access to advanced complementary
technologies.

(ii)

Transforming R&D to a program-centric operational model, entrenching target biology andenhancing translational medicine capabilities, to quickly achieve clinical proof of concept.
This, in turn, is expected to enable the advancement of higher quality internal candidates
more cost effectively, promote the signing of more profitable out-licensing deals, as well as
the generation of a deeper in-house pipeline.

(iii)

Diligently driving forward existing partnerships with global biopharma companies andinitiating new high-value partnerships to ensure the continued flow of revenues throughupfront and development milestone payments, and ultimately royalties from sales of
products that reach the market. The Group aims to retain rights to develop andcommercialize candidates in Japan/APAC under these partnership agreements.

(iv)

Building out an agile, scalable and effective clinical development and commercialization
business in Japan and APAC. This strategic initiative aims to capitalize on significant
underserved opportunities that the Group sees within this large attractive market. This
strategy includes in-licensing externally sourced and de-risked clinical assets that are either
approved or in late-stage clinical development, as well as expanding the pipeline withinternally generated programs in the future.

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Sosei Group Corporation
Section 2. Business Review
1 Management Policy, Management Environment and Issues to be Addressed (continued)
1.4 Business and financial issues that should be addressed with priority
Business advancement and strategy
As a science and technology-led biopharmaceutical business whose core activities are drug discovery,
drug development and the commercialization of pharmaceutical products, the Group has outlined astrategy to grow the business in Japan and internationally.
Outside of Japan, the Group intends to take programs from drug discovery through translational
medicine into early clinical development internally, and license these in-house programs to partners,
while retaining its rights to develop such programs in Japan when possible. In Japan, the Group will
start its development and commercialization strategy by in-licensing de-risked approved or late-stage
clinical assets and will expand the pipeline with internally generated programs in the future.
Risk recognition and countermeasures
The Group is exposed to a range of risks consistent with the industry in which it operates. The business,financial position and financial results of the Group may be adversely impacted by any of these risks.
The main risks relating to the financial position and operating results of the Group that management
considers could have a potentially significant impact on investor decisions are described in “Section 2,
Sub-section 3 Business and Operational Risks” and management takes appropriate measures to deal
with these risks.
Value creation
The pharmaceutical industry is undergoing rapid change due to numerous pressures faced by large
companies, such as patent expiries, the higher burden of approval and ever-increasing costs. This has
led to a reduction in the number of research-based businesses taking the full financial and commercial
risk of drug development.
New strategies across the industry are focused on securing external innovation in an efficient way.
Furthermore, ageing populations in many developed countries are driving the need for differentiatedand better treatments. As a result, large pharma and biotech companies are increasingly seeking
innovative solutions to their R&D challenges, and therefore increasingly executing collaborations
across research, discovery and development activities with mid-sized science and technology-led
companies. The Group is positioned to take advantage of this growth trend. The Group regularly
identifies and evaluates opportunities for business expansion and value creation and is pursuing acapital efficient business model that will sustainably create new commercial opportunities in an
evolving industry landscape.

- 10 -

Sosei Group Corporation
Section 2. Business Review
1 Management Policy, Management Environment and Issues to be Addressed (continued)
1.4 Business and financial issues that should be addressed with priority (continued)
Corporate Governance
The Group has business activities in multiple jurisdictions and takes corporate governance very
seriously. The Group is continuously evaluating ways to enhance its systems and processes, to ensure
it complies with all national regulations. Furthermore, the Group will continue to promote a corporate
culture that is committed to the highest standards of openness, integrity and accountability.
The Group’s Board of Directors is responsible for overseeing management and conducting risk
management and compliance activities to maintain standards and accountability and a majority ofmembers are independent external directors. Executive Officers work closely with the Board of
Directors to achieve long-term and sustainable growth for the Group and to create shareholder value.
They make decisions on and execute the Group’s strategy and business transactions that are significant,based on the authority delegated by the Board of Directors.

- 11 -

Sosei Group Corporation
Section 2. Business Review
2 Sustainability Approach and Initiatives
This section contains forward-looking statements, which are based on judgments made as ofDecember 31, 2023 and may differ from actual results.
2.1 Governance
The Group established the ESG Committee with the support of our Board of Directors in 2022, withthe mandate to manage, lead and oversee our ESG initiatives. The Chair of our ESG Committee is Miwa
Seki, one of our independent external directors, who is renowned for her ESG expertise and experiencein Japan. Other committee members include Rolf Soderstrom (independent external director), Noriaki
Nagai (independent external director), Chris Cargill (CEO) and Hironoshin Nomura (CFO). The ESG
Committee believes that improving our ESG performance is a vital component for the Groups’ longterm growth and success. With this overarching objective, our ESG Committee will strive to instill our
ESG initiatives across our organization so that environmental, social, and governance goals becomefoundations of our culture, value and business operations. Our ESG initiatives are priority topics for
our Board of Directors and Executive Officers and, with the leadership of our ESG Committee, arechampioned and implemented across our organization by our Charity Committee, Social Committee,
Environmental and Sustainability Group and Working Group.
2.2 Strategy
Strategy regarding climate change
The Group conducted a climate change scenario analysis based on TCFD recommendations to identify
climate change risks and opportunities, assess financial impact, and consider measures to address suchan impact. Our scenario analysis referred to RCP2.6 (below 2°C scenario) and RCP8.5 (4°C scenario)1,2
adopted by the UN Intergovernmental Panel on Climate Change (IPCC) as well as the scenarios usedby the International Energy Agency (IEA) and assessed the overall impact to our major global bases inJapan, UK, and South Korea. The results of the scenario analysis indicate that the impact of climatechange on the Group's business appears to be limited at present, however, the Board of Directors andthe ESG Committee will monitor the progress of the measures against risks of the entire Group, whichhave been assessed and identified by the analysis. The risks and opportunities related to climatechange for the Group, their impact on the business, and the Group's response are described below.

1 RCP: Representative Concentration Pathways

2 The RCPs include a stringent mitigation scenario (RCP2.6), two intermediate scenarios (RCP4.5 and RCP6.0) and one scenario with very

high GHG emissions (RCP8.5). Scenarios without additional efforts to constrain emissions (’baseline scenarios’) lead to pathways
ranging between RCP6.0 and RCP8.5. RCP2.6 is representative of a scenario that aims to keep global warming likely below 2°C above
pre-industrial temperatures.
- 12 -

Sosei Group Corporation
Section 2. Business Review
2 Sustainability Approach and Initiatives (continued)
2.2 Strategy (continued)
Scenario

Event

Acute

Risk

Physicalscenario(4°C)

ImpactThere appears to be noareas of high direct
Increase inphysical risks to thefrequency
Group's locations.
and severity
However, the risk ofof extreme
acute flooding or other
weatherdamage could beevents suchsignificant and affect theasoperations of some oftyphoons,
our drug discovery,
torrential
research andrains, anddevelopment, clinicalfloodstrial, and marketing
operations.
Increase in
There is a risk of
averageincreased electricity
annualcosts due to increased
temperature power usage.

Water
scarcity

There is a risk that midto long-term water
scarcity may result ininterruption ofoperations due to water
use restrictions.

Growingdemand for
medicines
and drug
discovery

Revenue may increase
due to increased
demand for existing
drugs or thedevelopment andcommercialization of
new drugs because ofchanges in disease
trends caused by global
warming.

Moreefficientenergy use

The promotion of adecarbonized society
will lead to thedevelopment of new
products and services
that improve energy
efficiency.

Chronic

Products
andservices

Opportunity

Transition
scenario(1.5°C)

Resilience- 13 -

Measures

Formulate business
continuity plans for thehead office and each site
to minimize the damageof a disaster on
operations.

Thoroughly implement
energy conservation
measures at each site.
Conduct water resource
acquisition risk studies
using the AQUEDUCT
Water Risk Atlas
provided by the World
Resources Institute todetermine the impact on
the Group’s operations.
Continue to strengthen
our development
pipeline and seek
opportunities forresearch anddevelopment of drugs indisease areas where ourpipeline can make newcontributions in relation
to global warming.
Reside in an officebuilding with enhanced
eco-friendly features toincrease energy
efficiency and reduceenergy consumption andgreenhouse gas (“GHG”)
emissions.

Sosei Group Corporation
Section 2. Business Review
2 Sustainability Approach and Initiatives (continued)
2.2 Strategy (continued)
Scenario

Event

Risk

Policyand legal

Carbontaxes andCO2
emission
regulations

Impact
The introduction of the
carbon price mechanism
in Japan, UK, South
Korea, Ireland, US,
Switzerland, and othercountries where wehave our bases may
result in increased
regulation of energyuse, and energy costs
are expected toincrease, but the impact
on company-wide
operating costs is
considered to belimited.

MeasuresCalculated GHG
emissions for the head
office and each of oursites and analyzed thefinancial impact of the
carbon price mechanism
if it were introduced ineach of our markets.
Started to examine
initiatives to reduce GHG
emissions.

Strategy regarding human capital
The promotion of diversity and inclusion and the creation of a collaborative working environment arecore pillars of the Groups’ vision of delivering life-changing medicines with world-leading science.
Diversity and pay equity
We are committed to pay equality for all colleagues with our intention to continue to build a diverse
and inclusive workforce. Commencing in 2021, a global review of staff salaries has been conducted on
an annual basis against market benchmarks based on each employee’s role and experience. In addition,by clarifying the role of each employee through a grading system throughout the organizations is toensure consistency and fairness in evaluation and pay. The Group will continue our company-wide
efforts to diversity and pay equity.
Share-based payments
We truly believe that employees should have a stake in the ownership of the organization, so they canbenefit from their direct contribution to the company. Accordingly, since April 2022, all permanent
employees are eligible to be considered for grants of Restricted Stock Units (RSUs) under Sosei Group’s
Long-Term Incentive Plan (LTIP) every year. The participation in and the actual grants of awards and/or
payments to our employees are made in accordance with the rules of the relevant LTIP scheme. It is
the Groups’ intention to continue to award employees further grants on an annual basis as anadditional process of recognizing their performance and contributions to the organization.

- 14 -

Sosei Group Corporation
Section 2. Business Review
2 Sustainability Approach and Initiatives (continued)
2.2 Strategy (continued)
Benefits, work-life balance
The Group has a benefits package that revolves around the health and growth of our employees. We
also support employees who have small children, with a return-to-work rate of 83% after maternity or
child-care leave. Furthermore, we support flexible work styles that suit the work situation and lifestyleof employees by introducing remote work and flexible working hours.
Capacity development training
We provide employees with opportunities for growth and skills development and undertake a variety
of initiatives to enable employees to realize their full potential. In addition to mandatory training suchas insider training and compliance training, we also provide training for managers, non-managers, andwomen’s empowerment training, etc., by dividing the target groups and by theme according to theirabilities and needs. Furthermore, we have introduced an E-learning and qualification support system,
supporting micro-learning and the acquisition of qualifications in specialized fields. By providing avariety of skill development opportunities, we encourage employee growth and improve individual
abilities and organizational capabilities.
The Group utilizes an employee engagement survey annually. We aim to use the survey results to guide
us with further developing ways to increase employee satisfaction and development strategies.
2.3 ESG Risk management
The Group has worked hard during 2022 to lay the foundations of our ESG commitment and to build aclear roadmap to achieving our ESG goals. This journey began with our inaugural ESG Committee
meeting in October 2022, which was brought together to understand our organization’s approach to
ESG topics. Then, through conversations with our Board of Directors, employees and external
stakeholders, the ESG Committee identified priority issues which potentially have a material impact(Materiality), initiatives that address our Materiality, and corresponding key performance indicators(KPIs) as a measure of our progress. The Materiality and KPIs identified by the ESG Committee (set out
below) were approved by our Board of Directors in March 2023 and are the initial ESG priority issues
and goals that our organization will strive to achieve in the coming years. The objective of our ESG
Committee will be to implement these ESG goals across our organization and to collaborate with bothinternal and external stakeholders to ensure these priorities become the foundation of our culture,values and business operations.

- 15 -

Sosei Group Corporation
Section 2. Business Review
2 Sustainability Approach and Initiatives (continued)
2.4 Indicators and targets
We recognize that our Materiality and KPIs are long-term objectives that we hope will shape ourorganization’s values, and it is our intention to build on and expand these as an ongoing commitment.
With regard to climate change, the Group's Scope 1 and Scope 2 GHG emissions were 800.66 t-CO23 in
FY2023. The Group’s GHG emission reduction targets will be discussed in the future.
As a global company, our Sosei Group Board of Directors comprise 33% non-Japanese nationals(including our CEO) and 54% of our global workforce are non-Japanese nationals (Japanese: 46%,
British: 32%, Rest of the World: 22%). In addition, we employ a diverse workforce regardless ofnationality or gender, with 46% of our employees being female. With the goal of attracting an evenmore diverse workforce, we will focus our efforts on promotion of diversity and inclusion, and thecreation of a collaborative working environment.

Environment

Materiality

Initiatives

KPIs

Promotingenvironmental
management

Focus on environmental
management systems
and energy reduction
goals and timelines at
our UK R&D Facility toensure our emissions
and waste levels areappropriately managed

Obtain Green Lab
Certification at our UK
R&D Facility within 5
years

Focus on reducing
Gender Gap

Maintain female senior
management roles(global) at 30% or more
over the medium term

Focus on creating R&D
efficiencies that will
enable the developmentof life-changing
medicines for patients

Promote R&D
efficiencies – deliver one
preclinical compoundand one clinicalcompound per year forthe next three years on
average from our inhouse pipeline

Enhance and increase
dialogue with ourshareholders

Provide a forum where
all shareholders can join
and discuss withcompany management
in an open and frankmannerDiversity, Equity andInclusion (DEI)

SocialCreating innovative
pharmaceuticals forpatients

Governance

Equity and transparency
to all stakeholders

3 In the 2023 GHG emissions, IPJ and IPK have been included from July 20, 2023.

- 16 -

Sosei Group Corporation
Section 2. Business Review
3 Business and Operational Risks
The main risks affecting the financial position, operating results and cash flows of the Group aredescribed below. The Group’s business faces various risks, not all of which may necessarily be included
below. The Group’s CEO and CAO have operational responsibility for the management of risk and they
have put systems in place for the heads of each department to identify and report significant risks
upwards. Management will avoid risks, or introduce countermeasures to reduce the impact of risks,
according to the nature and potential severity of those risks, as and when they become apparent.
Forward-looking statements in this text were determined by the Group as at December 31, 2023.
3.1 Research and Development of Pharmaceutical Products
Uncertainty of outcome from research and development activity
・Risk
A significant part of the Group’s activity is focused on pharmaceutical research and development.
Generally, the research and development period for pharmaceutical products, from basic researchthrough to approval, takes a long time and requires a considerable scale of investment. Moreover, thelikelihood of success is extremely low compared to other industries. Thus, research and development
activities are accompanied by uncertainty, and there is a possibility that this uncertainty may have asignificant impact on the Group’s financial position and operating results.
・CountermeasureManagement has expanded the Group’s development pipeline by creating multiple new therapeutic
drug candidates continuously using its unique platform technology, and subsequently partnering
product candidates with other pharmaceutical companies in co-development or licensing models thattransfer the R&D funding costs and risks associated with clinical development and commercialization.
Thereby the Group benefits from a diversification of funding sources, and from balancing the risks
associated with clinical development failure across multiple partnerships.
Matters related to the review of business strategies of business partners
・Risk
The pharmaceutical industry is characterized by fierce competition from numerous domestic andforeign companies and research institutions, including large international organizations. In addition,technological innovation is advancing at a rapid pace. As a result, major pharmaceutical andbiopharmaceutical companies periodically review their business strategies in order to maintain theircompetitiveness in the industry, and outcome may have a significant impact on the financial positionand operating results of the Group. In addition, as a result of competition with these competitors in
the areas of research, development, manufacturing and sales, the Group's financial position andoperating results may be significantly impacted.
・CountermeasureManagement strives to reduce such risks by maintaining and developing good relationships with its
business partners and executing appropriate contracts. In addition, through research and developmentof multiple profitable drugs, management aims to minimize the impact on business performance when
individual partnerships end.

- 17 -

Sosei Group Corporation
Section 2. Business Review
3 Business and Operational Risks (continued)
3.1 Research and Development of Pharmaceutical Products (continued)
Adverse drug reactions
・Risk
Pharmaceutical products may have adverse drug reactions during clinical trials or after
commercialization. For marketed products management continues to carry out activities to minimize
the risk of damage to patients’ health by conducting drug safety monitoring (pharmacovigilance) as amarketing authorization holder. Management makes every effort to avoid risks and reduce possible
impacts. However, if unexpected adverse drug reactions lead to product recall, discontinuance of
manufacturing and sales, or filing of lawsuits regarding adverse drug reactions, there may be asignificant impact on the Group’s financial position and operating results.
・CountermeasureManagement collects domestic and overseas safety management information (information on adverse
drug reactions, etc.) in cooperation with partner companies or sales agents. In addition, the collectedsafety management information is appropriately evaluated, examined, and analyzed, andappropriately reported to agencies in accordance with the regulations of each country and region, andthe information is provided in cooperation with partner companies or sales agents. Thereby
management promotes the proper use of pharmaceutical products.
Pharmaceutical laws and other regulations
・Risk
The pharmaceutical industry is subject to a variety of regulations due to pharmaceutical laws andpharmaceutical administrative guidance in individual countries, and other laws and regulations
applicable to the business activities of research, development, manufacturing and sales. Taking a drug
from the discovery stage to the manufacturing and marketing approval stage incurs a great deal ofresearch and development cost over a long period of time. If sufficient data on efficacy and safety is
not obtained, and its medical utility as a drug cannot be demonstrated, approval from regulatory
authorities may not be granted as planned, and the market launch may become difficult. If thishappens with products licensed to other companies, the licensing conditions may change from thoseestablished at the outset or licensing itself may become difficult. In such an event, or in the event that
there is a large change in applicable regulations, there may be a significant impact on the Group’s
financial position and operating results.
・Countermeasure
Group management, in cooperation with its business partners, has a system in place to identify trends
in the revision of pharmaceutical-related regulations at an early stage and analyze whether or not a
response is necessary. In addition, management has established a governance structure across theGroup that allows it to take rapid decisions to minimize risks.

- 18 -

Sosei Group Corporation
Section 2. Business Review
3 Business and Operational Risks (continued)
3.1 Research and Development of Pharmaceutical Products (continued)
Product Liability
・RiskManagement is responsible for the manufacture/supply of pharmaceutical products, including for use
in clinical trials. If the Group supplies products and those products are not of the required standardsof quality and safety, the Group's financial position and operating results may be severely affected.
・CountermeasureManagement places the highest priority on product safety and quality, and constantly strives to raise
the awareness of its employees through internal education and other means. In addition, management
mitigates product liability risks by purchasing appropriate insurance.
3.2 Strategic Risks
Execution of business strategy
・RiskManagement continues to focus its in-house activities on leveraging the Group’s drug discovery
platform and expertise to create and develop drug candidates as well as enhancing its pipeline withthe aim of achieving important value inflection points that will enable new out-licensing and coinvestment agreements, as well as internal development and commercialization opportunities in Japanand select APAC market. Management is also focused on in-licensing de-risked approved or late-stage
clinical assets to build out its business in Japan and select APAC markets. As is the case for any company
pursuing new drug development, it is possible that investments might be allocated to the developmentof unsuccessful drug candidates, or failed technologies. In such an event, there may be a significant
impact on the Group’s financial position and operating results.
・CountermeasureManagement combines internal and external expertise to comprehensively assess investment
opportunities in R&D programs and technologies, including their commercial viability. Management’s
approach to investing is to balance risk and reward appropriately, ensuring excessive capital is not put
at risk.
Risks from investment strategy
・Risk
In the past, management has made equity investments in companies with highly promising yet
unproven technologies. These investments may enable the Group to accelerate its business model as
they provide a beneficial risk-reward profile through to a significant value inflection. However,investments in unproven technologies also carry the risk of failure which may lead to the impairmentof investments. In such an event, there may be a significant impact on the Group’s financial position
and financial performance.
・Countermeasure
An Investment Committee has been established with responsibility for conducting due diligence andmaking recommendations to the Group’s Board of Directors, which is in turn responsible for approving
strategic investments. Management’s approach to investments is to balance risk and reward
appropriately, ensuring excessive capital is not put at risk.
- 19 -

Sosei Group Corporation
Section 2. Business Review
3 Business and Operational Risks (continued)
3.3 Business Activities of the Group
Partnerships
・Risk
Management aims to build broad partnerships at each stage of research and development, including
incorporation of state-of-the-art technology while avoiding an increase in fixed costs. Should thesecurrent partnerships change, or should the Group fail to create new partnerships as expected there
may be a significant impact on the Group’s financial position and operating results.
・Countermeasure
When concluding agreements, management assesses possible risks, and strives to discuss and agree
mitigation strategies which are then included within the contracts, as appropriate. Furthermore,management has built a strong governance system across various functions and partner organizations
to identify risks and discuss solutions closely with those partners. Management takes the necessary
steps to minimize the impact on the Group’s financial results.
Securing and training human resources
・Risk
The business activities of the Group are delivered through the current management team, as well as
divisional leaders and their members. For that reason, management continually strives to secure andplace high calibre human resources in the right role and invest in their development through training.
If human resources cannot be secured due to tight labour markets or trained as planned, this may havea significant impact on the Group’s business activities and operating results.
・CountermeasureManagement believes that it is important to avoid human resource risks by improving the working
environment and providing employee training so that employees are invested in the company andwork with a sense of security. Management strives to create a sense of unity by sharing its corporate
goals based on employees’ understanding of the company’s philosophy and vision. To this end
management maintains a pleasant office environment, allows flexible working styles that suit
individual employee's lifestyles (including remote working), organizes events with and training by
experts in various fields inside and outside the company, and provides nutritional education tomaintain a healthy workforce.
Intellectual property rights
・Risk
Management uses a variety of intellectual property rights in research and development activities,
which are either proprietary or in-licensed by the Group. However, it is possible that management may
not be able to continue to use the intellectual property rights the Group needs to operate its
businesses. Also, it is possible that a third party will in the future launch a dispute claiming intellectual
property right infringement. Such events may have a significant impact on the Group’s financial
position and operating results.

- 20 -

Sosei Group Corporation
Section 2. Business Review
3 Business and Operational Risks (continued)
3.3 Business Activities of the Group (continued)
・CountermeasureManagement protects its intellectual property rights through the employment of internal IP experts(supported by external patent attorneys) who are responsible for monitoring and addressing any thirdparty infringements.
Financing・Risk
A large amount of research and development spending is necessary in the pharmaceutical industry
and that amount tends to increase as research and development progresses. When the Group requires
funds, if it is not possible to carry out flexible funding due to a deterioration in the market environment,
there may be a significant impact on the Group’s financial position and operating results, such that theGroup will be forced to reconsider its research and development structure and plans.
・CountermeasureManagement strives to reduce this risk by creating and regularly updating cash flow forecasts, andmaintaining sufficient liquidity (Cash and cash equivalents as at December 31, 2023 totaled JPY 49,065
million). In addition, regular review of funding options such as the issuance of new shares, issuance ofcorporate bonds, arranging commitment lines, taking out term loans, and other refinancing measuresenables the Group to secure funds in response to funding market conditions. In 2023 the Company
issued new shares through an international offering (JPY 2,053 million), new shares issued through athird-party allotment (JPY 8,000 million), refinanced its convertible bonds (JPY 32,000 million) andtook out a term loan (JPY 38,550 million at December 31, 2023) in order to strengthen liquidity. In
addition, The Company has a syndicated commitment line (unused JPY 5,000 million facility at
December 31,2023) from its banks.
Foreign currency fluctuations
・Risk
The Group’s international business activities include engaging in foreign currency-denominatedlicensing transactions with foreign companies and performing overseas research and development
activities. Foreign currency risk cannot be completely removed, even by hedging, and if the risk
manifests itself through sudden exchange rate fluctuations, it may have an impact on the Group’s
financial position and operating results.
・CountermeasureManagement reports monthly to the Board of Directors, cash balances broken down by currency aswell as an analysis of foreign exchange gains / losses, to regularly monitor the risk of foreign currency
fluctuations from holding foreign currencies. In addition, Management mitigates foreign currency
fluctuations by purchasing foreign currency appropriately or entering forward exchange contracts.

- 21 -

Sosei Group Corporation
Section 2. Business Review
3 Business and Operational Risks (continued)
3.3 Business Activities of the Group (continued)
Contractual payment obligations
・Risk
In its development pipeline-related contracts with business partners, the Group may have an obligation
to make payments to a partner both at a development stage prior to sales and after thecommencement of sales. Also, there may be an obligation to pay joint development costs, and to invest
in marketing activities after sales start. It is recognized that the form of payment for these
considerations is natural due to the nature of our business as a product development type bio-venture.
However, if the cost is high compared to the Group’s capital resources, the Group may experience asignificant financial burden, which could have a significant impact on its financial position andoperating results.
・Countermeasure
When concluding agreements, management assesses possible risks, and strives to discuss and agree
mitigations which are then included within the contracts. Furthermore, management has built a strong
governance system across various functions and partner organizations to identify risks in partnerships
and discuss solutions closely with those partners. Management takes the necessary steps to minimize
the impact on its financial results.
Establishment of domestic and international sales structure and technology licensing
Sales of the company's products in the domestic market
・Risk
The Group is a licensed marketing authorization holder for pharmaceuticals in Japan and overseas.
When a pharmaceutical product is approved for manufacturing and marketing, the Group, as amarketing authorization holder, will contract with an appropriate sales agent for the supply of productto the Japanese market, in order to maximize sales. If the management cannot partner with anappropriate sales agent in Japan and overseas, or if the Company or its contractors’ manufacturing or
distribution facilities are damaged or business activities are stalled due to natural disasters, fire, orother causes, or if delays or stoppages in the procurement of raw materials, or if product sales by thesales agent are not in line with expectations, or if the Group cannot provide a stable supply of its
product to the Japanese market due to compliance issues caused by the sales agent, the Group’s
financial position and financial performance may be affected as a result of harmed reputation as amarketing authorization holder and decreased revenue.
・Countermeasure
To ensure the quality and safety of the Group’s products, management has adopted an appropriate
corporate structure for a pharmaceutical marketing authorization holder with legal compliance as a
top priority. As a marketing authorization holder, management evaluates whether a potential sales
agent has sufficient capabilities, including sales expertise and regulatory compliance capabilities, andstrives to maintain and develop good relationships with its partners.

- 22 -

Sosei Group Corporation
Section 2. Business Review
3 Business and Operational Risks (continued)
3.3 Business Activities of the Group (continued)
Technology licensing of products developed by the Company or its subsidiaries
・Risk
The Group can profit through licensing out products to other companies at an intermediate stage ofdevelopment and receiving an upfront payment and sales-associated revenues. However, if technology
is not licensed out at the planned time due to delays in development or for some other reason, or if it
becomes difficult to license out a product under development as planned, it could have a significant
impact on the Group’s financial position and operating results.
・CountermeasureManagement will seek to resolve any unexpected external issues if they cause delays or have otheradverse business impacts. External experts will be engaged to help management avoid the risk ofdelays in development. In addition, management strives to develop the capabilities and expertise of
the Group’s workforce to drive effective decision making.
Business expansion through M&A (merger, acquisition, or transfer of a business, and otherinvestments)
・Risk
Management seeks to manage its resources efficiently and strives to maximize corporate value. It is
the Group’s policy to respond flexibly to business expansion opportunities, including M&A. However,
if by these measures the expected benefit is not obtained and an impairment loss relating to goodwill
or intangible assets is recorded, there may be a significant impact on the Group’s financial position andoperating results. Goodwill totaling JPY 24,623 million and intangible assets totaling JPY 52,291 million
were carried in the consolidated balance sheet as at December 31, 2023.
・Countermeasure
Before entering M&A transactions, management conducts detailed due diligence, using external
experts where necessary. It verifies alignment of the opportunity with the Group’s medium-termbusiness strategy, the potential impact on enterprise value and the existence and size of synergies.
Integration of acquired businesses
・Risk
The Group acquired Idorsia's subsidiaries in Japan and APAC (ex-China) from Idorsia in July 2023. Whilst
the resulting expansion in the size and scope of the Group’s business activities provides additional
opportunity for value creation, the Group is aware of the possibility of risks arising from such new
businesses. If there are issues with transitional arrangements or integration activities, or in theexecution of a subsidiary’s business plan, this could have a significant impact on the Group’s financial
position and operating results.
・CountermeasureManagement has appointed several executive officers of the Company to serve as directors ofsubsidiary companies to help oversee their activities. In addition, the Company's Board of Directors
and Audit Committee regularly monitor subsidiary activity and provide guidance to management as
necessary, thereby strengthening governance.
- 23 -

Sosei Group Corporation
Section 2. Business Review
3 Business and Operational Risks (continued)
3.3 Business Activities of the Group (continued)
Significant contracts
・Risk
Important agreements are stated under “Part 1: Company Information, Section 2. Business Review,
sub-section 5. Significant Contracts in Business Operation.” If significant contracts are terminated, it ispossible this will have a significant impact on the Group’s financial position and operating results.
・CountermeasureManagement takes appropriate measures when drafting significant contracts, such as the inclusion oftermination clauses drafted by external lawyers, where necessary. In addition, management deploys
risk mitigation measures such as considering the timing of termination of key contracts when reviewing
management strategies, as well as closely monitoring activities with key contract partners andimplementing responses according to the situation.
Litigation
・Risk
The Group was not litigated against in the year ended December 31, 2023, but the Group could be
subject in the future to litigation or other legal procedures, or investigation by authorities. If the Group
has to pay a large settlement, is ordered to pay a large fine or is subject to a disadvantageous legal
determination, this could have a significant impact on the Group’s financial position and operating
results.
・CountermeasureManagement has established compliance systems, quality management processes and othernecessary corporate structures to prevent problems from occurring. It strives to reduce the risk oflitigation connected to its business activities through the involvement of its legal department and byobtaining advice from external lawyers and other specialists, as necessary.
Establishment of internal controls
・Risk
The Group complies with the Standards and Practice Standards for Management Assessment and Audit
concerning Internal Control Over Financial Reporting in accordance with the Financial Instruments andExchange Act. It has established an internal control system for financial reporting and strives to operate
the system appropriately. If the internal controls fail to function effectively or an unexpected problem
occurs with internal controls such that the Group incurs significant losses, this could have a significant
impact on the Group’s financial position and operating results.
・CountermeasureManagement has established an effective internal control system for financial reporting and strives toensure its proper operation.

- 24 -

Sosei Group Corporation
Section 2. Business Review
4 Management’s Analysis of Financial Position, Operating Results and Cash Flows
Forward-looking statements in this text were determined by management as at December 31, 2023.
4.1 Operating Results
In 2023, the Group continued to make progress in extending and enhancing its world-leading
StaR®/SBDD discovery capabilities. The Group successfully validated and nominated a first GPCR target
into early drug discovery for immune-mediated diseases with an initial indication focus of
inflammatory bowel disease (“IBD”) under a collaboration with Verily. The Group also expanded acollaboration with PharmEnable to apply their respective technologies to drive novel drug discovery
for a second neurological disease target. Furthermore, the Group successfully identified, validated andnominated the first GPCR target to enter a therapeutic discovery program for gastrointestinal diseases
under its collaboration with Kallyope.
In terms of transforming R&D and operations, the Group achieved its goal of advancing at least two inhouse programs into Phase 1 clinical trials in 2023: the first being a novel GPR52 agonist for
schizophrenia (HTL0048149); and the second, an EP4 antagonist (HTL0039732), which is indevelopment as a cancer immunotherapy drug candidate with potential to treat advanced solid tumors.
The latter program is in development under a collaboration with Cancer Research UK, the world’s
largest independent funder of cancer research.
Through its extensive array of partnerships with major biopharmaceutical companies, the Group is
exposed to some of the most exciting and fastest growing therapeutic areas of interest within the
global pharmaceutical market, particularly in metabolic and neuropsychiatric disorders. In metabolic
diseases, such as diabetes and obesity, the Group is partnered with Pfizer on oral GLP-1 receptor (“GLP1R”) agonists and is looking at approaches beyond GLP-1R agonists in its collaboration with Eli Lilly, as
well as advancing internal programs to identify next-generation candidates in these areas.
In November, Pfizer entered a new GLP-1 receptor agonist (PF-06954522), discovered under thecollaboration with the Group, into a Phase 1 clinical trial. This followed the discontinuation of Pfizer’s
Phase 2 program with lotiglipron, a once-daily GLP-1R agonist candidate, in June.
In neuropsychiatric disorders, the Group has seen significant progress in its partnership with
Neurocrine Biosciences, through which Neurocrine has developed one of the largest portfolios ofmuscarinic receptor agonist candidates in the industry. During 2023, Neurocrine confirmed its plan toevaluate multiple new oral drug candidates in Phase 1 clinical studies, alongside its ongoing Phase 2
trial of NBI-1117568 (a muscarinic M4 agonist) for schizophrenia. Phase 1 studies of NBI-1117569 (anM4-preferring agonist) and NBI-1117570 (an M1/M4 selective dual agonist) have started and a Phase
1 study of NBI-1117567 (an M1-preferring agonist) is expected to be initiated in 2024.
In the period after the financial year under review, the Group entered into a global collaboration andexclusive option-to-license agreement with Boehringer Ingelheim in March 2024. At the center is a
joint mission to develop and commercialize the Groups’ portfolio of first-in-class GPR52 agonists, anovel GPCR target, with the intent to improve patient outcomes by simultaneously addressing positive,
negative, and cognitive symptoms of schizophrenia.

- 25 -

Sosei Group Corporation
Section 2. Business Review
4 Management’s Analysis of Financial Position, Operating Results and Cash Flows (continued)
4.1 Operating Results (continued)
Finally, the Group has made significant progress during 2023 in advancing a strategy to build out aleading sales platform in Japan and APAC regions. The Group successfully acquired the pharmaceuticals
business in Japan and South Korea from the Switzerland-based biopharmaceutical company Idorsia.
This transformational acquisition brought a highly experienced development and commercialization
team, a growing commercially available product in Japan, PIVLAZ®, and a late-stage development
candidate, daridorexant, as well as options to in-license in Japan and APAC regions (ex-China) several
other clinical-stage candidates from Idorsia’s pipeline for these markets.
This acquisition has rapidly accelerated the Group’s mission to build out an agile, scalable and effective
clinical development and commercialization business in the important Japan and APAC markets, andsped up its transition to becoming a fully integrated, commercial-stage pharmaceutical company.
The Group is highly motivated and committed to growing and developing its business in Japan andinternationally over the coming years. The Group retains a highly focused investment strategy acrossits business, remaining flexible to all value-creating opportunities, while continuing to rigorously
manage costs.
As of December 31, 2023, the Group had a total of 350 employees (an increase of 148 employees vs.
the end of the prior year). This is primarily due to the acquisition of IPJ and IPK, and their inclusion in
the scope of consolidation in the year under review.

- 26 -

Sosei Group Corporation
Section 2. Business Review
4 Management’s Analysis of Financial Position, Operating Results and Cash Flows (continued)
4.1 Operating Results (continued)
Financial results for the year ended December 31, 2023:
Revenue of JPY 12,766 million (a decrease of JPY 2,803 million vs. the prior year), an operating loss of
JPY 9,526 million (a decrease of JPY 12,962 million vs. the prior year), a net loss before income taxesof JPY 10,680 million (a decrease of JPY 11,758 million vs. the prior year) and a net loss of JPY 7,193
million (a decrease of JPY 7,575 million vs. the prior year). The operating results below include theresults of IPJ and IPK after the date of acquisition of their shares (July 20, 2023).

RevenueYear ended
December 31, 2023
¥m
12,766

Year ended
December 31, 2022¥m
15,569(2,803)(3,102)(10,075)(9,965)(23,142)
850(9,526)(1,154)-(926)(7,454)(4,377)(12,757)
624
3,436
(93)
(429)

(2,176)(2,621)(5,588)(10,385)226(12,962)(1,061)429-(1,836)

1,836(10,680)
3,487(7,193)

1,078
(696)
382

(11,758)
4,183(7,575)

Cost of sales
Research and development expenses
Selling, general and administrative expenses
Operating expenses
Net other income
Operating (loss) profit
Net finance costs
Share of loss of associates accounted for using
the equity method
Impairment loss on investments accounted forusing the equity method(Loss) profit before income tax
Income tax benefit (expense)
Net (loss) profit

ChangeAlternative performance measureCore operating profit / loss (Note 1)
Operating (loss) profit as stated above
Adjustments:
Depreciation
Amortization
Share-based payments (Note 2)
Restructuring (Note 2)
M&A related costs
Cost of sales adjustment (Note 3)
Core operating (loss) profit(9,526)

3,436(12,962)

983
1,495
844
53
1,263
1,812
(3,076)

563
782
542
533
5,856

420
713
302
(480)
1,263
1,812
(8,932)Average exchange rate during period
USD:JPY
GBP:JPY

140.53174.81131.30161.76

9.23
13.05

Notes 1. Core operating profit/loss is defined as IFRS Operating profit/loss + material non-cash costs + material non-recurring costs
and highlights the underlying recurring cash generating capability of the business.
2. Accelerated share-based payment expenses are included in Restructuring.
3. Cost of sales adjustment includes the impact of an accounting adjustment for inventory acquired in a business combinationin the year under review.
- 27 -

Sosei Group Corporation
Section 2. Business Review
4 Management’s Analysis of Financial Position, Operating Results and Cash Flows (continued)
4.1 Operating Results (continued)
The Group operates as a single business segment and, therefore, segmental information has been
omitted. Further explanation of the Group’s financial performance is detailed below.
RevenueYear ended
December 31, 2023

Year ended
December 31, 2022

¥m

¥m

6,173
3,839

80
12,063

6,093(8,224)

Upfront fee revenue recognised at deal inception

-

4,666

(4,666)

Milestone revenue recognised at milestone event

2,108

6,429

(4,321)

Deferred revenue releases (Note 1)

1,731

968

763

2,504

2,564

(60)

Pharmaceutical product sales
Upfront fees and milestone income

Royalty income

Change

Other

250

862

(612)

Total

12,766

15,569(2,803)

Notes 1. Reflects amounts released from deferred revenue in the balance sheet as explained in “Section 5. Financial Statements,
note 22. Revenue, 22.2 Contract balances, Contract liabilities (deferred revenue)”.

Revenue in the year under review totaled JPY 12,766 million (a decrease of JPY 2,803 million vs.
the prior year).
Revenue relating to pharmaceutical product sales in the year under review totaled JPY 6,173
million (an increase of JPY 6,093 million vs. the prior year). This was primarily due to the inclusionof IPJ in the scope of consolidation from July, which resulted in the addition of PIVLAZ® sales.
Revenue relating to upfront fees and milestone income in the year under review totaled JPY 3,839
million (a decrease of JPY 8,224 million vs. the prior year). Upfront fees and milestone income
comprises upfront fee revenue, milestone revenue and deferred revenue releases. Upfront feesand milestone income can vary considerably year on year and depend on the commencement of
new partnership agreements and the achievement of defined milestone events within that year. In
some contracts, income relating to research and development services is included within upfront
fee revenue or milestone revenue, and recorded initially as deferred revenue. Such income istransferred from deferred revenue to revenue as a result of the performance of research anddevelopment activity in the period under review. The decrease in upfront fees and milestone
income in the year under review was primarily due to signing no new partnership agreements andthe occurrence of four milestone events in the current year vs. two upfront fees and five milestone
events in the prior year.
Revenue relating to royalties in the year under review totaled JPY 2,504 million (a decrease of JPY
60 million vs. the prior year). The Group’s royalty revenue relates to sales of Ultibro® Breezhaler®,
Seebri® Breezhaler® and Enerzair® Breezhaler® by Novartis4.

4 Glycopyrronium bromide and certain use and formulation intellectual property were exclusively licensed to Novartis in April 2005 by Sosei and

Vectura. Seebri®, Ultibro®, Enerzair® and Breezhaler® are registered trademarks of Novartis AG.

- 28 -

Sosei Group Corporation
Section 2. Business Review
4 Management’s Analysis of Financial Position, Operating Results and Cash Flows (continued)
4.1 Operating Results (continued)
Operating expenses
Cost of sales
Cost of sales in the year under review totaled JPY 3,102 million (an increase of JPY 2,176 million vs. theprior year). Cost of sales excluding the effect of incorporating IPJ/IPK in the scope of consolidation in
the year under review totaled JPY 458 million (a decrease of JPY 468 million vs. the prior year). Thiswas due to a decrease in the internal costs of delivering research and development services tocustomers, as a result of lower revenues from contract research and development contracts. JPY 2,644
million has been recorded for the cost of sales of PIVLAZ® due to the inclusion of IPJ in the scope of
consolidation from July 2023.
Research & development expenses
Research and development (“R&D”) expenses in the year under review totaled JPY 10,075 million (anincrease of JPY 2,621 million vs. the prior year). R&D expenses excluding those incurred by IPJ/IPK after
July 2023 totaled JPY 9,194 million (an increase of JPY 1,740 million vs. the prior year). This increaseprimarily reflects an increased investment in discovery activities, but also reflects the impact of theweaker Yen. JPY 881 million has been included in 2023 for R&D expenses relating to IPJ/IPK. In the
period under review, 90% of R&D spend related to our UK operations.
Selling, general & administrative expenses
Selling, general and administrative (“SG&A”) expenses in the year under review totaled JPY 9,965
million (an increase of JPY 5,588 million vs. the prior year). SG&A expenses excluding those incurred
by IPJ/IPK after July 2023 totaled JPY 6,210 million (an increase of JPY 1,833 million vs. the prior year).
This increase was primarily due to the inclusion of non-recurring M&A related costs totaling JPY 1,263
million. JPY 3,755 million has been included in 2023 for SG&A expenses relating to IPJ/IPK, which
includes an amortization charge on Idorsia related intangible assets.
Net other income
Net other income in the year under review totaled JPY 850 million (an increase of JPY 226 million vs.
the prior year). This was primarily due to a higher R&D expenditure-related UK tax credit.
Operating loss
Operating loss in the year under review totaled JPY 9,526 million (vs. an operating profit of JPY 3,436
million in the prior year). This increase reflects the combined effect of all of the movements explained
above.

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Sosei Group Corporation
Section 2. Business Review
4 Management’s Analysis of Financial Position, Operating Results and Cash Flows (continued)
4.1 Operating Results (continued)
Net finance costs
Net finance costs in the year under review totaled JPY 1,154 million (an increase of JPY 1,061 million
vs. the prior year). This was primarily due to recording an accounting charge relating to the purchaseand cancellation of existing corporate bonds, and an increase in foreign exchange losses. This waspartially offset by an increase in interest income as a result of higher UK interest rates.
Share of profit / loss of associates accounted for using the equity method
The Group ceased to equity account for MiNA (Holdings) Limited (“MiNA”) from October 2022,
accordingly, there was no share of profit / loss of associates accounted for using the equity method in
the year under review.
Impairment loss on investments accounted for using the equity method
Impairment loss on investments accounted for using the equity method for the year ended 31
December 2022 was due to a decrease in the estimated value of MiNA, which was an associateaccounted for under the equity method.
Loss before income tax
Loss before income taxes in the year under review totaled JPY 10,680 million (vs. a profit before income
taxes of JPY 1,078 million in the prior year). This decrease reflects the combined effect of all of the
movements explained above.
Income tax benefit
Income tax benefit in the year under review totaled JPY 3,487 million (vs. an income tax expense of JPY
696 million in the prior year). This was primarily due to recording the following deferred tax assets in
2023: (i) JPY 1,289 million relating to Heptares Therapeutics Ltd. tax losses, (ii) JPY 948 million relating
Sosei Co. Ltd. tax losses, and (iii) JPY 612 million relating to the IPJ acquisition.
Net loss
Net loss in the year under review totaled JPY 7,193 million (vs. a net profit of JPY 382 million in theprior year). This reduction in profit reflects the combined effect of all of the movements explained
above.

- 30 -

Sosei Group Corporation
Section 2. Business Review
4 Management’s Analysis of Financial Position, Operating Results and Cash Flows (continued)
4.1 Operating Results (continued)
Alternative performance measure: Core operating profit / loss
Core operating profit / loss is an alternative performance measure which adjusts for material non-cash
costs and one-off costs in order to provide insights into the recurring cash generation capability of thecore business.
Core operating loss in the year under review totaled JPY 3,076 million (vs. a core operating profit of
JPY 5,856 million in the prior year). In calculating core operating loss, the following adjustments to the
IFRS operating loss have been made:








Depreciation totaled JPY 983 million (an increase of JPY 420 million vs. the prior year), JPY 357
million of which relates to the inclusion of IPJ/IPK in the scope of consolidation in 2023.
Amortization totaled JPY 1,495 million (an increase of JPY 713 million vs. the prior year), JPY
637 million of which relates to the inclusion of IPJ/IPK in the scope of consolidation in 2023.
Share-based payments totaled JPY 844 million (an increase of JPY 302 million vs. the prior year).
Restructuring costs totaled JPY 53 million (a decrease of JPY 480 million vs. the prior year).
These costs related to a management restructuring program at a subsidiary company (including
JPY 26 million of accelerated share-based payment expenses vs. JPY 158 million in the prioryear).
M&A related costs, including professional advisory fees, totaled JPY 1,263 million (including
acquisition-related costs relating to the transaction with Idorsia totaling JPY 1,149 million).
There were no M&A related costs in the prior year.
Cost of sales adjustment totaled JPY 1,812 million. This relates to an accounting adjustment for
inventory acquired in a business combination which feeds through to cost of sales, and which
will cease when all the opening inventory has been sold (there was no cost of sales adjustmentin the prior year).

Analysis of financial position: Assets, liabilities and equity
AssetsTotal assets as at December 31, 2023 were JPY 157,198 million (an increase of JPY 57,781 million vs.
the end of the prior year). This was primarily due to an increase in intangible assets of JPY 43,714
million resulting from the inclusion of IPJ/IPK in the scope of consolidation.
Liabilities
Total liabilities as at December 31, 2023 were JPY 90,388 million (an increase of JPY 48,907 million vs.
the end of the prior year). This was primarily due to bank borrowings totaling JPY 40,000 million takenout to partly finance the acquisition of IPJ/IPK shares and related assets.

- 31 -

Sosei Group Corporation
Section 2. Business Review
4 Management’s Analysis of Financial Position, Operating Results and Cash Flows (continued)
4.1 Operating Results (continued)
EquityTotal equity as at December 31, 2023 was JPY 66,810 million (an increase of JPY 8,874 million vs. theend of the prior year). This was mainly due to (i) an increase of JPY 5,472 million in capital stock and
JPY 4,511 million in capital surplus as a result of the issue of new shares by way of an overseas
subscription and third-party allotment (ii) an increase in other components of equity of JPY 6,072
million primarily relating to an increase in exchange gains on translation, and (iii) the net loss for theyear of JPY 7,193 million.
The ratios of Cash and cash equivalents, Interest-bearing debt and Equity attributable to owners of theparent company to total assets were 31.2%, 47.1% and 42.5%, respectively.
4.2 Analysis of cash flows
Cash and cash equivalents as at December 31, 2023 decreased by JPY 17,492 million from the
beginning of the year and amounted to JPY 49,065 million. The status and main drivers of each cash
flow during the year under review were as follows:
Cash flows from operating activities
Net cash used in operating activities in the year under review totaled JPY 5,273 million. This wasprimarily due to cash operating costs exceeding cash revenues.
Cash flows from investing activities
Net cash used in investing activities in the year under review totaled JPY 63,791 million. This wasprimarily due to the acquisition of IPJ/IPK shares and related assets.
Cash flows from financing activities
Net cash provided by financing activities in the year under review totaled JPY 48,329 million. This wasprimarily due to long-term bank borrowings to finance the acquisition of IPJ/IPK shares and related
assets, and the issue of new shares by way of an overseas subscription and third-party allotment.
4.3 Capital resources and liquidity of funds
Working capital to advance business is generated through pharmaceutical product sales, the receipt
of upfront fees and milestone income, as well as royalty income from partner companies in accordancewith the terms of collaboration and licensing agreements. In addition, funds are raised for working
capital purposes and business acquisitions through the issuance of new shares and bonds in theholding company and through bank borrowings.
The Group’s organic funding requirement on an ongoing basis primarily relates to sales of introduced
products and the cost of the developing candidate drugs and developing the Group’s drug discovery
platform. The Group will continue investing in research and development activities and related facilities.
Please also refer to “Section 5 Financial Statements Notes to the Consolidated Financial Statements,
Note 9 Financial Instruments, sub-section 9.1 Capital management”.

- 32 -

Sosei Group Corporation
Section 2. Business Review
4 Management’s Analysis of Financial Position, Operating Results and Cash Flows (continued)
4.4 Status of production, orders received and sales
The Group reported only one pharmaceutical segment in the year under review and prior year.
Purchases of inventory
Year ended
December 31, 2023¥m

Year ended
December 31, 2022¥m

Change
%

111

62

77.8

Purchases of inventory

Notes:
1. The purchase of inventory is based on the purchase price.
2. The increase in purchase of inventory from the previous financial year was due to the purchase of PIVLAZ® as a result of the
inclusion of IPJ in the scope of consolidation.

Status of Product Sales Orders Received
There were no applicable, as the Group’s production were based on sales plans.
Sales Result
Sales for the year ended December 31, 2023 were as follows:Year ended
December 31, 2023¥m

Year ended
December 31, 2022¥m

Change%Pharmaceutical product sales

6,173

80

7,616.3

Upfront fees and milestone income

3,839

12,063(68.2)

Royalty income

2,504

2,564

(2.3)

250

862

(71.0)

12,766

15,569(18.0)

Other

Sales to major business partners and their percentage of Total Sales for the year ended December 31,
2023 and the year ended December 31, 2022 were as follows.
Business partner

Year ended
December 31, 2023
AmountPercentage¥m%Year ended
December 31, 2022
AmountPercentage¥m%Medipal Holdings corporation

4,070

31.9

-

-

Novartis International AG

2,504

19.6

2,564

16.5

Idorsia Pharmaceuticals Ltd.2

1,500

11.8

-

-

AbbVie Inc.

1,212

9.5

2,849

18.3

Eli Lilly and Company

237

1.9

3,429

22.0

Neurocrine Biosciences, Inc.

21

0.2

4,138

26.6

Notes:
1. Sales in the table above include sales to subsidiaries of the customer groups listed.
2. Relates to milestones receivable from Idorsia Pharmaceuticals Ltd. which originated from Mochida Pharmaceutical Co. Ltd.
- 33 -

Sosei Group Corporation
Section 2. Business Review
4 Management’s Analysis of Financial Position, Operating Results and Cash Flows (continued)
4.5 Significant accounting estimates and associated assumptions
The Group's material accounting policies and significant estimates are described in“Section 5
Financial Statements, Note 3 Material accounting policies and Note 4 Significant accounting estimatesand associated judgments.”- 34 -

Sosei Group Corporation
Section 2. Business Review
5 Significant Contracts in Business Operation
The significant contracts that existed during the year ended December 31, 2023 were as follows:
5.1 Contracts Involving Sosei Group Corporation
Contract regarding acquisition of Heptares
Contract nameShare Purchase Agreement
Counterparty
105 Heptares shareholders
Execution dateFebruary 20, 2015
Contract period
Not determined
Main contents of
The Company acquired all of the issued shares of Heptares for a maximum
contract
price of USD 400 million, comprising USD 180 million as consideration forthe shares and a maximum price of USD 220 million in contingent
consideration, payable in the event that Heptares receives milestone or
royalty revenues upon the occurrence of certain events stipulated in theagreement.
Commitment line contract
Contract nameCommitment Line Agreement
Counterparty
Financial institutions, with Mizuho Bank, Ltd. as arranger and agent
Execution date
December 30, 2022
Borrowing limit
JPY 5,000 million
Commitment
From December 30, 2022 to December 29, 2023 (However, the Company
periodhas the right to extend the Commitment period until December 30, 2024
or December 30, 2025.
Collateral
Non-collateral agreement
Contract to acquire all outstanding shares of Idorsia Pharmaceuticals Japan Ltd. and Idorsia
Pharmaceuticals Korea Co.,Ltd.
Name of Contract
Purchase Agreement
Counter Party

Idorsia Ltd. and Idorsia Pharmaceuticals Ltd.

Date of Contract

July 20th, 2023

Duration
Main contents ofcontract

NA
Acquisition of all outstanding shares of Idorsia Pharmaceuticals Japan Ltd.
and Idorsia Pharmaceuticals Korea Co.,Ltd. and related intellectual property
rights for a consideration of CHF 400 million.

- 35 -

Sosei Group Corporation
Section 2. Business Review
5 Significant Contracts in Business Operation (continued)
5.1 Contracts Involving Sosei Group Corporation (continued)
Financial Loan Agreement
Name of Contract
Financial Loan Agreement
Counter Party

Mizuho Bank, Ltd.

Date of Contract
Last Date of
Repayment
Main contents ofcontract

July 20th, 2023
July 11th, 2030
The Company will borrow 40 billion yen to fund the acquisition of all
outstanding shares of Idorsia Pharmaceuticals Japan Ltd. and Idorsia
Pharmaceuticals Korea Co. and related intellectual property rights.

5.2 Contracts Involving Heptares
Development of Respiratory Drugs
Contract name
License Agreement
Counterparty
Novartis International AG, Vectura Ltd. (Note: Originally contracted with
Sosei R&D Ltd and novated to Heptares UK Ltd. in November 2018)
Execution date
April 12, 2005
Contract period
From the date of conclusion of the agreement until the later of (1) the
expiry of the last patent licensed by Sosei R&D Ltd. and its joint licenser
Vectura, or (2) 10 years after the initial launch date of the last productcommercialized by Sosei R&D Ltd. or a licensee.
Main contents ofSosei R&D Ltd. and Vectura granted exclusive licenses to Novartis tocontractdevelop and commercialize NVA237 and QVA149 globally.

Contract nameCounterparty
Execution date
Contract period

Main contents ofcontract

Research and License Agreement
AstraZeneca UK Limited
August 6, 2015
From the effective date of the agreement (the end of the waiting period
under the United States antitrust law) until the later for each applicableproduct and country of (1) the expiry date of the applicable patent rights,(2) the end of the legal monopoly period, or (3) the earlier of 10 years after
the market launch or the launch of a generic version.
Heptares granted to AstraZeneca exclusive worldwide development,
manufacturing and commercialization rights for the adenosine A2A
receptor antagonist HTL1071 and receives as consideration an upfront
payment, milestone and royalty revenues. In addition, both companies areto conduct a joint research program.

- 36 -

Sosei Group Corporation
Section 2. Business Review
5 Significant Contracts in Business Operation (continued)
5.2 Contracts Involving Heptares (continued)
Contract nameCounterparty
Execution date
Contract period
Main contents ofcontract

Contract nameCounterparty
Execution date
Contract period
Main contents ofcontract

Contract nameCounterparty
Execution date
Contract period

Main contents ofcontract

Research Collaboration and License Agreement
Pfizer Inc.
November 18, 2015
From the date of conclusion of the agreement until the later for eachapplicable product and country of either (1) the final patent expiry date of
the applicable patent rights, or (2) 10 years after the market launch.
Heptares granted to Pfizer exclusive rights to develop, manufacture, andcommercialize new pharmaceutical products related to up to 10 types of
GPCR targets in multiple fields in return for development andcommercialization milestone payments and royalties on net sales.
Research Collaboration and License Agreement
Genentech, Inc.
July 12, 2019
From the Contract Date to the later of either (1) the expiration date of thepatent term for the subject patent rights, etc., or (2) the date 10 years after
the commencement of marketing, for each covered product and country.
The two companies will jointly develop multiple GPCR targets, andHeptares granted to Genentech exclusive worldwide development,
manufacturing and commercialization rights for the identified Exclusive
Targets. Heptares is eligible to receive an upfront payment, milestones androyalties in consideration.
Multi-Target Collaboration Agreement
Millennium Pharmaceuticals, Inc.
(a 100% subsidiary of Takeda Pharmaceutical Co., Ltd.)
August 2, 2019
From the Contract Date to the later of (1) the expiration date of the patentterm for the Subject Patent Rights, etc., (2) the expiration date of 10 years
after the commencement of marketing, or (3) the end date of the statutory
monopoly period, for each Subject Product and country.
Heptares granted to Millennium Pharmaceuticals, Inc. exclusive worldwide
development, manufacturing and commercialization rights for selected
GPCR targets. Heptares is eligible to receive an upfront payment,
milestones and royalties in consideration. The two companies have also
implemented a joint research program.

- 37 -

Sosei Group Corporation
Section 2. Business Review
5 Significant Contracts in Business Operation (continued)
5.2 Contracts Involving Heptares (continued)
Contract name

Collaboration and Option to License Agreement

Counterparty

AbbVie Ireland Unlimited Company

Execution dateJune 24, 2020
From the Contract Date to the later of (1) the expiration date of the patentterm for the Subject Patent Rights, etc., (2) the expiration date of 10 years
after the commencement of marketing, or (3) the end date of the statutory
monopoly period, for each Subject Product and country.
Heptares and AbbVie will jointly develop new drug candidates. Heptares
granted to AbbVie an option to exclusively license the worldwide
development and commercialization rights. Heptares is eligible to receive
an upfront payment, milestones and royalties in consideration. AbbVie has
the option to expand the collaboration up to a total of four targets.

Contract period

Main contents ofcontract

Contract name

Collaboration and License Agreement

Counterparty

Tempero Bio, Inc.

Execution dateNovember 2, 2020
From the Contract Date to the later of (1) the expiration date of the patentterm for the Subject Patent Rights, etc., or (2) the expiration date of 10
years after the commencement of marketing, for each Subject Product andcountry.
Heptares granted to Tempero Bio exclusive global rights to its mGlu5
negative allosteric modulator (NAM) program including the candidate
HTL0014242. Heptares is eligible to receive an upfront payment, Tempero
Bio stock, milestones and royalties in consideration.

Contract period

Main contents ofcontract

Contract nameCounterparty
Execution date
Contract period

Main contents ofcontract

Global Collaboration and License Agreement
Biohaven Pharmaceutical Holding Company Ltd. (currently acquired by
Pfizer)November 30, 2020
From the Contract Date to the later of (1) the expiration date of the patentterm for the Subject Patent Rights, etc., (2) the expiration date of 10 years
after the commencement of marketing, or (3) the end date of the statutory
monopoly period, for each Subject Product and country.
Heptares granted to Biohaven exclusive rights to develop, manufactureand distribute a portfolio of novel, small-molecule CGRP receptor
antagonists and is eligible to receive an upfront payment, milestones androyalties in consideration.

- 38 -

Sosei Group Corporation
Section 2. Business Review
5 Significant Contracts in Business Operation (continued)
5.2 Contracts Involving Heptares (continued)
Contract name

Collaboration and License Agreement

Counterparty

GlaxoSmithKline Intellectual Property (No.5) Limited

Execution date

December 18, 2020
From the Contract Date to the later of (1) the expiration date of the patentterm for the Subject Patent Rights, etc., (2) the expiration date of 10 years
after the commencement of marketing, or (3) the end date of the statutory
monopoly period, for each Subject Product and country.

Contract period

Main contents ofcontract

Heptares granted to GSK, exclusive rights to develop, manufacture anddistribute a portfolio of GPR35 agonists and is eligible to receive an upfront
payment, milestones and royalties in consideration.

Contract nameCounterparty
Execution date
Contract period

Collaboration and License Agreement
Neurocrine Biosciences, Inc.
November 22, 2021
From the Contract Date to the later of (1) the expiration date of the patentterm for the Subject Patent Rights, etc., (2) the expiration date of 10 years
after the commencement of marketing, or (3) the end date of the statutory
monopoly period, for each Subject Product and country.
Heptares granted to Neurocrine Biosciences exclusive rights to develop,
manufacture and commercialize novel subtype-selective muscarinic
receptor agonists for the treatment of major neurological disorders,
including Alzheimer’s disease in return for an upfront payment,
development and commercialization milestone payments and royalties on
net sales.

Main contents ofcontract

Contract nameCounterparty
Execution date
Contract period

Main contents ofcontract

Amendment to Collaboration and Option to License Agreement
AbbVie Global Enterprises Ltd.
August 1, 2022
From the Contract Date to the later of (1) the expiration date of the patentterm for the Subject Patent Rights, etc., (2) the expiration date of 10 years
after the commencement of marketing, or (3) the end date of the statutory
monopoly period, for each Subject Product and country.
Heptares and AbbVie will jointly develop new drug candidates targeting
neurological diseases. Heptares granted to AbbVie an option to exclusively
license the worldwide development and commercialization distribution
rights. Heptares is eligible to receive an upfront payment, milestones androyalties in consideration.

- 39 -

Sosei Group Corporation
Section 2. Business Review
5 Significant Contracts in Business Operation (continued)
5.2 Contracts Involving Heptares (continued)
Contract nameCounterparty
Execution date
Contract period

Main contents ofcontract

Multi-Target Collaboration and License Agreement
Eli Lilly and Company
December 15, 2022
From the Contract Date to the later of (1) the expiration date of the patentterm for the Subject Patent Rights, etc., (2) the expiration date of 10 years
after the commencement of marketing, or (3) the end date of the statutory
monopoly period, for each Subject Product and country.
Heptares and Eli Lilly will jointly develop new drug candidates targeting
diabetes and metabolic diseases. Heptares granted to Eli Lilly exclusive
worldwide development and commercialization rights. Heptares is eligible
to receive an upfront payment, milestones and royalties in consideration.

- 40 -

Sosei Group Corporation
Section 2. Business Review
6 Research and Development Activities
As a biotechnology Group oriented towards product development, management focuses resources on
pharmaceutical research and development activities. The Group’s research and development expenses
comprise development expenses for the Group’s development products, expenses for discovering thenext generation of development candidates and research for foundational technologies for drug
discovery.
The Group’s research and development expenses for the year ended December 31, 2023 were JPY
10,075 million (measured in accordance with IFRS).
Details of the Group’s Research and Development activities during the year were as follows:(i) Extending and enhancing the Group’s world-leading StaR®/SBDD discovery capabilities
In terms of enhancing the Group’s world-leading StaR®/SBDD, the Group will focus on progressing
existing strategic collaborations with companies that have complementary technologies and look tocollaborate with new partners. By leveraging this enhanced technology advantage in the GPCR space,
the Group aims to generate and advance multiple programs into its own development pipeline while
continuing to be a discovery and development partner-of-choice for leading biopharmaceuticalcompanies.
On October 5, 2023, the Group and Verily announced the successful validation and nomination of afirst GPCR target into early drug discovery for immune-mediated diseases with an initial indication
focus of inflammatory bowel disease (IBD). This scientific breakthrough between the companies is thefirst research milestone stemming from the strategic collaboration announced in 2022 that brings
together the complementary capabilities of Verily's immune profiling technology and the Group’s
GPCR SBDD platform. The companies select drug targets by leveraging sophisticated computational
analysis of genetic and functional genomic data and focused laboratory validation, resulting inincreased confidence that identified targets have the highest relevance to human disease andsignificantly improved chances of clinical success.
On October 10, 2023, the Group and PharmEnable Therapeutics (“PharmEnable”) announced the
expansion of their collaboration to apply their respective technologies to drive novel drug discovery
for a second neurological disease target. The Group is known for its expertise in receptor protein
structure determination, SBDD and translational development. PharmEnable will apply its proprietary
artificial intelligence (AI)-enabled medicinal chemistry platform (chemUNIVERSE) to design highly
specific drug leads for further development. Expanding their 2021 agreement, the companies will
jointly conduct and share the costs of the discovery and the development program and will co-own
any resulting products equally. The companies are already exploiting their complementary capabilities
in an ongoing collaboration focused on an initial target receptor, where they have identified promisingsmall molecules with a new binding mode and novel chemotype.

- 41 -

Sosei Group Corporation
Section 2. Business Review
6 Research and Development Activities (continued)
On November 10, 2023, the Group and Kallyope Inc. ("Kallyope”) announced the successful
identification, validation and nomination of a first GPCR target to enter a therapeutic discovery
program for gastrointestinal diseases. This is the first scientific milestone stemming from the strategic
drug discovery collaboration between the two companies announced in 2022. The collaboration aims
to leverage the Group’s GPCR Diversified Compound Library and GPCR expertise and the innovative
Kallyope Klarity™ platform, which combines single-cell sequencing, circuit mapping, computational
biology and enteroid phenotypic screening. The collaborating teams at the Group and Kallyope intend
to progress the nominated target into a fully supported SBDD program as well as continuing to identify
additional gastrointestinal targets for future programs.
(ii)

Transforming in-house R&D to a program-centric operating model designed to enhance
productivity, value and success

The Group is focused on strengthening its in-house R&D and has achieved its goal of advancing at least
two in-house programs into clinical trials in 2023.
On July 3, 2023, the Group announced that it has dosed the first subject in a Phase 1 trial evaluating
HTL0048149 (HTL’149), a first-in-class GPR52 agonist, which represents a novel mechanism of action
for the treatment of schizophrenia and related neurological diseases. HTL’149 was developed to be aonce-daily, orally available small molecule drug with an antipsychotic and pro-cognitive profile and to
avoid the adverse effects typically associated with existing antipsychotic drugs. HTL’149 achieves thisprofile through selectively targeting the orphan GPR52 receptor in the brain to address positive
symptoms (e.g. psychosis, delusions, hallucinations), negative symptoms (e.g. social withdrawal) andcognitive impairment (e.g. attention, working memory and executive function) associated withschizophrenia. Through this novel mechanism of action, HTL’149 aims to address the significant
proportion of schizophrenia patients who do not respond to or suffer side effects leading tocompliance issues from using existing antipsychotics. Furthermore, current antipsychotic drugs do noteffectively treat the negative or cognitive symptoms of disease. The Phase 1 trial is a two-part,
randomized, double-blind, placebo-controlled, single- and multiple-ascending dose study to assess thesafety, pharmacokinetics, and pharmacodynamics of oral HTL’149 in healthy volunteers aged 18-55
years. The trial is being conducted in the UK and is expected to read-out initial data in 12-18 months
from initiation.

- 42 -

Sosei Group Corporation
Section 2. Business Review
6 Research and Development Activities (continued)
On August 10, 2023, the Group announced that the first patient had been dosed in a Phase 1/2a clinical
trial evaluating its orally available small molecule cancer immunotherapy drug HTL0039732 foradvanced solid tumors under an agreement with Cancer Research UK. HTL0039732 works by blocking
signalling through a specific type of prostaglandin receptor, the prostaglandin E2 (PGE2)-type
prostanoid receptor 4 (EP4). In cancer, PGE2 acts in the tumor microenvironment to trigger cancer
cells to evade the immune system. Targeting EP4 to block the effects of PGE2 increases the ability of
the immune system to detect and control cancer cells and makes HTL0039732 a potential candidate
to treat patients with cancers that generally do not respond well to current immunotherapies, such as
microsatellite stable colorectal, gastroesophageal, head and neck, and castrate-resistant prostatecancer. Cancer Research UK’s Centre for Drug Development (CDD) is sponsoring, designing andconducting the Phase 1/2a trial with three main objectives: to define the toxicity, tolerability andpharmacokinetics of HTL0039732, to identify the recommended dose for Phase 2 studies, and toassess its antitumor activity as a monotherapy and in combination with the PD-L1 inhibitor
atezolizumab. Phase 2a of the trial will expand the optimal combination dose in up to four cohorts inspecified cancer indications. The Group holds a license to the results generated under the trial tocontinue the clinical development and commercialization of HTL0039732.
(iii)

Supporting our existing partnerships with major global biopharmaceutical companies to drive
continued revenue flow

Through its extensive array of partnerships with major biopharmaceutical companies, the Group has
an economic interest to programs advancing in some of the most exciting and fastest growing
therapeutic areas of interest to the global pharmaceutical market, particularly in metabolic andneuropsychiatric disorders.
On January 5, 2023, the Group noted its partner Tempero Bio Inc. (“Tempero Bio”) had announced US
FDA clearance of its Investigational New Drug (IND) application for TMP-301 for the treatment of
alcohol and substance use disorders. TMP-301 (formerly HTL0014242) is a novel mGluR5 negative
allosteric modulator (NAM) candidate discovered by the Group and licensed to Tempero Bio. Tempero
Bio had initiated a Phase 1 study with TMP-301 in healthy volunteers in 2023 with support from a USD
5.3 million grant from the US National Institute on Drug Abuse (NIDA).
On March 30, 2023, Centessa Pharmaceuticals (“Centessa”) announced, in its Full Year 2022 Financial
Results and Business Update, that it had nominated ORX750, an orally administered, selective orexin
receptor-2 (OX2R) agonist developed using the Group’s SBDD platform, as its product candidate withthe potential to be a best-in-class therapy for narcolepsy and other sleep disorders. Centessa alsopresented ORX750 increased wakefulness in NT1 model and wild type mice. ORX750 is currently inpreclinical development and undergoing IND-enabling activities.

- 43 -

Sosei Group Corporation
Section 2. Business Review
6 Research and Development Activities (continued)
On June 27, 2023, the Group noted the decision by its partner Pfizer Inc. (“Pfizer”) to prioritize thedevelopment of clinical-stage GLP-1 receptor agonist candidate danuglipron for the treatment ofdiabetes and obesity and as a result has discontinued the development of lotiglipron. Both novel andorally available candidates were being advanced by Pfizer in Phase 2 clinical trials. Lotiglipron was
discovered and developed by Pfizer during a multi-target research collaboration in which Pfizer hadaccess to the Group’s proprietary StaR® technology. The Group will explore next steps with Pfizer for
the future development of lotiglipron, as the Group has done previously with other partners in similar
situations.
On September 12, 2023, the Group announced that Neurocrine Biosciences Inc. (“Neurocrine”) had
initiated a Phase 1 first-in-human clinical study of NBI-1117570 in healthy adult participants. NBI1117570 is an investigational, oral, muscarinic M1/M4 selective dual agonist that may have thepotential to treat neurological and neuropsychiatric conditions and was developed utilizing the Group’s
SBDD platform.
On October 31, 2023, the Group announced that it would receive a USD3.75 million milestone
payment under the 2019 multi-target Research Collaboration and License Agreement with Genentech
Inc. (“Genentech”). The discovery-based payment is related to progression of a potential first-in-classproject targeting an undisclosed GPCR. Genentech will now be responsible for further development
and commercialization of this potential new medicine. This milestone is the latest arising from an
ongoing collaboration that utilizes the Group’s GPCR-focused SBDD capabilities combined with
Genentech’s discovery, development and therapeutic area expertise directed towards multiple GPCR
targets nominated by Genentech.
On November 6, 2023, the Group announced that it had been notified by Pfizer that it had entered a
new oral small molecule GLP-1 receptor agonist into a Phase 1 clinical trial. PF-06954522 was
discovered by Pfizer scientists during the ongoing collaboration in which Pfizer had access to theGroup’s StaR® technology.
On November 24, 2023, the Group announced it had initiated discussions with GSK to regain fullownership of GSK4381406, a selective, first-in-class, oral GPR35 agonist in development under a Global
Collaboration and License Agreement with GSK as a potential new treatment for Inflammatory Bowel
Diseases (“IBD”). GPR35 is an important orphan GPCR with an established genetic association to IBD.
GSK4381406 was designed by the Group and licensed to GSK in 2020. Since then, the Group and GSK
had advanced GSK4381406 through a joint development program, generating promising mechanistic,
preclinical and safety data suggesting that it may have the potential to improve barrier function andreduce visceral pain in gastrointestinal indications such as ulcerative colitis and irritable bowel
syndrome. These data enabled the Group and GSK to gain approval from the UK Medicines and
Healthcare products Regulatory Agency (“MHRA”) in mid-2023 to enter GSK4381406 into first-inhuman studies (NCT05999708).

- 44 -

Sosei Group Corporation
Section 2. Business Review
6 Research and Development Activities (continued)
GSK’s decision to deprioritize and discontinue the development of GSK4381406 was due to changes toboth its immunology research strategy and immunology research leadership. The decision was notbased on any scientific, preclinical or safety data related to GSK4381406. Under the terms of the 2020
agreement between the companies, the Group has the right – for no upfront payment – to regain fullownership of the GSK4381406 program. GSK becomes eligible for a low single digit royalty from theGroup on net sales of GSK4381406 should it become commercially available.
Upon regaining ownership, the Group expects to proceed with the planned Phase 1 trial in the UK itself
while determining the optimal strategy for the further clinical development and/or re-partnering of
the program.
On December 6, 2023, the Group noted Neurocrine had confirmed its plans to evaluate two newmuscarinic agonist candidates in Phase 1 studies: NBI-1117569, a muscarinic M4-preferring agonist,
and NBI-1117567, a muscarinic M1-preferring agonist. Both investigational, oral compounds may havethe potential to treat neurological and neuropsychiatric conditions and were designed by the Group.
Neurocrine confirmed a Phase 1 study of NBI-1117569 has started and a Phase 1 study of NBI-1117567
will be initiated in 2024.
(iv) Building out a leading commercialization business in JapanOn April 1, 2023, the Group appointed Christopher Cargill, President and CEO, to the position ofRepresentative Director and President of Sosei Co. Ltd., effective the same date. This appointment hasenabled Mr. Cargill to directly manage the subsidiary’s business and to focus on strengthening theJapan business to achieve its strategic goals.
A key element of this strategy was to build an agile, scalable and effective clinical development andcommercialization business capability that would enable the Company to deliver life-changing
medicines to patients in Japan and capitalize on the significant underserved opportunities that it sees
within this large attractive market.
On July 20, 2023, the Group acquired Idorsia Limited’s pharmaceuticals business in Japan and South
Korea, accelerating its transformation into a fully integrated biopharmaceutical Group. This included
the acquisition of 100% of IPJ and IPK.
This acquisition fulfils the Group’s objective to build out a leading sales platform in Japan and was theconclusion of a rigorous global search. The transaction, which was fully funded by existing cash and a
new long-term, low-rate corporate loan, provides the Group with multiple strategic benefits by:••

Accelerating the Company’s mission by adding experienced clinical development capability andprofitable commercial operations in Japan, with a lean model for sales and marketing, and theability to scale and create further value.
Securing and expanding the Company’s future pipeline with two major products PIVLAZ® anddaridorexant; exclusive opt-ins for Phase 3 assets (cenerimod and lucerastat); and selected rights
to up to five additional clinical-stage programs from Idorsia’s global pipeline.
- 45 -

Sosei Group Corporation
Section 2. Business Review
6 Research and Development Activities (continued)••

Bringing a highly skilled team with a proven track record of excellence and delivery, led by Dr.
Satoshi Tanaka, who has directed several approvals and successful commercial launches over the
past two decades in Japan and South Korea.
Leveraging Japan’s quality clinical environment to target underserved, specialty disease areas;and providing a platform to expand across broader APAC regions and extend product launches.

The transaction also brings together complementary capabilities to develop and commercialize novel
medicines across Japan and APAC (ex-China) from three sources of innovation: (i) The Group’s wholly
owned discovery and early development pipeline, (ii) selected clinical candidates from Idorsia’s
pipeline, and (iii) in-licensing of Japan/APAC (ex-China) rights to clinical product candidates from third
parties.
In addition, the Company will continue to seek partners for novel candidates or programs discoveredby the Group for development and commercialization outside of Japan/APAC territories where
significant unmet needs exist, while seeking to retain Japan and APAC rights.
On October 31, 2023, the Group announced that IPJ had submitted a New Drug Application (“NDA”)
to the Japanese Pharmaceuticals and Medical Devices Agency (“PMDA”) for the approval of
daridorexant (ACT541468), a dual orexin receptor antagonist, which has been co-developed by Idorsia
and Mochida Pharmaceutical Co., Ltd. ("Mochida”), for the treatment of adult patients with insomnia.
In relation to the filing of this NDA and the sub-licensing of rights by Mochida to Shionogi & Co.,Ltd.,the Group received milestone fees of JPY 1,500 million.
The NDA is supported by positive results of a randomized, double-blind, placebo-controlled Phase 3
study in Japan to investigate the efficacy and safety of daridorexant. Daridorexant was approved in the
US and Europe in January and April 2022, respectively, and is marketed by Idorsia in these and otherapproved territories as QUVIVIQ™.
On December 7, 2023, the Group announced that PIVLAZ® (clazosentan sodium) 150 mg had received
marketing approval from the Ministry of Food and Drug Safety (MFDS) in South Korea for theprevention of cerebral vasospasm, vasospasm-related cerebral infarction, and cerebral ischemic
symptoms after aneurysmal subarachnoid hemorrhage (“aSAH”).
The approval was based on scientific and clinical data from an extensive Japanese Phase 3 programsubmitted by IPK. In South Korea, PIVLAZ® is expected to become commercially available to patients inearly 2025. PIVLAZ® received marketing approval in Japan in January 2022 and was launched in April
2022 by IPJ. PIVLAZ® had been used in approximately 8,900 patients in Japan as of November 2023.

- 46 -

Sosei Group Corporation
Section 3. Facilities
1 Overview of Capital Expenditures
The total amount of capital expenditures made by the Group in the year under review was JPY 1,222
million, which was mainly for the expansion of the R&D base in Cambridge, U.K. There were nodisposals or sales of important facilities during the year under review.
2 Status of Main Facilities
The Group’s main facilities as at December 31, 2023 were as follows:
2.1 Filing Company
Buildings¥m

Office name
(Location)

Description

Head office(Chiyoda-ku, Tokyo)

Group administration

29

Book value
Furniture
Leasesand¥mfixtures
¥m
10

-

Total
¥m

39

Numberofemployees
30(0.7)

Notes:
1. The above amounts are based on JGAAP.
2. The Head office is a leased facility.
3. The annual average number of other workers is provided separately in parentheses.

2.2 Domestic Subsidiaries

Subsidiary(Location)
Idorsia
Pharmaceuticals
Japan Ltd.
Head office(Minato-ku, Tokyo)

Description
Company
administrat
ion &
Sales
OfficeBuildings Machineryandandstructures equipment¥m¥m

Furnitureandfixtures¥mBook value
Constructi
on in
progress¥m

Right-ofuse Assets

-

54

-

2,216

2,627

Furnitureandfixtures¥mBook value
Constructi
on in
progress¥m

Right-ofuse Assets

Total

186

20

1,830

357

¥m

Total

Numberof¥m employees
89(18.4)

Notes:
1. The above amounts are based on IFRS.
2. The above office facility is a leased facility.
3. The annual average number of other workers is provided separately in parentheses.

2.3 Overseas Subsidiaries

Subsidiary(Location)
Heptares
Therapeutics Ltd.
Head office(Cambridge, U.K.)

Description
Research
facility

Buildings Machineryandandstructures equipment
¥m
¥m

1,736

833

Notes:
1. The above amounts are based on IFRS.
2. The Research facility is a leased facility.
3. The annual average number of other workers is provided separately in parentheses.

- 47 -¥m

Numberofemployee
¥m
s

4,605

173
(12.7)

Sosei Group Corporation
Section 3. Facilities
3 Plans for New Installation and Retirement of Facilities
3.1 New Installation of Important Facilities
Not applicable.
3.2 Retirement of Important Facilities
Not applicable.

- 48 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information
1.1 Total Number of Shares
Total Number of Shares
Type

Total number of authorized shares (shares)

Common shares

149,376,000

Issued Shares

Type

Number ofissued sharesat December
31, 2023(shares)Number ofissued sharesat the date ofsubmissionMarch 27,2024 (shares)

Name of listed
financial
instruments
exchange or nameof registeredauthorized financial
instruments firms’
associations

Details

Commonshares89,446,777

89,446,777

Tokyo Stock
Exchange Prime

Number of sharesconstituting one unit:
100 shares

Total

89,446,777

89,446,777--

Notes:In the “number of issued shares at the date of submission” the number of shares issued through the exercise of stock options
during the period between March 1, 2024 and the submission date of this securities report is not included.

1.2 Stock Acquisition Rights (Stock Options)
Details of Stock Acquisition Rights
Please refer to “Section 5 Financial Statements Notes to the Consolidated Financial Statements, Note
24 Share-based payments”.
Contents of Rights Plan
Not applicable.

- 49 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.2 Stock Acquisition Rights (Stock Options) (continued)
Contents of Exercise of others
a. Sosei Group Corporation Euro-Yen Convertible Bonds due 2026 (Hereinafter referred to as the"Bonds with Stock Acquisition Rights", of which only the bonds are referred to as the "Bonds"
and only the stock acquisition rights are referred to as the "Stock Acquisition Rights".)
Resolution dateJuly 7, 2021

Number of stock acquisition rights (units) (*)

15

Number of treasury stock acquisition rights among stock acquisition rights(*)-

Class and number of shares underlying stock acquisition rights (shares)(Note 1) (*)
Amount to be paid into exercise stock acquisition rights (yen) (Note 2) (*)
Period for exercising stock acquisition rights (Note 3) (*)
Share issue price and additional paid-in capital per share in the event ofissuance of shares upon exercise of stock acquisition rights (yen) (Note4) (*)
Conditions for exercising stock acquisition rights (*)

Common Shares

67,1142,235
From August 10, 2021 to July 13,
2026
Issue price: 2,235
Additional paid-in capital per
share:1,118(Note 5)Matters relating to transfer of stock acquisition rights (*)

Matters relating to granting of stock acquisition rights in association with
acts of organizational restructuring (*)

The stock acquisition rights areattached to convertible bond-typebonds with stock acquisition rights
and cannot be transferred separatelyfrom the bonds.
(Note 6)

Details and value of assets to be contributed for the exercise of stock

Upon the exercise of each stockacquisition right, the bonds
pertaining to such stock acquisitionrights shall be contributed, and thevalue of such bonds shall be equal to
the nominal value thereof.

Balance of stock acquisition rights at the end of the financial year (\m)

150

(*)

The position as at the end of the current year (December 31, 2023) is described above. As at the end of the monthprior to the submission date (February 29, 2024) there had been no change. Accordingly, equivalent disclosures relating
to the position as at the end of the month prior to the submission date have been omitted. As the Redemption andCancellation of Convertible Bonds due 2026 was implemented on March 18, 2024, there are no residuals of stockacquisition rights at the date of submission (March 27, 2024).

- 50 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.2 Stock Acquisition Rights (Stock Options) (continued)
Note 1 The type and content of shares to be issued upon exercise of the Stock Acquisition Rights
shall be shares of the Company's common stock (100 shares per unit), and the number ofshares of the Company's common stock to be delivered by the Company upon exercise of
the Stock Acquisition Rights shall be the number obtained by dividing the total face value ofthe Bonds pertaining to the exercise request by the conversion price set forth in 2 (1) and(2) below. However, any fraction of a share resulting from the exercise of the Stock
Acquisition Rights shall be rounded down and no adjustment in cash shall be made. In
addition, if the exercise of the Stock Acquisition Rights results in the issuance of sharesconstituting less than one unit, such shares constituting less than one unit shall be delivered
to the holders of the Bonds (the "Bondholders") in the same manner as shares constituting
one unit, and the Company shall not make any cash settlement for such shares constituting
less than one unit.
Note 2 (1) The amount to be paid in at the time of exercise of the Stock Acquisition Rights (the"Conversion Price") shall initially be JPY 2,235.
(2) The conversion price shall be adjusted in accordance with the following formula if, after
the issuance of the Bonds, the Company issues shares of common stock of the Company ata paid in price below the market price of the Company's common stock or disposes ofshares of common stock of the Company held by the Company. In the following formula,the "number of outstanding shares" refers to the total number of the Company's issued
common shares (excluding those held by the Company).

Conversion Priceafter adjustment＝

Conversion
Price before
adjustment

Number ofoutstanding
shares×+

Net balanceof newlyissued and ×
disposedsharesAmount paid
per share

Market value
Number of+outstanding shares

Net balance of newly issued
and disposed shares

The Conversion Price shall also be adjusted from time to time in the event of a split orconsolidation of the Company's common stock, the distribution of a certain amount of
surplus, the issuance of stock acquisition rights (including those attached to bonds withstock acquisition rights) that allow the Company to request the delivery of the Company's
common stock at a price lower than the market price of the Company's common stock, orthe occurrence of certain other events.

- 51 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.2 Stock Acquisition Rights (Stock Options) (continued)
Note 3 Provided, however, that (i) in the event of early redemption by the Company, no later than
three business days prior to the redemption date in Tokyo (however, this excludes the Stock
Acquisition Rights pertaining to the Bonds that are elected not to be subject to early
redemption due to Tax Reform), (ii) in the event of early redemption at the option of theBondholders, until the time when the Redemption Notice is deposited with the Agent for
Receipt of Payment and Exercise of Stock Acquisition Rights, (iii) in the case of a purchaseand cancellation, until the time of cancellation of the Bonds, and (iv)in the case of forfeitureof the benefit of the term of the Bonds, until the time of forfeiture of the benefit of theterm. In any of the above cases, the Stock Acquisition Rights may not be exercised later thanJuly 13, 2026 (local time at the place where the Bonds are deposited for the exercise of theStock Acquisition Rights). Notwithstanding the foregoing, the Stock Acquisition Rights may
not be exercised in the cases specified in the Stock Acquisition Rights Issuance Guidelines.
Note 4 The amount of stated capital to be increased shall be half of the maximum increased
amount of stated capital, etc., as calculated in accordance with Article 14, Paragraph 1 of
the Rules of Account Settlement of Corporations, with any fraction less than one yen
resulting from the calculation being rounded up to the nearest one yen. In addition, theamount of capital reserve to be increased shall be the amount obtained by subtracting theamount of capital to be increased from the relevant maximum amount of increase in capital,
etc. As the Redemption and Cancellation of Convertible Bonds due 2026 was implemented
on March 18, 2024, there is no increase in the amount of stated capital and the amount of
capital reserve.
Note 5 Each Stock Acquisition Right may not be exercised in part.
Note 6 (1) In the event of Organizational Restructuring, etc., the Company shall use its best efforts
to have the Succeeding Company, etc. (as defined below) succeed to the position as theprincipal debtor of the Bonds with Stock Acquisition Rights and deliver new stock acquisitionrights in place of the Stock Acquisition Rights in accordance with the terms and conditionsof the Bonds with Stock Acquisition Rights. However, such succession and delivery shall takeplace only if (i) such succession and delivery are feasible under the laws applicable at thetime, (ii) a mechanism for such succession and delivery has already been established or canbe established, and (iii) the Company or the Succeeding Company, etc. does not incur any
costs (including taxes) that are unreasonable (as determined by the Company) from theperspective of the Reorganization, etc. as a whole. In such cases, the Company shall also
make its best efforts to ensure that the Succeeding Company, etc. is a listed company inJapan as at the effective date of the Reorganization, etc. This shall not apply if the Company
issues a certificate to the effect that the Succeeding Company, etc. is not expected by theCompany to be a listed company in Japan on the effective date of the Reorganization, etc.
for any reason whatsoever. The "Succeeding Company, etc." means the counterparty in the
Reorganization, etc., which assumes the obligations of the Company with respect to theBonds with Stock Acquisition Rights or the Stock Acquisition Rights.
- 52 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.2 Stock Acquisition Rights (Stock Options) (continued)(2) The details of the stock acquisition rights of the Succeeding Company, etc. to bedelivered in accordance with the provisions of (1) above shall be as follows:(i) Number of Stock Acquisition Rights:
The number of Stock Acquisition Rights shall be the same as the number of Stock
Acquisition Rights pertaining to the Bonds with Stock Acquisition Rights remaining
immediately prior to the effective date of the Reorganization.
(ii) Class of shares to be issued upon exercise of stock acquisition rights:
Common stock of the Succeeding Company, etc.
(iii) Number of shares to be issued upon exercise of stock acquisition rights:
The number of shares of common stock of the Succeeding Company, etc. to bedelivered upon exercise of the stock acquisition rights of the Succeeding Company,
etc. shall be determined by reference to the terms and conditions of the Bonds, taking
into consideration the terms and conditions of the Reorganization, etc., and shall also
be subject to (I) or (II) below. The conversion price shall be subject to adjustment in
the same manner as set forth above.
(I) In the case of certain mergers, share exchanges, or share transfers, theconversion price shall be determined so that the number of shares of common
stock of the succeeding company, etc. that the holders of the number of shares ofcommon stock of the Company that would be obtained if they exercised the Stock
Acquisition Rights immediately prior to the effective date of the Reorganization,etc. receive in the Reorganization, etc. shall be received when they exercise theStock Acquisition Rights of the succeeding company, etc. immediately after theeffective date of the Reorganization, etc. If securities or other property other thanthe common stock of the Succeeding Company, etc. are delivered upon the
Reorganization, etc., the number of shares of common stock of the Succeeding
Company, etc. equal to the number obtained by dividing the value of suchsecurities or property by the market value of the common stock of the Succeeding
Company, etc. shall be received together.
(II) In the case of organizational restructuring, etc. other than the above, theconversion price shall be determined so that the Bondholders with Stock
Acquisition Rights will receive the same economic benefits as they would receive
if they exercised their Stock Acquisition Rights immediately prior to the effective
date of said organizational restructuring, etc. when they exercise the Stock
Acquisition Rights of the Surviving Entity, etc. immediately after the effective dateof said organizational restructuring, etc.
(iv) Details of property to be contributed upon the exercise of stock acquisition rights
and the amount thereof:
Upon exercise of the stock acquisition rights of the Succeeding Company, etc., theSucceeded Bonds shall be contributed, and the value of such Succeeded Bonds shallbe the same as the face value of the Succeeded Bonds.

- 53 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.2 Stock Acquisition Rights (Stock Options) (continued)(v) Period during which the Stock Acquisition Rights may be exercised:
From the effective date of the Reorganization, etc. (or a date within 14 days after
the effective date of the Reorganization, etc., as the case may be) until the
expiration dateof the exercise period of the Stock Acquisition Rights set forth above.
(vi) Other conditions for the exercise of stock acquisition rights:
Partial exercise of each stock acquisition right of the Surviving Entity shall not be
permitted.
(vii) Capital stock and capital reserve to be increased in the event of the issuance of shares
upon the exercise of stock acquisition rights:
The amount of stated capital to be increased in the event of the issuance of sharesby the exercise of stock acquisition rights of the Successor Company, etc. shall be themaximum amount of increase in stated capital, etc. calculated in accordance with theprovisions of Article 17 of the Corporate Calculation Rules multiplied by 0.5, with any
fraction less than one yen resulting from the calculation being rounded up to thenearest one yen. The amount of additional paid-in capital to be increased shall be theamount obtained by subtracting the amount of stated capital to be increased fromthe maximum amount of increase in stated capital, etc.
(viii) In the event of reorganization, etc.:
In the event of an organizational restructuring, etc. of the Succeeding Company, etc.,
the Bonds will be treated in the same manner.
(ix) Other matter:
If a Succeeding Company, etc. exercises the stock acquisition rights, fractions of lessthan one share resulting from the exercise of stock acquisition rights shall be rounded
down and no cash adjustment shall be made. The stock acquisition rights of the
Succeeding Company, etc. cannot be transferred separately from the Succeeded
Bonds.
(3) In the event that the Company's obligations under the Trust Deed are assumed or
succeeded to by the Successor Company, etc., the Company shall comply with the terms
and conditions of the Bonds, in addition to attaching a guarantee in certain cases as set
forth in the terms and conditions of the Bonds.

- 54 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.2 Stock Acquisition Rights (Stock Options) (continued)
Contents of Exercise of othersb. Sosei Group Corporation Euro-Yen Convertible Bonds due 2028 (Hereinafter referred to as the"Bonds with Stock Acquisition Rights", of which only the bonds are referred to as the "Bonds"
and only the stock acquisition rights are referred to as the "Stock Acquisition Rights".)
Resolution dateNov 28, 2023

Number of stock acquisition rights (units) (*)

3,200

Number of treasury stock acquisition rights among stock acquisition rights(*)
Class and number of shares underlying stock acquisition rights (shares)(Note 1) (*)

Common Shares

Amount to be paid into exercise stock acquisition rights (yen) (Note 2) (*)
Period for exercising stock acquisition rights (Note 3) (*)
Share issue price and additional paid-in capital per share in the event ofissuance of shares upon exercise of stock acquisition rights (yen) (Note4) (*)

17,957,351

1,782
From Dec 28, 2023 to Nov 30, 2028
Issue price: 1,782
Additional paid-in capital per
share:891

Conditions for exercising stock acquisition rights (*)(Note 5)Matters relating to transfer of stock acquisition rights (*)

The stock acquisition rights areattached to convertible bond-typebonds with stock acquisition rights
and cannot be transferred separatelyfrom the bonds.

Matters relating to granting of stock acquisition rights in association with
acts of organizational restructuring (*)(Note 6)

Details and value of assets to be contributed for the exercise of stock

Upon the exercise of each stockacquisition right, the bonds
pertaining to such stock acquisitionrights shall be contributed, and thevalue of such bonds shall be equal to
the nominal value thereof.

Balance of stock acquisition rights at the end of the financial year (\m)

32,000(*)

The position as at the end of the current year (December 31, 2023) is described above. As at the end of the monthprior to the submission date (February 29, 2024) there had been no change. Accordingly, equivalent disclosures relating
to the position as at the end of the month prior to the submission date have been omitted.

- 55 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.2 Stock Acquisition Rights (Stock Options) (continued)
Note 1 The type and content of shares to be issued upon exercise of the Stock Acquisition Rights
shall be shares of the Company's common stock (100 shares per unit), and the number ofshares of the Company's common stock to be delivered by the Company upon exercise of
the Stock Acquisition Rights shall be the number obtained by dividing the total face value ofthe Bonds pertaining to the exercise request by the conversion price set forth in 2 (1) and(2) below. However, any fraction of a share resulting from the exercise of the Stock
Acquisition Rights shall be rounded down and no adjustment in cash shall be made. In
addition, if the exercise of the Stock Acquisition Rights results in the issuance of sharesconstituting less than one unit, such shares constituting less than one unit shall be delivered
to the holders of the Bonds (the "Bondholders") in the same manner as shares constituting
one unit, and the Company shall not make any cash settlement for such shares constituting
less than one unit.
Note 2 (1) The amount to be paid in at the time of exercise of the Stock Acquisition Rights (the"Conversion Price") shall initially be JPY 1,782.
(2) The conversion price shall be adjusted in accordance with the following formula if, after
the issuance of the Bonds, the Company issues shares of common stock of the Company ata paid in price below the market price of the Company's common stock or disposes ofshares of common stock of the Company held by the Company. In the following formula,the "number of outstanding shares" refers to the total number of the Company's issued
common shares (excluding those held by the Company).

Conversion Priceafter adjustment＝

Conversion
Price before
adjustment

Number ofoutstanding
shares×+

Net balanceof newlyissued and ×
disposedsharesAmount paid
per share

Market value
Number of+outstanding shares

Net balance of newly issued
and disposed shares

The Conversion Price shall also be adjusted from time to time in the event of a split orconsolidation of the Company's common stock, the distribution of a certain amount of
surplus, the issuance of stock acquisition rights (including those attached to bonds withstock acquisition rights) that allow the Company to request the delivery of the Company's
common stock at a price lower than the market price of the Company's common stock, orthe occurrence of certain other events.

- 56 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.2 Stock Acquisition Rights (Stock Options) (continued)
Note 3 Provided, however, that (i) in the event of early redemption by the Company, no later than
three business days prior to the redemption date in Tokyo (however, this excludes the Stock
Acquisition Rights pertaining to the Bonds that are elected not to be subject to early
redemption due to Tax Reform), (ii) in the event of early redemption at the option of theBondholders, until the time when the Redemption Notice is deposited with the Agent for
Receipt of Payment and Exercise of Stock Acquisition Rights, (iii) in the case of a purchaseand cancellation, until the time of cancellation of the Bonds, and (iv) in the case of forfeitureof the benefit of the term of the Bonds, until the time of forfeiture of the benefit of theterm. In any of the above cases, the Stock Acquisition Rights may not be exercised later thanNov 30, 2028 (local time at the place where the Bonds are deposited for the exercise of theStock Acquisition Rights). Notwithstanding the foregoing, the Stock Acquisition Rights may
not be exercised in the cases specified in the Stock Acquisition Rights Issuance Guidelines
Note 4 The amount of stated capital to be increased shall be half of the maximum increased
amount of stated capital, etc., as calculated in accordance with Article 14, Paragraph 1 of
the Rules of Account Settlement of Corporations, with any fraction less than one yen
resulting from the calculation being rounded up to the nearest one yen. In addition, theamount of capital reserve to be increased shall be the amount obtained by subtracting theamount of capital to be increased from the relevant maximum amount of increase in capital,
etc.
Note 5 Each Stock Acquisition Right may not be exercised in part.
Note 6 (1) In the event of Organizational Restructuring, etc., the Company shall use its best efforts
to have the Succeeding Company, etc. (as defined below) succeed to the position as theprincipal debtor of the Bonds with Stock Acquisition Rights and deliver new stock acquisitionrights in place of the Stock Acquisition Rights in accordance with the terms and conditionsof the Bonds with Stock Acquisition Rights. However, such succession and delivery shall takeplace only if (i) such succession and delivery are feasible under the laws applicable at thetime, (ii) a mechanism for such succession and delivery has already been established or canbe established, and (iii) the Company or the Succeeding Company, etc. does not incur any
costs (including taxes) that are unreasonable (as determined by the Company) from theperspective of the Reorganization, etc. as a whole. In such cases, the Company shall also
make its best efforts to ensure that the Succeeding Company, etc. is a listed company inJapan as at the effective date of the Reorganization, etc. This shall not apply if the Company
issues a certificate to the effect that the Succeeding Company, etc. is not expected by theCompany to be a listed company in Japan on the effective date of the Reorganization, etc.
for any reason whatsoever. The "Succeeding Company, etc." means the counterparty in the
Reorganization, etc., which assumes the obligations of the Company with respect to theBonds with Stock Acquisition Rights or the Stock Acquisition Rights.

- 57 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.2 Stock Acquisition Rights (Stock Options) (continued)(2) The details of the stock acquisition rights of the Succeeding Company, etc. to bedelivered in accordance with the provisions of (1) above shall be as follows:(i) Number of Stock Acquisition Rights:
The number of Stock Acquisition Rights shall be the same as the number of Stock
Acquisition Rights pertaining to the Bonds with Stock Acquisition Rights remaining
immediately prior to the effective date of the Reorganization.
(ii) Class of shares to be issued upon exercise of stock acquisition rights:
Common stock of the Succeeding Company, etc.
(iii) Number of shares to be issued upon exercise of stock acquisition rights:
The number of shares of common stock of the Succeeding Company, etc. to bedelivered upon exercise of the stock acquisition rights of the Succeeding Company,
etc. shall be determined by reference to the terms and conditions of the Bonds, taking
into consideration the terms and conditions of the Reorganization, etc., and shall also
be subject to (I) or (II) below. The conversion price shall be subject to adjustment in
the same manner as set forth above.
(I) In the case of certain mergers, share exchanges, or share transfers, theconversion price shall be determined so that the number of shares of common
stock of the succeeding company, etc. that the holders of the number of shares ofcommon stock of the Company that would be obtained if they exercised the Stock
Acquisition Rights immediately prior to the effective date of the Reorganization,etc. receive in the Reorganization, etc. shall be received when they exercise theStock Acquisition Rights of the succeeding company, etc. immediately after theeffective date of the Reorganization, etc. If securities or other property other thanthe common stock of the Succeeding Company, etc. are delivered upon the
Reorganization, etc., the number of shares of common stock of the Succeeding
Company, etc. equal to the number obtained by dividing the value of suchsecurities or property by the market value of the common stock of the Succeeding
Company, etc. shall be received together.
(II) In the case of organizational restructuring, etc. other than the above, theconversion price shall be determined so that the Bondholders with Stock
Acquisition Rights will receive the same economic benefits as they would receive
if they exercised their Stock Acquisition Rights immediately prior to the effective
date of said organizational restructuring, etc. when they exercise the Stock
Acquisition Rights of the Surviving Entity, etc. immediately after the effective dateof said organizational restructuring, etc.
(iv) Details of property to be contributed upon the exercise of stock acquisition rights
and the amount thereof:
Upon exercise of the stock acquisition rights of the Succeeding Company, etc., theSucceeded Bonds shall be contributed, and the value of such Succeeded Bonds shallbe the same as the face value of the Succeeded Bonds.
(v) Period during which the Stock Acquisition Rights may be exercised:
From the effective date of the Reorganization, etc. (or a date within 14 days after theeffective date of the Reorganization, etc., as the case may be) until the expirationdate- 58 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.2 Stock Acquisition Rights (Stock Options) (continued)of the exercise period of the Stock Acquisition Rights set forth above.
(vi) Other conditions for the exercise of stock acquisition rights:
Partial exercise of each stock acquisition right of the Surviving Entity shall not be
permitted.
(vii) Capital stock and capital reserve to be increased in the event of the issuance of shares
upon the exercise of stock acquisition rights:
The amount of stated capital to be increased in the event of the issuance of sharesby the exercise of stock acquisition rights of the Successor Company, etc. shall be themaximum amount of increase in stated capital, etc. calculated in accordance with theprovisions of Article 17 of the Corporate Calculation Rules multiplied by 0.5, with any
fraction less than one yen resulting from the calculation being rounded up to thenearest one yen. The amount of additional paid-in capital to be increased shall be theamount obtained by subtracting the amount of stated capital to be increased fromthe maximum amount of increase in stated capital, etc.
(viii) In the event of reorganization, etc.:
In the event of an organizational restructuring, etc. of the Succeeding Company, etc.,
the Bonds will be treated in the same manner.
(ix) Other matter:
If a Succeeding Company, etc. exercises the stock acquisition rights, fractions of lessthan one share resulting from the exercise of stock acquisition rights shall be rounded
down and no cash adjustment shall be made. The stock acquisition rights of the
Succeeding Company, etc. cannot be transferred separately from the Succeeded
Bonds.
(3) In the event that the Company's obligations under the Trust Deed are assumed or
succeeded to by the Successor Company, etc., the Company shall comply with the terms
and conditions of the Bonds, in addition to attaching a guarantee in certain cases as set
forth in the terms and conditions of the Bonds.
1.3 Status of Exercise of Moving Strike Convertible Bonds (MSCB)
Not applicable.

- 59 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.4 Changes in the Total Number of Issued Shares, and Capital Stock
Date

Increase/(decrease) in
total number
of issued
shares(shares)

Balance of
total
number ofissued shares

Increase/(decrease) in
capital stock

Balance ofcapital stock¥m¥m(shares)

Increase/(decrease) in
legal
capitalreserve¥m

Balance of
legal
capitalreserve¥m

January 1, 2019–
December 31,
2019
Note 1

771,200

77,073,136

625

37,479625

25,596

January 1, 2020–
December 31,
2020
Notes 2,3,4

3,522,992

80,596,128

2,741

40,2202,741

28,337January 1, 2021–
December 31,
2021
Notes 5,6,7

922,188

81,518,316

816

41,036816

29,153January 1, 2022–
December 31,
2022
Notes 8,9,10

404,914

81,923,230

299

41,335299

29,452January 1, 2023–
December 31,
2023
Notes 11,12,13

7,523,547

89,446,777

5,472

46,807

5,472

34,924

Notes:
1. The total number of issued shares increased by 771,200 due to the exercise of stock acquisition rights between January 1, 2019and December 31, 2019, and the resulting increases in capital stock and legal capital reserve were JPY 625 million each.
2. The total number of issued shares increased by 3,301,400 due to the issuance of new shares by way of an international offeringwith a payment date of July 16, 2020 based on the resolution at the meeting of the Board of Directors held on June 30, 2020, andthe resulting increases in capital stock and legal capital reserve were JPY 2,528 million each:Issue price JPY 1,595
Payment amount JPY 1,531.2
Additional paid-in capital per share JPY 765.6
3. The total number of issued shares increased by 149,200 due to the exercise of stock acquisition rights between January 1, 2020and December 31, 2020, and the resulting increases in capital stock and legal capital reserve were JPY 132 million each.
4. The total number of issued shares increased by 72,392 due to the issue of new shares under the Restricted Stock Unit (RSU)
scheme and the resulting increases in capital stock and legal capital reserve were JPY 81 million each.
5. The total number of issued shares increased by 136,312 due to the exercise of stock acquisition rights of Euro-yen denominatedconvertible bonds due 2025 between January 1, 2021 and December 31, 2021, and the resulting increases in capital stock andlegal capital reserve were JPY 127 million each.
6. The total number of issued shares increased by 584,000 due to the exercise of stock acquisition rights between January 1, 2021
and December 31, 2021, and the resulting increases in capital stock and legal capital reserve were JPY 503 million each.
7. The total number of issued shares increased by 201,876 as a result of the issue of new shares under the RSU scheme and theresulting increases in capital stock and legal capital reserve were JPY 186 million each.
- 60 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.4 Changes in the Total Number of Issued Shares, and Capital Stock (continued)
8. The total number of issued shares increased by 5,200 due to the exercise of stock acquisition rights between January 1, 2022 andDecember 31, 2022, and the resulting increases in capital stock and legal capital reserve were JPY 9 million each.
9. The total number of issued shares increased by 380,071 as a result of the issue of new shares under the RSU scheme and theresulting increases in capital stock and legal capital reserve were JPY 278 million each.
10. The total number of issued shares increased by 19,643 as a result of the issue of new shares under the Performance Share Unit
(PSU) scheme and the resulting increases in capital stock and legal capital reserve were JPY 12 million each.
11. The total number of issued shares increased by 413,547 as a result of the issue of new shares under the RSU scheme and theresulting increases in capital stock and legal capital reserve were JPY 445 million each.
12. The total number of issued shares increased by 1,500,000 due to the issuance of new shares by way of global offering with apayment date of December 14, 2023 based on the resolution at the meeting of the Board of Directors held on November 28,
2023, and the resulting increases in capital stock and legal capital reserve were JPY 1,027 million each:Issue price JPY 1,426
Payment amount JPY 1,368.96
Additional paid-in capital per share JPY684.48
13. The total number of issued shares increased by 5,610,000 due to the issuance of new shares by way of third-party allotment witha payment date of December 15, 2023 based on the resolution at the meeting of the Board of Directors held on November 28,
2023, and the resulting increases in capital stock and legal capital reserve were JPY 4,000 million each:
Payment amount JPY 1,426
Additional paid-in capital per share JPY713

1.5 Shareholding by Shareholder Category as at December 31, 2023
Category

Shareholding status (Number of shares per share unit: 100 shares)
PublicFinancial
Financialsector institutions instruments
business
operators

Other
corporations

Foreign investors, etc.
Companies, etc.

Total

Individuals

Individuals,
etc.

Fractionalshares(shares)Number ofshareholders(persons)

-

12

42

260

185

123

26,98427,606-

Number ofshares held
(units)-121,267

34,59135,337219,955

1,929

480,902

893,981

48,677

Shareholding
13.5643.869
3.952
24.6030.215
53.793 100. 000
ratio (%)
Notes:
1. Common shares in the “Individuals, etc.” column include 3 units and the “Fractional shares” column includes 35 treasury shares(totaling 335 shares) owned by the Company.

- 61 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.6 Major Shareholders as at December 31, 2023
Name

Address

Number ofsharesheld(shares)

Ratio ofshares held tototal numberof shares issued(Excluding
treasury stock)(%)

The Master Trust Bank of Japan, Ltd.
(trust account)

2-11-3, Hamamatsucho, Minatoku, Tokyo, JPN

8,137,800

9.10

Daisuke Gomi

Matsumoto-shi, Nagano

6,630,000

7.41

JICVGI Opportunity Fund No.1
Investment Limited Partnership

1-3-1, Toranomon, Minato-ku,
Tokyo, JPN

5,610,000

6.27

Custody Bank of Japan, Ltd. (trust
account)

1-8-12, Harumi, Chuo-ku, Tokyo,
JPN

2,787,500

3.12

TAIYO FUND, L.P.
(Standing proxy: MUFG Bank, Ltd.)

5300 CARILLON POINT KIRKLAND,
WA 98033, USA(Standing proxy: 2-7-1,
Marunouchi, Chiyoda-ku, Tokyo,
JPN)

2,521,600

2.82

SSBTC CLIENT OMNIBUS ACCOUNT(Standing proxy: HSBC Tokyo Branch,
Custody Business Department)

ONE CONGRESS STREET, SUITE 1,
BOSTON, MASSACHUSETTS(Standing proxy: 3-11-1,
Nihonbashi, Chuo-ku, Tokyo, JPN)

1,952,340

2.18

TAIYO HANEI FUND, L.P.
(Standing proxy: MUFG Bank, Ltd.)

5300 CARILLON POINT KIRKLAND,
WA 98033, USA(Standing proxy: 2-7-1,
Marunouchi, Chiyoda-ku, Tokyo,
JPN)

1,902,500

2.13

Pfizer Pharmaceuticals K.K.

3-22-7, Yoyogi, Shibuya-ku,
Tokyo, JPN

1,885,136

2.11

STATE STREET BANK AND TRUSTCOMPANY 505227(Standing proxy: Mizuho Bank, Ltd.,
Settlement & Clearing Services
Department)

P.O. BOX 351 BOSTONMASSACHUSETTS 02101 U.S.A.
(Standing proxy: Shinagawa
Intercity Tower A, 2-15-1, Konan,
Minato-ku, Tokyo, JPN)

1,602,700

1.79

JP MORGAN CHASE BANK 385781(Standing proxy: Mizuho Bank, Ltd.,
Settlement & Clearing Services
Department)

25 BANK STREET, CANARY
WHARF, LONDON, E14 5JP,
UNITED KINGDOM(Standing proxy: Shinagawa
Intercity Tower A, 2-15-1, Konan,
Minato-ku, Tokyo, JPN)

1,009,600

1.13

34,039,176

38.06

Notes:
1.
Of the above number of shares, the number of shares held in association with fiduciary activities is as follows:
The Master Trust Bank of Japan, Ltd. (trust account) 8,137,800 shares
Custody Bank of Japan, Ltd. (trust account)
2,787,500 shares- 62 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.6 Major Shareholders as at December 31, 2023 (continued)
2.

In the amended report of possession of large volumes provided for public inspection on May 15, 2023, the following
shareholdings are respectively attributed to Barclays Capital Securities Ltd. and its four joint holders at May 8, 2023. However,since the Company is unable to confirm the actual number of shares held at December 31, 2023, they are not included in
the major shareholders table above. The contents of the amended report of possession of large volumes is as follows:

Details included in the report are as follows:

3.

Name

Address

Number ofsharesheld(shares)

Percentage ofshares held to total
numberof shares issued(%)

Barclays Capital Securities Ltd.

1 Churchill Place, LONDON, E14 5HP, UK

1,493,083

1.82

Barclays Bank plc

1 Churchill Place, LONDON, E14 5HP, UK

2,100

0

Barclays Securities Japan Ltd.

6-10-1, Roppongi, Minato-ku, 106-6131,
Tokyo, JPN

18,9000.02

Palomino Ltd.

1 Churchill Place, LONDON, E14 5HP, UK

00

Barclays Capital Inc.

CT Corporation System, Corporate Center1
11th, Hartford State of Connecticut,
06103-3220, US

00

1,514,083

1.85

In the amended report of possession of large volumes provided for public inspection on June 20, 2023, the following
shareholdings are respectively attributed to JPMorgan Asset Management Ltd. and its four joint holders at June 15, 2023.
However, since the Company is unable to confirm the actual number of shares held at December 31, 2023, they are notincluded in the major shareholders table above. The contents of the amended report of possession of large volumes is asfollows:

Details included in the report are as follows:

4.

Name

Address

Number ofsharesheld(shares)

Percentage ofshares held to total
numberof shares issued(%)

JPMorgan Asset Management Ltd.

Tokyo Building, 2-7-3 Marunouchi,
Chiyoda-ku, 100-6432, Tokyo, JPN

1,303,300

1.58

JPMorgan Securities Japan Co., Ltd.

Tokyo Building, 2-7-3 Marunouchi,
Chiyoda-ku, 100-6432, Tokyo, JPN-26,702-0.03

J.P. Morgan Securities plc

25 Bank Street, Canary Wharf, London, E14
5JP, UK

628,899

0.76

J.P. Morgan Securities LLC

383 Madison Avenue, New York City, State
of New York, 10179, US

1,793,406

2.15

J.P. Morgan Prime Inc.

383 Madison Avenue, New York City, State
of New York, 10179, US

218,972

0.27

3,917,875

4.69

In the amended report of possession of large volumes provided for public inspection on September 25, 2023, the following
shareholdings are respectively attributed to Capital Research and Management Company and its four joint holders at
September 15, 2023. However, since the Company is unable to confirm the actual number of shares held at December 31,
2023, they are not included in the major shareholders table above. The contents of the amended report of possession of large
volumes is as follows:- 63 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.6 Major Shareholders as at December 31, 2023 (continued)
Details included in the report are as follows:

5.

Name

Address

Number ofsharesheld(shares)

Percentage ofshares held to total
numberof shares issued(%)

Capital Research and Management
Company

333 South Hope Street, Los Angeles, CA
90071, U.S.A.

1,841,200

2.24

Capital International Inc.

11100 Santa Monica Boulevard, 15th FL.,
Los Angeles, CA 90025, U.S.A.

295,400

0.36

Capital International Sarl

3 Place des Bergues, 1201 Geneva,
Switzerland

283,4220.34

Capital International K.K.

Marunouchi Nijubashi Building, 3-2-3
Marunouchi, Chiyoda-ku Tokyo

1,888,000

2.29

Capital Group Investment
Management Pte. Ltd.

One Raffles Quay 43rd floor North Tower
Singapore 048583

129,4800.16

4,437,502

5.39

In the amended report of possession of large volumes provided for public inspection on December 22, 2023, the following
shareholdings are respectively attributed to GOLDMAN SACHS JAPAN CO., LTD. and its two joint holders at December 15,
2023. However, since the Company is unable to confirm the actual number of shares held at December 31, 2023, they are
not included in the major shareholders table above. The contents of the amended report of possession of large volumes is asfollows:

Details included in the report are as follows:

6.

Name

Address

Number ofsharesheld(shares)

Percentage ofshares held to total
numberof shares issued(%)

GOLDMAN SACHS JAPAN CO., LTD.

Roppongi Hills Mori Tower, 10-1, Roppongi
6-chome, Minato ku, Tokyo

2,100

0.00

Goldman Sachs International

Plumtree Court, 25 Shoe Lane, London
EC4A 4AU, United Kingdom

2,291,412

2.56

Goldman Sachs & Co. LLC

200 West Street, New York 10282, U.S.A.

97,6810.11

2,391,193

2.67

In the amended report of possession of large volumes provided for public inspection on December 22, 2023, the following
shareholdings are respectively attributed to Mizuho Securities Co., Ltd. and its two joint holders at December 15, 2023.
However, since the Company is unable to confirm the actual number of shares held at December 31, 2023, they are notincluded in the major shareholders table above. The contents of the amended report of possession of large volumes is asfollows:- 64 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.6 Major Shareholders as at December 31, 2023 (continued)

Details included in the report are as follows:

7.

Name

Address

Number ofsharesheld(shares)

Percentage ofshares held to total
numberof shares issued(%)

Mizuho Securities Co., Ltd.

5-1, Ootemachi 1-chome, Chiyoda-ku,
Tokyo

3,376,292

3.57

Asset Management One Co., Ltd.

8-2, Marunouchi 1-chome, Chiyoda-ku,
Tokyo

1,717,600

1.81

Mizuho International plc

30 Old Bailey, London, EC4M 7AU, United
Kingdom

00.00

5,093,892

5.38

In the amended report of possession of large volumes provided for public inspection on January 9, 2024, the following
shareholdings are respectively attributed to Nomura Securities Co.,Ltd. and its two joint holders at December 29, 2023.
However, since the Company is unable to confirm the actual number of shares held at December 31, 2023, they are notincluded in the major shareholders table above. The contents of the amended report of possession of large volumes is asfollows:

Details included in the report are as follows:
Name

Address

Number ofsharesheld(shares)

Percentage ofshares held to total
numberof shares issued(%)

Nomura Securities Co.,Ltd.

13-1, Nihonbashi 1-chome, Chuo-ku, Tokyo

6,150

0.01

NOMURA INTERNATIONAL PLC

1 Angel Lane, London EC4R 3AB, United
Kingdom

3,199,198

3.49

Nomura Asset Management Co.,Ltd.

2-1, Toyosu 2-chome, Koto-ku, Tokyo

2,212,300

2.47

5,417,648

5.91- 65 -

Sosei Group Corporation
Section 4. Information about the Filing Company
1 Stock Information (continued)
1.7 Voting Rights
Issued Shares as at December 31, 2023
Item

Number of shares(shares)Number of voting
rights

Details

Non-voting shares

-

-

-

Shares with restricted voting rights(treasury shares, etc.)

-

-

-

Shares with restricted voting rights (other)

-

-

-

Shares with full voting rights (treasury
shares, etc.)

Common shares
300

-

-

Shares with full voting rights (other)

Common shares
89,397,800

Shares less than one unit

Note1
893,978

Common shares
48,677-Note2

89,446,777

-

-

-

893,978-

Total number of issued shares
Voting rights held by all the shareholders

Notes:
1. These shares are standard shares of the Company which do not have any limitation of rights.
2. The number of shares less than one unit includes 35 treasury shares owned by the Company.

Treasury Shares, Etc. as at December 31, 2023
Name or tradename ofholderHolder’s
address

Sosei Group
Corporation

2-1 Kojimachi,
Chiyoda-ku,
Tokyo

Number ofshares held in
own name(shares)Number ofshares held in
another’s name(shares)

Total number ofshares held
(shares)

Ratio of shares
held to total
number ofshares issued
(%)

300

-

300

0.00

- 66 -

Sosei Group Corporation
Section 4. Information about the Filing Company
2 Acquisitions, etc. of Treasury SharesClasses of shares: Acquisition of ordinary shares that falls under Article 155, Item 7 of the Companies
Act
2.1 Acquisitions by Resolution of General Meeting of Shareholders
Not applicable.
2.2 Acquisitions by Resolution of Board of Directors
Not applicable.
2.3 Acquisitions not Based on Resolution of General Meeting of Shareholders or Board of Directors
Category81

Total amount ofpurchase price (yen)223,878258

383,364

Number of shares (shares)

Acquired treasury shares during the financial year
ending December 31, 2023
Acquired treasury shares during the period fromthe end of the financial year to the filling date ofannual securities report

Notes:
1. " Acquired treasury shares during the period from the end of the financial year to the filling date of annual securities report" do
not include fractional shares purchased from March 1, 2024 to the filling date of this annual securities report.

2.4 Status of Disposals or Holdings of Acquired Treasury Shares
During the financial year ended
December 31, 2023
Item

The period from the end of the financial
year to the filling date of annual
securities report

Number of shares(shares)

Total amount ofdisposal price(yen)

Number of shares(shares)

Total amount ofdisposal price(yen)

Undertaken treasury shares

-

-

-

-

Retirement treasury shares

-

-

-

-

Mergers, Stock exchange,
Share delivery, company
split treasury shares

-

-

-

-

Others

-

-

-

-

335

-

593

-

Holding of Acquired
Treasury Shares

Notes:
1. Treasury shares disposed of in the period from the end of the financial year to the filling date of annual securities report do notinclude fractional shares sold from March 1, 2024 to the filling date of this annual securities report.
2.
Treasury shares held in the period from the end of the financial year to the filling date of annual securities report do not include
fractional shares purchased from March 1, 2024 to the filling date of this annual securities report.

- 67 -

Sosei Group Corporation
Section 4. Information about the Filing Company
3 Dividend Policy
The declaration and payment of any dividends in the future will depend on the results of operations,financial condition, cash requirements, future prospects, profits available for distribution and otherfactors deemed by the Board to be relevant at the time.
At present, the Group is making prudent investments to build a globally competitive biotechnology
business and, therefore, does not expect to pay any dividends in the near to medium term. The Board
will continue to reassess this position based on the factors above. With regard to dividends of surplus,
except where stipulated otherwise by laws and regulations, the Company’s Articles of Incorporation
stipulate that the Board of Directors may decide without a resolution of the General Meeting of
Shareholders. Moreover, the record date for the year-end dividend shall be December 31, and therecord date for the interim dividend shall be June 30.

- 68 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance
4.1 Corporate Governance
Overview of Corporate Governance
The Group aims to become one of Japan’s global biotechnology champions. It has been building
business systems to support further business expansion and recognizes that building an effective
corporate governance system is an important management priority for achieving an increase incorporate value over the medium to long term. For this reason, the Group utilizes independent
external directors and establishes communication channels between the Audit Committee, theexternal auditor and the internal audit department, to support the strategic management andoversight functions of the Board of Directors. At the same time, the Group is striving to increase theintegrity and transparency of management and further improve its corporate governance throughmeasures such as fulfilling its accountability to various stakeholders, including shareholders,
employees, business partners, customers, creditors, consumers and local communities.
Overview of the Corporate Governance System and Reason for Adoption of the System
The Company has adopted the “company with nomination committee, etc.” system in order tostrengthen Board oversight, increase transparency and speed up management decision-making,among other duties. Under this system, the Company has clearly separated the oversight function andbusiness execution function of management and has largely delegated business execution authority
to its executive officers. It judges this system to be appropriate to increase management efficiency
and strengthen the oversight of management.
Overview of the Board of Directors and Committees
a. Board of Directors
・Composition and purpose
The Board of Directors comprises 9 directors, including 7 independent external directors. The Board
sets basic management policies, supervises the execution of duties by executive officers anddirectors, and deliberates on management strategies to realize sustainable growth and add corporate
value. One of the directors serves concurrently as representative executive officer.

- 69 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.1 Corporate Governance (continued)
・Activities
During the current financial year, the Company held 17 Board of Directors meetings, and theattendance status of individual directors is as follows.
Number of times held

Number of times attendanceShinichi Tamura

17

15

Christopher Cargill

17

17

Tomohiro Tohyama

17

15

Kuniaki Kaga

17

16David Roblin

17

16

Noriaki Nagai

17

17

Rolf Soderstrom

17

17

Miwa Seki

17

15

Eiko Tomita

12

11

Name

Ms. Eiko Tomita was elected as Directors at the 33rd Ordinary General Meeting of Shareholders held on March 23, 2023 and was appointed as director
on 1 April 2023, and accordingly, the numbers of times she attended the Board of Directors meetings held since assuming office are stated above.

The Board of Directors deliberates on individual proposals and basic management policies andstrategies through multifaceted and frank questions and advice from directors and executive officers
who are diverse in terms of gender, generation, nationality, and expertise. In recent years, theCompany has promoted the flexible holding and management of Board of Directors meetings online
in consideration of the convenience of attendees and prevention of the spread of COVID-19 infection.
On the other hand, in consideration of the significance of face-to-face discussions, the Company isstriving to operate highly effective meetings, including holding one Board of Directors meeting inJapan and one in the UK during the the current financial year. During the current financial year, theBoard of Directors discussed and considered a wide range of matters, including finance, R&D,
development, acquisition of Idorsia’s Pharmaceuticals Business in Japan and APAC (ex-China) ,issuance of Convertible Bonds and buyback of existing Convertible Bonds, issuance of new shares by
global offering, issuance of new shares by third party allotment issuance of new shares by a post-hoc
granted stock-based compensation (RSU) plan and appointment of executive officers.
b. Nomination Committee

・Composition and purpose
The Nomination Committee comprises 3 independent external directors and the Chairman of theBoard. The Committee makes proposals for the election of directors for resolution by the
Shareholders. The Committee assesses whether candidates have sufficient expertise and experience
to support the Company’s global strategy.

- 70 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.1 Corporate Governance (continued)
・Activities
During the current financial year, the Company held 2 Nomination Committee meetings, and theattendance status of individual directors is as follows.
Number of times held

Number of times attendanceShinichi Tamura

22David Roblin

20Noriaki Nagai

2

2

Miwa Seki

2

2

Name

In selecting director candidates, the Nomination Committee held multifaceted discussions, including
consideration based on the company's vision and interviews with the Nomination committee
members.
In addition, the Nomination Committee discusses and investigates future policies for the Board of
Directors and succession planning. As a result, based on this policy, the Nomination Committee havedecided to nominate the current directors as candidates for reappointment.
c. Compensation Committee

・Composition and purpose
The Compensation Committee comprises 3 independent external directors, the Chairman of theBoard and 1 director serving concurrently as a representative executive officer. The Compensation
Committee sets the remuneration policy for directors and executive officers, and, based on thatpolicy determines their individual remuneration in view of performance and other contributions to
the Company.
・Activities
The activities of the Compensation Committee are as described in "4 Remuneration paid to Officers
ⅵ. Overview and activities of the Compensation Committee’s process of determining the amountof remuneration for Officers in the current financial year".
d. Audit Committee

・Composition and purpose
The Audit Committee comprises 5 independent external directors. The Audit Committee is
responsible for overseeing the execution of the directors’ and executive officers’ duties as well as theappointment and dismissal of the external auditor. The Audit Committee does not have full-timemembers, but it works closely with the Internal Audit Department.
・Activities
The activities of the Compensation Committee are as described in "3 Status of Audits Status ofAudit Committee’s Audits".
- 71 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.1 Corporate Governance (continued)
e. Executive officers
As described in “4.2 Status of Officers as at March 27, 2024”, 8 executive officers are currently
appointed (including one representative executive officer). They perform the decision-making andbusiness execution functions entrusted to them by the Board of Directors.
The Board of Directors elects the representative executive officer and other senior executive officers
as well as assigning responsibilities to them.
Schematic Depiction of the Group’s Corporate Governance System- 72 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.1 Corporate Governance (continued)
Other Matters relating to corporate governancea. Status of Establishment of Internal Control Systems
To ensure that management complies with all aspects of the law, the reliability of financial reporting,and implementation of appropriate risk management practices, the Board of Directors has resolveda basic policy for the establishment of internal control systems in accordance with the Companies
Act and aims to implement it thoroughly. An overview of the basic policy is as follows:i. Matters relating to the directors and employees who assist in the duties of the Audit Committee,
and system to ensure those directors and employees act independently from executive officers:Management assigns employees to assist in the duties of the Audit Committee who shallperform its duties at the instruction and direction of a chair of the Audit Committee incooperation with Internal Audit Department. The Audit committee conducts evaluation of
the performance of the duties of such employees and his or her reassignment requires anapproval of the Audit Committee.
ii. System of reporting to the Audit Committee by directors, executive officers and employees andothers matters relating to the report to the Audit Committee:
 Directors, executive officers, audit and supervisory board members (Kansa-yaku) andemployees of the Company and its subsidiaries shall report to the Audit Committee in atimely and appropriate manner if the Audit Committee or its designated Committee
member requests a report on the execution of business. Also, when they become aware ofany matter that may have a material effect on the business or financial conditions of theCompany or its subsidiaries, they shall report immediately to the Audit Committee. The
Company shall not give any disadvantageous treatment to a person who made reports to
the Audit Committee because of the reporting.
 Internal Audit Department shall report to audit committee timely and adequately the status
of internal audits.
 Office of Japan Compliance and Governance Department shall report to the Audit
Committee timely and adequately the status of whistleblowing system.
iii. Other system to ensure the effective audit by the Audit Committee:
 Internal Audit Department shall consult with the Audit Committee on, among other things,
the policy and plan of internal audits, exchange the information on audits and otherwise
cooperate closely with the Audit Committee.
 In the event an Audit Committee member requests for advance payment or reimbursementof the expenses necessary for the performance of the duties of the Audit Committee, theCompany shall dispose of such expenses or liabilities without delay.
iv. System to ensure that executive officers and employees of the Company as well as directors andemployees of subsidiaries perform their duties in compliance with laws and regulations and the
Articles of Incorporation of the Company:- 73 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.1 Corporate Governance (continued)
The code of conduct of the Group companies sets forth the principles of acting incompliance with applicable laws and regulations and in accordance with high standards ofcorporate ethics, and the management shall act to improve awareness of all directors,
executive officers and employees of the Company and its subsidiaries of compliance andthe corporate principle. An independent compliance helpline system shall be establishedand properly operated so that employees of Group companies and business partners may
timely report on unlawful or dishonest acts occurred at Group companies.
 Internal Audit Department conducts internal audits on the performance of the duties byexecutive officers, directors of subsidiaries and employees of the Company and subsidiaries.
v. System to retain and manage information relating to the performance of duties by executive
officers:
Minutes of the meetings at which executive officers and subsidiaries’ directors are present andother important meetings, written documents recording required approval and otherinformation relating to the performance of the duties by executive officers shall be prepared,
retained and managed in accordance with the Regulations of Document Management andother internal regulations.
vi. Rules and systems for the risk management: The Company shall identify risks associated with the conduct of business of the Group
companies, select the risks of the high priority, and decide specific policies and measures todeal with those risks and ensure adequate implementation by the Company and its
subsidiaries.
 In making business judgment and decisions on business strategies and other importantmatters, the discussions shall be conducted comprehensively at the Board of Directors andother meetings and the relevant risks shall be dealt with by taking such actions as obtaining
opinions of outside experts as necessary before making decisions.
vii. System to ensure that the executive officers and directors and employees of subsidiaries
perform their duties efficiently:
 The Board of Directors shall decide the responsibilities of each executive officer, and therespective decision-making authorities in the performance of the duties shall be specified
for executive officers, directors and employees of the Company and subsidiaries.
 The Company shall provide the charters and rules of the meetings of the Company andsubsidiaries and ensure that report is made on the status of the performance of the duties
and efficient discussions are made on the important matters in accordance with the rules.
 The Company shall improve the efficiency of the performance of the duties by designingand building IT systems.
- 74 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.1 Corporate Governance (continued)viii. System to ensure the proper operation of the business group consisting of the Company and its
subsidiaries: The Company shall manage the business of the subsidiaries by appointing executive officersof the Company as directors of subsidiaries, receiving monthly report on the status ofoperation and implementing other measures in accordance with the Regulation ofManagement of Group Companies. Further, relevant divisions of the Company shall provide
guidance and support to enable subsidiaries to establish compliance and other systems toensure the proper operation of business of subsidiaries.
 Internal Audit Department shall give instructions and recommendations to subsidiaries
depending on the results of internal audit.
 The Company shall take various measures including separation of duties and responsibilities
and ongoing monitoring at the Company and subsidiaries in order to ensure the effective
internal control over financial reporting of the Group companies, and shall evaluate, maintainand improve the system of internal control.
b. Overview of Details of Liability Limitation Agreements
The Company and the Independent External Directors have concluded agreements limiting liability fordamages under Article 423, Paragraph 1 of the Companies Act, in accordance with the provisions ofArticle 427, Paragraph 1 of the same act. The maximum amount of liability for damages under these
agreements for each Independent External Director is the minimum amount stipulated in Article 425,
Paragraph 1 of the Companies Act.
c. Outline of the directors and executive officers, etc. liability insurance policy, etc.
The Company has concluded a directors and officers liability insurance (“D&O insurance”) policy withan insurance company as provided for in Article 430-3, Paragraph 1 of the Companies Act with all
Directors, Executive Officers and Corporate Auditors of the Company and its subsidiaries as insured
parties. The Company pays the full premium for the provision of this policy.
This insurance policy covers losses arising from the liability borne by the insured party in the course of
the execution of his/her duty or claims pertaining to the pursuit of such liability.
d. Number of Directors and election of Directors
The Company’s Articles of Incorporation stipulate that there may be no more than 12 directors.
Furthermore, the Articles of Incorporation stipulate that a resolution to elect a director must be madeby a majority vote where shareholders holding at least one-third of the voting rights of theshareholders eligible to exercise voting rights are present, furthermore that a resolution to elect a
director may not be made by cumulative voting.

- 75 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.1 Corporate Governance (continued)
e. Matters Requiring a Special Resolution of the General Meeting of Shareholders
With regard to special resolutions of the General Meeting of Shareholders stipulated in Article 309,
Paragraph 2 of the Companies Act, to ensure the smooth operation of the General Meeting of
Shareholders, the Company’s Articles of Incorporation stipulate that these resolutions must be madeby a vote of at least two-thirds where shareholders holding at least one-third of the voting rights ofthe shareholders eligible to exercise voting rights are present.
f. Decision-Making Body for Declaring Dividends of Surplus
With regard to matters such as the dividend of surplus stipulated in the items under Article 459,
Paragraph 1 of the Companies Act, the Company’s Articles of Incorporation stipulate that in order toenable flexible decision-making the Board of Directors shall decide on these matters without aresolution from the General Meeting of Shareholders, except in cases where it is otherwise stipulated
by laws and regulations.
g. Interim DividendWith regard to matters such as the interim dividend stipulated in the items under Article 454,
Paragraph 5 of the Companies Act, the Company’s Articles of Incorporation stipulate that in order toenable flexible decision-making the Company shall pay any interim dividend on June 30 as thereference date.
h. Acquisition of Treasury Shares
To enable execution of flexible capital policies in response to changes in the business environment, theCompany’s Articles of Incorporation stipulate that the Company may acquire its own stock from market
exchanges by resolution of the Board of Directors, in accordance with the provision of Article 165,
Paragraph 2 of the Companies Act.
4.2 Status of Officers as at March 27, 2024
Men: 13, Women: 3 (percentage of female officers: 18.8 %)- 76 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.2 Status of Officers as at March 27, 2024
Status of Directors
Job title

Name

Director
Chairmanof theBoard

ShinichiTamura

Date
of
birth
Sep. 17,
1949

Summary of career
Apr. 1978
Feb. 1987
Jul. 1989
Jun. 1990
Jun. 2005
Mar. 2012
Jun. 2016
Jan. 2019

Director

Christopher
CargillJan. 3,1984

Sep. 2021
Mar. 2022
Feb. 2009
Apr. 2010
Sep. 2017
Jun. 2018
Jun. 2018
Nov. 2018
Jan. 2019
Apr. 2021
Sep. 2021
Mar. 2022
Aug. 2022
Apr. 2023
Jul. 2023

Director

Tomohiro
TohyamaFeb. 21,1950

Apr. 1978
Apr. 1980
May 1984
Feb. 1985
Jun. 1985
Aug. 1985
Oct. 1990
Nov. 1999
Jun. 2010
Jun. 2011
May 2016
May 2016
Jun. 2016

Termof officeJoined Fujisawa Pharmaceutical Co., Ltd. (currently
Astellas Pharma Inc.)
Joined Genentech Inc.
Representative Director & President, Genentech
LimitedRepresentative Director & CEO of the Company
Board Director, Representative Executive Officer andPresident, CEO of the Company
Managing Director, Sosei R&D Ltd.
Chairman of the Board of the Company
Representative Executive Officer and Executive
Chairman of the Company
Representative Executive Officer, Chairman, President
and CEO of the Company
Representative Executive Officer, CEO of the Company
Chairman of the Board of the Company (to the present)
Joined KPMG
Joined J.P. Morgan Chase & Co
Head of IR and Corporate Communication Dept of theCompany
Interim CFO of the Company
Director, Sosei R&D Ltd.
Executive Officer and Executive Vice President, CFO of
the Company
Director, Heptares Therapeutics Ltd. (to the present)
Executive Officer, COO, CFO of the Company
Executive Officer, CFO of the Company
Board Director, Representative Executive Officer,
President and CEO of the Company (to the present)
Director, Sosei Group USA Inc. (to the present)
Representative Director and President, Sosei Co. Ltd.(tothe present)
Director, Idorsia Pharmaceuticals Japan Ltd. (to thepresent)
Entered Legal Training and Research Institute, Supreme
Court of Japan
Registered with Dai-ichi Tokyo Bar Association
Joined Nishimura & Sanada Law Office
Mason & Sloane LLP., USA
Pollock, Bloom & Dekom, USA
Pryor, Cashman, Sherman & Flynn, USA
Returned to Nishimura & Sanada Law Office as apartnerPartner (one of founders) at TMI Associates (to thepresent)
Outside Corporate Auditor, Nippon Shikizai, Inc.
Outside Director, Avex Group Holdings Inc.
Independent External Director of the Company (to thepresent)
Outside Director, Member of the Audit and Supervisory
Committee, Nippon Shikizai, Inc. (to the present)
Outside Director, Trust Capital Co., Ltd.
Outside Statutory Auditor, WOWOW Inc.
- 77 -Note
3

No. ofsharesowned
594,270Note
341,687Note
351,258

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.2 Status of Officers as at March 27, 2024 (continued)
Status of Directors
Job title

Name

Director

Kuniaki
Kaga

Director

David Roblin

Date
of
birth
Sep. 1,
1951

Sep.
25,
1966

Summary of career

Term ofofficeApr. 1975

Joined Mitsubishi Kasei Kogyo Kabushiki Kaisha (current
Mitsubishi Chemical Corporation)
Jun. 2004
Deputy Director, Head of Healthcare Planning
Department, Mitsubishi Chemical Corporation
Oct. 2005
Deputy Director, Mitsubishi Chemical Holdings
Corporation (current Mitsubishi Chemical Group
Corporation)
Head of Healthcare Strategy OfficeJun. 2006
Executive Officer and Head of Healthcare Strategy
Office, Mitsubishi Chemical Holdings Corporation(current Mitsubishi Chemical Group Corporation)
Executive Officer, Head of Healthcare Business Domain,
and General Manager of Healthcare Planning Office,Healthcare Business Domain, Mitsubishi Chemical
Corporation
Jun. 2009
Board Director, Mitsubishi Tanabe Pharma Corporation
Jun. 2010
Representative Director, Managing Executive Officer,
General Manager of International Business
Department, Mitsubishi Tanabe Pharma Corporation
Apr. 2012
Representative Director, Senior Managing Executive
Officer, General Manager of Research Division andInternational Business Department, Mitsubishi Tanabe
Pharma Corporation
Apr. 2014
President and Representative Director, Life Science
Institute, Inc.
Board Director, Mitsubishi Tanabe Pharma Corporation
Board Director, The KAITEKI Institute, Inc.
Feb. 2015
President and Representative Director, The KAITEKI
Institute, Inc.
Jun. 2018
Independent External Director of the Company (to thepresent)
Jan. 2021
External Director, SUSMED, Inc (to the present)
Apr. 1991
Medical practice at St George's and St Bartholomew's
Hospital, London
Jun. 1997
Head of Therapy Area for Anti-Infectives, Bayer PharmaAG
Jun. 2008
Senior Vice President, Head of Research, Site Head,
Chief Medical Officer (CMO) Europe R&D, Pfizer Inc.
Apr. 2011
CMO, Creabilis
Sep. 2013
Honorary Professor, Swansea University, School of
Medicine (to the present)
Feb 2014
COO, The Francis Crick InstituteJun. 2015
Honorary Professor of Translational Medicine, St
George's Hospital Medical School (to the present)
Feb. 2017
Chairman of Scientific Translation, The Francis Crick
Institute (to the present)
Feb. 2017
President of R&D, Summit Therapeutics
Jun. 2018
Independent External Director of the Company (to thepresent)
Mar. 2020 COO and CEO JuvRX, Juvenescence Ltd
Apr. 2022
CEO, Relation Therapeutics Limited (to the present)
Chairman of the Board, Centauri Therapeutics Limited (to thepresent)- 78 -

Note
3

Note
3

No. ofsharesowned
35,598

6,532

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.2 Status of Officers as at March 27, 2024 (continued)
Job
title

Name

Date
of
birth

Summary of career

Director

NoriakiNagai

Dec. 1,
1957

Apr. 1981
Sep. 1998
Jun. 2000
Apr. 2006
Apr. 2010
Apr. 2011
Jun. 2013
Jun. 2013
Apr. 2014
Apr. 2015
Mar. 2019

Director Rolf
Soderstrom

Jul. 29,
1965

Jan. 1988
Dec. 2000
Jun. 2002
Jan. 2004
Aug. 2007
Dec. 2008
Jul. 2019
Mar. 2020
Sep. 2020
Jul. 2021

Director

Miwa Seki

Feb. 25,1965

Apr. 1988
Apr. 1989
Sep. 1993
Feb. 1997
Jan. 2003
Apr. 2015
Jun. 2018
Jun. 2020
Apr. 2021
May. 2021
Mar. 2022

Joined Nomura Securities, Co., Ltd. (NSC)
Managing Director, Head of European Administration
Division of Nomura International plc
General Manager, Legal Dept., NSC
Executive Officers in charge of Corporate, Nomura
Holdings, Inc. (NHI) Executive Officer in charge of Legal,
NSC
Executive Managing Director in charge of corporate
planning, legal and secretary, NSC
Executive Officer and Chief Legal Officer, NHI
Executive Managing Director in charge of legal andsecretary, NSC
External Director, Japan Securities Depository Center, Inc.
External Director, Japan Securities Clearing Corporation
Executive Officer in charge of Corporate and Chief Legal
Officer, NHI Executive Managing Director in charge ofplanning management, NSC
Professor of Business Law, Doshisha University
Independent External Director of the Company (to thepresent)
Joined PricewaterhouseCoopers
Corporate Finance Director, Cable & Wireless plc
External Director, MobileOne Ltd. (current M1 Ltd.)
Divisional Finance Director, Cobham plc
Chief Financial Officer, Protherics plc (current BTG plc)
Chief Financial Officer, BTG plc
Senior Independent Director, Ergomed plc
Independent External Director of the Company (to thepresent)
Non Executive Director, BioPharma Credit plc (to thepresent)
Chief Financial Officer, Syncona Investment Management
Limited (to the present)
Joined DENTSU INC.
Joined Smith Barney
Joined Morgan Stanley
Joined Clay Finlay Limited
General Manager, Tokyo Branch, Clay Finlay Limited
Associate Professor, Faculty of Foreign Studies, Kyorin
University
External Director, World Co., Ltd. (to the present)
External Director, DAIWA HOUSE INDUSTRY CO., LTD. (tothe present)
Specially Appointed Associate Professor, Faculty of Foreign
Studies, Kyorin University
General Partner MPOWER PARTNERS FUND (to thepresent)
Independent External Director of the Company (to thepresent)- 79 -

Term
of
offic
e
Note
3

No. ofsharesowned
34,164Note
314,313Note
311,276

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.2 Status of Officers as at March 27, 2024 (continued)
Job
title

Name

Date
of
birth

Summary of career

Director

Eiko
TomitaApr. 20,1961

Apr. 1984
Sep. 1994
Sep. 1999
Nov. 2000
Sep. 2006
Apr. 2007
Nov. 2017

Mar. 2020

Apr. 2023

Joined Eisai Co., Ltd.
Joined IBRD Japan Corporation
Joined Monsanto Japan Ltd. (current Pfizer Inc.)
Joined AstraZeneca K.K.
Joined Pfizer Japan Inc.
Joined Bristol-Myers Squibb K.K.
Bristol-Myers Squibb Vice President, Global Regulatory
Sciences Intercontinental responsible for Japan, Korea,
Taiwan and Intercontinental (Australia, Brazil, Turkey,
India, Middle East and South America, etc.)
Bristol-Myers Squibb Vice President, Global Regulatory
Sciences Intercontinental responsible forIntercontinental (China, Korea, Taiwan, Australia,
Russia, Brazil, Turkey, India, Middle East, SouthAmerica, etc.)
Independent External Director of the Company (to thepresent)

Total

Ter
m of
offic
e
Note
3

No. ofsharesowned-

789,098

Notes:
1. Directors Tomohiro Tohyama, Kuniaki Kaga, David Roblin, Noriaki Nagai, Rolf Soderstrom, Miwa Seki and Eiko Tomita are
Independent External Directors.
2. The Company’s committee structure is as follows:
Nomination Committee:
Chairman: Miwa Seki , Member: Shinichi Tamura, Member: David Roblin,
Member: Noriaki Nagai
Compensation Committee:
Chairman: David Roblin, Member: Shinichi Tamura, Member: Christopher Cargill,
Member: Tomohiro Tohyama, Member: Rolf Soderstrom
Audit Committee:
Chairman: Rolf Soderstrom, Member: Tomohiro Tohyama, Member: Kuniaki Kaga,
Member: Noriaki Nagai,: Member: Miwa Seki
3. From appointment at the Ordinary General Meeting of Shareholders held on March 27, 2024, to the conclusion of the Ordinary
General Meeting of Shareholders relating to the period ending December 31, 2024.

- 80 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.2 Status of Officers as at March 27, 2024 (continued)
Status of Executive Officers
Job title
Representati
ve Executive
Officer,President
and Chief
Executive
Officer
Executive
Officer andExecutive
Vice
President,
Chief
Financial
Officer

Name

Date
of
birth
Christopher Jan. 3,
Cargill
1984

Hironoshin Nov. 26,
Nomura1983

Summary of career

Apr. 2009
Jan. 2015
Sep. 2020

Apr. 2023
Jul. 2023
Jul. 2023
KieranJohnsonExecutive
Officer andExecutive
Vice
President,
Chief
Compliance
Officer

Kazuhiko
Yoshizumi

May 13,
1969

Jan. 1992
Oct. 2002
Apr. 2004
Sep. 2017
Jan. 2019
May 2019
Mar. 2022

Feb. 19,1954

No. ofsharesowned
41,687

Joined Mitsubishi Research Institute
Joined Mizuho Securities
Senior Vice President, IR & Corporate Strategy, theCompany
Executive Officer and Executive Vice President, Chief
Financial Officer, the Company (to the present)
Director, Sosei Co. Ltd. (to the present)
Managing Director, Idorsia Pharmaceuticals Japan
Ltd. (to the present)
Director, Idorsia Pharmaceuticals Korea Co., Ltd. (tothe present)

Note

2,983

Joined KPMG (UK)Founded Amberley Consulting Ltd.
Joined GSK (UK)
Senior Vice President, Group Financial Controller,
the Company
Director, Heptares Therapeutics Ltd. (to the present)
Director, MiNA (Holdings) Ltd. (to October 13, 2022)
Executive Officer and Executive Vice President, Chief
Accounting Officer, the Company (to the present)
Director, Sosei Group USA Inc. (to the present)
Joined NEC Corporation
General manager of legal department, NEC
Corporation
General Manager of NEC Fielding Co., Ltd.
Associate Senior Vice President and General
Manager of NEC Fielding Co., Ltd.
General manager of legal department, the Company
General manager of legal department and generalmanager of group compliance, the Company
Executive Officer and Executive Vice President,Group Chief Compliance Officer, the Company
Executive Officer and Group Chief Compliance
Officer, the Company
Executive Officer and Executive Vice President, Chief
Compliance Officer, the Company (to the present)
Managing Director, Idorsia Pharmaceuticals Japan
Ltd. (to the present)
Director, Idorsia Pharmaceuticals Korea Co., Ltd. (tothe present)

Note

10,994

Note

12,843See previous section

Mar. 2022

Executive
Officer andExecutive
Vice
President,
Chief
Accounting
OfficerTermofofficeNoteAug. 2022
Apr. 1977
Jan. 2003
Dec. 2007
Apr. 2010
Apr. 2015
Jul. 2016
Apr. 2018
Sep. 2021
Mar. 2022
Jul. 2023
Jul. 2023- 81 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.2 Status of Officers as at March 27, 2024 (continued)
Job title

Name

Executive
Officer andExecutive
Vice
President,

Matthew
Barnes

Date
of
birth
May 2,
1973

Executive
Officer andExecutive
Vice
President,
Chief of Staff

Candelle
Chong

Oct. 16,
1989

Executive
Officer andExecutive
Vice
President

SatoshiTanakaJan. 27,
1957

Executive
Officer andExecutive
Vice
President,
Chief
Operating
Officer

Toshihiro
Maeda

May. 24
1979

Summary of career
Mar. 1998
Jan. 2003

Joined Celltech R&D (now UCB)
Joined Takeda Pharmaceuticals (formerly Paradigm
Therapeutics)
Aug. 2016
Joined Heptares Therapeutics Ltd.
Jan. 2022
Senior Vice President, Drug Discovery, Head of R&D
Portfolio Management, the Company
Mar. 2022 Executive Officer and Executive Vice President, theCompany (to the present)
President of Heptares Therapeutics Ltd. (to thepresent)
Feb. 2013
Joined J.P. Morgan Chase & Co.
Apr. 2018
Vice President, Corporate Strategy, the Company
Apr. 2022
Senior Vice President, Corporate Strategy, theCompany
Mar. 2023
Executive Officer and Executive Vice President, Chiefof Staff, the Company (to the present)
Mar. 2023
Director, Heptares Therapeutics Ltd. (to thepresent)
Nov. 1990 Joined Knoll AG, Germany
Apr. 1994
Representative Director and President, Knoll Japan(current BASF Pharma Japan)
Apr. 2000
Haarmann, Hemmelrath & Partner (Japan)
Representative Director and President,
Haarmann, Hemmelrath & management consulting
Oct. 2001 Representative Director and President, Actelion
Pharmaceuticals Japan
Representative Director and Chairman,
Actelion Pharmaceuticals Korea Ltd.
Mar. 2018 Representative Director and President, Idorsia
Pharmaceuticals Japan Ltd. (to the present)
Representative Director and Chairman, Idorsia
Pharmaceuticals Korea Co., Ltd. (to the present)
Jul. 2023
Executive Officer and Executive Vice President, theCompany (to the present)
Apr. 2002
Joined Ministry of Economy, Trade and Industry
Jun. 2010
Joined McKinsey and Company
Oct. 2014
Joined Merck & Co
Jul. 2019
Joined Bristol-Myers Squibb K.K.
Dec. 2021 Bristol-Myers Squibb K.K.
Cell Therapy Business Unit Director, Bristol-Myers
Squibb K.K.
Dec. 2023 Executive Officer and Executive Vice President, theCompany (to the present)

Total

Term
of
officeNote

No. ofshares
owned
2,786

Note

9,418

Note

-

Note

-

80,711

Notes:
1.
From the conclusion of the first Board of Directors meeting held after the conclusion of the Ordinary General Meeting of
Shareholders on March 27, 2024 to the conclusion of the first Board of Directors meeting to be held after the conclusion of theOrdinary General Meeting of Shareholders relating to the period ending December 31, 2024.

- 82 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.2 Status of Officers as at March 27, 2024 (continued)
External Officers
Number of external directors and personal, capital or business relationships with the Group and otherinterests
The Company has 7 external directors. There are no reportable personal or transactional relationships
or other special interests between the external directors and the Company. The holdings of external
directors in the Company's shares are shown in the number of shares owned column above.
Functions and roles of external directors in the corporate governance of the Company
Mr. Tomohiro Tohyama is expected to play a significant role in making decisions on importantmanagement matters and supervising the execution of operations of the Company as an external
director of the Company, in addition to making comments as necessary on deliberations of agenda
items at meetings of the Board of Directors, from his professional perspective as an attorney at law.
Mr. Kuniaki Kaga, based on his experience in corporate management at one of Japan's leading chemicaland pharmaceutical companies, is expected to make comments as necessary for deliberations on
agenda items at meetings of the Board of Directors and play a significant role in making decisions onimportant matters concerning the Company's management and supervising the execution of businessas an external director of the Company.
Mr. David Roblin, based on his clinical experience as a physician and his experience in research anddevelopment at a pharmaceutical company, is expected to make comments as necessary fordeliberations on agenda items at meetings of the Board of Directors and to play a significant role inmaking decisions on important management matters and supervising business execution as anexternal director of the Company.
Mr. Noriaki Nagai, based on his experience in the corporate division of a major securities company andas a professor at the Faculty of Law, is expected to play a significant role in making decisions onimportant management matters and supervising the execution of business operations of the Company
as an external director of the Company.
Mr. Rolf Soderstrom has extensive experience in M&A, risk management, governance, etc. as a financeleader at companies in Europe, North America, and Asia, and is expected to play a significant role inmaking decisions on important management matters and supervising business execution as anexternal director of the Company.
Ms. Miwa Seki has extensive experience as Head of Japan at a foreign capital financial institution andas a founding partner of an ESG-oriented investment fund and is expected to play a significant role inmaking decisions on important management matters and supervising business execution as anexternal director of the Company.

- 83 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.2 Status of Officers as at March 27, 2024 (continued)
Ms. Eiko Tomita has been deeply involved in the international pharmaceutical approval process for
global pharmaceutical companies both domestically and internationally and is expected to play asignificant role in making decisions on important management matters and supervising businessexecution as an external director of the Company.
Details of the Company's stance on the appointment of external directors and the criteria for their
independence from the Company
When appointing external directors, the Company considers it important to ensure the effectivenessof the Board of Directors and their independence from the management team and makes individual
judgments that they meet the criteria set forth by the Company below, based on their background andrelationship with the Company. The Company has designated Mr. Tomohiro Tohyama, Mr. Kuniaki Kaga,
Mr. David Roblin, Mr. Noriaki Nagai, Mr. Rolf Soderstrom, Ms. Miwa Seki and Ms. Eiko Tomita as
independent directors in accordance with the provisions of Tokyo Stock Exchange, Inc.
Criteria for determining the independence of external directors:
An external director will be determined to be independent if he or she does not fall under any of thefollowing categories:(1) A person who is or was an executive director, executive officer or other officer or employee(hereinafter collectively referred to as "Executive") of our Group (the Company and its subsidiaries andassociates);(2) A person who is or was in any of the last three business years an Executive at one of the Group’s
principal business partners (a company with which the annual amount of transactions (the amount of
products and services provided or procured) exceeds 2% of the consolidated net sales of the Company
or the partner, or a financial institution from which the amount of borrowing outstanding at the endof the financial year exceeds 2% of the Company’s consolidated total assets) and its parent andsubsidiary companies, and subsidiaries of such parent company;(3) A consultant, or accounting or legal expert who has received in any of the last three business years
cash or other property exceeding JPY 10 million from our Group, other than the remuneration as adirector or officer (or a person who belongs to an organization if the said property has been received
by a juridical person, partnership or any other organization);(4) A person who belongs or belonged to an auditing firm that is an external auditor of the Company
or its consolidated subsidiaries in any of the last three business years;(5) A major shareholder of the Company (shareholder holding 10% or more on a voting rights basis of
the shares in the Company in their own or other's name) at the end of the most recent business year;(6) A spouse or relative within the second degree of kinship of a person who falls under any of theitems (1) to (5) above provided that an Executive shall be in an “Important Position.” For the purposeof this item, a person is in an “Important Position" when the person is a director (excluding external
director), executive officer, officer, employee in a senior management position or general manager orhigher, or other person who is objectively and reasonably judged to be in a position of equivalent
importance; or(7) A person who is reasonably judged to be unable to perform his or her duties as an independent
external director due to a potential conflict of interest with shareholders.
- 84 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.2 Status of Officers as at March 27, 2024 (continued)
Mutual collaboration between supervision by external directors and audits by the Audit Committee,
internal audits and external audits, and relationship with other departments in charge of internal
control
The Company's external Directors make comments as appropriate to ensure the adequacy andappropriateness of management supervision and decision-making by the Board of Directors, such as
by asking questions and expressing opinions, as appropriate, based on their expertise during
deliberations at Board of Directors meetings. In addition, external directors who are members of the
Audit Committee have regular opportunities to exchange opinions and reports by the external auditor
and receive timely and appropriate reports from the Internal Audit Department on the implementation
status of internal audits in order to gather information and share issues. Furthermore, the external
Directors share awareness of internal controls with the Internal Audit Department and otherdepartments in charge of internal controls, and work to continuously improve internal controls.
4.3 Status of Audits
Status of Audit Committee’s Audits
The Audit Committee comprises 5 independent external directors. Mr. Noriaki Nagai, having had yearsof experience from senior positions including as a director of a corporate planning division at a major
securities company, Mr. Rolf Soderstrom, a Chartered Certified Accountant in the UK and having had
experience as Head of a Finance department , and Ms. Miwa Seki, having had experience as Head ofJapan at a foreign capital financial institution and as a founding partner of an ESG-oriented investment
fund, possess considerable knowledge in accounting and finance.
The Audit Committee was held 16 times during the year ended December 31, 2023. The Committee
received an explanation of the annual audit plan from the External Auditor at the beginning of thefinancial year and subsequently received reports and explanations of the audit procedures and audit
results from the External Auditor at each quarter-end and at the financial year-end. The Committee
also evaluated the appropriate qualification and independence of the External Auditor and evaluatedthe appropriateness of the audit conducted by the External Auditor.
The Audit Committee receives and comments on a report from the Internal Audit Department
regarding the annual internal audit policy and audit plan. When required, the Committee provides
instructions regarding the content, method, and other aspects of internal audits. The Audit Committee
determines its own annual audit policy and audit plan and receives regular reports from the directors
and the executive officers on their execution of duties. The Audit Committee receives reports on the
results of internal audits conducted by the Internal Audit Department and provides instructions to therelevant departments as necessary.
The Audit Committee has conducted audits in close coordination with the internal audit department
and employees who assist in the performance of duties of the Committee, and believes it is notessential that a full-time committee member be selected. Accordingly, a full-time committee member
has not been selected.
- 85 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.3 Status of Audits (continued)
The attendance status of each Audit Committee members during the current financial year was asfollows:
Name

Number of times held

Number of times attendance

Tomohiro Tohyama

16

15

Kuniaki Kaga

16

16

Noriaki Nagai

16

16

Rolf Soderstrom

16

15

Miwa Seki

16

13

Status of Internal Audits
The Company’s Internal Audit Department conducts internal audits of the Company and its
subsidiaries. The Internal Audit Department is staffed by three members, who investigate and evaluate
the effectiveness, efficiency, and appropriateness of operations, including internal controls overfinancial reporting, and based on the results provides guidance on improvements to relevant internal
departments and subsidiaries whenever needed. The staff members also report the audit results to
the Representative Executive Officer and CEO, and to the Audit Committee as well as the Board of
Directors to ensure the effectiveness of internal audits.
Status of External Audits
Name of the audit firm:
Ernst & Young ShinNihon LLC
Number of consecutive periods of audits:
6 periods
The certified public accountants that performed the external audit:
Kiyoto Tanaka (number of consecutive years of audits: 1)
Hiroyuki Nakada (number of consecutive years of audits: 1)
Number of audit team members:
10 certified public accountants and 15 others
Policy and reason for Nominating External Auditor
The Audit Committee has selected Ernst & Young ShinNihon LLC as the candidate for External Auditor,
as it concluded that Ernst & Young ShinNihon LLC is qualified for the role based on a comprehensive
review of its auditing systems, including its capability to conduct audits of the consolidated financial
statements on a global basis. Ernst & Young ShinNihon LLC demonstrated significant expertise inquality control systems and has assured independence, and according to our judgment, is wellqualified for the position of External Auditor.
- 86 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.3 Status of Audits (continued)
If circumstances arise that would interfere with the appropriate execution of the duties of the
independent auditors or cause the Audit Committee to deem it appropriate to dismiss or not toreappoint the independent auditors, the Audit Committee will make a proposal for dismissal or nonreappointment of the independent auditors for submission to the Ordinary General Meeting of
Shareholders. Also, when it deems that any cause stipulated in each item of Article 340, Paragraph 1of the Companies Act applies to the independent auditors, the Audit Committee can dismiss theindependent auditors by agreement of all Committee members.
Compensation for Audits paid to the External Auditor
Year ended December 31, 2023
Classification

Year ended December 31, 2022

Compensation foraudit certification
services¥mCompensation for
non-audit services

Compensation for
non-audit services¥mCompensation foraudit certification
services¥m

Filing company
Consolidated
subsidiaries

78

25

60

-

13

-

-

-

Total

91

25

60

-

¥m

Notes:
1.
In the audit agreement between the Company and the External Auditor, there is no clear distinction between the compensation
for audits based on the Companies Act and the compensation for audits based on the Financial Instruments and Exchange Act,and no distinction can be made in practice, so amounts of compensation for the External Auditor for the year ending December
31, 2023 are the total of these two components.
2.
Compensation for non-audit services in the previous year relates to providing a comfort letter.

Compensation paid to auditors from the same network as the External Auditor (excluding the above
amounts)
Year ended December 31, 2023
Classification

Year ended December 31, 2022

Compensation foraudit certification
services¥mCompensation for
non-audit services

Compensation foraudit certification
services¥mCompensation for
non-audit services

Filing company-

Consolidated
subsidiaries

55

3

-

8

-

47

-

Total

55

3

47

8

¥m

¥m

Notes:
1.

Non-audit services to the filing company include support services such as consists of support on tax and related services for an
expatriate.

- 87 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.3 Status of Audit (continued)
Other Compensation for Audit Certification Services by the External Auditor from the same network
Year ended December 31, 2023
Not applicableYear ended December 31, 2022
Not applicable
Policy for Determining Compensation for Audits
Audit compensation paid to the Company’s External Auditor is decided with the consent of the Audit
Committee after discussion with the External Auditor regarding the audit content, conditions, andother factors for that financial year.
Reason for Compensation for Audits
The Audit Committee has confirmed the audit plan of the independent External Auditor, the state of
execution of duties for external audits, the basis of remuneration estimates, etc. and has considered
whether audit remuneration is adequate for the implementation of appropriate audits. The
Committee concluded that the audit remuneration is appropriate and has given its consent to the
remuneration, etc. of the independent External Auditor in accordance with Article 399, Paragraph 1of the Companies Act.
4.4 Remuneration paid to Officers
Policy concerning decisions on the content of individual remuneration for Executive Officers andDirectors by the Compensation Committee
The Compensation Committee of the Company has adopted a policy (please see below) to determine
the remuneration for individual Executive Officers and Directors. The Compensation Committee
concluded that the individual remuneration packages of Executive Officers and Directors during theyear under review was in line with the above mentioned policy, as the method in which the content
of remuneration was decided and the remuneration content itself were consistent with the policy.
i. Basic Policy
・ The basic policy of the remuneration for Officers is to provide incentives for attracting andretaining talent, and implementing management strategies designed to deliver sustainablegrowth and enhance the corporate value of the Group.
・ Remuneration for Directors is set to provide incentives for attracting and retaining excellent
talent to act as Directors of the Company, to enable strengthening the oversight function ofGroup management, as well as to enable a proactive contribution to the enhancement ofcorporate value by sharing the benefits and risks of stock price fluctuations with shareholders.
Director’s remuneration consists of a fixed amount of base salary and share-based payments inthe form of restricted stock units (RSUs).

- 88 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.4 Remuneration paid to Officers (continued)
・Remuneration for Executive Officers is set to provide incentives for realization of the Company’s
vision and strategy, medium-to long-term enhancement of corporate value and shareholder
value, as well as to compensate for the individuals’ roles and achievements. Executive Officer’s
remuneration consists of a fixed amount of base salary, a bonus determined according to theaccomplishment of the individual’s business objectives, retirement allowances, and share-based
payments in the form of Restricted Stock Units (RSUs).
・ The Compensation Committee, of which a majority comprises external directors, determines
compensation fairly and appropriately, ensuring transparency under the chairmanship of an
external director.
ii. Policy for determining the amount or the method of calculation of individual remuneration(excluding non-monetary remuneration outlined in iii. below)
a. Remuneration paid to Directors
The amount of fixed base salary (annual salary) is the same for all Directors except for the
Chairperson, and determined referring to the market data obtained from benchmarking surveys
and other available databases of external research organizations. Directors who concurrently
serve as Executive Officers shall not be paid Directors’ compensation.
b. Remuneration paid to Executive Officers
・ Fixed base salary (annual salary) is determined based on an individual performance in theprevious financial year and an evaluation of their contribution to the Company, taking into
consideration factors such as remuneration levels at comparable companies in the country
where the individual is acting or resides, using available databases of external researchorganizations for reference.
・ Bonuses, are determined by multiplying the amount of base salary by a certain percentage
determined for each individual according to factors such as his/her responsibilities andperformance, and the difficulty in acquiring the talent that is fit for the role. The amountpayable is determined in accordance with the accomplishment of the individual businessobjectives.
・ Retirement allowances are equivalent to the sum of the bonus and the annual salary for theprevious business year. However, retirement allowances are not paid to Executive Officers
who are not re-appointed or dismissed due to misconduct, violation of law, regulations andthe Articles of Incorporation of the Company, breach of trust, gross negligence, incompetence
or inability to execute duties, disqualification as an Executive Officer under the Companies
Act, or any other justifiable reason. Furthermore, in case where the law stipulates that adismissal notice allowance is payable following a contract termination, only the difference
between the amount of the annual salary of the previous year and the dismissal notice
allowance will be paid.

- 89 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.4 Remuneration paid to Officers (continued)iii. Contents of non-monetary remuneration and policy for determining the amount or number or the
method of calculating the amount or number of non-monetary remuneration
The Company has introduced a post-hoc granted share-based payments (RSUs) as non-monetary
remuneration. An overview of which is as follows.
a. Conditions for allotment
Shares of the Company are allotted on the condition that an individual has served continuously
in the position of Director or Executive Officer of the Company throughout the performance
period. However, in cases where a Director or Executive Officer ceases to hold office due to the
expiration of his/her term of office, other grounds deemed by the Board of Directors to bejustifiable, or death during the performance period, a number of shares calculated by theCompany under the applicable share-based payment regulations will be allotted.
b. Maximum number of the Company’s shares to be delivered
The number of shares of the Company to be delivered under the plan, together with the numberof shares issued under other share-based payment plans, cannot exceed 10% of the total
number of issued and outstanding shares of the Company.
c. Performance period and number of allotted shares:
・ The performance period for Directors (excluding Directors who concurrently serve as
Executive Officers) is one year, after the expiration of which, a number of shares to be allottedis calculated by dividing an amount equivalent to 130% of the base salary by the stock priceat the start of the performance period.
・ The performance period for Executive Officers and Directors who concurrently serve as
Executive Officers are two years and three years from the first day of the performance period
respectively. After the expiration of each performance period, half of the total number ofshares will be allotted respectively. The number of shares to be allotted is calculated by
dividing the amount of basic compensation multiplied by a certain ratio (125% to 250%), set
by position, by the stock price at the start of the performance period.
d. Method for the allotment of shares
Shares are allotted in exchange for the contribution in kind of monetary compensation claims.
Monetary compensation claims are provided to Officers to whom the allocation of shares isscheduled and the amount is calculated by multiplying the number of allocated shares by theamount to be paid per share determined by decision of the Board of Directors or a
Representative Executive Officer authorized thereby.

- 90 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.4 Remuneration paid to Officers (continued)

ⅳ. Policy for determining the composition of Officer compensation
The composition ratio of the amount of individual remuneration, etc. is as follows:
Base salary

Bonus

Stock
compensation
Restricted Stock
Units (RSU).

Retirement
allowances

Director

1

-

1.3

-

Representative
Executive Officer &
CEO

1

0.75

2.5

1.75

Executive Officer

1

0.4～0.6

1.25～1.75

1.4～1.6

Notes:
1.

In the above table, the model for the bonus to be paid is a payment of standard amount determined by the Company.
This ratio may change in accordance with factors such as the Company’s business results and share price.

ⅴ. Policy for determining the timing or conditions for granting remuneration to Officers
・ One twelfth of the base salary is payable monthly.
・ Bonuses are paid annually in February.
・ Share-based payments: Restricted Stock Units (RSU) are granted in April of each year, andshares are allotted after the end of the performance period.

ⅵ. Overview and activities of the Compensation Committee’s process of determining the amount of
remuneration for Officers in the current financial year
The Compensation Committee consists of four directors including three external directors and one
director who also serves as a representative executive officer. It set the policy for determining the
remuneration packages for Directors and Executive Officers and determined the remuneration foreach Officer based on this policy, considering individual performance and their contribution to theCompany.

- 91 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.4 Remuneration paid to Officers (continued)
The Compensation Committee was held seven times during the current financial year, and theattendance was as follows:
Name

Number of times held

Number of times attendanceShinichi Tamura

7

5

Christopher Cargill

7

7

Tomohiro Tohyama

77David Roblin

7

6

Rolf Soderstrom

7

7

The amount of individual base salary, bonuses, share-based payments and retirement allowance was
decided in consideration of the roles, the achievements and other contributions to the company ofeach Officer as well as the remuneration level of other companies in the same industry.
Total Amount of Remuneration, Total Amount of Remuneration by Type, and Number of Officers to
Be Paid, by Executive Category
Executive
category

Total amount of
remuneration¥m

Total amount of remuneration by type(¥m)
Base salary

Bonuses

Share-based
payments

Number of
officers to be
paid

Directors(External
directors)

304
(215)

128
(95)

(-)

176
(120)

8
(7)

Executive
Officers

656

257

237

162

7

Notes:
1.
Renumeration of Christopher Cargill, Director and Executive Officer is excluded from Directors remuneration.
2.
Renumeration of Christopher Cargill, Director and Executive Officer is included in Executive Officers remuneration.
3.
The table above does not include the following:
・Retirement allowance of ¥28 million, which were paid by the Company subsidiaries to one Executive Officer who
retired in March 2023 in accordance with the result of the Remuneration Committee held in April 2023.
・Salaries totaling ¥90 million were paid by Company subsidiaries to three Executive Officers, including one Executive
Officer who retired in March 2023.
・Bonuses totaling ¥30 million were paid by Company subsidiaries to two Executive Officers in February 2024 inaccordance with the resolution of the Remuneration Committee held in January 2024.
・ Non-monetary remuneration totaling ¥46 million was paid by Company subsidiaries to two Executive Officers,
including one Executive Officer who retired in March 2023.
4.
Remuneration of one Executive Officer who was appointed in March 2023 and one Executive Officers who was appointed inJuly 2023 is included from the date of appointment.
5.
Share-based payments represent the Company's shares. The terms of allocation are as described in " iii Contents of nonmonetary remuneration and policy for determining the amount or number or the method of calculating the amount or numberof non-monetary remuneration" of “Policy concerning decisions on the content of individual remuneration for Executive
Officers and Directors by the Compensation Committee”.
6.
The amount of share-based payments in the table above shows the amount recorded as an expense in the current financial
year in accordance with JGAAP.
- 92 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.4 Remuneration paid to Officers (continued)
Total amount of Consolidated Compensation and Other Payments for Individuals whose
Consolidated Compensation and Other Payments amount to JPY 100 million or more
Total amount of remuneration by type(¥m)

Total amountof consolidated
remuneration(¥m)

Company
category

Executive
category

Filingcompany

Executive
Officer

101

121

90

312

Kieran Johnson(Executive
Officer)Filingcompany

Executive
Officer

53

26

25

104

Matthew Barnes(Executive
Officer)

Heptares
Therapeuti
cs Ltd.

Executive
Officer

57

19

29

105

Name

Christopher
Cargill(Representative
Executive
Officer, President

Base salary

Bonuses

Sharebased
payments& Chief Executive
Officer)

Notes:
The amount of share-based payments in the table above represents the amount recorded as an expense in the current financial
year in accordance with JGAAP.

- 93 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.5 Status of Holdings in Investment Shares
Criteria and Concepts for Classification of Investment Shares
The Group classifies any shares that it acquires according to the purpose of the investment. Shares
held for the purpose of receiving profits solely from fluctuations in the value of those shares ordividends on those shares are classified as investment shares for the purpose of net investment. Sharesacquired and not held for the purpose of net investment are classified as policy-held shares.
Investment shares held for purposes other than investment for gain from capital or dividenda. Holding policy, the method of verifying the reasonableness of a holding, and the details of verificationby the Board of Directors (or organization equivalent to the Board of Directors) regarding theappropriateness of holding individual issues
The Group holds investments in a number of listed companies which arose from past businessdevelopment transactions. After any restrictive holdings periods have passed Management
periodically assesses whether or not to continue to hold each investment after performing a balanced
assessment of various factors, including the investment’s expected returns and future prospects,
general markets conditions and the Group’s liquidity needs. The purpose of holding stocks is regularly
verified by the Board of Directors and a policy is followed of reducing non-core investments when there
is no strategic or financial rationale to continue to hold such investments.
b. Shareholding status of the Company
Not applicablec. Shareholdings in companies (largest holding company) with the highest balance sheet values(amount of investment shares) of the Company and its consolidated subsidiaries
Shareholdings of Heptares Therapeutics Ltd., the largest holding company, are as follows:Class

Number of companies in whichinvestment shares are held

Carrying Value

Unlisted shares

2

1,110

Listed shares

2

1,208

Notes:
1. Amounts accounted for under IFRS.

Description of shareholdings that increased during the year:
Not applicable
Description of shareholdings that decreased during the year:
Not applicable- 94 -¥m

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.5 Status of Holdings in Investment Shares (continue)
Shares acquired and sold during the year do not include reverse split, share split, share transfer, shareexchange, merger and such kind of changes in shares.
d. Information on the number of shares for each specific investment share and shares deemed to beheld though trust campanies
Specific Investment Shares
Description

Centessa
Pharmaceuticals
PLC

December 31,
2023

December 31,
2022

Number ofsharesNumber ofsharesCarrying value¥m

Carrying value¥m929,353929,353

1,043

378

Purpose of holding, quantitative effect ofholding, and reason for the increase or
decrease in the number of shares

Does theinvestmentcompany
hold sharesin theCompany?

Centessa Pharmaceuticals PLC has therights to access know-how provided by
Heptares Therapeutics Ltd. for orexin
positive modulators and analogues.

No

The Company holds the shares with theobjective of maximizing the value of theconsideration acquired to reflect theresults of such development progress.
Biohaven Ltd.

27,30827,308165

50

To benefit from value created through the
exploitation of IP rights

No

Notes:
1. Amounts accounted for under IFRS
2. Quantitative holding effects are not described in order to preserve confidential information in contracts. The appropriateness ofholding these shares is explained in “Investment shares held for purposes other than investment for gain from capital or dividend a.”
above.

Deemed Shares held through trust companies:
Not applicable.

- 95 -

Sosei Group Corporation
Section 4. Information about the Filing Company
4 Corporate Governance (continued)
4.5 Status of Holdings in Investment Shares (continue)
Investment shares held for net investment purposesa. Status of shareholdings of the Company
December 31, 2023
Class

Unlisted shares

Number ofcompanies in whichinvestment sharesare held
1

December 31, 2022
Carrying
value
¥m
95

Number ofcompanies in whichinvestment sharesare held
1

Carrying
value
¥m
117

Year ended December 31, 2023
Class

Unlisted shares

Dividend income¥mGain or loss on disposal¥m

Unrealized gain or loss onrevaluation
¥m

-

-

(22)

Notes:
1. Amounts accounted for under JGAAP.

b. Status of shareholdings of Heptares Therapeutics Ltd., the largest holding company
Not applicable.

- 96 -

Sosei Group Corporation
Section 5. Financial Statements
1 Policy for the preparation of the Consolidated and Non-Consolidated Financial Statements
The consolidated financial statements of the Company are prepared in accordance with International
Financial Reporting Standards (hereinafter, “IFRS”) pursuant to the provisions of Article 93 of the“Ordinance on Terminology, Forms and Preparation Methods of Consolidated Financial Statements”(Ordinance of the Ministry of Finance No. 28 of 1976).
The non-consolidated financial statements of the Company are prepared in accordance with the“Ordinance on Terminology, Forms and Preparation Methods of Financial Statements, etc.”(Ordinance of the Ministry of Finance No. 59 of 1963) (hereinafter, the “Ordinance on FS”).
The Company is categorized as a company allowed to file specified financial statements, and the nonconsolidated financial statements are prepared in accordance with the provisions of Article 127 of theOrdinance on FS.
2 Audit Attestation
In accordance with the provisions of Article 193-2, Paragraph 1 of the Financial Instruments andExchange Act, the consolidated financial statements and the non-consolidated financial statements
for the year ended December 31, 2023 were audited by Ernst & Young ShinNihon LLC.
3 Special effort to ensure the appropriateness of Financial Statements and development of a system
for the fair preparation of Consolidated Financial Statements in accordance with IFRS
Significant effort is made to ensure the appropriateness of the financial statements. Specifically, theCompany is a member of the Financial Accounting Standards Foundation (FASF), and has developed asystem that enables the timely acquisition of information regarding the establishment and revision of
accounting standards, practical guidelines, etc.
The Company keeps up to date with accounting developments by reviewing new and amended
standards published by the International Accounting Standards Board. To prepare appropriate
consolidated financial statements under IFRS, management has developed accounting policies for theGroup that comply with IFRS and performs accounting procedures based on those policies.

- 97 -

Sosei Group Corporation
Section 5. Financial Statements
Consolidated Balance Sheet as December 31, 2023
December 31,
2023¥m

December 31,
2022
¥m

10,12
4,11
4,11
30
8,9
6,16

7,900
24,62352,291
3,964
3,266
42
92,086

3,791
15,306
8,577
1,737
64
29,475

9,14,22
15

5,064
2,903
2,099
316
5,665
49,065
65,112
157,198

2,462
32
58
833
66,557
69,942
99,41730
9,17,32
9,17,32
9,12,32
19
4,20,22

1,490
30,551
32,664
3,985
484
4,029
73,203

2,922
27,981
1,577
118
4,791
37,389

9,18

4,244
378
143
5,798
832
5,790
17,18590,388

1,628
260
176
36
1,992
4,092
41,48146,80734,048(1)(16,104)
2,060
66,81066,810157,198

41,33529,525(1)(8,911)(4,012)
57,93657,936
99,417

Note
AssetsNon-current assets
Property, plant and equipment
Goodwill
Intangible assets
Deferred tax assets
Other financial assets
Other non-current assets
Total non-current assets
Current assets
Trade and other receivables
Inventories
Income taxes receivable
Other financial assets
Other current assets
Cash and cash equivalents
Total current assets
Total assets

9
16
9,13
9

Liabilities and Equity
Liabilities
Non-current liabilities
Deferred tax liabilities
Corporate bonds
Bank borrowings
Lease liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Income taxes payable
Corporate bonds
Current portion of long-term bank borrowings
Lease liabilities
Other financial liabilities
Other current liabilities
Total current liabilities
Total liabilities
EquityCapital stock
Capital surplus
Treasury stock
Retained earnings
Other components of equity
Equity attributable to owners of the parent
Total equity
Total liabilities and equity

9,17,32
9,17,32
9,12,32
9
20,22

21
21
21
9,21
9,21
9

- 98 -

Sosei Group Corporation
Section 5. Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Year ended December 31, 2023
Note
Revenue

4,6,22

Cost of sales

10,23,24

Gross profit
Research and development expenses

10,11,23,24

Selling, general and administrative expenses

10,11,23,24,
25

Year ended
December 31,
2023¥mYear ended
December 31,
2022¥m

12,766(3,102)
9,664(10,075)

15,569(926)
14,643(7,454)(9,965)(4,377)
626
(2)
3,436
663
(756)

Share of loss of associates accounted for using the equity method

29

944
(94)
(9,526)
1,341(2,495)-

Impairment loss on investments accounted for using the equity
method29-(1,836)30(10,680)
3,487(7,193)

1,078
(696)
382

8,9,21

668

(928)

21

668

(928)

9,10,11,21,
30

5,404

291

21

5,404

291

21

6,072
(1,121)

(637)
(255)

(7,193)(7,193)382
382(1,121)(1,121)

(255)
(255)

(87.18)(87.18)

4.68
4.63

Other income
Other expenses

26
27

Operating (loss) profit
Finance income

9,28

Finance costs

9,12,28(Loss) profit before income taxes
Income tax benefit (expense)
Net (loss) profit(429)

Other comprehensive income:Items that will not be reclassified subsequently to profit or loss:
Net change in fair value of equity instruments designated asmeasured at fair value through other comprehensive income
Total items that will not be reclassified subsequently to
profit or loss
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations
Total items that may be reclassified subsequently to
profit or loss
Total other comprehensive income
Total comprehensive income for the year
Net (loss) profit attributable to:
Owners of the parent
Total comprehensive income for the year attributable to:
Owners of the parent
Earnings per share (yen)Basic (loss) earnings per share

31

Diluted (loss) earnings per share31- 99 -

Sosei Group Corporation
Section 5. Financial Statements
Consolidated Statement of Changes in Equity
Year ended December 31, 2023

Note
Balance at January 1, 2022
Net profit
Other comprehensive income
Total comprehensive income for the year
Issuance of new shares
Share-based payments
Purchase of treasury stock
Transfer from other components of equity toretained earnings
Total transactions with owners
Balance at December 31, 2022
Net loss
Other comprehensive income
Total comprehensive income for the year
Issuance of new shares
Share-based payments
Purchase of treasury stock
Issuance of corporate bonds
Repurchase and cancellation of corporate bonds
Total transactions with owners
Balance at December 31, 2023

21
21
21,24
21
9,21

21
21
21,24
21
21
21

Capital stock¥m
41,036299-

Capitalsurplus¥m
29,100(299)
724-

Treasury
stock
¥m
(0)
(1)

Retainedearnings¥m(9,768)
382
382
-

Other
componentsof equity¥m(2,900)
(637)
(637)
-

Equityattributableto ownersof theparent¥m
57,468
382
(637)
(255)
0
724
(1)

Total equity¥m
57,468
382
(637)
(255)
0
724
(1)

-

-

-

475

(475)

-

-

299
41,3355,472
5,472
46,807425
29,525
4,511
832
800
(1,620)4,523
34,048

(1)
(1)
(0)
(0)
(1)

475
(8,911)(7,193)(7,193)(16,104)(475)(4,012)
6,072
6,072
2,060

723
57,936(7,193)
6,072(1,121)
9,983
832
(0)
800
(1,620)9,995
66,810723
57,936(7,193)
6,072(1,121)
9,983
832
(0)
800
(1,620)9,995
66,810- 100 -

Sosei Group Corporation
Section 5: Financial Statements
Consolidated Statement of Cash Flows
Note

Cash flows from operating activities(Loss) profit before income taxes
Adjustments for:
Depreciation and amortization
Share-based payments
Loss on investment in securities
Change in fair value of contingent consideration
Charge for repurchase and cancellation of corporate bonds
Net foreign exchange loss
Interest income
Interest expenses
Share of loss of associates accounted for using the equity
methodImpairment loss on investments accounted for using the equity
methodDecrease (increase) in trade and other receivables
Decrease (increase) in inventories
Increase in trade and other payables(Decrease) increase in deferred revenue
Other
Subtotal
Grants received
Interest and dividends received
Interest paid
Income taxes paid
Income tax refunded
Net cash (used in) provided by operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Payment for acquisition of business
Proceeds from sales of investment in securities
Proceeds from settlement of contingent consideration receivable
Other
Net cash (used in) provided by investing activities
Cash flows from financing activities
Proceeds from long-term bank borrowings
Repayments of long-term bank borrowings
Repayments of lease liabilities
Proceeds from issuance of corporate bonds
Payments for repurchase and cancellation of corporate bonds
Payment for settlement of contingent consideration
Proceeds from issuance of common stock
Other
Net cash provided by (used in) financing activities
Effects of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

- 101 -

Year ended
December 31,
2023¥mYear ended
December 31,
2022¥m(10,680)

1,078

2,478
870
46
(116)
1,317
145
(1,225)
804

1,345
700
41
(114)
195
(236)
714

-

429

-

1,836

1,315
1,908
1,552
(1,732)(1,434)(4,752)
29
1,085
(241)
(1,394)0(5,273)

(210)
(32)
315
5,153
(1,122)
10,092
57
236
(171)
(262)
0
9,952

10
11
7
8
9

(804)
(47)
(62,941)
1(63,791)

(277)
(26)
1,209
137
1,043

32
32
12,32
17,32
17,32
9,32
21

39,900(1,450)(485)
31,708(31,300)
9,983(27)
48,3293,243(17,492)
66,55749,065(206)(4,680)0(1)(4,887)362
6,470
60,08766,557

10,11
23,24
28
28
28
28
28
28
29
29

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
1

Reporting entity
Sosei Group Corporation (the “Company”) is a joint-stock company located in Japan. The address of
its registered head office and principal place of business is available on the Company’s website (URL:
https://www.soseiheptares.com/). The consolidated financial statements reflect the transactions andbalances of the Company and its subsidiaries (the “Group”) as at the end of December 31, 2023 andfor the twelve month period then ended. The Group is engaged in the pharmaceutical business.

2

Basis of preparation
2.1 Compliance with International Financial Reporting Standards
The Japanese language consolidated financial statements of the Group have been prepared inaccordance with IFRS published by the International Accounting Standards Board since theCompany meets the requirements of a "Specified Company applying Designated International
Financial Reporting Standards", pursuant to Article 1-2 of the Ordinance on Terminology, Forms
and Preparation Methods of Consolidated Financial Statements (Ordinance of the Ministry of
Finance No. 28 of 1976), and applied the provisions of Article 93 of said Ordinance. The Group’s
Japanese and English language consolidated financial statements were approved by the Boardof Directors on March 27, 2024.
2.2

Basis of measurement
The consolidated financial statements of the Group have been prepared on the historical costbasis except for specified financial instruments and other balances measured at fair value as
explained in Note 3 Material accounting policies.

2.3

Presentation currency
The consolidated financial statements of the Group are presented in Japanese yen, which is thefunctional currency of the Company, and amounts are rounded up or down to the nearest
million yen.

2.4

Change in presentation
Consolidated Balance Sheet
The “Inventories" balance which was included in "Other current assets" in the previous financial
year, is presented separately in the current financial year due to the increased materiality. To
reflect this change in presentation, JPY 865 million presented as "Other current assets" in the
consolidated balance sheet as at December 31, 2022 has been reclassified as "Inventories" (JPY
32 million) and "Other current assets" (JPY 833 million).

- 102 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
2

Basis of preparation (continued)
2.4 Change in presentation (continued)
The “Provisions" balance which was included in "Other non-current liabilities" in the previous
financial year, is presented separately in the current financial year due to the increasedmateriality. To reflect this change in presentation, JPY 4,909 million presented as "Other noncurrent liabilities" in the consolidated balance sheet as at December 31, 2022 has been
reclassified as "Provisions" (JPY 118 million) and "Other non-current liabilities" (JPY 4,791
million).

3

Material accounting policies
3.1

Basis of consolidation
The consolidated financial statements are prepared based on the financial statements of theCompany and entities controlled by the Company as at December 31. The Company controls anentity when it is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to use its power over the investee to affect its returns. The Company
reassesses whether or not it controls the investee if facts and circumstances indicate that there
are changes to either of the elements of control above.
Subsidiaries
All subsidiaries are consolidated from the date the Group obtains control of such subsidiaries
until the date on which the Group loses control of those subsidiaries. Where the accounting
policies of subsidiaries are different from those of the Group, adjustments are made to thefinancial statements of the subsidiaries. Intragroup transactions are eliminated in the
preparation of the consolidated financial statements.
Changes in the Group’s ownership interest in subsidiaries that do not result in the Group losing
control of the subsidiaries are accounted for as equity transactions. The carrying amounts of theGroup’s interests and the non-controlling interests are adjusted to reflect the changes in theirrelative interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received isrecognized directly in equity and attributed to the owners of the parent.
When the Group loses control of a subsidiary, a gain or loss on disposal is recognized in profit orloss and is calculated as the difference between (i) the aggregate of the fair value of theconsideration received and the fair value of any retained interest, and (ii) the previous carrying
amount of assets (including goodwill) and liabilities of the subsidiary, and any non-controllinginterests.

- 103 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.1 Basis of consolidation (continued)
Associates
An associate is an entity which is not controlled or jointly controlled by the Group but for which
the Group has significant influence over the financial and operating policies of the entity. When
the Group holds 20% or more but less than 50% of the voting rights of other companies, there
is a rebuttable presumption that the Group has a significant influence over the other companies.
Investments in associates are accounted for using the equity method from the date the Groupgains significant influence until the date it loses that influence over the entities.
An investment in an associate is tested for impairment as a single asset if there is objective
evidence indicating that the investment in the associate is impaired.
Unrealized gains arising from transactions with entities accounted for using the equity method
are eliminated against the investment to the extent of the Group’s interest in the investee.
Unrealized losses are eliminated in the same way as unrealized gains unless there is evidence ofimpairment.
3.2

Business combinations
Business combinations are accounted for using the acquisition method. The considerationtransferred in a business combination is measured at fair value, which is calculated as the sumof the acquisition-date fair values of the assets transferred by the Group, liabilities assumed, andequity instruments issued by the Company in exchange for control of the acquiree. If theconsideration transferred exceeds the fair value of identifiable assets and liabilities, the excess
is recorded as goodwill in the consolidated balance sheet. Conversely, if the fair value of such
assets and liabilities exceeds the consideration transferred, the excess is immediately recognized
as a gain in the consolidated statement of profit or loss and other comprehensive income. If theinitial accounting for a business combination is incomplete by the end of the period in which thebusiness combination occurred, the Group reports provisional amounts for items for which theaccounting is incomplete. Those provisional amounts are adjusted retrospectively during themeasurement period which lasts no more than one year from the acquisition date. Acquisition
costs are expensed as incurred.
When the consideration transferred by the Group in a business combination includes assets or
liabilities resulting from a contingent consideration arrangement, the contingent considerationis measured at its acquisition-date fair value and included as part of the considerationtransferred in a business combination. Changes in the fair value of the contingent considerationthat qualify as measurement period adjustments are adjusted retrospectively, withcorresponding adjustments against goodwill. Measurement period adjustments areadjustments that arise from additional information obtained during the “measurement period”(which cannot exceed one year from the acquisition date) about facts and circumstances thatexisted at the acquisition date.
- 104 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.2

Business combinations (continued)
Changes in the fair value of the contingent consideration that do not qualify as measurement
period adjustments are accounted for through either of the following:a)Contingent consideration that is classified as equity is not remeasured at subsequent
reporting dates, and its subsequent settlement is accounted for within equity.
b)Contingent consideration that is classified as an asset or liability is remeasured atsubsequent reporting dates in accordance with IFRS 9 Financial Instruments orInternational Accounting Standards (“IAS”) 37 Provisions, Contingent Liabilities andContingent Assets, with the corresponding gain or loss being recognized in profit or loss.
The Group chooses whether non-controlling interests are measured at fair value or based on
the proportionate interest of the recognized amount of identifiable net assets on the acquisition
date for each transaction.

3.3

Foreign currency translations
Transactions denominated in foreign currencies
Transactions denominated in foreign currencies are translated into the functional currency ofeach Group company at the rates of exchange prevailing at the dates of the transactions.
Foreign-denominated monetary assets and liabilities are retranslated into the functional
currency of each Group company using the exchange rates at the end of the period.
Non-monetary assets and liabilities denominated in foreign currencies measured at fair value
are retranslated into the functional currency at the exchange rates on the date fair value isdetermined. Non-monetary items measured at cost are translated at the exchange rate on thetransaction date.
Exchange differences resulting from retranslation or settlement are recognized in financeincome or finance costs in the period incurred. Exchange differences resulting from thetranslation of financial assets measured through other comprehensive income are recognizedin “Other comprehensive income” in the consolidated statement of profit or loss and othercomprehensive income and accumulated in “Other components of equity” in the consolidatedbalance sheet.
Financial statements of foreign operations
The assets and liabilities of the Group’s foreign operations (such as overseas subsidiaries) aretranslated into Japanese yen at the exchange rates prevailing at the end of the period. Income
and expenses are translated into Japanese yen at the average exchange rates for the period aslong as there have been no significant exchange rate fluctuation.
- 105 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.3

Foreign currency translations (continued)
Exchange differences arising from the translation of the financial statements of foreign
operations are recognized in “Other comprehensive income” in the consolidated statement of
profit or loss and other comprehensive income and accumulated in “Other components ofequity” in the consolidated balance sheet.

3.4

Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation andaccumulated impairment losses. The cost includes costs directly attributable to the acquisitionof the asset, the initial estimate of costs for dismantling and removing the asset and the costsof restoring property to its original state.
Property, plant and equipment are depreciated based on their depreciable amounts by thestraight-line method over the expected useful life of each asset.
The normal expected useful lives of major asset categories are as follows: Buildings and structures:
3 - 18 years Machinery and equipment: 4 - 8 years
 Furniture and fixtures:
2 - 18 years
 Right-of-use assets:
2 - 16 years
The expected useful lives, residual values and depreciation methods are reviewed at the end ofeach financial year, and changes in these items, if any, are applied prospectively as changes inaccounting estimates.

3.5

Goodwill
Goodwill arising from the acquisition of a subsidiary is recorded at cost less accumulated
impairment losses. Upon initial recognition goodwill is measured at the fair value of theconsideration transferred, including the amount recognized for non-controlling interests, lessthe net recognized value (normally the fair value) of identifiable assets acquired and liabilities
assumed at the time of the acquisition. Goodwill is not amortized. It is allocated to cashgenerating units and an annual impairment test is conducted at the same time in each financial
year or whenever there is an indication that goodwill may be impaired. Impairment losses on
goodwill are recognized in the consolidated statement of profit or loss and other comprehensive
income and are not reversed subsequently.

- 106 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.6

Intangible assets
Separately acquired intangible assets with finite useful lives are measured at cost lessaccumulated amortization and accumulated impairment losses. The cost is directly attributable
to the acquisition of the intangible asset.
Intangible assets are amortized based on their amortizable amounts by the straight-line method
over the expected useful life of each asset. The amortization method, expected useful lives, andresidual values are reviewed at the end of each financial year, and changes in these items, if any,
are applied prospectively as changes in accounting estimates.
Expected useful lives of major asset categories are as follows: Product-related assets: 18 - 28 years
 Core technology:
12 - 20 years
 Customer-related assets: 20 years
Intangible assets with indefinite useful lives and intangible assets that are not yet available foruse and therefore not yet amortized, are tested for impairment at the same time in eachfinancial year and whenever there is an indication of impairment.
Expenditure on research activities is recognized as a cost in the period in which it occurs.
Internally generated intangible assets arising at the development stage are recognized only
when all the following criteria have been demonstrated: the technical feasibility of completing the intangible asset so that it will be available foruse or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset;
 how the intangible asset will generate probable future economic benefits;
 the availability of adequate technical, financial and other resources to complete thedevelopment and to use or sell the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during
its development.
The amount initially recognized for internally generated intangible assets is the total cost
incurred from the date that the intangible asset initially met the above recognition criteria.
When an internally generated intangible asset cannot be recognized, development costs are
expensed in the period they occur. After initial recognition, internally generated intangible
assets are stated at acquisition cost less cumulative amortization and cumulative impairment inline with other intangible assets. Intangible assets acquired through business combinations andrecognized separately from goodwill are stated at acquisition cost less cumulative amortizationand cumulative impairment after initial recognition at fair value as of the acquisition date in thesame way as individually acquired intangible assets.

- 107 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.7

Leases (as a lessee)
Management assesses whether any new contract includes a lease at the inception of thecontract. If a contract conveys the right to control the use of an identified asset for a period in
exchange for consideration, the contract is, or contains, a lease.
Initial recognition and measurement
At the commencement date of the contract, a right-of-use asset is measured at an amount equal
to the initial measurement of the lease liability, adjusted by an estimate of costs to be incurredin dismantling and removing the underlying asset, restoring the site on which it is located or
restoring the underlying asset itself. The lease liability is measured at the present value of theremaining lease payments, discounted using the lessee’s incremental borrowing rate at thecommencement date.
Subsequent measurement
A right-of-use asset is depreciated using the straight-line method over the shorter of the leaseterm or the useful life of the right-of-use asset. The expected useful life used in calculating thedepreciation expense is 2 to 16 years. Interest on the lease liability is calculated to be theamount that produces a constant periodic rate of interest on the remaining balance of the leaseliability. The lease liability is reduced by lease payments net of the interest expense.
Presentation
In the consolidated balance sheet, the Group presents right-of-use assets in “Property, plant andequipment”. In the consolidated statement of profit or loss and other comprehensive income,the Group presents interest expense at an amount that produces a constant periodic rate ofinterest on the remaining balance of the lease liability in “Finance costs”.
Short-term leases and leases of low-value assets
For low-value asset leases and short-term leases with lease terms of 12 months or less, theGroup has adopted the exemption provisions of IFRS 16 Leases and has elected not to recognize
right-of-use assets and lease liabilities. The Group recognizes lease payments for these leases as
expenses over the lease term using the straight-line method.

- 108 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.8

Impairment of non-financial assets
The book values of non-financial assets are reviewed for indications of impairment at eachreporting date. If any such indications exist, the asset’s recoverable amount is estimated. For
goodwill and intangible assets with indefinite useful lives or intangible assets not yet available
for use, the recoverable amount is estimated at the same time in each financial year. The
recoverable amount of assets or cash-generating units is the higher of value in use or fair valueless disposal costs. In the calculation of value in use, estimated future cash flows are discounted
to present value using a discount rate that reflects the time value of money and risks inherent
to the asset. In respect of cash-generating units, assets are grouped into the smallest units
generating largely independent cash flows from other assets or units through continued usage.
In respect of cash-generating units for goodwill, goodwill is assessed based on those business
units defined for the purposes of internal reporting. In principle, a cash-generating unit for
goodwill is classified as a type of business and geographical region. Corporate assets do not
generate independent cash inflows. Therefore, when there are indications of impairment incorporate assets the recoverable amount of the cash-generating unit to which the corporate
asset belongs is calculated for the impairment test. Assets that do not have external cash flows
are included within the cash-generating units of the business units that they support.
Impairment loss is recognized in profit or loss when the book value of the asset or cashgenerating unit exceeds the recoverable amount. Impairment loss recognized in connection withcash-generating units is allocated first to reduce the book value of goodwill relating to that cashgenerating unit. Any additional impairment required is allocated next to reduce the book valuesof other assets within the cash-generating unit proportionally.
Impairment losses related to goodwill are not reversed. In respect of impairment losses on otherassets recognized in the past, the existence of indications showing that the loss has decreased
or been eliminated is assessed on each reporting date. If there are indications of a reversal of
impairment and the estimate used for determining the recoverable amount has changed, theimpairment loss is reversed. The previously recognized impairment loss is reversed to the extent
that the carrying amount of the asset does not exceed what the carrying amount would havebeen (net of amortization and depreciation) had no impairment loss been recognized for theasset in prior years.

3.9

Financial assets (excluding derivatives)
Initial recognition and measurement of financial assets
Trade receivables and other receivables are recognized initially on the date they occur. Other
financial assets are recognized on their transaction dates. At initial recognition, the Groupmeasures a financial asset at its fair value plus, in the case of a financial asset not measured atfair value through profit or loss, transaction costs that are directly attributable to the acquisitionof the financial asset.
- 109 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.9

Financial assets (excluding derivatives) (continued)
At the time of initial recognition, the classification of financial assets is determined as follows:

Debt instruments:o Financial assets measured at amortized cost:
Debt instruments are measured at amortized cost when both of the following
conditions are met:(a) the financial asset is held in a business model whose objective is to hold financial
assets in order to collect contractual cash flows, and(b) the contractual terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amountoutstanding.
o Financial assets measured at fair value through profit or loss are debt instruments
other than those defined above.

 Equity instruments:o Financial assets measured at fair value through other comprehensive income:
The Group may irrevocably elect to classify equity investments, other than those
held for trading, upon initial recognition as financial assets measured at fair value
through other comprehensive income.
o Financial assets measured at fair value through profit or loss are equity instruments
other than those defined above.
Subsequent measurement of financial assets
After initial recognition, the Group measures a financial asset according to its classification as
follows:(a) a financial asset measured at fair value through profit or loss is remeasured at fair value atyear end with any change in fair value recognized in profit or loss.
(b) a financial asset measured at fair value through other comprehensive income is recognizedat an amount that reflects the change in the amount of the fair value. When the financial asset
is derecognized, the cumulative gain or loss in other components of equity is transferred toretained earnings. Dividends from a financial asset are recognized as part of financial income in
net income (loss) for the current period, except for those portions considered to be part of thecost of investment.
(c) a financial asset measured at amortized cost is recognized by the effective interest method.
Derecognition of financial assets
The Group derecognizes a financial asset when, and only when:(a) the contractual rights to cash flows from the financial asset expire, or(b) it transfers the contractual rights to receive cash flows from the financial asset and transfers
substantially all the risks and rewards of ownership of the financial asset.
- 110 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.9

Financial assets (excluding derivatives) (continued)
Impairment of financial assets
For financial assets measured at amortized cost, expected credit losses are recorded through anallowance for doubtful accounts. At each reporting date, the Group assesses whether the credit
risk on a financial instrument has increased significantly since initial recognition. The Groupmeasures the loss allowance for a financial instrument at an amount equal to the expectedannual credit loss where the credit risk on that financial instrument has not increased
significantly since initial recognition. Alternatively, the Group measures the loss allowance for afinancial instrument at an amount equal to the lifetime expected credit loss if the credit risk onthat financial instrument has increased significantly since initial recognition.
The Group uses the change in risk of a default occurring over the expected life of the financial
instrument to determine whether the credit risk has increased significantly. To make thisassessment, the Group compares the risk of a default occurring on the financial instrument as
at the reporting date, with the risk of a default occurring on the financial instrument as at thedate of initial recognition, and considers reasonable and supportable information, such as latepayment or financial information, that is available without undue cost or effort, that is indicativeof significant increases in credit risk since initial recognition. Regardless of a significant increasein credit risk since initial recognition, the Group measures the loss allowance for tradereceivables at an amount equal to the lifetime expected credit losses. The Group assumes thatthe credit risk on a financial instrument has not increased significantly since initial recognition if
the financial instrument is determined to have low credit risk at the reporting date.
Whether or not a financial asset is credit impaired is determined by the default of the borrower,
or if the lender, for economic or contractual reasons relating to the borrower’s financial difficulty,
grants to the borrower a concession(s) that the lender would not otherwise have granted, orwhen other factors occur, such as the indication of a bankruptcy of the borrower or the issuing
company or the disappearance of an active market. Expected credit losses are measured as thedifference between contractual cash flows that are due to the Group in accordance with acontract and the cash flows that the entity expects to receive, discounted at the original effective
interest rate and weighted by each asset’s probability of default risk. The Group directly reduces
the value of a credit impaired-financial asset when it, or a part of it, cannot realistically be
expected to be realized and its collateral is realized or transferred to the Group. Where an
impairment loss is reduced after initial recognition, the decrease in impairment loss (decrease
to the allowance for doubtful accounts) is reversed in profit or loss. The impairment loss isreversed up to the value of the amortization at the time the impairment loss was reversed, had
no impairment loss been recognized.

- 111 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.10 Financial liabilities (excluding derivatives)
Initial recognition and measurement of financial liabilities
Financial liabilities are recognized on the transaction date. At initial recognition, the Groupmeasures a financial liability at its fair value minus, in the case of a financial liability notmeasured at fair value through profit or loss, transaction costs that are directly attributable tothe acquisition or issue of the financial liability. The Group classifies financial liabilities upon
initial recognition as financial liabilities subsequently measured at fair value through profit orloss, or financial liabilities measured at amortized cost.
Subsequent measurement of financial liabilities
After initial recognition, the Group measures a financial liability as follows:(a) a financial liability measured at fair value through profit or loss is remeasured at fair value atyear end with any change in fair value recognized in profit or loss.
(b) a financial liability measured at amortized cost is recognized by the effective interest method.
If the discontinuation of amortization using the effective interest method and derecognition
occur, a gain or loss is recognized within net profit or loss for the current period as part of financecosts.
Derecognition of financial liabilities
The Group removes a financial liability (or a part of a financial liability) from its balance sheet
when, and only when, it is extinguished, i.e. when the obligation specified in the contract isdischarged or cancelled or expires.
3.11 Derivatives
The Group uses forward exchange contracts to manage its foreign currency risk. These
derivatives are initially recognized at fair value on the date the contract is entered into and areremeasured at fair value at each balance sheet date after initial recognition. Changes in fairvalue are recognized through profit or loss. These derivatives do not qualify for hedge
accounting.
3.12 Presentation of financial assets and financial liabilities
The Group offsets financial assets and financial liabilities showing the net amount only when theGroup has the legal right to offset the balances, and either settles the balances on a net basis orintends to simultaneously realize the asset and settle the liability.

- 112 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.13 Compound Financial Instruments
The liability element of a compound financial instrument is initially recognized at the fair valueof a similar liability that does not have an embedded equity conversion option. The equity
element of a compound financial instrument is initially recognized at the fair value of thecompound financial instrument as a whole minus the fair value of the liability element. The
directly attributable transaction costs are allocated to each element in proportion to the initialcarrying amounts.
After initial recognition, the liability element of a compound financial instrument is measured
at amortized cost using the effective interest method. The equity element of a compound
financial instrument is not remeasured after initial recognition. Interest on the liability element
is recognized in finance costs. At the time of conversion, the liability element is transferred toequity and no gains or losses are recognized.
3.14 Inventories
Inventories are measured at the lower of cost (including purchasing and processing costs) andnet realizable value. Net realizable value is the estimated selling price in the course of businessless estimated costs of completion and estimated selling expenses. Cost is determined on a firstin, first-out basis.
3.15 Cash and cash equivalents
Cash and cash equivalents comprise cash at hand, readily available deposits and short-term
investments having maturities of three months or less from the date of acquisition that arereadily convertible into cash and are exposed to insignificant risk of changes in value.
3.16 Provisions
The Group recognizes a provision when it has a present legal or constructive obligation as aresult of a past event and it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; and a reliable estimate can be made of theamount of the obligation.
Provisions are measured as the present value of the expenditure expected to be required tosettle the obligation, using a pre-tax discount rate that reflects the current market assessmentof the time value of money and the risks specific to the obligation. Increases in provisions overtime are recognised as finance costs.

- 113 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.16 Provisions (continued)
Asset retirement obligations are estimated based on the past restoration experience and theestimated period of use determined by taking into account the useful life of the internal
structures of the offices. The Group estimates, recognises and measures the cost of restoration
obligations for leased offices and buildings, taking into account the specific conditions of each
property.
3.17 Government grants
Government grants are recognized at their fair value when there is reasonable assurance that
the Group will comply with the conditions attaching to them and that the grants will be received.
The amount of government grants relating to assets is recognized as deferred income andtransferred to profit or loss on a systematic and reasonable basis over the useful life of therelated assets. Government grants relating to items of expenses are recognized in profit or loss
systematically over the period during which the related expenses are to be compensated by the
grants.
3.18 Shareholders’ equity
Common sharesWith regard to equity instruments issued by the Company, the issuance value is recorded in“Capital stock” and “Capital surplus”, and any directly attributable costs of issuing shares are
deducted from “Capital surplus”.
3.19 Revenue recognition
The Group recognizes revenue from contracts with customers based on the following five-step
approach:
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
Pharmaceutical product sales
Pharmaceutical product sales are recognized upon the customer’s acceptance.
Grant of Licenses
The promise to grant a license is regarded as a distinct performance obligation if the customer
can benefit from the license either on its own or together with other resources that are readily
available to the customer, and the Group’s promise to transfer the license to the customer isseparately identifiable from other promises in the contract.
- 114 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.19 Revenue recognition (continued)
The promise to grant a license under a contract is a promise to provide a right to accessintellectual property if all the following criteria are met and in other cases, revenue isrecognized at a point in time as a right to use license is determined to exist:• the contract requires, or the customer reasonably expects, that the Group will undertake
activities that significantly affect the intellectual property to which the customer has rights.
• the rights granted by the license directly expose the customer to any positive or negative
effects of the Group’s activities identified in the above criterion; an• those activities do not result in the transfer of a good or a service to the customer as those
activities occur.
(a)

When a license is distinct from other goods or services and evaluated as a right to use
license• Upfront fees are recognized at the time of the grant of the license if the performanceobligation is satisfied at a point in time.
• Development milestone income is only recognized when it is determined that theachievement of milestones agreed between the parties, such as regulatory filings, areassured, taking into consideration the probability of a subsequent significant reversal ofrevenue.
• Sales royalty income and sales milestone income are measured and recognized based on
the sales recorded by the counterparty when (or as) the later of (i) a sales transaction
has occurred or a contractually agreed target is achieved, and (ii) the performanceobligation is satisfied.

(b)

When a license is distinct from other goods or services and evaluated as a right to accesslicense:Not applicable.

Research and Development services
Revenue from Research and Development services is recognized over time because thecustomer simultaneously receives and consumes the benefits provided by the Group’s
performance as the Group performs.

- 115 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.19 Revenue recognition (continued)(a) Research and Development services – compensated through upfront fees anddevelopment milestones
When a performance obligation is not satisfied at a point in time and consideration isreceived prior to the satisfaction of the performance obligation, the consideration isrecorded as a contract liability (deferred revenue). Revenue is measured, and the sameamount is derecognized from the contract liability (deferred revenue), based on the ratioof actual time incurred on each R&D program at the reporting period end to the total
time estimated to be incurred from the commencement of the R&D plan until its
scheduled completion date. However, development milestone income, which includes
variable consideration, is recognized only to the extent that it is highly probable that asignificant reversal in the amount of cumulative revenue will not occur when theuncertainty associated with the variable consideration is subsequently resolved.
(b)

Research and Development services – compensated through FTE charges
Full Time Equivalent (“FTE”) revenue earned from providing research and development
services to customers is recognized over time by multiplying the amount of time workedby the contracted charge-out rate.

The transaction price for granting licenses is allocated to the grant of license performanceobligation based on the stand-alone selling price calculated using the residual approach. The
consideration is the amount receivable within one year from satisfaction of the performanceobligations or fulfillment of contractual terms and conditions.
Variable consideration is allocated to a specific performance obligation only if both of thefollowing conditions apply:• Variable payment terms relate specifically to the Group's effort to satisfy the performanceobligation or transfer the distinct good or service.
• Allocating the variable amount of consideration entirely to the performance obligation or
the distinct good or service, is consistent with the following allocation objective when
considering all of the performance obligations and payment terms in the contract: an entity
should allocate the transaction price to each performance obligation or distinct good orservice in an amount that depicts the amount of consideration to which the entity expects
to be entitled to in exchange for transferring the promised goods or services to thecustomer.
There are no significant financing components included in any license contracts or any researchand development contracts.

- 116 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.20 Share-based payments transactions
The Group operates a Stock Option Plan, Restricted Stock Unit Plan, and Performance Share Unit
Plan as incentive plans for its officers and employees. These incentive plans are estimated at fairvalue at the grant date and recognized in profit or loss over the period up to the time of vesting.
The equivalent amount is recognized as an increase in equity. The fair value of options granted
is measured using a valuation model, such as the Black-Scholes model, taking into account theterms and conditions of the options.
3.21 Borrowing costs
With regard to assets that require a substantial period of time to prepare for their intended use
or sale, borrowing costs directly attributable to the acquisition, construction, or production ofsuch assets are capitalized as part of the cost of the assets.
3.22 Income taxes
Income tax expenses comprise current and deferred taxes. These are recognized in profit or loss,
except for items arising from business combinations and items recognized in othercomprehensive income.
Current tax expenses are calculated at an expected amount of taxes to be paid to the tax
authorities (or to be returned from tax authorities) using the tax rates (and tax laws andregulations) that have been enacted, or substantially enacted, by the end of the period.
Deferred tax assets or liabilities are recognized for temporary differences arising between the
carrying amount of an asset or liability in the consolidated balance sheet and their tax base.
However, if temporary differences arise from the initial recognition of an asset or liability in atransaction, other than business combinations, that have no effect on profit or loss foraccounting purposes and taxable profits (tax losses) on the transaction date, deferred tax assets
or liabilities are not recognized.
Deferred tax assets or liabilities are calculated in accordance with laws and regulations that havebeen enacted, or substantially enacted, by the end of the period, using the tax rates expected
to be applicable when the related deferred tax assets are realized or the related deferred tax
liabilities are settled.
Deferred tax assets such as deductible temporary differences, unused tax losses and tax credits
are recognized to the extent that it is probable that future taxable profits will be available against
which these assets can be utilized.

- 117 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
3

Material accounting policies (continued)
3.22 Income taxes (continued)
Deferred tax assets and liabilities are recognized for temporary differences associated withsubsidiaries. However, deferred tax liabilities are not recognized when the Group is able tocontrol the timing of the reversal of temporary differences and it is probable that the temporary
differences will not be reversed in the foreseeable future. Deferred tax assets are recognized tothe extent that it is deemed probable that there will be sufficient taxable profits against which
benefits from temporary differences can be utilized and the temporary differences will bereversed in the foreseeable future.
3.23 Earnings per share
Basic earnings per share is calculated by dividing net profit attributable to common shareholdersof the parent by the weighted-average number of common shares outstanding, adjusted by the
number of treasury shares for the period concerned. Diluted earnings per share is calculated byadjusting net profit and the weighted-average number of common shares outstanding, net oftreasury shares, for the effects of all dilutive common shares.

4

Significant accounting estimates and associated judgments
In preparing consolidated financial statements in accordance with IFRS, management is required tomake judgements, estimates, and assumptions that affect the application of accounting policies andthe amounts of assets, liabilities, revenue, and expenses. Actual results may differ from theseestimates due to their nature. The estimates and underlying assumptions are reviewed on an ongoingbasis. The effects of revisions to accounting estimates are recognized prospectively in the period inwhich the estimate is revised and in any future periods affected. The key judgements and estimates
made by management that have had a significant effect on the amounts recognized in the
consolidated financial statements are as follows:
Valuation and impairment of Goodwill and Intangible Assetso Cash-generating unit relating to Pharmaceutical Drug Discovery:
The carrying amounts of Pharmaceutical Drug Discovery related Goodwill and Intangible Assets(core technology) were JPY 11,179 million and JPY 8,466 million, respectively, as at December 31,
2023.
o Cash-generating unit relating to Pharmaceutical Product Sales:
The carrying amounts of Pharmaceutical Product Sales related Goodwill and Intangible Assets(product-related assets and in-progress research and development) were JPY 8,018 million and JPY
43,352 million, respectively, as at December 31, 2023.
Method of calculation of the carrying amounts in the consolidated financial statements andsignificant assumptions used in the calculation- 118 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
4

Significant accounting estimates and associated judgments (continued)
The book values of non-financial assets are reviewed for indications of impairment at eachreporting date. If any such indications exist, the asset’s recoverable amount is estimated. For
goodwill and intangible assets with indefinite useful lives or intangible assets not yet available
for use, the recoverable amount is estimated at the same time in each financial year. Goodwill
is not amortized. It is allocated to cash-generating units and an annual impairment test is
conducted at the same time in each financial year or whenever there is an indication that
goodwill may be impaired. Impairment losses on goodwill are recognized in the consolidated
statement of profit or loss and other comprehensive income and are not reversed
subsequently. In respect of cash-generating units for goodwill, goodwill is assessed based on
those business units defined for the purposes of internal reporting. In principle, a cashgenerating unit is classified as a type of business and geographical region. In respect of cashgenerating units for intangible assets, intangible assets are grouped based on the smallest
cash-generating unit that produces largely independent cash inflows.
(a) Recoverable amount of Goodwill and Intangible Assets of Cash-Generating Units relating toPharmaceutical Drug Discovery
The recoverable amount of the Pharmaceutical Drug Discovery cash generating unit has beenassessed using a fair value less costs of disposal method by estimating future cash flows basedon business plans. Assumptions used in business plans and fair value less costs of disposal
calculation include the timings of milestone achievements and product launches, theprobabilities of success of R&D activities and projected revenues including expected future
product sales and the weighted average cost of capital. Management uses its experience,external sources, knowledge of the activities of competitors and industry trends in forming
these assumptions.
(b) Recoverable amount of Goodwill and Intangible Assets of Cash-Generating Units relating toPharmaceutical Product Sales
The recoverable amount of the Pharmaceutical Product Sales cash generating unit has beenassessed using the value in use method by estimating the future cash flows based on businessplans. Assumptions used in business plans and the value in use calculation include the market
size of related pharmaceutical products and market shares, selling, general & administrative
expense and research & development (R&D) expenses, growth rate and the weighted average
cost of capital. Management uses its experience, external sources, knowledge of the activities
of competitors and industry trends in forming these assumptions.


Effects on the consolidated financial statements for the year ending December 31, 2024
If there are material adverse differences between management’s projected cash flows and theactual cash flows due to the uncertainties including the timing of milestone achievement andmarket shares of pharmaceutical products, impairment losses may be recognized.

- 119 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
4

Significant accounting estimates and associated judgments (continued)
Revenue recognition
The balance of contract liabilities was JPY 5,260 million as at December 31, 2023. JPY 1,731 million offormer contract liabilities was recognized as revenue during the financial year ended December 31,
2023.
Method of calculation of the carrying amounts in the consolidated financial statements andsignificant assumptions used in the calculation
When a performance obligation is not satisfied at a point in time and consideration is received
prior to the satisfaction of the performance obligation, the consideration is recorded as acontract liability (deferred revenue). Revenue is measured, and the same amount isderecognized from the contract liability (deferred revenue), based on the ratio of actual time
incurred on each R&D program at the reporting period end to the total time estimated to be
incurred from the commencement of the R&D plan until its scheduled completion date.
For the following reasons, the calculation of total estimated time is characterized byuncertainty:
 Research and development generally takes a long time and is highly individualized for eachproject.
 By its nature, the achievement of results is not guaranteed, and the total estimated timerequired varies depending on the progress of the R&D.
 The total estimated time for R&D is subjective in that it depends on the judgment of project
managers who have expertise and experience in R&D.



5

Effects on the consolidated financial statements for the year ending December 31, 2024
Fluctuations in the total estimated time due to above uncertainties may have a significant
impact on the amount of revenue recognized in the consolidated financial statements for theyear ending December 31, 2024.

New standards and new interpretations not yet adopted
There were no accounting standards that were newly established or amended by the approval dateof the consolidated financial statements that are expected to have a significant effect on the Group.

- 120 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
6

Operating segments
6.1

Overview of reportable segments
The Group operates a single business segment being the pharmaceutical business.

6.2

Information regarding products and services
The breakdown of revenue is as follows:Year ended
December 31, 2023
¥m
6,173
3,839
2,504
250
12,766

Pharmaceutical product sales
Upfront fees and milestone income
Royalty income
Other

6.3

Year ended
December 31, 2022¥m
80
12,063
2,564
862
15,569Geographical information
The following table provides the Group’s revenue from external customers by location andinformation about non-current assets by location.
Revenues from external customers
Country

Year ended
December 31, 2023
¥m
6,173

Year ended
December 31, 2022
¥m
80

Switzerland

4,004

2,564

USA

1,373

9,934

Bermuda

1,212

2,849

4

142

12,766

15,569At December 31, 2023
¥m

At December 31, 2022
¥m

Japan

54,690167

UK

30,003

27,571

Other

163

-

84,856

27,738Japan

UK
Notes:
1. Revenues in the table are based on the address of customers.

Non-current assets

Notes:
1. Non-current assets do not include deferred tax assets and other financial assets.

- 121 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
6

Operating segments (continued)
6.4

Information about major customers
Revenues: Customers that account for 10% or more of revenue in the consolidated statement of
profit or loss and other comprehensive income are as follows:Year ended
December 31, 2023
¥m
4,070

Year ended
December 31, 2022¥m-

Novartis International AG

2,504

2,564

Idorsia Pharmaceuticals Ltd. (Note 2)

1,500

-

AbbVie Inc.

1,212

2,849

Eli Lilly and Company

237

3,429

Neurocrine Biosciences, Inc.

21

4,138

Name of customer

Medipal Holdings Corporation

Notes:
1. Revenues in the table above include revenues from subsidiaries of the customer groups listed.
2. Relates to milestones receivable from Idorsia Pharmaceuticals Ltd. which originated from Mochida Pharmaceutical
Co. Ltd.

7

Business combinations
7.1

Overview of Business Combination
Acquisition of shares in Idorsia Pharmaceuticals Japan Ltd. and Idorsia Pharmaceuticals Korea
Co., Ltd. and related assets
The Company announced that it had resolved at a meeting of the Board of Directors held on
July 20, 2023, to acquire from Idorsia Ltd. and Idorsia Pharmaceutical Ltd. (together “Idorsia”)
the entire share capital of Idorsia Pharmaceuticals Japan Ltd. (“IPJ”) and Idorsia
Pharmaceuticals Korea Co., Ltd. (“IPK”) together with related intercompany receivablebalances and intellectual property rights (the “Transaction”). The Company acquired all shareson the same day.
Name of the acquiree and Description of business
Name of the acquiree:
Idorsia Pharmaceuticals Japan Ltd.
Idorsia Pharmaceuticals Korea Co., Ltd.
Description of business:
Research & Development, importation, packaging andsale of pharmaceutical products- 122 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
7

Business combinations (continued)
7.1 Overview of Business Combination (continued)
Primary reason for the business combination
In 2022, the new leadership team at the Group began executing an evolved corporate strategy
designed to leverage its proprietary platform, pipeline and capabilities and build a balanced
and integrated business with a commercial capability in Japan/APAC and partnering
opportunities globally. A key element of this strategy was to build an agile, scalable andeffective clinical development and commercialization business capability to enable the Groupto deliver life-changing medicines to patients in Japan and capitalize on the significant
underserved opportunities that it sees within this large attractive market.
The acquisition of IPJ and IPK addressed this objective and was the conclusion of a rigorous
global search by the Group team. The cash-flow positive Transaction, which was fully funded byexisting cash and a new long-term, low-rate corporate loan, provides the Group with multiple
strategic benefits by:






Accelerating the Group’s mission by adding experienced clinical development capability and a
profitable commercial operation in Japan, with a lean model for sales and marketing, and theability to scale and create further value.
Securing and expanding the Group’s future pipeline with two major products PIVLAZ® andDaridorexant; exclusive opt-ins for Cenerimod and Lucerastat; and selected rights for up to
five additional clinical-stage programs from Idorsia’s global pipeline.
Bringing a highly skilled team with a proven track record of excellence and delivery, led by Dr.
Satoshi Tanaka, who has directed several New Drug Application (Japan) and Ministry of Foodand Drug Safety (South Korea) approvals and successful commercial launches over the past
two decades.
Leveraging Japan’s quality clinical environment to target underserved, specialty disease areas;and providing the platform to expand across broader APAC regions and extend productlaunches.
The Transaction also brings together complementary capabilities to develop andcommercialize novel medicines across Japan and APAC (ex-China) from three sources ofinnovation: (i) the Group’s wholly owned discovery and early development pipeline, (ii)selected clinical candidates from Idorsia’s pipeline, and (iii) in-licensing of Japan/APAC (exChina) rights to clinical product candidates from third parties.
In addition, the Group will continue to seek partners for novel candidates or programs
discovered by the Group for development and commercialization outside of Japan/APAC
territories where significant unmet needs exist, as well as the requirements for substantial
expertise and resources.
Date of acquisition
July 20, 2023
- 123 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
7

Business combinations (continued)
7.1 Overview of Business Combination (continued)
Percentage of voting equity interests acquired
Idorsia Pharmaceuticals Japan Ltd.
Idorsia Pharmaceuticals Korea Co., Ltd.

100%
100%

Method of acquisition
Acquisition of shares for cash
Consideration for the Transaction
JPY 64,440 million.
Acquisition related costs of JPY 1,149 million relating to the Transaction were included in
Selling, general and administrative expenses.
7.2

Fair value of assets acquired and liabilities assumed as of the acquisition date, and goodwill
Amount¥m
Fair value of assets acquired and liabilities assumed:
Property, plant and equipment
Intangible assets
Deferred tax assets
Trade and other receivables
Inventories
Other assets
Lease liabilities
Trade and other payables
Other liabilities
Net fair value of assets acquired and liabilities assumed
Goodwill

3,431
44,071
2,279
3,505
4,779
2,735
(2,837)(880)(661)
56,422
8,018
64,440The fair value of product-related assets and in-progress research and development included in Intangible assets
is measured using a discounted cashflow model. The assumptions used include projections of the market size
and market shares of related pharmaceutical products and the discount rate.
Goodwill reflects the future excess earning power expected from future business development and synergies
with existing businesses. None of the recognized goodwill is expected to be deductible for tax purposes.

7.3

Cash flows relating to the acquisition of Idorsia
Amount¥m
64,440(1,499)62,941

Cash and cash equivalents paid for acquisition
Cash and cash equivalents of assets acquired
Net cash payment for the acquisition of IPJ/IPK- 124 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
7

Business combinations (continued)
7.4

8

Impact on Business Performance
The consolidated statement of profit or loss and other comprehensive income includes revenue
and net profit of JPY 7,609 million and JPY 623 million, respectively, arising from IPJ/IPK after theacquisition date. Assuming that the business combination had taken place at the beginning of
the financial year, the Group’s revenue and net loss for the twelve-month period ended
December 31, 2023 would have been JPY 17,783 million and JPY 10,710 million, respectively.
Such information has not been audited or reviewed by our independent auditors.

Licensing transactions with equity components
Year ended December 31, 2023
Not applicable.
Year ended December 31, 2022
Heptares Therapeutics Ltd., a subsidiary of the Company, entered into a global research anddevelopment collaboration and license agreement with Biohaven Pharmaceutical Holding Company
Ltd. in 2020 (“Biohaven”) and received common shares in Biohaven under the terms of this agreement.
On October 3, 2022, Pfizer completed its tender offer for Biohaven, and the Group received JPY 1,209
million (USD 8.1 million) in cash and 27,308 shares in Biohaven Ltd., a spin-out company that included
Biohaven’s non-CGPR development stage pipeline, in exchange for the Biohaven shares. Biohaven Ltd.
is listed on the New York Stock Exchange. Management recognizes the investment in Biohaven Ltd. as
an equity financial asset and designates it as a financial asset measured at fair value through othercomprehensive income.

- 125 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments
9.1

Capital management
The Group maintains a capital structure designed to facilitate sustainable growth and maximize
corporate value, in support of its long-term strategy. The capital structure mainly comprises
equity and convertible bonds, with additional flexibility provided by a commitment line.
The Group’s capital structure is regularly reviewed and adjusted in response to commercial
opportunities, changes in economic conditions and associated risks. In order to maintain or
adjust the Group’s capital structure, management may issue new shares, convert bonds toequity, draw down funds under the commitment line, convert the commitment line to a termloan or raise funds through other means (including corporate bonds, bank borrowings andleases). Although the Group had net debt as at 31 December 2023, it has sufficient liquidity tocontinue regular operations for a number of years due to the maturity profile of its liabilities. In
December 2023, the company secured funds by issuing new shares through overseas offering
raised and third-party allotment, repurchased convertible bonds maturing in 2026, and issued
new convertible bonds maturing in 2028, which enhanced the Group’s liquidity for the next five
years.
Please refer to Note 17 Corporate bonds and borrowings for details of the commitment line.

- 126 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.1

Capital management (continued)
The capital structure of the Group is as follows:
December 31, 2023
Amount (¥m)

December 31, 2022

Ratio to total
asset (%)

Amount (¥m)

Ratio to total
asset (%)

Cash and cash equivalents

49,06531.2

66,557

66.9

Corporate bonds (Note 1)(30,694)(19.5)(27,981)(28.1)

Bank borrowings (Note 2)(38,462)(24.5)--

Drawn commitment line

-

-

-

-

Lease liabilities(4,817)(3.1)(1,753)(1.8)

Net cash(24,908)(15.8)

36,82337.0

Total equity

66,81042.5

57,936

58.3

Total assets

157,198

100.0

99,417100.0

Ratio of cash and cash
equivalents to interest-

66.3

223.8

bearing debt (%)
Notes:
1.

2.

The total amount of corporate bonds issued is JPY 32,000 million. The aggregate principal amount of the convertible bonds iscarried at amortized cost using the effective interest method after deducting an amount equivalent to the value of the stockacquisition rights as well as directly attributable transaction costs from the principal amount.
The total amount of bank borrowings issued is JPY 30,000 million. The aggregate principal amount of the bank borrowings iscarried at amortized cost using the effective interest method after deducting an amount of the borrowing costs from theprincipal amount.

- 127 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.2

Classification of financial instruments
The breakdown of financial instruments is as follows:
December 31, 2023¥m

December 31, 2022
¥m

598

268

2,318

1,411

666

58

Trade and other receivables

5,064

2,462

Financial liabilities
Financial liabilities measured atfair value through profit or loss:
Other financial liabilities-

36

Corporate bonds

30,69427,981

Bank borrowings

38,462-

Lease liabilities

4,817

1,753

Trade and other payables

4,244

1,628

Financial assets
Financial assets measured at fairvalue through profit or loss:
Other financial assets
Financial assets measured at fairvalue through othercomprehensive income:
Other financial assets
Financial assets measured atamortized cost:
Other financial assets

Financial liabilities measured atamortized cost:

9.3

Risk management of financial instruments
The Group’s activities are exposed to various risks due to changes in the economic and financial
environment. Investments are limited to short-term instruments with minimal risk and theGroup does not engage in speculative transactions. Financing is procured through regularreview of funding options such as the issuance of new shares, issuance of corporate bonds,
arranging commitment lines, refinancing term loans, and other refinancing measures.

- 128 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.4

Currency exchange rate risk
The Group operates globally and is exposed to currency exchange rate risk with regard totransactions denominated in currencies other than the functional currency of each groupcompany. Other than Japanese Yen, the Group’s transactions are principally denominated in the
British pound, U.S. dollar, Euro and Swiss franc.
The Group’s exposures to currency exchange rate risk are as follows:
December 31, 2023
Net exposure (¥m)
Net exposure (In thousandsof local currency units)

GBP

USD

EUR

CHF

790

3,325

10

63

4,399

23,575

66

376

GBP

USD

EUR

CHF

798

5,283

(28)

26

5,026

40,247(202)

185

December 31, 2022
Net exposure (¥m)
Net exposure (In thousandsof local currency units)

Foreign currency sensitivity analysis
A sensitivity analysis of the Group’s exposures to currency exchange rate risk is as follows. This
analysis shows the impact on profit before income taxes in the consolidated statement of profit
or loss and other comprehensive income of a 1% appreciation in Japanese yen against therelevant foreign currencies at the reporting date, assuming that all other variables remain
constant. The analysis indicates the impact of foreign exchange translation and does not take
into account the potential effect on expected revenue, purchases and other transactions.
December 31, 2023¥m

December 31, 2022
¥m

GBP

(8)

(8)

USD

(33)

(53)

EUR

0

0

CHF

(1)

(0)

- 129 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.5Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate due to changes in market interest rates. A portion of the Group’s bank borrowings havefloating interest rates and are exposed to interest rate risk. Interest on the commitment line ischargeable at a variable rate based on the amount of the facility that has been drawn down. The
Group is also charged a commitment fee, not classed as interest, on the unutilized portion of
the facility. The Group did not borrow any funds under the commitment line during 2023. Whilst
the commitment line remains unutilized, there is no associated interest rate risk. The Group has
issued convertible bonds. As the interest rate on these bonds is fixed, fluctuations in interest
rates have a limited impact on profit or loss.
Interest rate sensitivity analysis
The impact of a 1% increase in interest rates in each reporting period on the Group’s income
before income taxes is as follows.
December 31, 2023¥m

December 31, 2022
¥m

(176)

-

Impact on income before
income taxes

9.6

Credit risk
Credit risk is the risk that a customer or counterparty to a financial instrument will cause afinancial loss to the Group by failing to meet its contractual obligations. “Trade and otherreceivables” are exposed to customer credit risk. The Group manages this risk in accordancewith credit management policies. Since customers of the Group are companies with high credit
standings, the Group’s exposure to credit risk is limited. There are no significant over-due
receivables or significant expected credit losses. Therefore, no impairment or allowance for
doubtful accounts has been recorded.

9.7

Liquidity risk
Liquidity risk is the risk that the Group will encounter problems in meeting obligations associatedwith financial liabilities that are settled by delivering cash or another financial asset. Although“Corporate bonds”, ”Bank borrowings”, “Lease liabilities” and “Trade and other payables” areexposed to liquidity risk, the Group manages the risk by developing and updating financial plans
in a timely manner, maintaining sufficient liquidity in hand, and through other means. The
breakdown of financial liabilities by due date is as follows:- 130 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.7

Liquidity risk (continued)
Non-derivative financial liabilities
December 31, 2023
Greater than 1
year andless than 5 years¥m¥mGreater than 5
years

150

32,000-38,5505,800

23,200

9,550

4,817

5,510

962

3,192

1,356

4,244

4,244

4,244

-

-

78,21780,454

11,15658,392

10,906

Book value

Contractual
cash flow

Within 1 year

Greater than 5
years

¥m

¥m

Greater than 1
year andless than 5 years¥m¥m

Corporate bonds

27,981

30,000-30,000-

Lease liabilities

1,753

2,052

230

760

1,062

Trade and otherpayables

1,628

1,628

1,628

-

-

31,362

33,6801,858

30,760

1,062Book value

Contractual
cash flow

Within 1 year

Greater than 5
years

¥m

¥m

Greater than 1
year andless than 5 years
¥m
¥m

36

36

36

-

-

36

36

36

-

-

Book value

Contractual
cash flow¥m¥m

Corporate bonds

30,69432,150Bank borrowings

38,462

Lease liabilities
Trade and otherpayablesWithin 1 year¥m

December 31, 2022¥m

Derivative financial liabilities
December 31, 2023
Not applicable.
December 31, 2022

Other financial liabilities(Note 1)
Notes:
1.

Other financial liabilities relate to forward exchange contracts. They are presented net of any receivables arising from suchderivative transactions.

- 131 -

¥m

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.8

Fair value
Fair value of financial instruments
The classification of financial instruments within the fair value hierarchy from Level 1 to Level 3
is as follows:
Level 1: Quoted prices (unadjusted) in an active market for identical assets or liabilities
Level 2: Fair value determined using inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or indirectly
Level 3: Fair value determined using valuation techniques including measurement based on
unobservable inputs
Transfers between levels of the fair value hierarchy that occurred during the year ended
December 31, 2023 and 2022 are deemed to have occurred at each quarter end.

9.8.1 Financial instruments that are measured at fair value on a recurring basis
The breakdown of financial instruments that are measured at fair value on a recurring basis as ateach financial year end is as follows:
At December 31, 2023

Financial assets:
Financial assets measured at fair value through profit or loss
Other financial assets
Financial assets measured at fair value through othercomprehensive income
Other financial assets
Financial liabilities:
Financial liabilities measured at fair value through profit or loss
Other financial liabilities- 132 -

Level 1¥m

Level 2¥m

Level 3
¥m

Total
¥m

-

21

577

598

1,208
1,208

21

1,110
1,687

2,318
2,916

-

-

-

-

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.8

Fair value (continued)

9.8.1 Financial instruments that are measured at fair value on a recurring basis (continued)
At December 31, 2022

Financial assets:
Financial assets measured at fair value through profit or loss:
Other financial assets
Financial assets measured at fair value through othercomprehensive income:
Other financial assets
Financial liabilities:
Financial liabilities measured at fair value through profit or loss
Other financial liabilities

Level 1¥m

Level 2¥m

Level 3
¥m

Total
¥m

-

-

268

268

428
428

-

983
1,251

1,411
1,679

-

36
36

-

36
36

The above fair values of financial instruments are calculated as follows:
Other financial assets
Other financial assets are revalued as at the reporting period end in line with changes in fairvalue. At December 31, 2023 other financial assets comprised listed securities of Centessa
Pharmaceuticals plc. (“Centessa”) and Biohaven Ltd., and unlisted securities of Tempero Bio, Inc(“Tempero Bio”), Sosei RMF1 Limited Partnership for Investment (“RMF1”) and MiNA (Holdings)
Limited (“MiNA”), as well as contingent consideration receivable relating to a business disposal,
insurance reserves and memberships.
Listed securities are classified as Level 1 of the fair value hierarchy and membership is classified
as Level 2 of the fair value hierarchy. All other securities are classified as Level 3.
a. Listed securities
The fair values of listed shares are assessed using the market price at the end of the period, andchanges in fair value are recorded in “Net change in fair value of equity instruments designatedas measured at fair value through other comprehensive income” in the consolidated statementof profit or loss and other comprehensive income.

- 133 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.8 Fair value (continued)
9.8.1 Financial instruments that are measured at fair value on a recurring basis (continued)
b. Unlisted securities
The fair value of the Group’s investment in Tempero Bio is assessed using a discounted cashflow
model. Significant unobservable inputs used in the model include the estimated probabilities ofsuccess of assets progressing through contractual milestone events such as regulatory approval,
the discount rate (13.8%) (as at December 31, 2022, 13.8%) and discount for lack ofcontrol/marketability (32.0%) (as at December 31, 2022, 32.0%). Changes in fair value arerecorded in “Net change in fair value of equity instruments designated as measured at fair value
through other comprehensive income” in the consolidated statement of profit or loss and othercomprehensive income.
The fair value of the Group’s investment in RMF1 is assessed using an appropriate valuation
model based on a number of variables including net assets, future cashflows and estimatedprofits, all of which represent significant unobservable inputs used in the valuation model.
Changes in fair value are recorded in “Finance income” or “Finance costs” in the consolidated
statement of profit or loss and other comprehensive income.
The fair value of the Group’s investment in MiNA is measured using a fair value assessment
based on a third-party valuation. Changes in fair value are recorded in “Net change in fair valueof equity instruments designated as measured at fair value through other comprehensive
income” in the consolidated statement of profit or loss and other comprehensive income.
c. Contingent consideration receivable relating to a business disposal
The fair value of contingent consideration receivable relating to a business disposal is assessedusing a probability adjusted discounted cashflow model. Significant unobservable inputs used in
the model include the estimated probabilities of success of assets progressing throughcontractual milestone events, such as regulatory approval, and discount rates (6.6%) (as at
December 31, 2022, 5.5%). Changes in fair value are recorded in “Finance income” or “Financecosts” in the consolidated statement of profit or loss and other comprehensive income.
d. Insurance reserves
The fair value of insurance reserves is assessed based on the surrender values provided by the
insurance companies with which the Company transacts business.
e. Memberships
The fair value of memberships is assessed based on publicly available prices for identical assets
in markets that are not active.

- 134 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.8

Fair value (continued)
Other financial liabilities
Other financial liabilities relate to forward exchange contracts. They are classified as Level 2 ofthe fair value hierarchy as the fair value is assessed based on the amount presented by thecorrespondent financial institution.
Contingent consideration in business combinations
The fair value of the contingent consideration in business combination is assessed using aprobability adjusted discounted cashflow model. Significant unobservable inputs used in themodel include the estimated probabilities of success of assets progressing through contractual
milestone events such as regulatory approval. As such, contingent consideration in businesscombinations is classified as Level 3 of the fair value hierarchy. Changes in fair value are recordedin "Finance income" or "Finance costs" in the consolidated statement of profit or loss and othercomprehensive income. As at December 31, 2023 and as at December 31, 2022, there was nooutstanding balance. The maximum amount of contingent consideration payable to the former
shareholders of Heptares Therapeutics Limited under the 2015 Share Purchase Agreement is
USD 220 million, of which USD 118 million has been paid out to date. In respect of the remainingbalance, it is possible that additional amounts of contingent consideration may become payablein the future.

9.8.2 Financial instruments measured at fair value through other comprehensive income
The breakdown of financial assets measured at fair value through other comprehensive income
is as follows:Year ended
December 31, 2023
¥m
1,043

Year ended
December 31, 2022¥m
378

Biohaven Ltd.

165

50

Tempero Bio

-

2

1,110

981

Centessa

MiNA

9.8.3 Derecognition of financial assets measured at fair value through other comprehensive income

Fair value of investment at the date of derecognition
Cumulative gain or loss on disposal

Year ended
December 31, 2023¥m-

Year ended
December 31, 2022
¥m
1,174

-

588

When a financial asset measured at fair value through other comprehensive income isderecognized, the cumulative gain or loss in other components of equity is transferred toretained earnings.
- 135 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.8

Fair value (continued)

9.8.3 Derecognition of financial assets measured at fair value through other comprehensive income(continued)
In the year ended December 31, 2022, the amount transferred to retained earnings from othercomponents of equity (after tax) was JPY 475 million. This was due to derecognition of theGroup’s equity investment a financial asset designated as measured at fair value through othercomprehensive income, as it sold its shares in response to a tender offer and received shares aspin-out company, as partial consideration.
9.8.4 Financial instruments measured at amortized cost
The breakdown of the carrying amount and fair value of financial instruments measured atamortized cost at the financial year end is as follows (financial instruments whose carrying value
is a reasonable approximation of fair value are omitted).
Year ended
December 31, 2023¥m
Carrying value
Fair value
Financial liabilities:
Corporate bonds
Bank borrowings

30,694
38,46231,751
38,585

Year ended
December 31, 2022¥m
Carrying value
Fair value
27,981-

28,580-The fair value of the corporate bonds is calculated as the present value of the total principal andinterest discounted at a rate that takes into account the remaining term of the bonds and credit
risk. It is categorized as Level 2 of the fair value hierarchy.
The fair value of the bank borrowings is calculated as the present value of the total principal andinterest discounted at the interest rate that would be applicable to a new similar borrowing. It iscategorized as Level 2 of the fair value hierarchy.
9.8.5 Reconciliation of movements of Level 3 financial instruments
For Level 3 financial instruments management decides the appropriate valuation method andmeasures the fair value in accordance with that valuation policy, supported by external valuation
experts when deemed appropriate. The movements in the fair values of financial assets andliabilities are summarized below.

- 136 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
9

Financial instruments (continued)
9.8

Fair value (continued)

9.8.5 Reconciliation of movements of Level 3 financial instruments (continued)
Year ended December 31, 2023
Financial assets
¥m
1,251
84
126
199
27
1,687

Balance at the beginning of the year
Net gains or losses (unrealized) (Note 1)
Other comprehensive income (Note 2)
Increase due to business combination
Other
Balance at the end of the year

Financial liabilities¥m-

Notes:
1. Included in “Finance income” and “Finance costs” in the consolidated statement of profit or loss and other comprehensive
income.
2. Other comprehensive income is included in “Net change in fair value of equity instruments designated as measured at fairvalue through other comprehensive income” and “Exchange differences on translating foreign operations” in the consolidated
statement of profit or loss and other comprehensive income.

Year ended December 31, 2022
Financial assets
¥m
521
(137)
52
9
(185)
991
1,251

Balance at the beginning of the year
Settlement
Net gains or losses (realized) (Note 1)
Net gains or losses (unrealized) (Note 1)
Other comprehensive income (Note 2)
Transfer from other accounts (Note 3)
Balance at the end of the year

Financial liabilities¥m
4,095(4,680)585-

Notes:
1. Included in “Finance income” and “Finance costs” in the consolidated statement of profit or loss and other comprehensive
income.
2. Other comprehensive income is included in “Net change in fair value of equity instruments designated as measured at fairvalue through other comprehensive income” and “Exchange differences on translating foreign operations” in the consolidated
statement of profit or loss and other comprehensive income.
3. Transfer of equity investment in MiNA from investments accounted for using the equity method.

- 137 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
10

Property, plant and equipment
Changes in acquisition cost, accumulated depreciation and accumulated impairment losses of property,
plant and equipment
10.1 Acquisition cost
Buildings Machinery&&
structures equipment

Balance at January 1,
2022
Additions
Disposals or sales
Transfer
Exchange differenceson translation
Balance at December
31, 2022
Additions
Acquisition due tobusiness combination
Disposals or sales
Transfer
Exchange differenceson translation
Balance at December
31, 2023

Furniture& fixtures

Constructi Right-of-use
on in
assetsprogress (Buildings &structures)¥m¥mRight-of- Right-ofuse assets use assets(Furniture (Vehicles)& fixtures)
¥m
¥m

Total

¥m

¥m

¥m

¥m

1,952

1,327

326

-

2,092

42

-

5,739

48
-

107
(12)
-

38
(35)
60

171
(60)

102
-

(42)
-

-

466
(89)
-

41

20

5

(2)

39

-

-

103

2,041

1,442

394

109

2,233

--

-

6,219

14

74

97

548

460

-

29

1,222

521

13

87

-

2,656

-

154

3,431

(91)
274

(16)
371

(3)
3

(648)

(174)
-

-

-

(284)
-

269

201

50

11

277

-

-

808

3,028

2,085

628

20

5,452

-

183

11,396

Right-of- Right-ofuse assets use assets(Furniture (Vehicles)& fixtures)
¥m
¥m

Total

10.2 Depreciation and accumulated impairment losses
Buildings Machinery&&
structures equipment

Balance at January 1,
2022
Depreciation expense
Disposals or sales
Exchange differenceson translation
Balance at December
31, 2022
Depreciation expense
Disposals or sales
Exchange differenceson translation
Balance at December
31, 2023

Furniture& fixtures

Constructi Right-of-use
on in
assetsprogress (Buildings &structures)
¥m
¥m

¥m

¥m

¥m

(402)

(768)

(255)

-

(469)

(28)

-

(1,922)

(137)
-

(178)
12

(34)
35

-

(210)
-

(4)
32

-

(563)
79

(6)

(6)

(5)

-

(5)

-

-

(22)

(545)

(940)

(259)

-

(684)

-

-

(2,428)

(223)
30

(181)
15

(65)
3

-

(493)
174

-

(21)
-

(983)
222

(73)

(128)

(33)

-

(73)

-

-

(307)

(811)

(1,234)(354)-(1,076)-(21)(3,496)- 138 -

¥m

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
10 Property, plant and equipment (continued)
10.3 Carrying amount
Buildings Machinery&&
structures equipment

Balance at January 1,
2022
Balance at December
31, 2022
Balance at December
31, 2023

Furniture& fixtures

Constructi
on in
progress

Right-ofuse assets(Buildings&
structures)¥m¥mRight-ofuse assets(Furniture& fixtures)

Right-ofuse assets(Vehicles)

Total

¥m

¥m

¥m

¥m

¥m

¥m

1,550

559

71

-

1,623

14

-

3,817

1,496

502

135

109

1,549

-

-

3,791

2,217

851

274

20

4,376

-

162

7,900

Notes:
1: Depreciation expense is recorded in “Cost of sales”, “Research and development expenses” and “Selling, general andadministrative expenses”.
2: There were no significant contractual commitments for the acquisition of property, plant and equipment as at
December 31, 2023 and December 31, 2022.

11 Goodwill and intangible assets
Changes in acquisition cost, accumulated amortization and accumulated impairment losses of
goodwill and intangible assets
11.1 Acquisition cost
Goodwill
Product- In‐process
related research andassets development
¥m
¥m

¥m
Balance atJanuary 1, 2022
Additions
Disposals or sales
Exchange differenceson translation
Balance at December
31, 2022
Additions
Acquisition due tobusiness combination
Exchange differenceson translation
Balance at December
31, 2023

Intangible assets
Core
Customertechnology
relatedassets
¥m
¥m

Other

Total

¥m

¥m

15,095

1,053-

13,466

4,676

85

19,280

-

-

-

-

-

27

27

-

-

-

-

-

(19)

(19)

211

-

-

293

126

1

420

15,306

1,053-

13,7594,802

94

19,708

-

-

-

-

-

47

47

8,018

38,138

5,825

-

-

108

44,071

1,299

-

-

1,809

723

10

2,542

24,62339,191

5,825

15,5685,525

259

66,368- 139 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
11 Goodwill and intangible assets (continued)
11.2 Accumulated amortization and accumulated impairment losses
Intangible assets
Core
Customertechnology
relatedassets¥m¥m

Goodwill
Product- In‐process
related research andassets development
¥m
¥m

¥m
Balance atJanuary 1, 2022
Amortization expense
Disposals or sales
Exchange differenceson translation
Balance at December
31, 2022
Amortization expense
Exchange differenceson translation
Balance at December
31, 2023

Other

Total

¥m

¥m

-

(941)

-

(4,705)(4,451)(63)(10,160)

-

(11)

-

(749)

(12)

(10)

(782)

-

-

-

-

-

19

19

-

-

-

(88)

(120)

-

(208)

-

(952)

-

(5,542)(4,583)(54)(11,131)

-

(623)

-

(810)

(20)

(42)

(1,495)

-

-

-

(750)

(695)

(6)

(1,451)-(1,575)-(7,102)(5,298)(102)(14,077)

11.3 Carrying amount
Goodwill¥mBalance atJanuary 1, 2022
Balance at
December 31, 2022
Balance at
December 31, 2023

Product- In‐process
related research andassets development¥m¥mIntangible assets
Core
Customertechnology
relatedassets
¥m
¥m

Other

Total

¥m

¥m

15,095

112

-

8,761

225

22

9,120

15,306

101

-

8,217

219

40

8,577

24,62337,616

5,825

8,466

227

157

52,291

Notes:
1. Amortization expenses are all included in “Selling, general and administrative expenses” in the consolidated statementof profit or loss and other comprehensive income, with the exception of some items in the “Other” category which areincluded in “Research and development expenses” in the consolidated statement of profit or loss and othercomprehensive income.

- 140 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
11 Goodwill and intangible assets (continued)
11.4 Goodwill
Goodwill arose from the separate acquisitions of Sosei R&D Ltd. (formerly Arakis Limited), Heptares
Therapeutics Ltd., Heptares Zurich AG (formerly G7 Therapeutics AG), Idorsia Pharmaceuticals Japan
Ltd. and Idorsia Pharmaceuticals Korea Co., Ltd. by the Group. These acquisitions generate (i) a streamof royalties on global sales of Novartis’ respiratory disease pharmaceutical products
Seebri®Breezhaler®, Ultibro® Breezhaler® and Enerzair® Breezhaler® (“Respiratory”) (ii) revenues
arising from the discovery of novel small molecules, peptides and antibody drugs targeting G-proteincoupled receptors (“GPCRs”), which is based on proprietary Stabilized Receptor (StaR®) technology
and structure-based drug discovery (“SBDD”), and involves the discovery of small moleculecompounds and peptides and antigen creation for the discovery of monoclonal antibodies (“mAbs”)(“Pharmaceutical Drug Discovery”), and (iii) revenues arising from sales of PIVLAZ® and daridorexant(“Pharmaceutical Product Sales”). The Respiratory, Pharmaceutical Drug Discovery andPharmaceutical Product Sales activities have been identified as separate Cash-Generating Units(CGUs) when testing for impairment. As at December 31, 2023, the goodwill allocated to each CGU
was JPY 5,426 million for the Respiratory CGU, JPY 11,179 million for the Pharmaceutical Drug
Discovery CGU and JPY 8,018 million for the Pharmaceutical Product Sales CGU. As at December 31,
2022, the goodwill allocated to each CGU was JPY 5,426 million for the Respiratory CGU, JPY 9,880
million for the Pharmaceutical Drug Discovery CGU and nil for the Pharmaceutical Product Sales CGU.
The recoverable amounts of the Respiratory CGU and Pharmaceutical Drug Discovery CGU have beenassessed using the fair value less costs of disposal method and the Pharmaceutical Product Sales CGU
have been assessed using the value in use method. Fair value less costs of disposal and value in use
have been calculated based on estimated future cash flows that have been risk adjusted anddiscounted to take into account the time value of money. Assumptions used in fair value less costs ofdisposal calculation include the timings of milestone achievements and product launches, theprobabilities of success of R&D activities and projected revenues including expected future productsales and the weighted average cost of capital. Assumptions used in the value in use calculation
include the market size and market shares of related pharmaceutical products, selling, general &administrative expense and research & development (R&D) expenses, growth rate and the weighted
average cost of capital. Management uses its experience, external sources, knowledge of the activities
of competitors and industry trends in forming these assumptions. The valuation methodology uses
significant inputs which are not based on observable market data, therefore this valuation techniqueis categorized as Level 3 in the fair value hierarchy.
As a result of the impairment test performed based on the below assumptions, there were no eventsor circumstances that led to the recognition of impairment losses during the year ended December
31, 2023 and December 31, 2022.

- 141 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
11 Goodwill and intangible assets (continued)
11.4 Goodwill (continued)
Year ended
December 31, 2023
10.6%

Post-tax discount rate
Respiratory

Estimate of future cash flows

Estimate of future cash flows

9.9%

Estimate of future cash flows

10.2%

Future cash flows have been estimated based on past
performance and a 20 year business plan. For the period after
the business plan a terminal value has been included with an
expected growth rate of zero.
7.3%

Post-tax discount rate
Pharmaceutical
Product Sales

10.2%

Future cash flows have been estimated based on past
performance and a 12 year business plan.

Post-tax discount rate
Pharmaceutical Drug
Discovery

Year ended
December 31, 2022-

Future cash flows have been estimated based on past
performance and a 5 year business plan. The growth rate of
future cash flows for periods beyond the period for which thebusiness plan is prepared is assumed to be zero.

Notes:
1. The discount rate is based on the weighted-average cost of capital with certain adjustments.

11.5 Significant intangible assets
Product-related assets
Acquisition due to business combination in the year represent the assessed value of PIVLAZ® thatexisted at the time of the Idorsia Pharmaceuticals Japan Ltd. and Idorsia Pharmaceuticals Korea Co.,
Ltd. acquisition at December 31, 2023 was JPY 37,527 million. This was not applicable in 2022. Theseassets are being amortized using the straight-line method. The expected useful life is 28 years and theremaining amortization period is 27 years. Product-related assets also include amounts relating to
Oravi®, an agent for the treatment of oropharyngeal candidiasis, for which Sosei Co., Ltd. has received
marketing approval. The carrying amounts of these product-related intangible assets at December 31,
2023 and 2022 include internally generated intangible assets of JPY 37 million and JPY 41 million,
respectively, and other intangible assets of JPY 52 million and JPY 60 million, respectively. These assets
are being amortized using the straight-line method. The expected useful life is 18 years and theremaining amortization period is 8 years.
In-process research and development
This represents the assessed value of intangible assets that existed at the time of the Idorsia
Pharmaceuticals Japan Ltd. and Idorsia Pharmaceuticals Korea Co., Ltd. acquisition related todaridorexant. Amortization of such assets has not commenced.

- 142 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
11 Goodwill and intangible assets (continued)
11.5 Significant intangible assets (continued)
Core technology
This represents the assessed value of core technology belonging to Heptares. These assets are being
amortized using the straight-line method over their expected useful lives of 12-20 years. The
remaining amortization periods are 5-12 years.
Customer-related assets
This represents the assessed value of intangible assets that existed at the time of the Heptares
acquisition that have subsequently been partnered. These assets are being amortized using thestraight-line method over their expected useful lives of 20 years. The remaining amortization period
is 12 years.
11.6 Contractual commitments
There were no contractual commitments relating to the acquisition of intangible assets at December
31, 2023 and December 31, 2022. Milestone payments and royalty payments may become payabledepending on the successful progression of R&D collaborations and future sales revenues.
12 Lease transactions
The Group has principally entered into lease agreements for facilities and buildings. These contracts
do not impose any significant restrictions on decision-making by the Group, such as those concerning
dividends, additional debt and further leasing.
There are no options to renew leases or purchase leased assets. There are no escalation clauses in thelease contracts other than inflationary increases in relation to the Group’s UK R&D facility.
The breakdown of gains/losses (excluding depreciation) and cash outflows related to leases is asfollows:
December 31, 2023¥m

December 31, 2022
¥m

(114)
(18)
(13)
(485)
(630)

(58)
(4)
(1)
(206)
(269)

Gains / (losses) on leases:
Interest expense on lease liabilities
Short term lease expenses
Small asset lease expenses
Payment for lease liabilities
Total cash outflows related to leases

Please refer to Note 10 Property, plant and equipment for details of additions, depreciation expense
and the carrying amount of right-of-use assets.
Please refer to Note 9.7 Liquidity risk for details of the balance of lease liabilities by due date.

- 143 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
13 Cash and cash equivalents
The breakdown of cash and cash equivalents is as follows:
Cash and bank deposits

December 31, 2023
¥m
49,065

December 31, 2022¥m
66,557

14 Trade and other receivables
The breakdown of trade and other receivables is as follows:
Trade receivables
Accrued income

December 31, 2023
¥m
4,141
923
5,064

December 31, 2022
¥m
1,383
1,079
2,462

December 31, 2023
¥m
2,686
217
2,903

December 31, 2022
¥m
32
32

15 Inventories
The breakdown of inventories is as follows:
Finished Products
Semi-finished goods
Goods in process

The amount of inventories recognized within expenses was JPY 2,138 million in the current financial
year and JPY 30 million in the previous financial year.
16 Other assets
The breakdown of other non-current assets and other current assets is as follows:
December 31, 2023¥m

December 31, 2022
¥m

42
42

64
64

790
4,724
151
5,665

638
13
69
113
833

Other non-current assets
Long-term prepaid expenses
Other current assets
Prepaid expenses
Accounts receivable
Consumption taxes receivable
Other- 144 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
17 Corporate bonds and borrowings
17.1 Corporate bonds
A summary of the terms & conditions relating to convertible bonds issued by the Company is asfollows:
IssuerSosei Group
Corporation

Sosei Group
Corporation

Bond Name

Euro-yen DenominatedConvertible Bonds
due 2026
Notes 1,2,3
Euro-yen
DenominatedConvertible Bonds
due 2028
Notes 4

Issue
Date

Carrying amountInterest Collateral
Rate
(%)

Maturity
Date

At December
31, 2023¥m

At December
31, 2022¥m

July 27,
2021

143
(143)

27,981

0.25

None

July 27,
2026

December
14,
2023

30,551

-

0.25

None

December
14, 2028

Notes:
1. Figures in brackets ( ) represent amounts due to be redeemed within one year.
2. Description of the convertible bonds:
Euro-yen Denominated Convertible Bonds due 2026
Shares to be issued:
Common shares
Issue price of Stock Acquisition Rights:
Free of charge
Conversion price of Shares:
JPY 2,235
Aggregate principal amount:
JPY 30,000 million
Total issue price of shares issued on exercise of Stock Acquisition Rights: Percentage of Stock Acquisition Rights granted:
100%
Exercise period of Stock Acquisition Rights:
From August 10,2021 to July 13, 2026
Upon the exercise of each Stock Acquisition Right, the Bonds relating to such Stock Acquisition Right shall be converted, and thevalue of such Bonds shall be equal to the nominal value thereof.
3. During the current financial year, the Company repurchased and cancelled JPY 29,850 million (nominal value) of Euro Yen Convertible
bonds. The balance of 150 million yen was redeemed early on March 18, 2024.
4. Description of the convertible bonds:
Euro-yen Denominated Convertible Bonds due 2028
Shares to be issued:
Common shares
Issue price of Stock Acquisition Rights:
Free of charge
Conversion price of Shares:
JPY 1,782
Aggregate principal amount:
JPY 32,000 million
Total issue price of shares issued on exercise of Stock Acquisition
Rights:Percentage of Stock Acquisition Rights granted:
100%
Exercise period of Stock Acquisition Rights:
From December 28, 2023 to November 30, 2028
Upon the exercise of each Stock Acquisition Right, the Bonds relating to such Stock Acquisition Right shall be converted, and thevalue of such Bonds shall be equal to the nominal value thereof.

Please refer to Note 9 Financial instruments for the management of liquidity and interest-rate risks on
Convertible bonds.
- 145 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
17 Corporate bonds and borrowings (continued)
17.2 Borrowings
At December 31,

At December 31,

Average

2023

2022

interest rate

¥m

¥m

%

32,664

-

0.42

5,798

-

0.42

-

38,462---

Long term bankborrowings (non-current
portion)Current portion of longterm bank borrowings

Repayment term

From 2025 to2030

As at the end of the current financial year, there were no borrowings under the commitment line
agreement.
On December 30, 2022, the Company entered into a commitment line agreement for one year
(maximum loan amount: JPY 5,000 million) with Mizuho Bank and three other banks. Under thecommitment line agreement, the Company is subject to a financial covenant requiring it to maintainits consolidated net assets at 75% or more of the level at the second quarter of the financial year
ending December 31, 2022 at every second quarter after the financial year end and at every financial
year end. In addition, the Company has the following rights under the commitment line agreement:
1. Extend the maturity of the commitment line for a period of one year on the anniversary of thecontract date and for another one year on the anniversary of the second year, for a total of two
extensions.
2. Convert the commitment line at each anniversary date up to December 30, 2025 into an
installment term loan of the same value with a repayment period of four years.
The contract was extended in December 2023, with a contract term ending December 30, 2024.

- 146 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
18 Trade and other payables
The breakdown of trade and other payables is as follows:
Trade payables
Other payables
Accrued expenses

December 31, 2023
¥m
112
3,048
1,084
4,244

December 31, 2022
¥m
751
877
1,628

19 Provisions

Balance at January 1, 2023
Increase during the year
Increase from business combination
Exchange differences on translation
Balance at December 31, 2023

Asset retirement
obligations
¥m
118
10
333
13
474

Other
¥m

Total
¥m

9
1
10

118
19
333
14
484

The breakdown of provisions in the consolidated balance sheet is as follows:
Non-current liabilities

December 31, 2023
¥m
484
484

December 31, 2022
¥m
118
118

Asset retirement obligations are estimated based on the past restoration experience and theestimated period of use determined by taking into account the useful life of the internal structures ofthe offices, etc., and taking into account the specific conditions of each property. The Group estimates,
recognises and measures the cost of restoration obligations for leased offices and buildings, taking
into account the specific conditions of each property. These costs are expected to be paid after theestimated period of use but are affected by future business plans and other factors.
20 Other liabilities
The breakdown of other non-current liabilities and other current liabilities is as follows:
December 31, 2023¥m

December 31, 2022
¥m

3,882
147
4,029

4,791
4,791

1,388
4,262
134
6
5,790

1,450
105
400
37
1,992

Other non-current liabilities
Long-term deferred revenue
Other
Other current liabilities
Deferred revenue
Accrued consumption tax
Deposits
Accrued bonuses
Other- 147 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
21 Equity and other components of equity
21.1 Capital stock
Number of sharesauthorized

Number of sharesissuedTreasury stock

Balance at January 1, 2022
149,376,000
Increase in the number of shares through exercise ofsubscription rights to shares
Increase in the number of shares through issuance ofshares due to allotment of Restricted Stock Units
Increase in the number of shares through issuance ofshares due to allotment of Performance Share Units
Increase in the number of shares through requests
for purchase of odd-lot shares
Balance at December 31, 2022
149,376,000
Increase in the number of shares through overseas
subscription
Increase in the number of shares through third-party
allotment
Increase in the number of shares through issuance ofshares due to allotment of Restricted Stock Units
Increase in the number of shares through requests
for purchase of odd-lot shares
Balance at December 31, 2023
149,376,000
Notes: Issued shares are all common shares with no par value

81,518,316

213

5,200

-

380,071-

19,643--

41

81,923,230

254

1,500,000-

5,610,000-

413,547--

81

89,446,777335

21.2 Capital surplus
Legal capital surplus
Based on the Companies Act in Japan, the Group incorporates more than half of the amount related
to payments or benefits at the time of issuance of shares into capital stock, and the amount that is
not recorded as capital stock is recorded in capital surplus.
Stock acquisition rights
The Group issued stock acquisition rights based on the Companies Act in Japan. Please refer to Note
24 Share-based payments for details of the stock options. In addition, the Group has issued convertible
bonds and recorded the fair value of stock acquisition rights at the time of issuance of the bonds incapital surplus.
Restricted Stock Units (RSUs) and Performance Share Units (PSUs)
Of the fair value of the shares allotted and to be allotted under the RSU and PSU plans, the amountcorresponding to the elapsed service period is recorded in capital surplus. Please refer to Note 24
Share-based payments for details of RSUs and PSUs.

- 148 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
21 Equity and other components of equity (continued)
21.2 Capital surplus (continued)
Other capital surplus
The directly attributable transaction cost of equity financial assets issued by the Group is deductedfrom the capital surplus.
21.3 Retained earnings
Retained earnings comprise unappropriated retained earnings or losses. Retained earnings include
accumulated exchange differences on translating foreign operations at the IFRS transition date.
21.4 Other components of equity
Financial assets at fair value through other comprehensive income
Comprises the cumulative amount of changes in the fair value of financial assets measured at fairvalue through other comprehensive income up to the date of derecognition.
Exchange differences on translating foreign operations
These adjustments reflect exchange differences resulting from the translation of foreign operations’financial statements maintained in foreign currencies for the preparation of the Group’s consolidated
financial statements.

- 149 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
21 Equity and other components of equity (continued)
21.4 Other components of equity (continued)
Other components of equity
Items that may be
Items that will not bereclassified subsequently reclassified subsequently
to profit or loss
to profit or loss¥m¥m
Financial assets
measured Exchange differences on
at fair value throughtranslating foreign
operations
other comprehensive¥mincome¥m
819(3,719)Total¥m

Balance at January 1, 2022
(2,900)
Amount arising during the year
Before tax effect
(721)
629
(92)
Amount of tax effect
(207)
(207)
Net of tax effect
(928)
629
(299)
Transfer to profit or loss
Before tax effect
(338)
(338)
Amount of tax effect
Net of tax effect
(338)
(338)
Other comprehensive income – net of tax effect
(928)
291
(637)
Transfer to retained earnings (see Note 9.8.3)
(475)
(475)
Balance at December 31, 2022
(584)
(3,428)(4,012)
Amount arising during the year
Before tax effect
702
5,404
6,106
Amount of tax effect
(34)
(34)
Net of tax effect
668
5,404
6,072
Transfer to profit or loss
Before tax effectAmount of tax effect
Net of tax effect
Other comprehensive Income – net of tax effect
668
5,404
6,072
Balance at December 31, 2023
84
1,976
2,060
Note: For transfer to retained earnings, please refer to "9. Financial instruments 8. Fair value 3. Derecognition offinancial assets measured at fair value through other comprehensive income".

21.5 Dividends
Not applicable- 150 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
22 Revenue
The Group earns revenue through selling a fully developed pharmaceutical product, granting licenses
that provide the rights to develop and market pharmaceutical products and through the provision ofresearch and development services to customers. These activities are classified into the following
types of revenue based on their purpose and performance obligations:
Types of revenue classified by purpose:• Pharmaceutical product sales: Revenue from product sales• Upfront fees and milestone income: Upfront fees, Development milestone income, Sales
milestone income• Royalty income: Sales royalty income• Other: Revenue from contracted research and development services
Types of revenue classified by performance obligation are shown in the Notes to the Consolidated
Financial Statements under “3 Material accounting policies 3.19 Revenue recognition”:
22.1 Breakdown of revenue
Relationship between types of revenue and performance obligations:Year ended December 31, 2023

Types of Revenue
Pharmaceutical product sales
Upfront fees and milestone income
Royalty income
Other

Product
supply revenue
¥m
6,173
6,173

Performance obligations
Research andGrant ofDevelopment
Licenses
services
¥m
¥m
2,108
1,731
2,504
250
4,612
1,981

Total
¥m
6,173
3,839
2,504
250
12,766

Notes:
1. Includes revenue of JPY 4,612 million recognized from performance obligations satisfied in prior periods.

Year ended December 31, 2022

Types of Revenue
Pharmaceutical product sales
Upfront fees and milestone income
Royalty income
Other

Product
supply revenue
¥m
80
80

Performance obligations
Research andGrant ofDevelopment
Licenses
services¥m¥m
11,095
968
2,564
862
13,6591,830

Notes:
1. Includes revenue of JPY 8,993 million recognized from performance obligations satisfied in prior periods.

- 151 -

Total
¥m
80
12,063
2,564
862
15,569

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
22 Revenue (continued)
22.2 Contract balances
Receivables from contracts with customers
Included in the balance sheet as “Trade and other receivables”.
Contract liabilities (deferred revenue)
Included in the balance sheet as “Other non-current liabilities” and “Other current liabilities”.
Opening and closing balances of contract liabilities
from contracts with customers
Beginning balance (Note1)
Of the beginning balance, the amount recognized asrevenue in the year
Exchange differences on translation
Amount newly recognized as contract liability andcarried forward to the next periodEnding Balance (Note2)
Other non-current liabilities
Other current liabilities

At December 31, 2023
¥m

At December 31, 2022
¥m

6,221

1,141

(1,731)

(473)

770

(72)

-

5,625

5,260
3,882
1,378

6,221
4,791
1,430

Notes:
1. The significant change in the contract liability in the current financial year was a decrease due to changes in the measure of progress.
2. All of the contract liabilities (deferred revenue) that existed at December 31, 2023 are expected to be recognized as revenue by
the year ended December 31, 2029.

22.3 Transaction price allocated to the remaining performance obligations
Research and development services related performance obligations arising under contracts may beunsatisfied or partially satisfied at the reporting date. Milestone income allocated to research anddevelopment services is not included in the transaction price allocated to the remaining performanceobligation because the uncertainty of reaching the agreed milestone, such as a regulatory filing, will
not be resolved until the actual achievement of the milestone.
Since the Group has a right to consideration from a customer in an amount that corresponds directlywith the value to the customer of the Group’s performance of services completed to date, thetransaction price allocated to the remaining performance obligations relating to research anddevelopment services is omitted as a practical expedient in accordance with paragraphs 121(b) andB16 of IFRS 15 Revenue from Contracts with Customers.

- 152 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
23 Employee benefits
The breakdown of employee benefits is as follows:Year ended
December 31, 2023
¥m
5,294
870
51
6,215

Remuneration and bonuses
Share-based payments
Retirement benefits
Note 1

Year ended
December 31, 2022
¥m
3,798
700
380
4,878

Notes:
1. Employment benefits are recorded in “Cost of sales”, “Research and development expenses” and “Selling, general and administrative
expenses”.

24 Share-based payments
The Company introduced a Stock Option Plan, Restricted Stock Unit (“RSU”) Plan, and Performance
Share Unit (“PSU”) Plan to increase the motivation and drive of the Directors, the Executive Officers
and the eligible employees of the Company and its wholly owned subsidiaries (“Executives andEmployees”) to energetically realize the Company’s vision and strategy. These Plans will also promote
the sharing of benefits and risks of share price fluctuations with shareholders, and further encourage
the Executives and Employees to actively contribute to an increase in share price and enhance theCompany’s corporate value. Stock Options, RSUs and PSUs are granted by resolution at a meeting of
the Company’s Board of Directors.

- 153 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.1 Stock Options
Details of stock options
The Company has granted stock options to Directors, Executive Officers and eligible employees of
the Company and its wholly owned subsidiaries. Shares granted through the execution of stock
options are shares issued by Sosei Group Corporation.
Resolution date

Classification and number of people
granted stock options at the time of
grant

Number of stock acquisition rights
outstanding at December 31, 2023
(units) (* )31st Stock Acquisition
RightsMay 15, 2017

32nd Stock Acquisition
RightsMay 15, 2017

33rd Stock Acquisition
RightsMay 15, 2017

Directors

5 Directors

0 Directors

0Executive officers

3 Executive officers

0 Executive officers

0

Employees

0 Employees

7 Employees

1

Directors ofsubsidiaries

0 Directors ofsubsidiaries

2 Directors ofsubsidiaries

0

Employees ofsubsidiaries

4 Employees ofsubsidiaries

7 Employees ofsubsidiaries

102

10

16

Common shares
69,200(Note 4)

Common shares
4,000(Note 4)

Common shares
6,400(Note 4)

Amount to be paid to exercise stockacquisition rights (yen) (* )1(Note 5)

3,067
(Note 5)

3,067
(Note 5)Period for exercising stock acquisitionrights (* )From July 1, 2020
to April 30, 2027

From July 1, 2020
to April 30, 2027

From July 1, 2020
to April 30, 2027

Class and number of shares underlying
stock acquisition rights at December 31,
2023 (shares) (* )Share issue price and contribution tocapital stock per share in the event ofissuance of shares upon exercise ofstock acquisition rights (yen) (* )Conditions for exercising stockacquisition rights (* )Matters relating to transfer of stockacquisition rights (* )Matters relating to granting of stockacquisition rights in association with actsof organizational restructuring (* )173

Issue price: 3,088
Issue price: 5,015
Issue price: 5,015
Contribution to capital stock Contribution to capital stock Contribution to capital stock
per share: 1,544
per share: 2,508
per share: 2,508
Note 6Note 6Note 6

Approval by resolution of
the Company’s Board of
Directors

Approval by resolution of
the Company’s Board of
Directors

Approval by resolution of
the Company’s Board of
Directors

Note 3Note 3Note 3- 154 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.1 Stock Options (continued)
Resolution date

Classification and number of people
granted options at the time of grant

34th Stock Acquisition
RightsNovember 21, 2017
Directors

0

Directors

0

Executive officers

0

Executive officers

0

Employees

3

Employees0

Directors ofsubsidiaries

0

Directors ofsubsidiaries

0

Employees ofsubsidiaries

0

Employees ofsubsidiaries

9

Number of stock acquisition rights
outstanding at December 31, 2023
(units) (* )Class and number of shares underlying
stock acquisition rights at December 31,
2023 (shares) (* )35th Stock Acquisition
RightsNovember 21, 20172

1

Common shares
800(Note 4)

Common shares
400(Note 4)

Amount to be paid to exercise stockacquisition rights (yen) (* )2,672(Note 5)

2,672
(Note 5)Period for exercising stock acquisitionrights (* )From December 1, 2020
to October 29, 2027

From December 1, 2020
to October 29, 2027

Share issue price and contribution tocapital stock per share in the event ofissuance of shares upon exercise ofstock acquisition rights (yen) (* )Issue price: 4,227
Contribution to capital stock
per share: 2,114

Issue price: 4,227
Contribution to capitalstock per share: 2,114

Note 6Note 6

Approval by resolution of
the Company’s Board of
Directors

Approval by resolution of
the Company’s Board of
Directors

Note 3Note 3

Conditions for exercising stockacquisition rights (* )Matters relating to transfer of stockacquisition rights (* )Matters relating to granting of stockacquisition rights in association with actsof organizational restructuring (* )(* ) The status as at December 31, 2023 is described above. As at the end of the month prior to the submission date(February 29, 2024) there had been no changes.

- 155 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.1 Stock Options (continued)
1. If the Company issues new shares with a paid-in amount lower than the market value, the exercise
amount in the case of issuance of shares upon exercise of stock acquisition rights shall be adjusted
using the following formula, with any fraction less than one yen resulting from the adjustment being
rounded up.

Exercise amount＝after adjustment

Exercise amount
beforeadjustment

×

Number ofoutstanding
shares+Number ofoutstanding shares

Number ofshares newly
issued×

Amount paid per
share

Market value per share＋ Number of shares newly issued

2. In addition to the above, details are stipulated in an “Agreement on Allotment of Stock Option”
concluded between the Company and eligible recipients in accordance with a resolution of the Boardof Directors.
3. In the event that the Company conducts a merger (limited to cases where the Company is dissolvedin the merger), an absorption-type company split (limited to cases where the Company is the splitting
company), an incorporation-type company split, a share exchange or a stock transfer (each limited tocases where the Company becomes a wholly owned subsidiary) (collectively, “Reorganization”), stockacquisition rights of one of the stock corporations listed in Article 236, Paragraph 1, item 8 (a) through(e) of the Companies Act (the “Reorganized Company”) shall be granted to the holders of the Stock
Acquisition Rights remaining at the time the Reorganization takes effect, in accordance with thefollowing conditions. In this case, the remaining Stock Acquisition Rights will be forfeit and the
Reorganized Company shall issue new stock acquisition rights. Provided, however, that the foregoing
applies only to cases where the grant of the stock acquisition rights of the Reorganized Company, in
accordance with the following conditions, is provided for in the relevant absorption-type merger
agreement, incorporation-type merger agreement, absorption-type company split agreement,
incorporation-type company split agreement, share exchange agreement or stock transfer agreement.
(1) Number of Stock Acquisition Rights of the Reorganized Company to be granted:
Stock acquisition rights will be granted to the respective holders of the remaining Stock
Acquisition Rights in the same number as the Rights they held.
(2) Class of shares of the Reorganized Company to be delivered upon exercise of the Stock
Acquisition Rights:
Common stock of the Reorganized Company(3) Number of shares of the Reorganized Company to be delivered upon exercise of the Stock
Acquisition Rights:
To be determined in accordance with Note 4 after considering the terms and conditions of theReorganization.
(4) Value of assets to be contributed upon exercise of the Stock Acquisition Rights:
To be determined in accordance with Note 5 after considering the terms and conditions of theReorganization.

- 156 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.1 Stock Options (continued)(5) Period for exercising stock acquisition rights:
A period commencing on either the beginning date of the Exercise Period or the effective date of
the Reorganization, whichever is later, and ending on the ending date of the Exercise Period.
(6) Matters concerning increases in capital and capital reserve in the event of issuance of shares
due to exercise of Stock Acquisition Rights:i) The amount of capital to be increased in the event that new shares are issued upon theexercise of the Rights shall be one half of the maximum amount of increase in capital,
calculated in accordance with Article 17, Paragraph 1 of the Ordinance for Companies
Accounting. Any amount less than one yen arising from such calculation shall be rounded up
to the nearest yen.
ii) The amount of increase in the capital reserve in the event that new shares are issued upon
the exercise of the Rights shall be the maximum amount of increase in capital stated in item i)above less the amount of capital to be increased as specified in item i) above.
(7) Restrictions on acquiring Stock Acquisition Rights through transfer:
Acquisition of stock acquisition rights through transfer shall require approval by resolution of theBoard of Directors of the Reorganized Company.
(8) Other conditions for the exercise of Stock Acquisition Rights:
To be determined according to “Conditions for exercising stock acquisition rights” in the table
above.
(9) Acquisition of Stock Acquisition Rights:i) In the event that a merger agreement by which the Company would be the dissolving
company, an agreement or plan to divest by which the Company would be divested, or a shareexchange agreement or stock transfer plan by which the Company would become a wholly
owned subsidiary is approved by the General Meeting of Shareholders (or by resolution of theBoard of Directors if approval by the General Meeting of Shareholders is not required), theCompany may acquire without contribution all of the Rights on a date that would bedetermined separately by the Board of Directors of the Company.
ii) In the event that the provisions in clause “Stock option holders must be directors, executive
officers or employees of the Company or the Company’s subsidiaries when exercising stock
options; provided, however, that this does not apply in cases of retirement due to expirationof term of office or reaching the mandatory retirement age, or when there are other legitimate
reasons” prevent a Rights Holder from exercising the Rights, the Company may acquire theRights without contribution.
4. If, after the allotment date of the Rights, the Company conducts a stock split (including any
allotment of shares without contribution; the same shall apply hereinafter) or a stock consolidation,
the Number of Shares Granted shall be adjusted according to the following formula. Such adjustment
shall only be made with respect to the number of shares subject to unexercised Stock Acquisition
Rights, with any fractional shares resulting from such adjustment rounded down to the nearest wholeshare.

- 157 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.1 Stock Options (continued)
Number of shares
granted after＝
adjustment

Number of shares granted before
adjustment

×

Stock split (or consolidation) ratio

The Number of Shares Granted after adjustment shall apply on and after the next day of the record
date (if no record date is fixed, the effective date) of the stock split or on and after the effective dateof stock consolidation.
Furthermore, if, after the allotment date, the Company conducts a merger, company split or capital
reduction, or in any other case similar thereto where an adjustment in the Number of Shares Granted
is required, the Company shall adjust the Number of Shares Granted as appropriate.
5. The value of the assets to be contributed upon exercise of the Rights shall be the amount obtainedby multiplying the amount to be paid for each share of common stock to be delivered upon theexercise of the Rights (the “Exercise Price”) by the Number of Shares Granted.
i) In case of a stock split or consolidation the Exercise Price shall be adjusted according to thefollowing formula, with any amount less than one yen resulting from the adjustment rounded up
to the nearest yen.
1
Exercise amountafter adjustment＝

Exercise amount
before adjustment

Stock split orconsolidation ratio×ii) In case the Company issues new shares of common stock or disposes of treasury stock at a
price below the market price of its common stock (except in the cases of the issue of new sharesand disposal of treasury shares based on the exercise of the Rights, and the transfer of treasury
shares due to a share exchange), the Exercise Price shall be adjusted according to the following
formula, with any amount less than one yen resulting from the adjustment rounded up to thenearest yen.

Exercise
price after
adjustment＝

Exercise
price
beforeadjustment

×

Number ofoutstanding
shares+Numberof newlyissuedshares×

Amountto bepaid pershare
grantedMarket price per share before
issue of new shares
Number ofoutstanding shares- 158 -＋

Number of newly
issued shares

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.1 Stock Options (continued)
In the formula above, the “Market price per share” shall be the average of the closing prices ofthe shares of common stock of the Company in regular trading on the TSE for the thirty (30)consecutive trading days (excluding days on which there is no such closing price) commencing
forty-five (45) trading days immediately before the date on which the Exercise Price after
adjustment shall be applied (any fraction less than one (1) yen arising as a result of suchcalculation shall be rounded off to one decimal place), and the “Number of outstanding shares”
is the total number of shares of the Company’s common stock minus the number of treasury
shares of common stock. If the treasury shares are disposed of, the “Number of newly issued
shares” shall be replaced with the “Number of treasury shares to be disposed of,” and “Amountto be paid per share granted” shall be replaced with “Selling price per share” in the above formula.
iii) In cases where the Company is a surviving company in an absorption-type merger or a
succeeding company in an absorption-type company split or a parent company in a shareexchange or in other similar cases where the adjustment of the Exercise Price is necessary, theExercise Price shall be adjusted as appropriate and to the extent reasonable.
6.(1) A Rights Holder must be a director, an executive officer and/or an employee of the Company or
its subsidiary at the time the Rights are exercised. Provided, however, this provision shall not apply to
directors or executive officers who have retired due to expiration of their terms of office, or
employees who have retired upon reaching the Company’s mandatory retirement age or for other
legitimate reasons that the Board of Directors may deem appropriate.
(2) Exercise of the Rights by heirs of Rights Holder shall not be permitted.
(3) Rights may not be exercised when doing so would cause the total number of shares of theCompany outstanding after exercise of such Rights to exceed the total number of shares authorized
to be issued by the Company at the time of the exercise.
(4) The Rights may not be exercised in less than one unit.

- 159 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.1 Stock Options (continued)
Additional Information
The information required to be presented in Section 4 Information about the Filing Company 1 Stock
Information 1.2 Stock Acquisition Rights, Details of Stock Acquisition Rights is consolidated in Note 24
Share-based payments.
Total number of exercisable shares and average exercise price of stock options in Sosei Group
Corporation
The number of shares and weighted-average exercise prices are as follows:Year ended December 31, 2023
Number ofshares(Shares)Year ended December 31, 2022

Weighted- WeightedNumber of
averageaveragesharesexercise remaining(Shares)
price contractual(¥)
life(Years)548
4.3
92,400WeightedWeightedaverage
averageremaining
exercisecontractual
price
life
(¥)
(Years)594
5.3

Balance at the beginning of the year

84,400Forfeited during the year

(3,600)3,069-(2,800)3,069-

Exercised during the year

-

-

-

(5,200)

1-

Balance at the end of the year

80,800436

3.3

84,400548

4.3

Exercise price range (¥)
Up to 2,000
2,001 to 3,069
Exercisable balance at end of year

69,20011,60080,800

1
3,028
436

3.3
3.4
-

69,20015,20084,400

1
3,038
548

4.3
4.4
-

Notes:
1. The weighted-average share price on the exercise date of the stock options exercised during the year ended December 31, 2022
was JPY 1,429.

- 160 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.2 Restricted Stock Units (RSUs) and Performance Share Units (PSUs)
Details of the RSU and PSU Plans (“the Plans”)
At the Board of Directors meeting held on April 17, 2019, the Company resolved to introduce a
Restricted Stock Unit (RSU) Plan for the Directors, the Executive Officers and the eligible
employees of the Company and its wholly owned subsidiaries (“Executives and Employees”) andPerformance Share Unit (PSU) Plan for certain Executives and Employees (except for External
Directors).
a. Conditions of Allotment
The Company will allot shares of the Company to Executives and employees according to thepredefined manner on the condition that they hold the position of Executive or eligible
employee during the specified performance period.
b. Maximum number of Shares to be issued under the Plans
The number of shares to be issued under the plans, together with the number of shares to beissued under other share-based payments schemes, shall not exceed 10% of the total numberof outstanding shares of the Company.
c. Relevant Performance Period and Number of Allotted Shares(i) RSUs for Directors (Excluding directors serving concurrently as Executive Officer):
The Performance Period is one year, and after the end of the Performance Period, the numberof shares calculated by dividing the base salary amount by the share price at the time of granting
the unit will be allocated.
However, Performance Periods for newly appointed directors shall be one, two and three years
from the first day of the Performance Period, and after the end of each Performance Period,
one-third each of the number of the shares calculated by dividing twice the amount of the basesalary by the stock price at the start of the Performance Period shall be allocated.
(ii) RSUs for Directors serving concurrently as Executive Officers, Executive Officers and eligible
employees:
Performance Periods shall be two and three years from the first day of the Performance Period,
and after the end of each Performance Period, one half of the number of shares calculated by
dividing the amount obtained by multiplying the base salary by certain percentages determinedfor each individual by the stock price from the start of the Performance Period shall be allocated.

- 161 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.2 Restricted Stock Units (RSUs) and Performance Share Units (PSUs) (continued)(iii) PSUs for Directors serving concurrently as Executive Officers, Executive Officers and eligible
employees:
The number of the Company’s shares allotted to each person (Allotted Shares) will be calculated
for each person by setting the base number of shares at the start of the Performance Period andmultiplying the base number of shares by certain coefficients after the Performance Period has
elapsed.
Base number of shares
The base number of shares shall be determined by dividing the amount obtained frommultiplying the base salary by a certain percentage (determined for each individual), by thestock price at the start of the Performance Period.
The number of shares to be allocated will be determined by multiplying the sum of the following
figures by the base number of shares.
o 50% of the number between 25% to 100 % to be determined based on the coefficients
according to the Relative Total Shareholder Return (“TSR”) Achievement level measured
against an agreed peer group at the end of the Performance Period where such TSR is above
the median.
o 50% of the number between 50% to 200% to be determined based on the coefficients
according to the Absolute TSR of the Company Achievement Level where the Absolute TSR
at the end of the Performance Period increases by 25% or more.
For Relative TSR the Company has selected multiple domestic competitors based on theirmarket capitalization and R&D expense ratio. The above coefficients are subject to change inthe future.
As described above, the TSR ratio is selected as an indicator for Performance Share Units (PSUs).
To increase awareness of the performance of competitors, to share the benefits and risks ofstock price fluctuations with shareholders, and to actively contribute to a rise in the stock priceand corporate value, figures based on the Company's TSR growth rate at the end of the Relevant
Calculation Period (Absolute TSR), and the average of figures based on percentiles (Relative TSR)
compared to TSRs of multiple domestic peers have been adopted. There were no applicable
PSUs in the current financial year. (The achievement of the performance target for relevant PSUs
amounted to 12.5% in the year ended December 31, 2022.)
d. Board of Directors meeting concerning Issuance or Disposition
The Board of Directors meeting for issuance or disposition of shares to be allotted shall in
principle, be held within one month after the date of the Ordinary General Meeting of
Shareholders for the most recent financial year during which the Performance Period ends;
provided however, that if there are exceptional circumstances, the date of the Board of Directors
meeting for issuance or disposition may be changed.
- 162 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.2 Restricted Stock Units (RSUs) and Performance Share Units (PSUs) (continued)
e. Method of delivering the Company’s shares
The Shares will be allotted to Executives and employees on the condition that Executives andemployees have been continuously employed by or held office with the Company throughout
the Performance period. Shares will be allotted in exchange for in-kind contribution of monetarycompensation claims, calculated by multiplying a predetermined number of allotted shares by
the issue price per share.
f. Grounds for Forfeiture
If during the Performance Period an Executive or employee falls under certain specified
circumstances, such as being subject to criminal punishment equivalent to or more severe thanimprisonment, being subject to a filing for the commencement of insolvency proceedings or civil
rehabilitation proceedings, etc., the Executive or employee will not obtain any right to be
allotted the shares of the Company under the Plans and the rights to receive the Company’s
shares shall lapse at the time such circumstances occur.
g. Treatment in Cases of Reorganization or Change of Control Transactions
If during the Performance Period, a transaction involving a reorganization or a change of control,
such as a merger agreement in which the Company becomes a dissolved entity, or a shareexchange/transfer agreement under which the Company becomes a wholly owned subsidiary,is approved by a general meeting of shareholders, etc. of the Company and that transaction
becomes effective before the completion of the Performance Period, the Company will, byresolution of the Board of Directors, allot the maximum number of shares to be allotted under
the Plans prior to the reorganization transaction coming into effect.
Number of RSUs granted and fair values at the date of grant
The number of units granted during the year and the weighted-average fair value are as follows.

RSUs
Number of units granted (unit)
Weighted-average fair value at the date of grant (¥)

Year ended
December 31, 2023

Year ended
December 31, 2022

588,630
2,422

702,616
1,283

Notes:
1. Fair value at the date of grant of RSUs is the closing price of the Company’s shares at the grant date.

- 163 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
24 Share-based payments (continued)
24.3 Expenses related to share-based payments transactions

Share-based payments

Year ended
December 31, 2023
¥m
870

Year ended
December 31, 2022
¥m
700

Notes:
1. Share-based payment expenses are accounted for as equity-settled share-based payment expenses and are included in “Cost of
sales” “Research and development expenses” and “Selling, general and administrative expenses” in the consolidated statement of
profit or loss and other comprehensive income.

25 Selling, general & administrative expenses
The breakdown of selling, general & administrative expenses is as follows:

Personnel expenses
Depreciation and amortization
Outsourcing expenses
Other

Year ended
December 31, 2023
¥m
3,214
1,798
2,474
2,479
9,965

Year ended
December 31, 2022
¥m
2,293
842
658
584
4,377

Year ended
December 31, 2023
¥m
920
15
9
944

Year ended
December 31, 2022
¥m
567
57
2
626

26 Other income
The breakdown of other income is as follows:

Government grants (Note 1)
Other grants
Other
Notes

1. Government grants mainly consist of R&D expenditure related UK tax credits.

27 Other expenses
The breakdown of other expenses is as follows:

Loss on retirement of non-current assets
Other

Year ended
December 31, 2023
¥m
62
32
94

- 164 -

Year ended
December 31, 2022
¥m
2
0
2

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
28 Finance income and finance costs
The breakdown of finance income is as follows:

Changes in the fair value of contingent consideration
receivable relating to business disposals
Changes in fair value of contingent consideration inbusiness combinations
Interest income
Foreign exchange gains

Year ended
December 31, 2023¥m

Year ended
December 31, 2022
¥m

116

64

-

50

1,225
1,341

236
313
663

Year ended
December 31, 2023¥m

Year ended
December 31, 2022
¥m

673
114
329

615
58
-

1,317

-

The breakdown of finance costs is as follows:

Interest expenses
Financial liabilities measured at amortized cost
Lease liabilities
Foreign exchange loss
Charge for repurchase and cancellation of
corporate bonds
Loss on revaluation of investments in capital
Cost of borrowing funds- 165 -

46

41

16

42

2,495

756

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
29 Investments accounted for using the equity method
The Group did not account for any investments as associates during the year ended December 31,
2023. One investment, which was not individually significant, was accounted for as an associateduring the previous financial year.
The impact on comprehensive income of associates that are not individually significant is as follows:Year ended
December 31, 2023¥m

Year ended
December 31, 2022¥m

Share of (loss) gain of associates accounted forusing the equity method

-

(429)

(Loss) profit from continuing operations

-

(429)

Total comprehensive income

-

(429)

In addition to the above, an impairment loss of JPY 1,836 million was recognized on investments
accounted for using the equity method during the previous financial year

- 166 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
30 Income taxes
30.1 Income tax (benefit) / expense
The breakdown of income tax (benefit) / expense is as follows:

Current tax expense
Current year
Prior year adjustment
Total current tax expense
Deferred tax expense (benefit) (Note 1)
Tax losses carried forward or temporary differences
Total deferred tax expense (benefit)
Total income tax expense (benefit)
Income tax expense related to other comprehensive
incomeYear ended
December 31, 2023¥m

Year ended
December 31, 2022
¥m

254

387

(94)

(43)

160

344

(3,647)(3,647)(3,487)
34

352
352
696
207

Notes:
1. The deferred tax expense includes the amount of benefits arising from previously unrecognized tax losses, tax
credits or temporary differences in prior periods. The resulting decrease in deferred tax expense was JPY 882
million for the year ended December 31, 2023. The amount was not material for the year ended December 31,
2022.

A reconciliation of the statutory effective tax rate and actual tax rate is as follows:

Statutory effective tax rate (Note 1)
Items not deductible permanently
Items not included permanently
Effect of differences in tax rates of foreign subsidiaries
Effect of differences in tax rates of Japanese subsidiaries
Effect of tax rate change
Effect of unrecognized tax losses carried forward or
temporary differences
Share of gain (loss) of associates accounted for using theequity method
Tax benefit on net profit or loss in the prior year
Undistributed profits of overseas subsidiaries
Convertible bonds
Acquisition related costs
Other
Actual tax rate

Year ended
December 31, 2023
(%)
30.6
(0.9)

Year ended
December 31, 2022
(%)
30.6
14.4

0.0
(3.6)
0.6
0.6

(0.5)
(43.8)
(1.4)
10.1

1.9

28.0

-

39.9

1.4
0.3
4.8
(3.2)
0.1
32.6

(7.4)
0.6
(6.0)
64.5

Notes:
1. The Company is mainly subject to corporate income tax, residential tax and enterprise tax. The effective
statutory tax rate based on those taxes was 30.6% for the years ended December 31, 2023 and December 31,
2022. However, foreign subsidiaries are subject to corporate tax and other taxes in their jurisdictions.

- 167 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
30 Income taxes (continued)
30.2 Deferred tax assets and liabilities
The amounts of recognized deferred tax assets and liabilities, and details of their increases ordecreases, are as follows:Year ended December 31, 2023

At January
1, 2023¥m
Deferred tax assets
Inventories
Lease liabilities
Tax losses carriedforward
Other
Total deferred tax
assetsDeferred tax
liabilities
Property, plant andequipment
Intangible assets
Right-of-use assets
Corporate bonds
Other
Total deferred tax
liabilities
Net deferred tax
assets / (liabilities)

Amounts
recognizedin otherAmounts
recognized in comprehens
profit or loss ive income¥m¥m

Amounts
Amountdirectly recognizedrecognized in businessin capital combination¥m¥m(Note)Other¥m

At
December31, 2023
¥m

-

520
(21)

-

-

1,925
949

(1)

2,445
927

355

2,088

-

-

-

34

2,477

451

432

(0)

(40)

491

23

(1,357)

806

3,019

(0)

(40)

3,365

56

7,206

(534)

(65)

-

-

(111)

(73)

(783)

(1,975)
(782)
(437)

230
33
464
(34)

150

(371)
-

(949)
(26)

(253)
1
-

(1,998)
(915)
(689)
(347)

(3,728)

628

150

(371)

(1,086)(325)(4,732)(2,922)

3,647

150

(411)

2,279

(269)

2,474

Notes:
1. Other comprises exchange differences on translating deferred tax liabilities of foreign entities.

- 168 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
30 Income taxes (continued)
30.2 Deferred tax assets and liabilities (continued)
Year ended December 31, 2022

At January 1,
2022¥m
Deferred tax assets
Tax losses carriedforward
Other
Total deferred tax assets
Deferred tax liabilities
Intangible assets
Corporate bonds
Other
Total deferred tax
liabilities
Net deferred tax
liabilities

Amounts
recognized inotherAmounts
recognized in comprehensive
incomeprofit or loss¥m¥m

Amounts
directly
recognizedin capital¥m(Note)Other¥m

At December
31, 2022
¥m

1,066

(729)

-

-

18

355

364
1,430

61
(668)

-

22
22

4
22

451
806

(2,056)(994)(1,086)

131
212
(27)

152

-

(50)
(10)

(1,975)
(782)
(971)

(4,136)

316

152

-

(60)

(3,728)(2,706)

(352)

152

22

(38)

(2,922)

Notes:
1. Other comprises exchange differences on translating deferred tax liabilities of foreign entities.

The amounts of deductible temporary differences and tax losses carried forward for which no deferred
tax asset is recognized are as follows:
At December 31, 2023
¥m

At December 31, 2022¥m

17,982
9,564
27,546

22,635
10,08032,715

Deductible temporary differences
Tax losses carried forward- 169 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
30 Income taxes (continued)
30.2 Deferred tax assets and liabilities (continued)
The expiration of tax losses carried forward for which no deferred tax asset has been recognized is asfollows:
At December 31, 2023
¥m

At December 31, 2022
¥m

44
1,128
8,392
9,564

462
229
94
228
9,067
10,080Year 1
Year 2
Year 3
Year 4
Year 5 to Year 10

Notes
1. Deferred tax assets of JPY 1,069 million were recognized at the end of the current financial year for subsidiaries that incurred
losses in the current or previous financial year and for which the recoverability of deferred tax assets is dependent on theavailability of future taxable income. The deferred tax assets were recognized as a result of a careful assessment of the likelihoodof generating taxable income from which the net operating loss carryforwards and deductible temporary differences can be
deducted, based on past operating results, approved future business plans, and tax planning opportunities.

31 Earnings per share
31.1 Basic earnings per share
The following table shows basic earnings per share and explains the basis for the calculation.

Net (loss) profit attributable to owners of the parent (¥m)
Weighted-average number of common shares
outstanding (Shares)
Basic earnings per share (¥)- 170 -

Year ended
December 31, 2023

Year ended
December 31, 2022

(7,193)382

82,516,507

81,785,008(87.18)

4.68

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
31 Earnings per share (continued)
31.2 Diluted earnings per share
The following table shows diluted earnings per share and the basis for the calculation:
Year ended
December 31, 2023

Year ended
December 31, 2022

(7,193)382--(7,193)382

82,516,507

81,785,008-

70,387

Increase in number of common shares due tothe allotment of Restricted Stock Units (Shares)-

727,124

Increase in number of common shares due tothe allotment of Performance Share Units(Shares)

-

7,922

-

-

82,516,507

82,590,441(87.18)

4.63

Net (loss) profit attributable to owners of the parent(¥m)
Adjustment to net (loss) profit used in the calculationof diluted earnings per share (¥m)
Net (loss) profit used in the calculation of diluted
earnings per share (¥m)
Weighted-average number of common shares
outstanding (Shares)
Increase in number of common shares used in thecalculation of diluted earnings per share (Shares):
Increase in number of common shares due tothe exercise of stock options (Shares)

Increase in number of common shares due tothe conversion of convertible bonds (Shares)
Weighted-average number of common shares
outstanding used in the calculation of diluted
earnings per share (Shares)
Diluted earnings per share (¥)
Summary of potential shares not included in thecalculation of diluted earnings per share because
they do not have a dilutive effect

The 32nd-35th series of-stock options(Totaling common shares 15,200)

Euro-yen DenominatedConvertible Bonds due 2026

(Common shares 13,422,818)
Notes:
1 In the current financial year, there was no dilutive effect from potential common shares as the conversion of stock options and RSU,
reduced the loss per share.

- 171 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
32 Cash flow information
Changes in liabilities arising from financing
Year ended December 31, 2023
Non-cash changes
Acquisition ofsubsidiary

Fair valuechangeOther

December31, 2023

857

-

-

1,856

30,694-38,450--12

38,462

1,753

(485)

2,837

-

712

4,817

29,73438,822

2,837

-

2,580

73,973January 1,
2023

Cash flows

Corporate bonds(Note 1)

27,981

Bank borrowing
Lease liabilities

Notes:
1. The Corporate bonds cash flow excludes JPY 1,171 million, equivalent to the value of stock acquisition rights, which is part of the
JPY 31,708 million balance shown as "Proceeds from issuance of corporate bonds" in the consolidated statement of cash flows ,and JPY (1,620) million, equivalent to the value of stock acquisition rights, which is part of the JPY (31,300) million balance shownas "Payments for repurchase and cancellation of corporate bonds" in the consolidated statement of cash flows.

Year ended December 31, 2022
Non-cash changes
Acquisition ofsubsidiary

Fair valuechangeOther

December31, 2022(4,680)

-

(50)

635

-

27,440

-

-

-

541

27,981

1,831

(206)

-

-

128

1,753

33,366(4,886)

-

(50)

1,304

29,734January 1,
2022

Cash flows

Contingent
consideration inbusiness combinations

4,095

Corporate bonds
Lease liabilities

Non-cash transactions
Year ended December 31, 2023
Acquisition of right of use assets totaled JPY 489 million for the year ended December 31, 2023.
Year ended December 31, 2022
Acquisition of right of use assets totaled JPY 102 million for the year ended December 31, 2022.

- 172 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
33 Related parties
33.1 Transactions with related parties
Year ended December 31, 2023:
Transactions with Officers and major individual shareholders
Type

Name

Officer

Shinichi Tamura

Officer

Christopher Cargill

Officer

Tomohiro Tohyama

Officer

Kuniaki Kaga

OfficerDavid Roblin

Officer

Noriaki Nagai

Officer

Rolf Soderstrom

Officer

Miwa Seki

Officer

Hironoshin Nomura

Officer

Kieran Johnson

Officer

Kazuhiko Yoshizumi

OfficerMatthew Barnes

Officer

Candelle Chong

Description of transaction

In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)
In-kind contribution of monetarycompensation claim (Note 1)

Transaction amount(¥m)

Outstandingbalance
(¥m)

209

-

117

-

15

-

15

-

15

-

15

-

28

-

15

-

5

-

23

-

24

-

13

-

21

-

Notes:
1. The in-kind contribution of monetary compensation claim relates to the Restricted Stock Units (RSUs).

Transactions with Associates
Not applicable.

- 173 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
33 Related parties (continued)
33.1 Transactions with related parties (continued)
Year ended December 31, 2022:
Transactions with Officers and major individual shareholders
Type

Name

Description of transaction

Exercise of stock options (Note 1)
Officer

Shinichi Tamura

OfficeChristopher Cargill

Officer

Tomohiro Tohyama

Officer

Kuniaki Kaga

OfficerDavid Roblin

Officer

Noriaki Nagai

Officer

Rolf Soderstrom

Officer

Kieran Johnson

Officer

Kazuhiko Yoshizumi

OfficerMatthew Barnes

Officer

Tadayoshi Yasui

In-kind contribution of monetarycompensation claim (Note 2)
In-kind contribution of monetarycompensation claim (Note 2)
In-kind contribution of monetarycompensation claim (Note 2)
In-kind contribution of monetarycompensation claim (Note 2)
In-kind contribution of monetarycompensation claim (Note 2)
In-kind contribution of monetarycompensation claim (Note 2)
In-kind contribution of monetarycompensation claim (Note 2)
In-kind contribution of monetarycompensation claim (Note 2)
In-kind contribution of monetarycompensation claim (Note 2)
In-kind contribution of monetarycompensation claim (Note 2)
In-kind contribution of monetarycompensation claim (Note 2)

Transaction amount(¥m)

Outstandingbalance
(¥m)

0

-

91

-

56
11

-

11

-

11

-

19

-

19

-

16
18

-

9

-

19

-

Notes:
1.

The exercise of stock options by Mr. Tamura, Mr. Weir and Mr. Tasker in the previous financial year relates to the 31st stockacquisition rights granted by the Board of Directors on May 15, 2017.

2.

In-kind contribution of monetary compensation claim relates to the Restricted Stock Unit plan.

Transactions with Associates
Not applicable.

- 174 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
33 Related parties (continued)
33.2 Remuneration of key management personnel
Year ended December 31, 2023¥m

Year ended December 31, 2022¥m

Remuneration and bonuses

830

727

Share-based payments

476

468

28
1,334

340
1,535

Retirement benefit

Notes:
1. Please refer to Section 4. Information about the Filing Company, 4 Corporate Governance, 4.4 Remuneration paid to directors
for details such as the basic policy regarding the compensation of senior management.

34 Significant subsidiaries
Please refer to Section 1 Company Overview, 4 Status of Subsidiaries and Associates.
35 Subsequent Events
On March 8, 2024, the Group entered into a global collaboration and exclusive option-to-license
agreement with Boehringer Ingelheim.
Purpose of the partnership
At the center is a joint mission to develop and commercialize the Groups’ portfolio of first-in-class
GPR52 agonists, a novel GPCR target, with the intent to improve patient outcomes by simultaneously
addressing positive, negative, and cognitive symptoms of schizophrenia.
Impact on Business Performance
The Group became eligible to receive an upfront payment of EUR 25 million from Boehringer
Ingelheim upon signing. In accordance with IFRS 15 Revenue from Contracts with Customers, revenue
is recognized as performance obligations are satisfied. Accordingly, a portion of the upfront fee will
be deferred and recognized as R&D services are performed.

- 175 -

Sosei Group Corporation
Section 5: Financial Statements
Notes to the Consolidated Financial Statements
36 Quarterly results
Quarterly information for the year ended December 31, 2023
Cumulative period

First quarter

Second quarter

Third quarter

Fourth quarter

943

2,146

5,474

12,766

Loss before income taxes (¥m)

(1,863)(3,760)(7,865)(10,680)

Net loss attributable to ownersof the parent (¥m)

(1,402)(2,060)(6,985)(7,193)

Basic loss per share (Yen)(17.11)(25.13)(85.05)(87.18)First quarter

Second quarter

Third quarter

Fourth quarter(17.11)(8.03)(59.81)(2.49)

Revenue (¥m)

(Accounting period)
Basic loss per share (Yen)- 176 -

Sosei Group Corporation
Section 5. Financial Statements
Non-consolidated Balance Sheet
As at December 31, 2023
Note
AssetsCurrent assets
Cash and deposits
Accounts receivable from subsidiaries and associates trade
Accounts receivable from subsidiaries and associates otherPrepaid expenses
Consumption taxes refund receivable
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Tools, furniture and fixtures
Total property, plant and equipment
Intangible assets
Sales rights
Software
Other
Total intangible assets
Investments and other assets
Shares of subsidiaries and associates
Long-term loans receivable from subsidiaries andassociates
Investments in capital
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

177

December 31, 2023¥m

December 31, 2022¥m

21,98939,103

4,094

-

8,891

-

150
4,714
61
39,89957
31
439,195

29
10
39

27
11
38

43,35216
043,3684
0
458,48049,973

3,390

2,918

95
58
(3,318)58,705102,112142,011117
58(2,918)50,14850,19089,385

Sosei Group Corporation
Section 5. Financial Statements
Non-consolidated Balance Sheet
As at December 31, 2023
Note
Liabilities
Current liabilities
Accounts payable - trade
Accounts payable - otherAccounts payable to subsidiaries and associates - otherAccrued expenses
Income taxes payable
Current portion of long-term bank borrowings
Current portion of corporate bonds
Deposits received
Provision for bonuses payable to employees
Provision for share-based payments
Other
Total current liabilities
Non-current liabilities
Long-term bank borrowings
Convertible bonds
Asset retirement obligations
Provision for share-based payments
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity:
Capital stock
Capital surplus:
Legal capital surplus
Retained earnings
Other retained earnings
Retained earnings brought forward
Treasury stock
Total shareholders’ equity
Valuation/translation difference
Unrealized holding gains or losses on securities
Stock acquisition rights
Total net assets
Total liabilities and net assets

178

1

December 31, 2023¥m

December 31, 2022
¥m

112
1,302
3,000
183
79
5,800
152
41
380
13
11,062

218
132
113
22
69
447
18
1,019

32,75032,79318
188
65,74976,811

30,53513274
30,822
31,84146,80734,92434,924(16,765)

41,33529,452
29,452(13,480)(16,765)(1)
64,965(0)(0)
235
65,200142,011(13,480)(1)
57,306(5)(5)
243
57,54489,385

Sosei Group Corporation
Section 5. Financial Statements
Non-consolidated Statement of Profit or Loss
For the year ended December 31, 2023

Note
1

Revenue
Cost of sales
Gross profit
General and administrative expenses

2

Operating loss
Non-operating income
Interest income
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Commission expenses
Charge for repurchase and cancellation of corporate
bonds
Bond issuance costs
Share issuance costs
Provision of allowance for doubtful accounts for
subsidiaries and associates
Foreign exchange loss
Miscellaneous loss
Total non-operating expenses
Ordinary loss
Extraordinary income
Gain realized on contingent consideration receivable
relating to business disposals
Gain on reversal of stock acquisition rights
Total extraordinary income
Loss before income taxes
Corporate tax, residential tax and enterprise tax
Net loss

1

179

Year ended
December 31, 2023
¥m
5,015
(646)
4,369
(4,704)(335)

Year ended
December 31, 2022
¥m
1,118
1,118
(2,213)(1,095)

132
0
132

79
0
79

(74)
(116)

(1)
(41)

(1,056)-(1,092)
(71)

-

(400)

(500)

(263)
(26)
(3,098)(3,301)

(25)
(3)
(570)
(1,586)

-

136

7
7
(3,294)9(3,285)5141(1,445)(52)(1,497)

Sosei Group Corporation
Section 5. Financial Statements
Non-consolidated Cost of Sales Statement
For the year ended December 31, 2023
Year ended
December 31, 2023
¥m

Note

AmountI. Cost of finished goods soldBeginning finished goods inventory
Purchase of finished goods
Total
Ending finished goods inventory
Total cost of finished goods sold
II. Expenses
Royalty
Packing costs
Storage charge
Total expenses
Total cost of sales

111
111
111
524
9
2
535
646

Ratio
(%)

Amount

Ratio
(%)

17.2

-

-

82.8
100.0

-

-

Cost accounting method
The Company calculates costs using a specific order costing based on actual costs.

180

Year ended
December 31, 2022¥m

Sosei Group Corporation
Section 5. Financial Statements
Non-consolidated Statement of Changes in Net Assets
For the year ended December 31, 2023
Shareholders’ equity
Capitalsurplus

Balance at December 31, 2021

Capital stock¥m

Legal capitalsurplus¥m

Retainedearnings
Other retained
earnings:
Retainedearnings¥mTreasuryshares¥m

41,03629,153(11,983)

(0)

299

299

Total
shareholders’equity¥m

Valuation/translationdifference
Unrealized
holdings gains
or loss on
securities
¥m

Stock
acquisitionrights¥m

Total net assets¥m

58,206-

264

58,470Changes during the year:
Issuance of new shares
Net loss
Purchase of treasury stock
Net changes in items other thanshareholders’ equity
Total changes during the year
Balance at December 31, 2022

(1,497)
(1)

598

598

(1,497)(1,497)

(1)

(1)
(5)

(21)

(26)

299

299

(1,497)

(1)

(900)

(5)

(21)

(926)

41,33529,452(13,480)(1)

57,306(5)

243

57,544

5,472

5,472

Changes during the year:
Issuance of new shares
Net loss(3,285)Purchase of treasury stock
Net changes in items other thanshareholders’ equity
Total changes during the

(0)

5,472

5,472

(3,285)(0)Balance at December 31, 2023

46,80734,924(16,765)(1)

181

10,944

10,944(3,285)(3,285)

(0)

(0)
5

(8)

(3)

7,659

5

(8)

7,656

64,965(0)

235

65,200Sosei Group Corporation
Section 5. Financial Statements
Notes to the Non-consolidated Financial Statements
1 Significant Accounting Policies
1.1

Asset Valuation Standards and Methods
Securities
Shares of subsidiaries and associates are carried at cost determined by the moving-averagemethod.

1.2 Depreciation Methods for non-current Assets
Property, Plant and Equipment (except leased assets)
The declining balance method is used. However, the straight-line method is used for facilities
attached to buildings acquired on or after April 1, 2016.
The normal estimated useful lives are as follows: Buildings (facilities attached to buildings): 6-18 years
 Tools, furniture and fixtures:
3-18 years
Intangible Assets (except leased assets)
The straight-line method is used.
For internal-use software, the straight-line method is used based on an estimated useful life of
5 years.
Leased assets: Finance lease transactions without a transfer of ownership
The straight-line method is used over the term of the lease with a residual value of zero.
1.3

Recognition Standards for Provisions
Allowance for doubtful accounts
Allowance is made for credit losses on accounts receivable and other accounts. An estimate of
the irrecoverable amount is set aside based on historical credit loss rates for ordinary receivables
and based on individual collectability for specific receivables regarded as doubtful.
Provision for bonuses payable to employees
Provision is made during the financial year for the estimated payment of employee bonuses.
Provision for bonuses payable to executive officers
Provision is made during the financial year for the estimated payment of bonuses to executive
officers.
Provision for share-based payments
Provision is made for an estimation of the in-kind contribution of monetary compensation claim
incurred from RSU/PSUs for directors and employees.

182

Sosei Group Corporation
Section 5. Financial Statements
Notes to the Non-consolidated Financial Statements
1 Significant Accounting Policies (continued)
1.4. Revenue Recognition
Pharmaceutical product sales
Pharmaceutical product sales are recognized upon the customer’s acceptance.
Management fees
The Company's revenue consists of management fees charged to its subsidiaries. Since theCompany's performance obligation is to provide contracted services to its subsidiaries and theCompany's performance obligation is satisfied when those services are performed, revenue isrecognized at that point in time.
1.5. Other Significant Matters relating to the Basis of Preparation of the Financial Statements
Accounting for Deferred Assets
Bond issuance cost: Expensed in full at the time of payment.
Share issuance cost: Expensed in full at the time of payment.
Standards for Conversion of Foreign-denominated Assets and Liabilities to Japanese Currency
Foreign-denominated monetary receivables and payables are converted to Japanese yen basedon the closing spot rate of each reporting period, and exchange differences are accounted forwithin profit or loss for the period.

2 Changes in presentation
Balance sheet
The “Consumption taxes refund receivable” balance which was included in “Others” in the previous
financial year, is separately stated in the current financial year due to the increased materiality. To
reflect this change in presentation, JPY 35 million presented as “Others“ in the non-consolidatedbalance sheet as at December 31, 2022 has been reclassified as “Consumption taxes refund
receivable” (JPY 31 million) and “Others” (JPY 4 million).
Statement of Profit or Loss
As a result of a review of the method of presentation following the commencement of product sales,
the company has decided to present “Operating revenue” as “Revenue” and “Operating expenses”
as “General and administrative expenses”.

- 183 -

Sosei Group Corporation
Section 5. Financial Statements
Notes to the Non-consolidated Financial Statements
3 Significant Accounting Estimates
Valuation of Shares of subsidiaries and associates
The closing balances were as follows:
December 31, 2023
¥m
58,480Shares of subsidiaries and associates

December 31, 2022¥m
49,973The closing balance as at December 31, 2023 mainly relates to Idorsia Pharmaceuticals Japan Ltd. andHeptares Therapeutics Ltd.
Method of calculation of the carrying amounts in the non-consolidated financial statements andsignificant assumptions used in the calculation
A valuation loss is recorded on non-marketable securities, such as investments in unlisted subsidiaries
and associates, when their net asset value decrease significantly due to deterioration of the financial
position of the security issuer, unless there is sufficient evidence to support their recoverability. The
net asset value used in the impairment assessment is calculated based on the net assets of the latest
available financial statements prepared in accordance with the Generally Accepted AccountingStandards and obtained from subsidiaries and associates before the period end, and includes goodwill.
Hence, significant assumptions related to significant accounting estimates described in “Valuationand impairment of Goodwill and Intangible Assets” within “4. Significant accounting estimates andassociated judgments” of the consolidated financial statements significantly affects the calculation of
the net asset value.
Effects on the non-consolidated financial statements for the year ending December 31, 2024
There is a possibility that a significant decline in the real value of an asset could result in a valuation
loss due to uncertain events in the future.
Valuation of sales rights
The closing balances were as follows:
December 31, 2023¥m
43,352

Sales rights

December 31, 2022¥m-

Method of calculation of the carrying amounts in the non-consolidated financial statements andsignificant assumptions used in the calculation
The Company’s sales rights are grouped according to the smallest unit that independently generates
cash flows. When an indication of impairment exists of an asset group, the total undiscounted future
cash flows generated from the asset group is compared to the book value to determine the necessityof impairment. Once an impairment loss is determined to be recognized, the book value is reduced
to the asset’s recoverable amount and the decreased amount is recorded as an impairment loss.
Indications of impairment include cases where operating losses or net cash outflows from operating
activities continue, or will continue in the near future, and significant changes with an adverse effecton the business environment have taken place, or will take place in the near future.
- 184 -

Sosei Group Corporation
Section 5. Financial Statements
Notes to the Non-consolidated Financial Statements
3 Significant Accounting Estimates (continued)
Effects on the non-consolidated financial statements for the year ending December 31, 2024
Since the purchase price of sales rights is calculated based on business plans of related
pharmaceutical products, there is a possibility that an impairment loss may be recorded when theactual result is significantly worse than the projected result, which leads to the indication of
impairment.
4 Non-consolidated Balance Sheet
4.1

Guarantee liabilities
As at December 31, 2023 debt guarantees totaling JPY 2,011 million existed (JPY 1,938 million in
the previous year) in relation to a land and building lease agreement signed by the Company’s
subsidiary, Heptares Therapeutics Ltd.

5 Non-consolidated Statement of Profit or Loss
5.1

Transactions with subsidiaries and associates are as follows:Year ended
December 31, 2023¥m

Year ended
December 31, 2022
¥m

7,705

1,129

0

-

Operating transactions
Non-operating transactions

5.2

The ratio of general and administrative expenses is 100% for both the current and previous years.
The main general and administrative expenses are as follows:Year ended
December 31, 2023¥m

Year ended
December 31, 2022¥m

Outsourcing expenses

1,913

1,608

Personnel expenses

1,633

253

6 Note on Securities
December 31, 2023
¥m
58,480Shares of subsidiaries and associates

December 31, 2022¥m
49,973Since market prices are not available, further disclosures are omitted.

7 Note on Revenue Recognition
The Company’s revenue recognition policy is shown in Notes to the Non-consolidated Financial- 185 -

Sosei Group Corporation
Section 5. Financial Statements
Notes to the Non-consolidated Financial Statements
Statements under Note 1 Significant Accounting Policies, Section 1.4. Revenue Recognition.
8 Note on Tax Effect Accounting
8.1

Main reasons for the occurrence of deferred tax assets and deferred tax liabilities
December 31, 2023¥m

December 31, 2022¥m

Tax losses carried forward

3,018

2,499

Shares in subsidiaries and associates

3,135

3,135

Allowance for doubtful debts

1,016

893

455

354

Deferred tax assets:

Other
Deferred tax assets subtotal

7,624

6,881

Valuation allowance for tax losses
carried forward(3,018)(2,499)Valuation allowance for deductible
temporary differences(4,606)(4,382)(7,624)(6,881)--

Valuation allowance subtotal
Total deferred tax assets

8.2

Main reasons for the difference between the statutory effective tax rate and actual effective tax
rate after the application of tax effect accounting
Year Ended
December 31, 2023¥m

Year Ended
December 31, 2022¥m

Statutory effective tax rate

30.6%

30.6%

Items not deductible permanently
such as entertainment expenses

(2.2)

(4.8)

Japanese Controlled Foreign Company(5.6)(18.3)

Share-based payment expenses

0.7

0.9

Valuation allowances(22.9)(14.9)

Other

(0.3)

2.7

Actual effective tax rate after theapplication of tax effect accounting

0.3

(3.8)

- 186 -

Sosei Group Corporation
Section 5. Financial Statements
Notes to the Non-consolidated Financial Statements
9 Supplementary Schedules
9.1

Supplementary Schedule of Property, Plant and Equipment

Classification Type of
assetsBalance at
beginningof current
year

Increaseduringcurrent
year

Decreaseduringcurrent
year

¥m

¥m

¥m

¥m

¥m

Depreciation&amortization
chargeduringcurrent year¥m

Buildings

45

5

-

50

21

5

29

Tools,
furnitureandfixtures

32

5

-

37

27

4

10

Total

77

10

-

87

48

9

39

Sales
rights-43,963-43,963611

611

43,352

Software

14

13

-

27

11

2

16

Other

0

-

-

0

-

-

0

Total

14

43,976-43,990622

613

43,368Note 1

Property,plant andequipment

Intangible
assets

Accumulated

Balanceat end ofcurrent
year

depreciation

Note 1Netbalanceat end ofcurrentyear¥mNotes:
1. The balances at the beginning and end of the current period are based on acquisition costs.
2. The increase in sales rights in the current period is due to the purchase from Idorsia Pharmaceuticals Japan Ltd.

9.2

Supplementary Schedule of Provisions
Balance at
beginning ofcurrent year¥m

Increase during
current year

Decrease during
current year

Balance at end ofcurrent year

¥m

¥m

¥m

Allowance for doubtful accounts

2,918

400

-

3,318

Provision for bonuses payable toemployees

69

-

69

-

Provision for share-based payments

721

382

535

568

Account title

9.3 Components of Major Assets and Liabilities
This information is omitted as consolidated financial statements have been prepared.
9.4 Others
Not applicable.

- 187 -

Sosei Group Corporation
Section 6. Stock-Related Information relating to the Parent Company
Accounting period
From January 1 to December 31
General shareholders
Held in Marchmeeting
Record date
December 31
Record date for distribution of June 30 (Interim dividends)
surplus
December 31 (Year-end dividends)
Number of shares
100 sharesconstituting one unit
Purchase of shares less than
one unit
Handling office(Special accounts)
4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo
Stock Transfer Agency Business Planning Department
Sumitomo Mitsui Trust Bank, Limited
Transfer agent(Special accounts)
4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo
Sumitomo Mitsui Trust Bank, Limited
Purchasing fee
FreeMethod of public noticeElectronic public notice. However, if the Company is unable to makeelectronic public notice due to an accident or any other compelling
reason, it will make an alternative public notice in “The Nikkei”
newspaper.
Public notices will be posted on the Company’s website:
https://www.soseiheptares.com/

Special benefit for
Shareholders

Not applicable.

Notes:The Company’s shareholders may not exercise any rights for shares less than one unit except for the following:(1) Rights set forth in items of Article 189, paragraph 2 of the Companies Act.
(2) Right to receive an allocation of shares for subscription or stock acquisition rights for subscription.
(3) Right to request sale of shares less than one unit as provided in the previous article.

- 188 -

Sosei Group Corporation
Section 7. Reference Information Relating to the Filing Company
1 Information on Filing Company’s Parent Company
The Company does not have a parent company.
2 Other Reference Information
From the beginning of this financial year until the filing date of this Annual Securities Report, theCompany has filed the following documents.
2.1 Annual Securities Report and Appendices, and Written Confirmation
Filed with Director General of Kanto Local Finance Bureau on March 23, 2023
Accounting period: 33rd Term (January 1, 2022 – December 31, 2022)
2.2 Internal Control Report and Appendices
Filed with Director General of Kanto Local Finance Bureau on March 23, 2023
Accounting period: 33rd Term (January 1, 2022 – December 31, 2022)
2.3 Quarterly Report and Written Confirmations
Filed with Director General of Kanto Local Finance Bureau on May 12, 2023
The 34th Term First Quarter (January 1, 2023 – March 31, 2023)
Filed with Director General of Kanto Local Finance Bureau on August 8, 2023
The 34th Term Second Quarter (April 1, 2023 – June 30, 2023)
Filed with Director General of Kanto Local Finance Bureau on November 10, 2023
The 34th Term Third Quarter (July 1, 2023 – September 30, 2023)
2.4 Extraordinary Reports
Filed with Director General of Kanto Local Finance Bureau on July 27, 2023
Extraordinary Report based on Article 19, paragraph 2, item (ⅷ-2) (Decision to acquire a
subsidiary) of the Cabinet Office Ordinance on Disclosure of Corporate Information, etc.
Filed with Director General of Kanto Local Finance Bureau on November 28, 2023
Extraordinary Report based on Article 19, paragraph 1 and Article 19, paragraph 2, item (i)(Overseas Recruitment and Issuance of Euro-yen Denominated Convertible Bonds due 2028
through an International Offering) of the Cabinet Office Ordinance on Disclosure of Corporate
Information, etc.
2.5 Amendment to Extraordinary Reports
Filed with Director General of Kanto Local Finance Bureau on November 29, 2023
Amendment related to the Extraordinary Reports filed on November 28, 2023

- 189 -

Sosei Group Corporation
Section 7. Reference Information Relating to the Filing Company
2 Other Reference Information (continued)
2.6 Securities Registration Statement (Reference Method)
Filed with Director General of Kanto Local Finance Bureau on April 7, 2023
(Securities Registration Statement (Reference Method) related to allotment to other eligible
persons)
Filed with Director General of Kanto Local Finance Bureau on November 28, 2023
(Securities Registration Statement (Reference Method) related to allotment to other eligible
persons)
2.7 Amendment to Securities Registration Statement (Reference Method)
Filed with Director General of Kanto Local Finance Bureau on May 12, 2023
Amendment related to the Securities Registration Statement (Reference Method) filed on April 7,
2023
Filed with Director General of Kanto Local Finance Bureau on July 27, 2023
Amendment related to the Securities Registration Statement (Reference Method) filed on April 7,
2023
Filed with Director General of Kanto Local Finance Bureau on August 4, 2023
Amendment related to the Securities Registration Statement (Reference Method) filed on April 7,
2023
Filed with Director General of Kanto Local Finance Bureau on August 8, 2023
Amendment related to the Securities Registration Statement (Reference Method) filed on April 7,
2023
Filed with Director General of Kanto Local Finance Bureau on November 10, 2023
Amendment related to the Securities Registration Statement (Reference Method) filed on April 7,
2023
Filed with Director General of Kanto Local Finance Bureau on November 28, 2023
Amendment related to the Securities Registration Statement (Reference Method) filed on April 7,
2023
Filed with Director General of Kanto Local Finance Bureau on November 29, 2023
Amendment related to the Securities Registration Statement (Reference Method) filed on April 7,
2023
Filed with Director General of Kanto Local Finance Bureau on November 29, 2023
Amendment related to the Securities Registration Statement (Reference Method) filed on
November 28, 2023
Filed with Director General of Kanto Local Finance Bureau on February 13, 2024
Amendment related to the Securities Registration Statement (Reference Method) filed on April 7,
2023- 190 -

Sosei Group Corporation
Part 2: Information about a Company which Provides a Guarantee to theFiling Company
Not applicable.

- 191 -

Independent Auditor’s Report

The Board of Directors
Sosei Group Corporation

The Audit of the Consolidated Financial Statements
OpinionWe have audited the accompanying consolidated financial statements of Sosei Group
Corporation and its subsidiaries (the Group), which comprise the consolidated balance sheet as
at December 31, 2023, and the consolidated statements of profit or loss and othercomprehensive income, changes in equity, and cash flows for the year then ended, and notes tothe consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at December 31, 2023, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of theGroup in accordance with the ethical requirements that are relevant to our audit of the consolidated
financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordancewith these requirements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of the audit of the consolidated financial statements as a whole, and informing the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.
Fair value measurement of the licenses recognized in the business combination
Description of Key Audit Matter
As described in Note 7 “Business Combinations” and Note 11 “Goodwill and intangible assets” tothe consolidated financial statements, the Group acquired the entire share capital of Idorsia
Pharmaceuticals Japan Ltd. (“IPJ”) and Idorsia Pharmaceuticals Korea Co., Ltd. (“IPK”) as well as
licenses for PIVLAZ and daridorexant in Japan and APAC (excluding China), among others, on July20, 2023 for a consideration of JPY 64,440 million and included IPJ and IPK as consolidated
subsidiaries from that date.
The Group accounted for the business combination in accordance with IFRS 3 “Business
Combinations”, and recognized and measured the identifiable assets acquired and liabilities assumed

at their fair values as of the acquisition date. The acquisition date fair values of product-related
intangible assets and in-process research and development related to the aforementioned licenses are
JPY 38,138 million and JPY 5,825 million, respectively.
Since projections of the market size and market share of related pharmaceutical products as well as
the discount rate used in the fair value measurement of intangible assets relating to the licenses involve
high estimation uncertainty and management subjectivity, management judgements significantly affectfair value measurement amounts.
Since fair value measurement of the identifiable assets, which forms the basis for purchase priceallocation, involves high estimation uncertainty and management subjectivity, and requires a highdegree of expertise and experience, we have determined that the fair value measurement of the licenses
recognized in the business combination to be a key audit matter.
Auditor’s Response
We performed the following procedures, among others, regarding fair value measurement of thelicenses recognized in the business combination.
・ considered the purpose and reasonableness of the business combination transactions throughinquiries of management and inspected related contracts.
・ performed the following procedures relating to the valuation of intangible assets associatedwith the licenses.
・ made inquiries to management and business managers regarding the projected market size of
related pharmaceutical products and compared such projections with available external data.
・ considered the consistency of the market share projections used in the model with the Group’sview on the competitive advantage of related pharmaceutical products, and the Group’s sales
strategy. Such views were obtained through inquiries of management and business managers.
In addition, we compared the market share projections with available external data.
・ involved valuation specialists from our network firm as specialists used by auditors to assess
the valuation model and discount rate used by management.

Valuation of goodwill and intangible assets relating to the Pharmaceutical Product Sales CGU
Description of Key Audit Matter
As described in Note 7 “Business Combinations” and Note 11 “Goodwill and intangible assets” to theconsolidated financial statements, the Group identified sales of PIVLAZ and daridorexant(“Pharmaceutical Product Sales”) as a cash-generating unit (“CGU”) and recognized goodwill in theamount of JPY 8,018 million in the consolidated balance sheet as at December 31, 2023 as a result of
the acquisition of IPJ and IPK on July 20, 2023. Moreover, the Group recognized product-related
intangible assets and in-process research and development of JPY 43,352 million relating to the licenses
recognized in the business combination and, combined with goodwill, they amount to JPY 51,370
million and represent 33% of total consolidated assets.
The Pharmaceutical Product Sales CGU is tested for impairment annually or whenever there is anindication of impairment. In the impairment test, when the recoverable amount is less than the carrying
amount, the carrying amount is reduced to the recoverable amount, and the resulting decrease in the
carrying amount is recognized as an impairment loss.
The Group determined the recoverable amount of the CGU in the annual impairment test performed
for the year ended December 31, 2023 by calculating its value in use. The future cash flows used formeasuring value in use are estimated based on a pharmaceutical product sales business plan approvedby management. Significant assumptions used in estimating value in use are projections of the market
size and market share of related pharmaceutical products, projections of related selling expenses andresearch and development expenses, the growth rate for the periods after the business plan as well as
the discount rate. Since the business plan and growth rate for the periods after the business plan involve
high estimation uncertainty and management subjectivity, management judgements significantly affectestimated future cash flows. Moreover, selecting the appropriate calculation method and input data forthe discount rate, which is an assumption used to measure value in use, requires a high degree ofexpertise and experience in valuations.
Considering the monetary materiality of goodwill and intangible assets relating to the Pharmaceutical
Product Sales CGU to the consolidated financial statements as well as the high estimation uncertainty
and management subjectivity, and the high degree of expertise and experience involved in themeasurement of value in use, we determined the valuation of the goodwill and intangible assets to be a
key audit matter.
Auditor’s Response
We performed the following procedures, among others, to assess the valuation of goodwill andintangible assets relating to the Pharmaceutical Product Sales CGU.
・considered the consistency between the business plan used in estimating future cash flows and thebusiness plan approved by management.
・compared the business plan prepared in the prior fiscal year with the actual results for the current
fiscal year to evaluate the accuracy of the Group’s business plan.
・considered the following significant assumptions which form the basis for the business plan.
・ made inquiries to management and business managers regarding the projected market size of
related pharmaceutical products and compared such projections with available external data.
・ considered the consistency of the market share projections used in the model with the Group’sview on the competitive advantage of related pharmaceutical products and the Group’s sales
strategy. Such views were obtained through inquiries of management and business managers.
In addition, we compared the market share projections with available external data.
・ considered the consistency of projections of related selling expenses and research anddevelopment expenses with the Group’s projected sales plan and growth rate for the periods
after the business plan.
・involved valuation specialists from our network firm as specialists used by auditors to assess thevaluation model, discount rate and growth rate for the periods after the business plan used bymanagement.
・ performed stress testing using our own independent assumptions for the significant assumptions
underlying the future cash flows.

Valuation of goodwill and core technology related to the Pharmaceutical Drug Discovery CGU
Description of Key Audit Matter

As described in Note 11 “Goodwill and intangible assets” to the consolidated financial statements, theGroup has identified the discovery of drugs targeting G-protein-coupled receptors (“Pharmaceutical
Drug Discovery”) as a cash-generating unit (“CGU”) and recognized goodwill in the amount of JPY
11,179 million in the consolidated balance sheet as at December 31, 2023. Moreover, the Group
recognized core technology in the amount of JPY 8,465 million, and combined with goodwill, theyamount to JPY 19,644 million and represent 12% of total consolidated assets.
The Pharmaceutical Drug Discovery CGU is tested for impairment annually or whenever there is anindication of impairment. In the impairment test, when the recoverable amount is less than the carrying

amount, the carrying amount is reduced to the recoverable amount, and the resulting decrease in the
carrying amount is recognized as an impairment loss.

The Group determined the recoverable amount of the CGU in the annual impairment test performed
for the year ended December 31, 2023 by calculating its fair value less costs of disposal. The future
cash flows used for measuring fair value less costs of disposal were estimated based on a
Pharmaceutical Drug Discovery business plan approved by management and reflects assumptions thatmarket participants would use when pricing the asset. Significant assumptions underlying the future
cash flows include the timing of milestone achievements such as product launches, the probability ofsuccess of Research and Development (“R&D”) activities, the projected revenue plan including
expected future product sales, and the discount rate. Since the business plan and probability of successinvolve high estimation uncertainty and management subjectivity, management judgements
significantly affect estimated future cash flows.
Moreover, selecting the appropriate calculation method and input data for the discount rate, which isan assumption used in measuring fair value less costs of disposal, requires a high degree of expertiseand experience in valuations.
Therefore, since the measurement of fair value less costs of disposal involves high estimation
uncertainty and management subjectivity, and requires a high degree of expertise and experience, we
determined the valuation of goodwill and core technology relating to the Pharmaceutical Drug
Discovery CGU to be a key audit matter.
Auditor’s Response
We performed the following procedures, among others, to assess the valuation of goodwill and coretechnology relating to the Pharmaceutical Drug Discovery CGU.
・considered the consistency between the business plan used in estimating future cash flows and thebusiness plan approved by management.
・compared the business plan used in estimating future cash flows in the prior fiscal year with theactual results for the current fiscal year to evaluate the accuracy of the Group’s business plan.
・ considered the timing of milestone achievements including product launches as well as theprobability of success of R&D activities by comparing such assumptions with progress in R&D
activities, which we evaluated through inquiries of project managers responsible for R&D
activities and inspection of relevant meeting minutes, as well as available external data.
・compared the projected revenue plan including expected future product sales, which forms thebasis for calculating sales milestone revenues and royalty income, with relevant contracts andavailable external data, and performed recalculations.
・involved valuation specialists from our network firm as specialists used by auditors to assess thediscount rate used by management. The valuation specialists independently estimated the discountrate using available external data and compared it with the discount rate selected by management.
・performed stress testing using our own independent assumptions for the significant assumptions
underlying the future cash flows.

Other Information
The other information comprises the information included in the Annual Securities Report that
contains audited consolidated and non-consolidated financial statements but does not include theconsolidated and non-consolidated financial statements and our auditor’s reports thereon.
Management is responsible for preparation and disclosure of the other information. The Audit
Committee is responsible for overseeing the Group’s reporting process of the other information.
Our opinion on the consolidated financial statements does not cover the other information and
we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is toread the other information and, in doing so, consider whether the other information is materiallyinconsistent with the consolidated financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and the Audit Committee for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with IFRSs, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by IFRSs, mattersrelated to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Group or to cease operations, or has no realistic alternative but todo so.
The Audit Committee is responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the consolidated financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent theunderlying transactions and events in a manner that achieves fair presentation in accordancewith IFRSs.
・ Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with the ethicalrequirements regarding independence that are relevant to our audit of the consolidated financial
statements in Japan, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken toeliminate threats or safeguards applied to reduce threats to an acceptable level.
From the matters communicated with the Audit Committee, we determine those matters thatwere of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because theadverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.

Fee-related Information
The fees for the audits of the financial statements of Sosei Group Corporation and its
subsidiaries and other services provided by us and other EY member firms for the year ended
December 31, 2023 are presented in paragraph (4.3) titled “Status of Audits” in Section 4“Corporate Governance” included in Item 4 “Information about the Filing Company” in Part 1of the annual securities report for the year ended December 31, 2023 of the Group.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
Ernst & Young ShinNihon LLC
Tokyo, Japan
March 27, 2024

Kiyoto Tanaka
Kiyoto Tanaka
Designated Engagement Partner
Certified Public Accountant

Hiroyuki Nakada
Hiroyuki Nakada
Designated Engagement Partner
Certified Public Accountant

Independent Auditor’s Report

The Board of Directors
Sosei Group Corporation

The Audit of the Non-Consolidated Financial Statements
OpinionWe have audited the accompanying non-consolidated financial statements of Sosei Group
Corporation (the Company), which comprise the non-consolidated balance sheet as at December
31, 2023, and the non-consolidated statements of profit or loss and changes in net assets for theyear then ended, significant accounting policies, other notes to the non-consolidated financial
statements and supplementary schedules.
In our opinion, the accompanying non-consolidated financial statements present fairly, in allmaterial respects, the non-consolidated financial position of the Company as at December 31,
2023, and its non-consolidated financial performance for the year then ended in accordance withaccounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Non-Consolidated Financial Statements section of our report. We are independentof the Company in accordance with the ethical requirements that are relevant to our audit of the
non-consolidated financial statements in Japan, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the non-consolidated financial statements of the current period. These matterswere addressed in the context of the audit of the non-consolidated financial statements as awhole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion onthese matters.

Valuation of shares of subsidiaries and associates
Description of Key Audit Matter
As described in Note 3 “Significant Accounting Estimates” to the non-consolidated financial statements,
shares of subsidiaries and associates recognized in the amount of JPY 58,480 million in the nonconsolidated balance sheet as at December 31, 2023 mainly represents the Company’s investment in
Heptares Therapeutics Ltd. (“Heptares”) and Idorsia Pharmaceuticals Japan Ltd. (“IPJ”), which are
wholly owned unlisted subsidiaries, and represents 41% of total non-consolidated assets.
A valuation loss is recorded on non-marketable securities, such as investments in unlisted subsidiaries,
when the net asset value decreases significantly due to deterioration of the financial position of the
security issuer, unless there is sufficient evidence to support its recoverability.
The net asset value of the investment in Heptares and IPJ, is calculated based on the net assets of thefinancial statements of Heptares and IPJ and includes the valuation differences of intangible assets (coretechnology) held by subsidiaries as well as goodwill recognized upon acquisition.
As described in Note 11 “Goodwill and intangible assets” to the consolidated financial statements, theCompany recognized intangible assets (core technology) and goodwill in the amount of JPY 8,466
million and JPY 24,623 million, respectively, in the consolidated balance sheet as at December 31,
2023.
Accordingly, high estimation uncertainty and management judgements relating to the impairment ofintangible assets described in key audit matters “Valuation of goodwill and core technology related to
the Pharmaceutical Drug Discovery CGU” and “Valuation of goodwill and intangible assets in cashgenerating unit related to Pharmaceutical Product Sales CGU” in the audit report for the consolidated
financial statements significantly affect the calculation of the net asset value.
Therefore, since the calculation of the net asset value involves high estimation uncertainty andmanagement judgements, we determined the valuation of shares of subsidiaries and associates to be a
key audit matter.
Auditor’s Response
We performed the following procedures, among others, to assess the valuation of shares of subsidiaries
and associates.
・evaluated through recalculation whether the net asset value was calculated based on the net assets ofthe financial statements of Heptares and IPJ and included the valuation difference of intangible assets(core technology) as well as goodwill recognized upon acquisition.
・considered the consistency of the net assets of the financial statements of Heptares and IPJ and thevaluation difference of intangible assets (core technology), which comprise the net asset value ofHeptares and IPJ, with the amounts evaluated during the audit of the consolidated financial statements.
・compared the carrying amount of shares of subsidiaries and associates with the net asset value.
・performed procedures described in the Auditor’s Response section of key audit matters “Valuationof goodwill and core technology related to the Pharmaceutical Drug Discovery CGU ” and“Valuation of goodwill and intangible assets related to the Pharmaceutical Product Sales CGU” in
the audit report for the consolidated financial statements for management judgements relating to theimpairment of intangible assets (core technology) and goodwill which significantly affect the net asset
value calculation.

Other Information
The other information comprises the information included in the Annual Securities Report that
contains audited consolidated and non-consolidated financial statements but does not include theconsolidated and non-consolidated financial statements and our auditor’s reports thereon.
Management is responsible for preparation and disclosure of the other information. The Audit
Committee is responsible for overseeing the Company’s reporting process of the otherinformation.
Our opinion on the non-consolidated financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the non-consolidated financial statements, our responsibility is toread the other information and, in doing so, consider whether the other information is materiallyinconsistent with the non-consolidated financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and the Audit Committee for the Non-Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of these non-consolidated
financial statements in accordance with accounting principles generally accepted in Japan, andfor such internal control as management determines is necessary to enable the preparation of
non-consolidated financial statements that are free from material misstatement, whether due tofraud or error.
In preparing the non-consolidated financial statements, management is responsible for assessing
the Company’s ability to continue as a going concern and disclosing, as required by accounting
principles generally accepted in Japan, matters related to going concern.
The Audit Committee is responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Non-Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the non-consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these nonconsolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit. We
also:

・ Identify and assess the risks of material misstatement of the non-consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.

Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the non-consolidated financial statements is not expressing an opinion on the effectivenessof the Company’s internal control.

・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the non-consolidated financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the non-consolidated financial
statements, including the disclosures, and whether the non-consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation inaccordance with accounting principles generally accepted in Japan.
We communicate with the Audit Committee regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with a statementthat we have complied with the ethical requirements regarding independence that are relevant toour audit of the non-consolidated financial statements in Japan, and to communicate with them
all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats or safeguards applied to reduce threatsto an acceptable level.
From the matters communicated with the Audit Committee, we determine those matters thatwere of most significance in the audit of the non-consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because theadverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Fee-related Information
Please refer to the Independent Auditor’s Report of the Consolidated Financial Statements.

Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company whichis required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.
Ernst & Young ShinNihon LLC
Tokyo, Japan
March 27, 2024

Kiyoto Tanaka
Kiyoto Tanaka
Designated Engagement Partner
Certified Public Accountant

Hiroyuki Nakada
Hiroyuki Nakada
Designated Engagement Partner
Certified Public Accountant

Unaudited 1

Sosei Group Corporation
Internal Control Report of Management

1. Matters related to the basic framework of internal control over financial reporting
Representative Executive Officer, CEO Christopher Cargill and Executive Officer, CAO Kieran
Johnson are responsible for the development and operation of the Company's internal control overfinancial reporting, and have developed and implemented internal control over financial reporting
based on the basic framework of internal control presented in the “On the Revision of theStandards and Practice Standards for Management Assessment and Audit concerning Internal
Control Over Financial Reporting (Council Opinions)”issued by the Business Accounting Council.
Since internal control can only provide reasonable assurance that each basic element of internal
control is functioning effectively in a combined and unified manner, there is a possibility thatinternal control over financial reporting cannot completely prevent or detect misstatements infinancial reporting.
2. Matters related to the scope of assessment, reference date and assessment procedures
The reference date for the assessment of internal control over financial reporting for the current
financial period was December 31, 2023, the end of the current financial year, and the assessment
was performed using the standard for evaluation of internal control over financial reporting whichis generally accepted as fair and appropriate.
In this evaluation, we evaluated those internal controls which could significantly impact overall
consolidated financial reporting [“Company level controls”]. Based on that, business processes
were selected for evaluation, and through analysis of those processes we identified key controls
which could significantly impact the reliability of financial reporting. We then evaluated theeffectiveness of those key controls by evaluating the design and operation of such controls.
The scope of our evaluation of internal control over financial reporting was determined for theCompany and its consolidated subsidiaries from the viewpoint of their impact on the reliability offinancial reporting after considering the significance of both monetary and qualitative effects.
Based on the results of our evaluation of Company level controls, we determined the required
scope for our evaluation of internal controls relating to business processes. In addition, the scopeof Company level controls covered all business locations except those which we determined to beminor from monetary and qualitative materiality perspectives.
With regard to the scope of our evaluation of internal control related to business processes, we
designated three business locations as “significant business locations” whose aggregate sales andtotal assets, respectively, in the current financial period (before the elimination of inter-company
transactions) exceed two-thirds of consolidated sales and total assets.
For the locations designated as significant, we evaluated the business processes relating to theaccounts most significant to their underlying business activities such as sales, accounts receivable,
inventory and R&D expenses. Notwithstanding this, we evaluated the business processes relating
to important accounts requiring estimates and forecasts which are likely to cause significant
misstatements if not performed properly, for locations designated as significant as well as otherlocations, since the possible impact of those processes on financial reporting could be material.

1: This document has been translated from the Japanese original for reference purposes only. Accordingly, this document is describedas ‘unaudited’ whereas the Internal Control Report of Management in the Japanese original has been audited.
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Unaudited 1

Sosei Group Corporation
Internal Control Report of Management

3. Matters related to assessment results
As a result of the assessment described above, we determined that the internal control overfinancial reporting was functioning effectively as at the closing date of the current financial year.
4. Supplementary information
Nothing reportable.
5. Special notes
Nothing reportable.

1: This document has been translated from the Japanese original for reference purposes only. Accordingly, this document is describedas ‘unaudited’ whereas the Internal Control Report of Management in the Japanese original has been audited.
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Sosei Group Corporation
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