English translation

March 23, 2023

Annual Report(January 1, 2022 through December 31, 2022)

1. Current Status of the Corporate Group(1) Business conditions and operating results
From the fiscal year ended December 31, 2022, the Group began preparing consolidated financial statements inconnection with the commencement of operations at its wholly-owned U.S.-based subsidiary, SymBio Pharma USA,
Inc. (President: Carolyn Yanavich), which serves as a strategic base for our global operations as a specialty
pharmaceutical company. As reference, we have provided year-on-year comparisons with the non-consolidated
financial statements in the same period last year, since there have been no substantial changes in our businesscomposition.
(i) Business results
In December 2020, the Group began selling TREAKISYM® (generic name: bendamustine hydrochloride or
bendamustine hydrochloride hydrate) through its own sales organization. This was a critical step of the Group to
attain profitability in FY 2021, which was a top priority for the fiscal year.
The Group has assigned medical representatives nationwide to establish a highly productive salesforce that canidentify local needs and plan detailed proposals. We also deployed hematology experts in each region of operation
to provide scientific information. To achieve nationwide distribution, we have entered into distribution agreementswith Suzuken Co., Ltd. and Toho Pharmaceutical Co., Ltd. with both companies as exclusive distributors. We arealso working with S.D. Collabo Co., Ltd. and have established two logistics centers, one in Eastern Japan and theother in Western Japan.
In February 2022, the Group obtained approval for a partial change to the marketing authorization of the readyto-dilute (RTD) liquid formulation of TREAKISYM® to add rapid infusion (RI) administration. Compared to thefreeze-dried (FD) formulation, the RTD formulation of TREAKISYM® reduces the time required for thecomplicated dissolution process. RI administration further reduces the infusion time to 10 minutes, benefitting
both patients and healthcare providers. The reduction in infusion volume also lowers the volume of saline solution
and, accordingly, the amount of salt (sodium chloride) used.
Conversion to the RI administration proceeded smoothly, with over 80% of medical institutions switching to RI
administration as of the end of December 2022.
As a result, net sales totaled 10,008,338 thousand yen (+21.2% year on year). Despite sales activities being
constrained by delays in treatment and continued restrictions on facility visits due to the spread of COVID-19, net
sales rose due to the approval for the use of TREAKISYM® in the bendamustine-rituximab (BR) therapy and inpolatuzumab vedotin plus bendamustine-rituximab (Pola+BR) therapy to treat recurrent/refractory diffuse large
B-cell lymphoma (r/r DLBCL).
Selling, general and administrative expenses totaled 5,636,278 thousand yen (+1.1% year on year). This amountincludes research and development expenses of 2,554,799 thousand yen (+47.2% year on year).
As a result, in FY 2022, operating profit was 1,963,625 thousand yen (versus 1,016,001 thousand yen in FY2021) and ordinary profit was 1,999,878 thousand yen (versus 1,001,133 thousand yen in FY 2021). Profit
attributable to owners of parent amounted to 1,179,238 thousand yen (versus 2,032,203 thousand yen in the same
period of FY 2021, due in part to the recording of 1,275,759 thousand yen in deferred tax assets). As cumulative
total sales of the RTD formulation of TREAKISYM® reached 11,000,000 thousand yen in FY 2022, the Groupbooked 550,000 thousand yen in sales milestone payments to Eagle Pharmaceuticals, Inc. (head office: New Jersey,
U.S.; hereinafter “Eagle”) under cost of sales.
In February 2022, generic versions of TREAKISYM® were approved for manufacturing and marketing in Japan.
Given the potential infringement of Eagle’s patents related to TREAKISYM® in Japan which are exclusively
licensed to the Company, the Company in coordination with Eagle notified four generic makers of potential patent
infringement and requested they take appropriate measures to avoid such infringement. In December 2022, Eagle
and the Company commenced the litigation seeking an injunction against the manufacture and sale of Pfizer’s andTowa’s generic version of TREAKISYM® and compensation for damages arising from the infringement.
Segment information has been omitted since the Group operates within a single segment, which includes the5research and development, manufacturing, and marketing of pharmaceutical drugs and other related activities.
(ii) Research and development activities
During the fiscal year under review, we conducted the following research and development activities in each ofour development pipelines.
(a) Anticancer agents: SyB L-0501 (FD formulation), SyB L-1701 (RTD formulation), and SyB L-1702 (RIadministration) (generic name: bendamustine hydrochloride or bendamustine hydrochloride hydrate, trade
name: TREAKISYM®)
For the RI administration, the Group completed clinical studies on safety and a partial change application wasapproved in February 2022, enabling the use of RI injection for all approved indications of the RTD formulation
in-licensed from Eagle.
The Group will actively conduct further research on TREAKISYM®, such as ongoing clinical research with
Saitama Medical University and joint research with Kyoto University, to explore new possibilities of the drug.
(b) Anticancer agents: SyB L-1101 (intravenous formulation) and SyB C-1101 (oral formulation) (generic name:rigosertib sodium)For rigosertib in-licensed from Onconova Therapeutics, Inc. and TREAKISYM®, the Group is searching for
new indications as well as new applications for the drugs used in combination with each other or with otherexisting drugs, through joint research and the offering of academia-industry collaborative courses with the
University of Tokyo.
(c) Antiviral drug: SyB V-1901 (generic name: brincidofovir [BCV])In the development of the intravenous and oral formulations of antiviral drug brincidofovir (SyB V-1901;
hereinafter “BCV IV” and “BCV Oral”) , in-licensed from Onconova with a view to global rollout, the Group has
been carrying out joint research with top research institutions of each specialized field in Japan and overseas inlight of the drugs’ broad effectiveness against dsDNA viruses.
The Group has decided to prioritize the global development of BCV IV primarily in Japan, the U.S., and Europe,
targeting disseminated AdV infections occurring after hematopoietic stem cell transplantation, a niche area with ahigh unmet medical need. In March 2021, the Group filed an Investigational New Drug (IND) application with the
FDA to conduct a Phase II clinical trial primarily in pediatric patients suffering from AdV infections (also including
adults). This development program was granted Fast Track designation by the FDA in April 2021, and theinvestigational drug was administered to the first patient in August 2021. As of December 31, 2022, 20 patientswere enrolled.
BK virus (BKV) infection after kidney transplantation is a disease with serious consequences for the recipient,the donor, the medical practitioner, and the society, due to the risk of impaired renal function and loss of thetransplanted kidney (graft loss). The Group submitted a clinical trial notification for a global Phase II study inpatients infected with BKV after kidney transplantation to the Pharmaceuticals and Medical Devices Agency(PMDA) of Japan in May 2022 and filed another notification with the Therapeutic Goods Administration (TGA)of Australia in August 2022, and the investigational drug was administered to the first patient in December 2022.
The Group is also looking to develop BCV to treat multiple sclerosis, an intractable disease that has recently
been proven to be associated with Epstein-Barr virus (EBV). In August 2022, the Group entered into acollaboration agreement with the National Institute of Neurological Disorders and Stroke (NINDS), part of the
National Institutes of Health (NIH) in the U.S., for the transfer of materials for evaluation of BCV’s potential
antiviral effect on EBV.
Among double-stranded DNA viruses (dsDNA), polyomaviruses are known to cause serious diseases throughtheir infection. As existing antiviral drugs show little efficacy, the development of an effective treatment is eagerly
awaited. In November 2022, the Group entered into Material Transfer Agreement with Penn State College ofMedicine whereby the Group will provide BCV for use in a non-clinical study to evaluate the efficacy of BCV ina mouse model of polyomavirus infection.
Some double-stranded DNA viruses, such as HSV1 and VZV, are directed against cranial nerve tissues and are
known to cause serious diseases, including Alzheimer's disease, in various cranial nerve areas due to infection
caused by their reactivation. In December 2022, the Group entered into a Sponsored Research Agreement with
Tufts University to conduct joint research on BCV. This joint research is a nonclinical study that will evaluate theefficacy of BCV in a herpes simplex virus (HSV) infection model using a 3D (three-dimensional) brain model
established by Tufts University.
In addition to having its strong antiviral effect, BCV also is expected to have an antitumor effect, and the Groupis exploring new indications such as EBV-positive lymphoma, refractory brain tumors, and other cancers via
research collaborations with the National Cancer Centre Singapore (NCCS) and University of California San
Francisco (UCSF) Brain Tumor Center. In December 2022, the results of collaborative research with NCCS on thetherapeutic efficacy of BCV in the treatment of NK/T-cell lymphoma for which no effective treatment is currently

6

available were presented by Dr. Jason Yongsheng Chan at the 64th American Society of Hematology (ASH) Annual
Meeting in New Orleans.
In September 2022, Chimerix Inc. announced that it has completed the closing of the sale of BCV to Emergent
BioSolutions Inc. (head office: Maryland, U.S.). The Group’s exclusive worldwide development, manufacturing,and marketing rights to BCV for all indications except orthopox virus infections (including smallpox andmonkeypox) will not be affected.
(iii) Business outside JapanThe Group appointed Dr. Carolyn Yanavich, President and Chief Operating Officer of SymBio Pharma USA,
Inc., as Chief Development Officer of the Group to further expand our global development structure and make
SymBio Pharma USA, Inc. as the driving force behind the international clinical trials, spearheading andaccelerating the global development plan for BCV.
(iv) Licensing of new drug candidates
The Group is moving ahead with global development of brincidofovir, an antiviral drug in-licensed in 2019. At
the same time, the Group continues to evaluate new drug candidates for potential in-licensing. Through these
efforts, the Group aims to create medium- to long-term business value as a profitable biopharmaceutical company
with growth potential.
(v) Capital investment
The total amount of capital expenditures during the fiscal year under review was 47,559 thousand yen, mainly
consisting of office investments and the purchase of appliances, network devices, and business software.

(2) Fundraising status

In the consolidated fiscal year under review, the Group raised 662,000 thousand yen through the issue of newshares with the CVI Investments, Inc. as the allottee, and 13,760 thousand yen through the issue of the 58th shareacquisition rights (total issue price: 13,760 thousand yen, total value of shares to be issued when the share acquisitionrights are exercised in full: 1,570,000 thousand yen).

(3) Status of assets and profit and loss
(Unit: thousands of yen)
FY 2022
The 18th Term

Fiscal year

FY 2019
FY 2020
FY 2021
The 15th Term
The 16th Term
The 17th Term
(Consolidated fiscal year)
Classification
Net sales———
10,008,338
Operating profit (loss)—
1,963,625——
Ordinary profit (loss)———
1,999,878
Profit (loss) attributable to owners———
1,179,238
of parent
Profit (Loss) per share (yen)
—
—
—
30.20
Total assets———
10,433,347
Net assets
8,506,092———
Net assets per share (yen)———204.83(Note) Figures for the 17th and prior terms have been omitted as the Company began preparing consolidated financial statementsfrom the 18th term (the consolidated fiscal year under review).

(4) Issues to be addressed by the GroupThe Group is committed to focusing on the following key management objectives.

(i) Further expansion of the pipeline
In order to enhance the enterprise value as a specialty pharmaceutical company, we need to expand the pipeline
through ongoing in-licensing of new drug candidates for development.
The Group is conducting or planning development of the following anticancer agents: SyB L-0501, SyB L1101, SyB C-1101, SyB L-1701, SyB L-1702, and antiviral drug SyB V-1901. Currently we are in discussion
with counterparties regarding the in-licensing of several new drug candidates, and will continue with active efforts
to in-license new drug candidates for development in order to further expand our pipeline.
(ii) Life cycle management of products in the existing pipeline7In order to enhance the enterprise value, not only in-licensing new drug candidates but also promoting productlife cycle management is important. Therefore, it is critical to maximize returns from each drug underdevelopment through indication expansion after the in-licensed drugs’ initial approval.
TREAKISYM® is approved for manufacturing and marketing in Japan for the indications ofrecurrent/refractory low-grade non-Hodgkin’s lymphoma and mantle cell lymphoma, chronic lymphocytic
leukemia, and first-line treatment of low-grade non-Hodgkin’s lymphoma and mantle cell lymphoma.
TREAKISYM® was also granted approval for recurrent/refractory diffuse large B-cell lymphoma (r/r DLBCL)in March 2021. In addition, the Company in-licensed the RTD formulation and RI injection of TREAKISYM®
from Eagle Pharmaceuticals in efforts to maximize the business value of TREAKISYM® by promoting the productlife cycle management of the product. For the RTD formulation, the Company obtained manufacturing andmarketing approval in September 2020, and launched the product in January 2021. For the RI injection, theCompany filed a partial change application in May 2021, and obtained approval in February 2022.
With respect to rigosertib, U.S. licenser Onconova had been conducting a global Phase III study (INSPIRE
study) of the drug in patients with myelodysplastic syndromes (MDS), but in August 2020, it announced that the
primary endpoint of the study—improved overall survival compared to physician’s choice of treatment—had notbeen met. The Company is in charge of clinical development in Japan and is reviewing ways to utilize findings
from the additional analysis of the INSPIRE study in future development of rigosertib.
With the aim of maximizing the business value of rigosertib and TREAKISYM®, the Company intends to
conduct joint research with the University of Tokyo, to investigate the efficacy of the drugs used in combination
as well as used in combination with other existing drugs and look for new indications.
The Company has proceeded with the global development of antiviral drug brincidofovir targeting adenovirus
infections occurring after hematopoietic stem cell transplantation and BK virus infections occurring after kidneytransplantation, areas with a high unmet medical need, ahead of any other indications. It has also begun to explore
the potential of the drug in treating virus-induced cancers. We aim to maximize earnings through managing thelifecycle of our products as we transform into a specialty pharmaceutical company with the capacity to expand
into global markets. Further, by accumulating data from joint research with the National Institutes of Health andTufts University, both in the US, we will investigate the effectiveness of brincidofovir in treating various dsDNA
virus infections in humans and expand its indication to multiple viral infections. In doing so, we aim to maximize
the market and business value of brincidofovir.
(iii) Countermeasures to generic drugs
In February 2022, four pharmaceutical companies obtained approval to manufacture and market genericversions of the RTD formulation of TREAKISYM®. Given the potential infringement of the licensor Eagle
Pharmaceuticals, Inc.’s patent and the exclusive patent license granted to SymBio, the Company, after discussing
with Eagle, notified the four companies of potential patent infringement in writing and requested they takeappropriate actions. In December 2022, the Company and Eagle jointly filed a lawsuit against Pfizer Japan Inc.
and Towa Pharmaceutical Co., Ltd., seeking an injunction against the manufacture and sale of the generic versionsof TREAKISYM® and claiming damages based on patent infringement.
(iv) Global expansion for further growth
In addition to Japan, the Group identifies China, South Korea, Taiwan, and Singapore as strategic regions andhas moved forward with business development in Asia. However, with expanding medical expenditures due tothe aging population in Japan, and the advent of the “era of generic drugs comprising 80% of all drugs dispensed”
as a governmental policy of Japan, the business environment for innovative drug developers is expected to remain
extremely challenging. Such a policy may also be implemented by other Asian countries.
Under these circumstances, the Group will promote global expansion aiming for further growth. Utilizing its
experience fostered through its business in Asia, the Company will search, evaluate, and negotiate concerning
new drug candidates that can follow antiviral drug brincidofovir in order to acquire their rights on a global scale.
(v) Securing personnel
The Group places the highest priority on personnel as the Company’s principal management resource. Without
talent, we cannot make superior achievements in terms of exploring, developing, and providing information
concerning new drugs; nor can we roll out these new drugs on a global scale. We have been continually recruiting
talented people; especially after being listed, we have recruited the best and brightest people in order to strengthen
the management organization. Going forward, we plan to continue to further strengthen our human resources by
providing on-the-job training and employee development programs.
(vi) Financial issue
It is necessary for the Group to raise funds required for business activities such as R&D expenditures as pipeline
development and global business expansion progress and as drug candidates increase in number.
Therefore, we make every effort to further strengthen the financial base by continually diversifying the methodof fund raising and curtailing costs through tight budget control.

8(5) Major business activities (as of December 31, 2022)

The Group regards underserved therapeutic areas that lack the development of new drugs, despite significant unmet
medical needs, as business opportunities. We develop new drugs with a primary focus on the treatment of rare diseases,
mainly in the areas of oncology, hematology, and multiple viral infections, and conduct integrated business activities
that encompass search for new drug candidates, development, manufacturing, and sales.

(6) Main office and employees(i) Main office (as of December 31, 2022)
Name

Location

Main office

Minato-ku, Tokyo(ii) Employees (as of December 31, 2022)
Classification

Number of employees

Male

92

Female30

Total or average

122

Increase or decrease
from previous fiscal
year-end―

Average age (years)

Average number ofyears of service

52.7

4.3

―

49.6

5.3

―

52.0

4.5

(Notes) 1. Number of employees refers to full time employees.
2. The above number of employees does not include 30 temporary staff (including two at consolidated subsidiary).
3. No comparatives with the previous fiscal year-end have been provided as the Company began preparing consolidated
financial statements from the 18th term (the consolidated fiscal year under review).

(7) Status of significant subsidiaries
Company name

CapitalVoting rights ratio

Main business

SymBio Pharma USA, Inc.

USD1.00

100.0%

Pharmaceutical R&D(8) Main lenders and amount of borrowings (as of December 31, 2022)
Not applicable.

92. Matters Related to Stock (as of December 31, 2022)(1) Total number of authorized shares
Common stock: 41,750,000 shares(2) Total number of shares outstanding

Common stock: 39,518,338 shares (excluding 85,268 shares of treasury stock)(3) Number of shareholders
40,016(4) Major shareholders (10 largest)
Name of shareholder
Number of shares held
Shareholding ratio
Fuminori Yoshida
1,109,700
2.8%
ML PRO SEGREGATION ACCOUNT
1,001,000
2.5%
Sukenori Ito
430,000
1.1%
Daisuke Gomi
300,000
0.8%
Matsui Securities Co., Ltd.
250,200
0.6%
SMBC Nikko Securities Inc.
221,700
0.6%
Toshitaka Kashihara
220,025
0.6%
Nomura Securities Co., Ltd. self-deposit account
178,600
0.5%
Daiwa Securities Co., Ltd.
155,250
0.4%
JPMorgan Securities Japan Co., Ltd.
136,1930.3%(Note) Shareholding ratio (%) indicates the percentage of shares outstanding held. Shares outstanding is equal to thenumber of shares issued minus treasury shares.

103. Matters Related to Share Acquisition Rights(1) Share acquisition rights held by the Company’s Officers that were issued as compensation
for services (as of December 31, 2022)
The 30th warrant
by resolution of the Board of
Directors meetingon May 14, 2013

The 43rd warrant
by resolution of the Board of
Directors meetingon March 29, 2018

The 48th warrant
by resolution of the Board of
Directors meetingon March 28, 2019

1,160 units

3,050 units

3,150 units

29,000 shares

76,250 shares

78,750 sharesNone

19,800 yen per unit

19,400 yen per unit

3,196 yen per share

1 yen per share

1 yen per share

From: May 15, 2015
To: May 14, 2023

From: March 30, 2021
To: March 29, 2028

From: March 30, 2022
To: March 29, 2029

645 units (1 holder)
16,125 shares

—

—

—

250 units (1 holder)
6,250 shares

500 units (2 holders)
12,500 shares

The 52nd warrant
by resolution of the Board of
Directors meetingon March 26, 2020

The 54th warrant
by resolution of the Board of
Directors meetingon March 24, 2021

The 56th warrant
by resolution of the Board of
Directors meetingon March 29, 2022

Number of share acquisitionrights4,600 units

1,630 units

3,200 units

Number of shares to be issued
upon the exercise of shareacquisition rights (Note 4)

115,000 shares

40,750 shares

80,000 shares

Amount paid for shareacquisition rights (Note 2) (Note 4)

8,100 yen per unit

29,225 yen per unit

17,200 yen per unit

1 yen per share

1 yen per share

1 yen per share

Number of share acquisitionrightsNumber of shares to be issued
upon the exercise of shareacquisition rights (Note 4)
Amount paid for shareacquisition rights
Value of property to becontributed upon the exerciseof each share acquisition right(Note 1)

Period in which exercise ofshare acquisition rights ispossible
Status of possession by
Directors (excluding Audit &Supervisory Committee
members and Outside
Directors) (Note 4)
Status of possession by
Outside Directors (excluding
Audit & Supervisory
Committee Members)

Value of property to becontributed upon the exerciseof each share acquisition right(Note 1)

Period in which exercise of
From: March 27, 2023
From: March 25, 2024
From: March 30, 2025
share acquisition rights is
To: March 26, 2030
To: March 24, 2031
To: March 29, 2032
possible
Status of possession by
Directors (excluding Audit &2,800 units (1 holder)
1,000 units (1 holder)
2,000 units (1 holder)Supervisory Committee
70,000 shares
25,000 shares
50,000 shares
Members and Outside(Note 4)
Directors)
Status of possession by
Outside Directors (excluding
800 units (2 holders)
450 units (3 holders)
450 units (3 holders)
Audit& Supervisory
20,000 shares
11,250 shares
11,250 shares(Note 4)
Committee Members)(Notes) 1. New shares were issued through the public offering on December 4, 2013, and third-party allotment on December 25,
2013, at the paid-in amount less than the value of property to be contributed upon the exercise of each share acquisitionright. Therefore, the stated value of property to be contributed upon the exercise of each share acquisition right excluding
those issued for the 32nd warrant and thereafter is adjusted in accordance with the adjustment provision.
2. The person who receives the allotment of share acquisition rights shall offset the amount to be paid for the relevant shareacquisition rights against cash compensation equivalent to the amount.

11

3. There are no share acquisition rights held by Directors serving as Audit & Supervisory Committee Members.
4. The Company conducted a 1-for-4 consolidation of common shares on July 1, 2019. Number of shares to be issued upon
the exercise of share acquisition rights and exercise price have been adjusted accordingly.

(2) Share acquisition rights distributed to the Company’s employees as compensation forservices during the fiscal year under review (as of December 31, 2022)

Number of share acquisitionrightsNumber of shares to be issued
upon the exercise of shareacquisition rights
Amount paid for shareacquisition rights (Note 2)
Value of property to becontributed upon the exercise ofeach share acquisition right
Period in which exercise of shareacquisition rights is possible

The 57th warrant
by resolution of the Board of
Directors meeting on March
29, 2022
6,455 units
161,375 shares
17,200 yen per unit
1 yen per share
From: March 20, 2025
To: March 29, 2032

Status of allotment to theCompany’s employees (Note 1)

5,881 units (105 holders)
147,025 shares(Notes) 1. Of the share acquisition rights mentioned above, 574 units (14,350 shares) have been forfeited due to the retirement
or resignation of employees.
2. The person who receives the allotment of share acquisition rights shall offset the amount to be paid for the relevant
share acquisition rights against cash compensation equivalent to the amount.

(3) Other important matters concerning share acquisition rights (as of December 31, 2022)
The details of the issue of share acquisition rights via third-party allotment were determined as below byresolution of the Board of Directors at a meeting held on May 16, 2022.
The 58th warrant by resolutionof the Board of Directors
meeting
on May 16, 2022
AlloteeNumber of share acquisitionrightsNumber of shares to be issued
upon the exercise of shareacquisition rights
Amount paid for shareacquisition rights
Value of property to becontributed upon the exercise ofeach share acquisition right
Period in which exercise of shareacquisition rights is possible

CVI INVESTMENT, Inc.
20,000 units
2,000,000 shares
688 yen per unit
785 yen per share
From: June 2, 2022
To: June 1, 2027

12

4. The Company’s Officers (as of December 31, 2022)(1) Names of Directors and Audit & Supervisory Board Members
Company position

Name

Responsibility and significant concurrent position

Representative Director

Fuminori Yoshida

Representative Director, President and CEO

Director

Shigetoshi Matsumoto

Director

Bruce David Cheson

Director

Eiji Ebinuma

Senior Advisor, Protiviti LLC
Audit Practice Counselor, Japan Audit &Supervisory Board Members Association
Scientific Advisor, Lymphoma Research
Foundation
Doctor, Cancer and Blood Disorders Center
Partner, Tanabe & Partners
Outside Director, Rakuten Bank, Ltd.
Audit & Supervisory Board Member, Toko
Electrical Construction Co.

Director (full-time Audit &Kiyoshi Watanabe
Supervisory Committee Member)
Director (Audit & Supervisory
Committee Member)

Kesao Endo

Representative, Endo C.P.A. Firm
Outside Director, Careerlink Co., Ltd.
Representative Partner, ABS Audit Corp.

Director (Audit & Supervisory
Committee Member)

Yasuhiro Tamo

Partner, Nomura & Partners(Notes) 1. On March 29, 2022, the Company transitioned to a company with Audit & Supervisory Committee. As a result of thetransition, the terms of office of full-time Audit & Supervisory Board Member Kiyoshi Watanabe and Audit &Supervisory Board Members Kesao Endo and Yasuhiro Tamo had expired, and Kiyoshi Watanabe was appointed
Director (full-time Audit & Supervisory Committee Member) and Kesao Endo and Yasuhiro Tamo were appointed
Directors (Audit & Supervisory Committee Members).
2. Shigetoshi Matsumoto, Bruce David Cheson, Eiji Ebinuma, Kiyoshi Watanabe, Kesao Endo, and Yasuhiro Tamo are
Outside Directors.
3. The Company has designated Outside Directors Shigetoshi Matsumoto, Eiji Ebinuma, Kiyoshi Watanabe, and Kesao
Endo as independent officers pursuant to the provisions of the Tokyo Stock Exchange (TSE) and registered them assuch with the TSE.
4. Director (Audit & Supervisory Committee Member) Kesao Endo possesses deep insight in finance and accounting,which he gained through his profession as a certified public accountant.
5. Change in Directors during the fiscal year under review is as follows:
Director Hirotaka Ito resigned on May 31, 2022. At the time of his resignation, he was Director, Vice President, and
COO.
6. The Company has appointed Outside Director Kiyoshi Watanabe as full-time Audit & Supervisory Committee
Member to enable gathering of information from Directors (excluding Audit & Supervisory Committee Members)
and information sharing at important meetings, as well as sufficient cooperation between the Internal Audit Division
and Audit & Supervisory Committee, with the aim of strengthening the Committee’s audit and supervisory functions.
7. The Company has adopted the Corporate Officer System. The Corporate Officers who do not hold concurrent
positions as Directors are as follows:
Corporate Officer Takaaki Fukushima
Corporate Officer Koji Fukushima
Corporate Officer Kozo Yoshida
Corporate Officer Yoshiharu Torikai
Corporate Officer Kei Bamba(2) Summary of the contents of the liability limitation agreement

The Company has entered into a liability limitation agreement with all Directors excluding those engaged in businessexecution based on the provisions of Article 427, Paragraph 1 of the Companies Act. Under the terms of the agreement,in the event that a Director has caused loss to the Company due to negligence of his or her duties, and if the Director
performed his or her duties in good faith and without gross negligence, the Director’s liability will be limited to thehigher of 1,000,000 yen or the minimum liability amount set forth in Article 425, Paragraph 1 of the Companies Act.

(3) Summary of the contents of the indemnification contract

The Company has entered into an indemnification contract with Fuminori Yoshida, Shigetoshi Matsumoto, Bruce
David Cheson, Kiyoshi Watanabe, Kesao Endo, and Yasuhiro Tamo as stipulated in Article 430-2, Paragraph 1 of theCompanies Act. In addition to expenses related to shareholder lawsuits that may arise due to misconduct, theindemnification contract covers a wide range of expenses that individual directors and the Company may incur,

13

including the costs of dealing with criminal proceedings and public investigations outside Japan. An indemnification
contract was also concluded for Director Hirotaka Ito, who resigned on May 31, 2022.

(4) Directors and Officers Liability Insurance Policies

The Company has obtained Directors and Officers Liability Insurance Policies covering the Directors and Corporate
Officers of the Company and its subsidiaries.
The aforementioned insurance is payable as indemnification for losses suffered by the insureds as a result of a legal
action brought for alleged wrongful acts in their capacity as Directors and Corporate Officers. However, the insurance
policies exclude coverage for claims arising out of fraudulent or dishonest acts conducted knowing that they were inviolation of the laws and regulations. By establishing such exclusions, we have taken steps to ensure the appropriatenessof the execution of duties by officers is not compromised.
Costs of premiums paid on the aforementioned insurance are borne entirely by the Company.

(5) Compensation of members of the Board of Directors(i) Matters related to the policy for determining the details of individual compensation for Directors
The Company’s basic policy is to set the compensation for Directors after the transition to a Company with Audit& Supervisory Committee at an appropriate level in consideration of their responsibilities. The amount ofcompensation for Directors does not include the share of salary as an employee for Directors who are concurrently
serving as employees.
The Audit & Supervisory Committee has the authority to make decisions on the policy concerning thedetermination of the amount of compensation, or the calculation method thereof, for Directors serving as Audit &Supervisory Committee Members. The contents of such authority and the scope of discretion shall be determinedby the Audit & Supervisory Committee with the consent of all of its members, within the limit of the total amountdetermined at the General Meeting of Shareholders.
1. Basic policy
The compensation system for Directors (excluding those serving as Audit & Supervisory Committee Members)
shall be linked to shareholders’ profit to function sufficiently as an incentive for the sustainable enhancement ofcorporate value. Furthermore, the compensation of individual Directors (excluding those serving as Audit &Supervisory Committee Members) shall be determined at an appropriate level based on the responsibilities ofeach position, and compensation shall consist of basic compensation as fixed compensation and stock-based
compensation.
2. Policy on determination of the amount of basic compensation (monetary compensation) of individual Directors(excluding those serving as Audit & Supervisory Board Members; including policies on determining thetiming or conditions for granting compensation)
The basic compensation for Directors (excluding those serving as Audit & Supervisory Committee Members)of the Company shall be a monthly fixed compensation, and shall be determined based on a comprehensive
consideration of the role, responsibilities, years of service taking into account the level of compensation at othercompanies, the Company’s business performance, and the level of employee salaries. In making the decision, theCompany confirms that the decision is in line with the above policy, based on the report of the Nomination andCompensation Committee, which is composed of a majority of Outside Directors, with an Outside Director
serving as the chairperson. The decision is then delegated to the Representative Director by a resolution of theBoard of Directors. In addition, the Company ensures reasonableness by delegating the decision to theRepresentative Director within the scope of the report that has been appropriately reviewed by the Nomination
and Compensation Committee.
3. Policy on determining the ratio of performance-linked compensation and other compensation of Directors(excluding those serving as Audit & Supervisory Committee Members)
Performance-linked compensation may be linked to the Medium-Term Management Plan to raise awarenessof the need to improve business performance, and compensation may be paid in a way that links businessperformance to compensation, or stock options may be granted. The ratio of performance-linked compensation
to other compensation shall be considered by the Nomination and Compensation Committee. The Board of
Directors shall delegate the President and Representative Director to respect the content of the report of theNomination and Compensation Committee and to determine the content of compensation for each individual
Director (excluding those serving as Audit & Supervisory Committee Members). The ratio of compensation for
Directors who engage in business execution is considered based on the level of compensation benchmarked tocompanies of a similar scale as the Company or companies in related industries and business categories.

144. Matters concerning the determination of the content of individual compensation of Directors (excluding thoseserving as Audit & Supervisory Committee Members)
The amount of compensation and stock options for each individual shall be reviewed by the Nomination andCompensation Committee. The Board of Directors shall delegate the Representative Director, President and CEO
to make decisions while respecting the content of the report of the Nomination and Compensation Committee.
Based on the delegation by the resolution of the Board of Directors, Representative Director, President and CEO
Fuminori Yoshida decides the amount, timing, and method of payment of compensation to each Director for thecurrent fiscal year. The above authority was delegated to Fuminori Yoshida, as the Company deems it appropriate
for the Representative Director, President and CEO to make decisions on the contents of compensation in orderto make decisions that take into account the evaluation of each Director’s business performance while taking acomprehensive view of the Company’s performance.
(ii) Reasons for the Board of Directors’ determination that the contents of the compensation of Directors(excluding those serving as Audit & Supervisory Committee Members) for the fiscal year under review is inline with the said policy
In determining the compensation for each individual Director (excluding those serving as Audit & Supervisory
Committee Members), the Board of Directors has determined that the contents of the decision are in line with theabove policy, given that the Representative Director makes the decision in line with the said policy.
(iii) Matters concerning the resolution of the General Meeting of Shareholders regarding compensation
At the 17th Ordinary General Meeting of Shareholders held on March 29, 2022, it was resolved that the maximum
annual amount of compensation for Directors (excluding those serving as Audit & Supervisory Committee
Members) shall be 130 million yen (40 million yen for Outside Directors; does not include employee salaries for
Directors concurrently serving as employees). The number of Directors (excluding those serving as Audit &Supervisory Committee Members) at the conclusion of the said General Meeting of Shareholders was five (5),including three (3) Outside Directors.
Separate from the monetary compensation, it was resolved at the said General Meeting of Shareholders that the
maximum annual amount of stock options granted to Directors (excluding those serving as Audit & Supervisory
Committee Members) shall be 90 million yen (30 million yen for Outside Directors), and that the maximum numberof stock acquisition rights granted within a year from the date of the General Meeting of Shareholders of each fiscal
year shall be 3,200 units (does not include employee salaries for Directors concurrently serving as employees). The
number of Directors (excluding those serving as Audit & Supervisory Committee Members) at the conclusion of
the said General Meeting of Shareholders was five (5), including three (3) Outside Directors. Note that prior to thetransition to a company with Audit & Supervisory Committee, it was resolved that the maximum annual amount ofstock options granted to Directors shall be 80 million yen at the 8th Ordinary General Meeting of Shareholders heldon March 28, 2013 (30 million for Outside Directors, approved at the 11th Ordinary General Meeting of
Shareholders held on March 30, 2016). Further, it was resolved that no more than 3,200 units of share acquisitionrights shall be granted per year to Directors at the 16th Ordinary General Meeting of Shareholders held on March24, 2021. The number of Directors at the conclusion of the said General Meeting of Shareholders was seven (7),including five (5) Outside Directors.
At the 17th Ordinary General Meeting of Shareholders held on March 29, 2022, it was resolved that the maximum
annual amount of monetary compensation for Directors serving as Audit & Supervisory Committee Members shallbe 30 million yen, and that the specific amount and timing of payments shall be determined by discussions among
Directors serving as Audit & Supervisory Committee Members. The number of Directors serving as Audit &Supervisory Committee Members at the conclusion of the said General Meeting of Shareholders was three (3).
Note that prior to the transition to a company with Audit & Supervisory Committee, it was resolved that the
maximum annual amount of compensation for Audit & Supervisory Board Members shall be 30 million yen at theExtraordinary General Meeting of Shareholders held on June 30, 2011. The number of Audit & Supervisory Board
Members at the conclusion of the said General Meeting of Shareholders was four (4).
(iv) Total amount of compensation for Directors and Audit & Supervisory Board Members

Classification
Directors, excluding
Audit & Supervisory
Committee Members(Outside Directors)

Total amount ofcompensation(thousand yen)
98,112(29,364)

Total amount of compensation by type (thousandyen)
PerformanceBase
Non-monetary
linkedcompensationcompensationcompensation
60,646(20,019)

15

―
(―)

37,466(9,345)

Number of
eligible
officers
5(3)Directors serving as
Audit & Supervisory
Committee Members(Outside Directors)
Audit & Supervisory
Board Members(outside members)

18,909(18,909)18,909(18,909)

―
(―)

―
(―)

3
(3)

5,398
(5,398)5,398(5,398)

―
(―)

―
(―)

3
(3)

(Notes) 1. The amount of compensation for Directors does not include the share of salary as an employee for Directors who areconcurrently serving as employees.
2. On March 29, 2022, the Company transitioned to a company with Audit & Supervisory Committee with the approvalof the proposal to partially amend the Articles of Incorporation at the 17th Ordinary General Meeting of Shareholders
held on the same day.
3. Compensation for the Audit & Supervisory Board Members above is the amount paid prior to the transition to acompany with Audit & Supervisory Committee.
4. The number of Directors or Audit & Supervisory Board Members compensated as stated above includes one (1)Director who resigned on May 31, 2022.
5. The contents of non-monetary compensation are the amount of expenses recorded during the fiscal year under review
related to stock acquisition rights granted as stock options.

(6) Matters Concerning Outside Directors and outside members of the Audit & Supervisory
Board(i) Status of main activities during the fiscal year under review

Position

Director

Director

Director

Name

Shigetoshi
Matsumoto

Bruce David
ChesonEiji Ebinuma

Opinions at the Board of
Status of attendance Status of attendance Directors meetings, the Audit
Status ofat the Audit && Supervisory Board
at the Audit &attendance at theSupervisory
meetings, and the Audit &Board of Directors Supervisory Board
Committee meetings
Supervisory Committee
meetings
meetings
meetings

17 out of 17(100%)

17 out of 17(100%)

17 out of 17(100%)

—

—

—

16

—

Mr. Matsumoto expressed
opinions from an objective
perspective independent fromthe Company’s management
engaged in business
operations, leveraging his
extensive knowledge andexperience with the businesspractices of companies in thesame industry and withauditing work.

—

Dr. Cheson expressed
opinions from an objective
perspective independent fromthe Company’s management
engaged in business
operations, leveraging his
extensive knowledge andexperience as a physician.

—Mr. Ebinuma expressed
opinions from an objective
perspective independent fromthe Company’s management
engaged in business
operations, using his
knowledge and experience atfinancial institutions and as an
attorney at law, mainly in thearea of labor law, and his
extensive knowledge as an
Outside Director.

Director (fulltime Audit &Supervisory
Committee
Member)Director (Audit& Supervisory
Committee
Member)KiyoshiWatanabeKesao Endo

17 out of 17(100%)

17 out of 17(100%)

4 out of 4
(100%)

4 out of 4
(100%)

14 out of 14(100%)

Mr. Watanabe actively
expressed opinions from an
objective and fair perspective
based on his extensive
experience and knowledge as
an audit & supervisory board
member at listed companies inorder to achieve highly
effective managerial
supervision.

14 out of 14(100%)

Mr. Endo actively expressed
opinions from a neutral
perspective based on thespecialized knowledge andextensive experience heaccumulated as a certified
public accountant in order toachieve highly effective
managerial supervision.

Mr. Tamo expressed opinionsfrom an objective perspective
independent from the
Director (Audit
Company’s management& Supervisory
17 out of 17
4 out of 4
14 out of 14
engaged in businessYasuhiro Tamo
Committee(100%)(100%)(100%)
operations, based on his
Member)knowledge and experience as
an attorney at law, mainly inthe area of corporate law.
(Notes) 1. On March 29, 2022, the Company transitioned to a company with Audit & Supervisory Committee with the approvalof the proposal to partially amend the Articles of Incorporation at the 17th Ordinary General Meeting of Shareholders
held on the same day.
2. Changes in Directors and Audit & Supervisory Board Members during the fiscal year under review were as follows.
The terms of office of full-time Audit & Supervisory Board Member Kiyoshi Watanabe and Audit & Supervisory Board
Members Kesao Endo and Yasuhiro Tamo expired, and Kiyoshi Watanabe was appointed Director (full-time Audit &Supervisory Committee Member) and Kesao Endo and Yasuhiro Tamo were appointed Directors (Audit & Supervisory
Committee Members).

(ii) Summary of duties performed in roles expected to be fulfilled by Outside Directors
1. Shigetoshi Matsumoto and Eiji Ebinuma have been involved as members of the Nomination andCompensation Committee from an objective and neutral standpoint in the selection of candidates for theCompany’s Board of Directors and the determination of compensation for Directors.
2. Bruce David Cheson has contributed to the enhancement of the Company’s group-wide governance andsupervisory functions from a global perspective, and to the monitoring and supervision of the managementof the Company from an independent standpoint.
3. Kiyoshi Watanabe has contributed to the enhancement and reinforcement of the Company’s corporate
governance and to the monitoring and supervision of the Company’s management from an independent
standpoint, leveraging his track record at financial institutions and his broad experience and deep insight inmanagement.
4. Kesao Endo has monitored and supervised the Company’s management and contributed to strengthening its
supervisory function over business execution from an independent standpoint, drawing on his expertise andabundant experience as a certified public accountant.
5. Yasuhiro Tamo has monitored and supervised the Company’s management and contributed to strengthening
the supervisory function of business execution from an independent standpoint, based on his knowledge andextensive experience as an attorney at law, mainly in the area of corporate law.

17

5. Status of Accounting Auditor(1) Name of accounting auditor
Ernst & Young ShinNihon LLC(2) Summary of the contents of the liability limitation agreement
Not applicable.

(3) Summary of the contents of the compensation agreement
Not applicable.

(4) Amount of compensation
Amount of compensation paid to the accounting auditor concerning the fiscal
year under review
Total amount of monetary and other property benefits to be paid by the Company
and its subsidiary

Amount paid
33,500 thousand yen
33,500 thousand yen(Notes) 1. Reasons for the Audit & Supervisory Committee’s approval of the amount of compensation to be paid to theaccounting auditor
The Audit & Supervisory Committee verified the contents of the audit planning by the accounting auditor, performanceof its duties in previous years, and status of planning and actual performance, and as a result of a careful review on theadequacy of the amount of compensation for the fiscal year under review, has approved the amount of compensation
to be paid to the accounting auditor, pursuant to the provisions of Article 399, Paragraph 1 of the Companies Act.
2. The amounts of compensation for audits paid in accordance with the Companies Act, and the audits conducted inaccordance with the Financial Instruments and Exchange Act, are not distinguished in the contract agreement between
the Company and the accounting auditor. It is not possible to distinguish between compensation paid for these two
types of audits; therefore the total amount thereof is stated.

(5) Policies for dismissal or non-reappointment of the accounting auditor

When it is deemed necessary to dismiss (or not reappoint) the accounting auditor for reasons relating to theaccounting auditor’s execution of duties, the Audit & Supervisory Committee shall determine the contents of a proposal
to be presented to a General Meeting of Shareholders in respect of the dismissal (or non-reappointment). In addition,
when the accounting auditor falls under any of the items of Article 340, Paragraph 1 of the Companies Act, the Audit& Supervisory Committee shall dismiss the accounting auditor with the consent of all members of the Audit &Supervisory Committee. If this is the case, an Audit & Supervisory Committee Member selected by the Audit &Supervisory Committee shall report the dismissal of the accounting auditor and the reasons for such dismissal at thefirst General Meeting of Shareholders convened after the dismissal.

18

6. System to Ensure the Appropriateness of Operations(1) The corporate system to ensure that Directors and employees comply with laws andordinances, as well as the Articles of Incorporation, in the process of performing their duties(i) Dissemination and thorough implementation of management philosophy
In order to implement its management philosophy, the Company has established for the Group a Corporate
Action Charter and standards of conduct to which all Company members are expected to adhere. The Company
informs all executives and staff regarding these policies and asks for each member’s understanding regarding thespirit of these regulations and for thorough compliance with the same. All business activities of the Company arebased on the premise of compliance with laws and ordinances and the maintenance of corporate ethical standards(below, “compliance”).
(ii) Establishment of internal control committee
The Company develops internal control systems and employs other measures to support thorough compliance,risk management, and financial reporting. In addition, an internal control committee has been established at theCompany to ensure the Group’s complete observance of laws and ordinances, the Articles of Incorporation, andother internal regulations through exhaustive supervision.
(iii) Establishment of internal audit office, etc.
The Company has established an internal audit office as an independent unit under the direct supervision of the
President and appoints internal auditors to its subsidiary as necessary. Through regular audits and related activities,
objective assessments are made as to the effectiveness and efficiency of business, the reliability of various
financial reports, safeguarding of assets, compliance status of operations, and the appropriateness andeffectiveness of corporate risk management policies. When necessary, the Company ensures the efficacy ofinternal controls by accepting advice and proposals concerning recommended improvements to the maintenanceand operation of systems.
(iv) Establishment of compliance reporting and consultation hot-lines
The Company has established compliance reporting and consultation hot-lines both internal to and outside theCompany, and has designated compliance liaisons to respond to reports and requests for consultation from
employees of the Group, and to identify and resolve any compliance issues at the earliest stage possible.
(v) Systems for securing reliable financial reporting
The Company establishes internal control systems and oversees their appropriate operation in order to ensure
reliable financial reporting for the Group.

(2) Corporate system for maintenance and control of information regarding theperformance of duties by Directors

The Group appoints an individual to be responsible for the general management of corporate documents and to
appropriately maintain and otherwise control all important documents containing information as to the performanceby Directors of their duties in addition to legally required records of proceedings of Shareholders meetings andBoard of Directors meetings, as provided in laws and ordinances as well as in the Company’s own “Rules for theManagement of Documents.”(3) Corporate system for control of risk of loss, including in-house rules for such control

The Group practices risk control under its basic risk control policy and related rules. The Internal Control
Committee is responsible for the supervision and promotion of risk management. Additionally, the Company willswiftly respond to emergency situation by establishing an emergency response headquarters managed by the
Representative Director and President.

(4) Corporate system to ensure the efficient performance of duties by Directors(i) Directors and employees perform their duties in appropriate and efficient accordance with the “Rules for the
Board of Directors” and “Rules for the Internal Approvals,” as well as other related regulations.
(ii) The Company regularly holds Executive Management Committee meetings pursuant to the “Rules for the
Executive Management Committee” and reviews key proposals for the purpose of supporting careful and timely
decision-making from the Representative Director and President.
(iii) The Company develops mid- to long-term business plans and operates and expands its business in accordancewith these plans. In addition, the Company establishes numerical targets within its business plans for each fiscal
year and, through monthly closings, manages progress toward these targets while making relevant reports to
Directors.

(5) Basic policy against anti-social forces and their associates

The Group resolutely opposes anti-social forces and their associates that pose a threat to the order or safety ofsociety and forbids their participation in any and all business activities.

19(6) Assistant to Audit & Supervisory Committee Members

Audit & Supervisory Committee Members may request that the Representative Director and President appoint an
employee to act as an assistant to Audit & Supervisory Committee Members. Upon receiving such a request, theRepresentative Director and President shall make an appropriate appointment.

(7) Ensuring the independence of assistants to Audit & Supervisory Committee Members
from Directors (excluding those serving as Audit &Supervisory Committee Members) andthe effectiveness of the Audit & Supervisory Committee Members’ instructions to employees(i) Assistants to Audit & Supervisory Committee Members shall not receive instructions concerning theirsupporting duties from anyone other than Audit & Supervisory Committee Members.
(ii) Matters such as personnel evaluation and transfer and disciplinary actions concerning employees that assist
Audit & Supervisory Committee Members shall be subject to the prior consent of the Audit & Supervisory
Committee.

(8) Corporate system for Directors and employees to report to the Audit & Supervisory
Committee; corporate system for other reports to the Audit & Supervisory Committee; andcorporate system to ensure the efficient performance of audits by the Audit & Supervisory
Committee(i) Any Director or employee shall promptly inform the Audit & Supervisory Committee if and when he/she
becomes aware of any circumstance that threatens to cause any significant damage to, or could adversely affect,
the Company.
(ii) Audit & Supervisory Committee Members may participate in all matters that they consider important in termsof gaining a better understanding of decision-making processes, conditions, and statuses of the Company’sbusinesses. Accordingly, they may attend Board of Directors meetings, Executive Management Committee
meetings, and other important meetings. In addition, they are permitted to view key decision-making documents
related to these meetings.
(iii) Audit & Supervisory Committee Members may individually interview Directors and employees in key
positions of responsibility to obtain information regarding the management conditions of the Company’sbusinesses.
(iv) Audit & Supervisory Committee Members will regularly exchange opinions with the Representative Director
and President and the accounting auditor.
(v) The Company will not apply any sort of unfavorable treatment or unjust punishment to individuals who makereports to the Audit & Supervisory Committee.

(9) Matters related to the treatment of expenses or obligations associated with the execution ofduties of Audit & Supervisory Committee Members (limited to the execution of duties of Audit& Supervisory Committee), including the procedures for prepayment or reimbursement of such
expenses(i) The Company will respond without delay to claims for the prepayment of expenses made by Audit &Supervisory Committee Members under Article 399-2 of the Companies Act, accepting responsibility for
associated expenses and processing related obligations, except in cases in which these have been determined
unnecessary for the execution of the duties of Audit & Supervisory Committee Members.
(ii) The Company authorizes and shoulders expenses incurred when Audit & Supervisory Committee Members
seek opinions or advice from external experts, including attorneys and certified public accountants, if it is foundnecessary for the execution of their duties.

(10) System to ensure appropriate operations of the corporate organization consisting of theCompany and its subsidiary
The Company will take the following measures to properly manage and operate the Group.
(i) We will apply SymBio Charter of Corporate Conduct to our subsidiary, and strive to ensure thorough awarenessof the Charter, along with the Codes of Conduct of subsidiary created based on the Charter.
(ii) The Company will build and operate an appropriate internal control system related to the following, to enableappropriate management and business execution of the Group.
1) System for reporting matters related to the execution of duties of subsidiary Directors to the Company
2) Regulations and other systems for risk management and loss control of the subsidiary203) System to ensure that Directors of subsidiary are executing their duties efficiently
4) System to ensure that Directors and employees of subsidiary are executing their duties in compliance withlaws and regulations and the Articles of Incorporation

7. Summary of the Status of System to Ensure the Appropriateness of Operations(1) The Company is striving to foster a culture of compliance across the organization and ensure appropriate
operation of internal control systems through its communications with Directors and employees, and throughpublication of information such as the basic policies regarding internal control systems, corporate complianceconduct principles, basic risk control policies, and the whistleblowing system manual on the Company’s

intranet bulletin board.

(2) At the Board of Directors meetings of the Company, Outside Directors (including Directors serving as

Audit & Supervisory Committee Members) participate in resolutions from an independent standpoint
and monitor and supervise the management. Each Audit & Supervisory Committee Member carries out
management audits as well.
(3) Full-time Audit & Supervisory Committee Members attend important meetings such as the Board of
Directors meetings as well as Executive Management Committee meetings, and exchange views withrepresentative directors monthly.

21

Consolidated Balance Sheet(As of December 31, 2022)

Item

Other

9,312,706
6,282,554
2,084,915
293,757
175,170452
252,745
209,886
13,224Non-current assets
Property, plant and equipment
Buildings
Tools, furniture and fixtures
Accumulated depreciation
Intangible assets
Software1,120,641
69,00964,931
73,159(69,080)
222,204
222,204

Investments and other assets

829,427

Deferred tax assets
Leasehold and guarantee deposits

744,728
84,698

Total assets(Liabilities)
Current liabilities
Accounts payable–trade
Accounts payable–other
Income taxes payable
Provision for product changeover
Other
Non-current liabilities
Provision for retirement benefits

1,923,870
46,633
1,163,721
401,066
16,331
296,118
3,385
3,385

Total liabilities

1,927,255

Amount(Assets)
Current assets
Cash and deposits
Accounts receivable–trade
Merchandise and finished goods
Semi-finished goods
Supplies
Advance payments
Prepaid expenses

Item(Unit:
thousands ofyen)
Amount10,433,347(Note) Amounts of less than one thousand yen are rounded down.

22(Net assets)
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Accumulated other comprehensive
incomeForeign currency translation
adjustment
Share acquisition rights

8,094,176
17,548,459
17,523,357(26,889,486)(88,154)243
243
411,672

Total net assets

8,506,092

Total liabilities and net assets

10,433,347

Consolidated Statement of Income
January 1, 2022
( toFrom
December 31, 2022 )Item(Unit:
thousandsyen)ofAmountI. Net sales
II. Cost of goods sold

10,008,338
2,408,434

Gross profit
III. Selling, general and administrative expenses

7,599,904
5,636,278

Operating profit
IV. Non-operating income

1,963,625

Interest income
Foreign exchange gains

98
136,179

Other

2,925

V. Non-operating expenses
Commission fee

56,543

Share issuance cost
Other

45,867
540

Ordinary profit
VI. Extraordinary income

139,204

102,951
1,999,878

Gain on reversal of share acquisition rights

106,401

Profit before income taxes

106,401
2,106,279

Income taxes–current
Income taxes–deferred

396,010531,030

927,041

Profit

1,179,238

Profit attributable to non-controlling interests
Profit attributable to owners of parent－
1,179,238(Note) Amounts of less than one thousand yen are rounded down.

23

Consolidated Statement of Changes in Equity
January 1, 2022
( Fromto December 31, 2022 )Shareholders’ equity

Balance as of January 1, 2022

Cumulative effect of changes
in accounting policies
Restated balance
Changes during period
Issuance of new shares

Share capital

Capital surplus

17,157,628

17,132,501(86,045)(92,822)

17,132,501

331,000

331,000

662,000

59,831

59,831

119,662

390,856

Balance as of December 31, 2022

17,548,459

17,523,357(28,068,725)

Total
Shareholders’equity6,228,181

17,157,628

390,831(86,045)

1,179,238

44

44

1,179,238(2,165)81

1,179,238(2,108)

1,958,817(26,889,486)(88,154)

8,094,176

Shareacquisitionrights519,099

Total net assets

6,747,325(92,822)44

44519,099

6,654,502
662,000
119,662
1,179,238(2,165)81

Net changes of items otherthan shareholders’ equity

198

198

(107,426)(107,228)

Total changes during period

198

198

(107,426)

1,851,589

Balance as of December 31, 2022

243

243

411,672

8,506,092(Note) Amounts of less than one thousand yen are rounded down.

24

6,135,358(2,165)
56

24

Accumulated other comprehensive
incomeTotal
Foreignaccumulated
currency
othertranslation
comprehensive
adjustment
incomeCumulative effect of changes
in accounting policies
Restated balance
Changes during period
Issuance of new shares
Issuance of new shares(exercise of share acquisitionrights)Profit attributable to ownersof parent
Purchase of treasury shares
Disposal of treasury shares(27,975,902)

Treasury shares(92,822)

Issuance of new shares(exercise of share acquisitionrights)Profit attributable to ownersof parent
Purchase of treasury shares
Disposal of treasury shares
Net changes of items otherthan shareholders’ equity
Total changes during period

Balance as of January 1, 2022

Retainedearnings(Unit: thousandsof yen)Notes to Consolidated Financial Statements(Basis of consolidated financial statements)(Scope of consolidation)

Number of consolidated subsidiaries and the name of key consolidated subsidiary
Number of consolidated subsidiaries
One
Name of consolidated subsidiary
SymBio Pharma USA, Inc.
Effective from the fiscal year under review, the Company included SymBio Pharma USA, Inc., previously
a non-consolidated subsidiary, in the scope of consolidation due to the subsidiary’s increased significance.

(Application of equity method accounting)None to be reported.

(Significant accounting policies)(1) Valuation basis and method of marketable and investment securities
Marketable and investment securities
Shares of subsidiaries and affiliates

Shares of subsidiaries are stated at cost determined by the movingaverage method.

Other marketable and investment
securities
Available-for-sale securities withdeterminable market value

Available-for-sale securities with a determinable market value arestated at fair value based on marketable value on the closing dateand other premises. Any valuation differences are included directly
in shareholders’ equity. Cost of securities sold is calculated by themoving-average method.

Available-for-sale securities
without determinable market value

Available-for-sale securities without determinable market value arestated at cost determined by the moving-average method.

Derivative transactions

Derivative financial instruments are stated at fair value.

Inventories

Merchandise and finished goods are stated at cost determined by
the first-in, first-out method, and semi-finished goods are stated atcost determined by the weighted average cost method. The amounton the balance sheet is calculated by reducing book value when thecontribution of inventories to profitability declines. Inventory items
are classified into separate categories for the purpose of detailed
monitoring of inventory movements and appropriate valuation.

(2) Depreciation and amortization of non-current assets
Property, plant and equipment
Depreciation of property, plant and equipment is computed by the(excluding lease assets)straight-line method.
The useful lives of major property, plant and equipment aresummarized as follows:
Buildings
3 to 18 years
Tools, furniture and fixtures
4 to 20 years
Intangible assets(excluding lease assets)

Amortization of intangible assets is computed by the straight-line
method.
Capitalized software costs are being amortized over the period of
the internal use of five years.

Lease assets

Depreciation of lease assets is computed by the straight-line method
over the lease term with no residual value.

25

(3) Basis for reserves and provisions
Provision for productAn estimated amount of expenses is recorded to prepare for expenses to bechangeover
incurred accompanying the changeover from the FD formulation to RTD
formulation of TREAKISYM®.
(4)

Recognition of significant revenues and expenses
The Group recognizes revenue from the sale of merchandise and finished goods at the time of delivery to
the customer, as this is when the control of the merchandise and finished goods is transferred to the customer
and performance obligations are satisfied. Revenue from the sale of merchandise and finished goods isestimated within the range in which it is highly probable that there will not be a significant reversal of theconsideration promised in the contract with the customer less sales rebates in accordance with the terms of thesales contract. The amount of consideration expected to be refunded to the customer is recorded as a refund
liability. The refund liability is estimated based on the terms of the contract and past records.

(5)

Other significant matters for preparation of consolidated financial statements(i) Fiscal year of the consolidated subsidiary
The closing date of the consolidated subsidiary is the same as the consolidated closing date.
(ii) Accounting method for deferred assets
Share issuance costs and bond issuance costs are recorded in full as expenses when incurred.
(iii) Accounting method for retirement benefits
A simplified method is applied in calculating the retirement benefit liabilities and retirement benefit
expenses, using the amount of benefits that would be payable if all employees voluntarily retired at theend of the fiscal year as retirement benefit liabilities.
(iv) Standard for translation of foreign-currency denominated assets or liabilities into Japanese yen
Monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at
the spot exchange rate prevailing on the closing date, and the difference arising from such translation isrecorded as profit or loss.

(Notes on changes in accounting policy)(Application of Accounting Standard for Revenue Recognition)
The Group has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29; March
31, 2020; hereinafter “Revenue Recognition Standard”) from the beginning of the fiscal year under review. As aresult of the application of this standard, revenue will be recognized in the amount expected to be received in
exchange for the promised goods or services at the time control of the promised goods or services is transferred tothe customer.
Under the previous accounting standard, for transactions where the total amount of consideration the Group is
entitled to in exchange for the transfer of promised goods or services, i.e., the transaction price, is likely to be
reduced after a contract is signed with the customer, the Group revised the transaction price once the amount to be
reduced was fixed. However, under the new accounting standard, the Group makes a reasonable estimate of thevariable amount and subtracts it from the transaction price at the time the goods or services are transferred to thecustomer. Further, under the previous accounting standard, the Group accounted for expected sales returns byrecording provisions for sales returns in the amount equivalent to gross profit; however, in accordance with theprovisions regarding variable consideration, the Group no longer recognizes revenue at the time of sale and records
refund liabilities as “other” under the current liabilities section of the balance sheet.
The Group has followed the transitional treatment prescribed in the provision of Paragraph 84 of the Revenue
Recognition Standard and has applied the new accounting standard from the opening balance of retained earningsof the fiscal year under review, whereby the cumulative effect of retrospective application of the new accounting
standard prior to the beginning of the fiscal year under review is added to or deducted from the beginning balanceof retained earnings.
As a result, in the consolidated statements of income for the fiscal year under review, net sales increased by
62,962-thousand-yen, operating profit and ordinary profit increased by 62,962 thousand yen, respectively, andprofit before income taxes increased by 62,962 thousand yen. In addition, the balance of retained earnings at the
beginning of the period decreased by 92,822 thousand yen.
Net assets per share, net income per share and diluted net income per share decreased by 2.38 yen, increased by
1.61 yen and increased by 1.59 yen, respectively, during the current fiscal year.
(Application of Accounting Standard for Fair Value Measurement)
The Group has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30; July 4,
2019; hereinafter “Fair Value Measurement Standard”) from the beginning of the fiscal year under review.
In applying the Fair Value Measurement Standard, the Group has followed the transitional treatment prescribedin the provision of Paragraph 19 of the Fair Value Measurement Standard and Paragraph 44-2 of the “Accounting

26

Standard for Financial Instruments” (ASBJ Statement No. 10; July 4, 2019) and will apply accounting the Fair
Value Measurement Standard prospectively.
The adoption of this accounting standard has no effect on the consolidated financial statements.

(Note to Significant Accounting Estimates)(1) Amount recorded in the consolidated financial statements for the fiscal year under review
Deferred tax assets recorded in the fiscal year under review: 744,728 thousand yen(2) Information regarding significant accounting estimates on the identified item(i) Calculation method
Based on the company classification stipulated in the “Implementation Guidance on Recoverability ofDeferred Tax Assets” (ASBJ Guidance No. 26, February 16, 2018), the Company recorded deferred tax
assets for the deductible temporary differences and losses carryforward at the end of the fiscal year underreview, to the extent that they can be used to reduce future tax burden. When recording deferred tax assets,taxable income before adjustment for temporary differences, etc. is estimated based on the business plan.
(ii) Major assumptions
Taxable income based on future profitability is estimated according to the Group’s business plan. The
estimate is also based on certain assumptions that take into consideration significant uncertainties causedby such factors as the impact of sales volume of existing drugs on net sales and the impact of pipeline
development progress on tax adjustment items.
(iii) Impact on the consolidated financial statements for subsequent fiscal years
Any revisions to the assumptions underlying the estimates due to changes in the economic conditions,etc., may have a significant impact on the amount of deferred tax assets to be recorded on the consolidated
financial statements for subsequent fiscal years.

(Additional information)(Overdraft and commitment line contracts)
The Group has overdraft and commitment line contracts with three banks in a business relationship to efficiently
procure working capital. The status of the bank overdraft and loan commitments based on these contracts at the endof the fiscal year under review is as follows:(Unit: thousands of yen)
Total amounts of bank overdraft limit and loan commitment line
3,150,000
Balance of borrowing outstanding—
Unused balance
3,150,000(Impact of COVID-19)
The outlook for the business environment remains uncertain, as COVID-19 infections remain a threat tohealthcare facilities and patients, altering patient care behavior and making patients more cautious about treatment.
Such impacts are considered in our accounting estimates such as the recoverability of deferred tax assets, etc.

(Consolidated statement of income)R&D costs included in general and administrative expenses:

2,554,799 thousand yen(Statement of changes in equity)(1) Type and number of shares issued and treasury shares

Commonstock

At beginning ofcurrent period
Shares issued

Increase

38,457,206

1,146,400(Unit: number of shares)
At end of current
Decrease
period－39,603,606(Notes) Increase of 1,000,000 shares in the total number of outstanding common shares is due to a capital increase and increaseof 146,400 shares issued in common stock is due to the exercise of share acquisition rights.

(2) Number of shares to be issued upon exercise of share acquisition rights issued at the end of the fiscal year
under review
Common stock
2,175,425 shares

27

(Note) Excludes share acquisition rights for which the commencement date of the exercise period has not yet arrived.

(3) Matters related to dividends from surplus paid during the current fiscal year.
None to be reported(Financial instruments)(1)

Financial instruments(i) Policies for financial instruments
The Group procures the funds necessary in light of the pipeline development plan (primarily by third-party
allotment and offering by new share issuance). A temporary surplus fund is invested in financial instruments
which are highly safe and liquid.
As a principle, the Group does not enter into derivative transactions for speculative trading purposes but uses
them within the scope prescribed in the Group’s internal rules.
(ii) Types of financial instruments and related risks
Operating receivables such as accounts receivable–trade are exposed to the credit risk of customers and joint
development partners. Operating receivables denominated in foreign currencies are exposed to foreign exchange
fluctuation risk.
Operating payables such as accounts payable–trade and accounts payable–other are mostly due within 60 days.
Operating payables denominated in foreign currencies are exposed to foreign exchange fluctuation risk.
The Group uses derivative transactions to avoid foreign exchange fluctuation risks and enters into forward
exchange contracts within the scope prescribed in the internal rules based on balances of receivables and payables
denominated in foreign currencies as well as the actual volume of export and import transactions denominated inforeign currencies.
Leasehold and guarantee deposits are mostly security deposits related to leased office premises and theirrefunds are subject to the credit risk of the lessor.

(iii) Risk management for financial instruments
1. Monitoring of credit risks (the risk that customers or counterparties may default on obligations)
In accordance with the Group’s internal credit policies for managing credit risk arising from operatingreceivables, the department in charge periodically monitors the creditworthiness of major customers andmonitors due dates and outstanding balances by individual customers. In addition, the Company is making
efforts to promptly identify and mitigate risks of bad debts from customers who are having financial
difficulties.
The Group enters into derivative transactions only with financial institutions which have a sound credit
profile in order to mitigate the counterparty risk.
2. Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates, interest rates, andothers)The Group deposits cash primarily with financial institutions with high credit ratings.
The Group enters into forward exchange contracts in order to avoid foreign exchange fluctuation risks inconnection with receivables and payables denominated in foreign currencies.
Followed by appropriate authorization procedures prescribed in the Group’s internal rules, the Finance &Accounting department executes and monitors derivative transactions. Transaction performances are reported
to the Executive Management Committee on a regular basis.
3. Monitoring of liquidity risks (the risk that the Company may not be able to meet its obligations on thescheduled due date)
Based on the report from each department, the responsible department of the Group prepares and updates
its cash flow plans on a timely basis and ensures to maintain the liquidity on hand to manage liquidity risk.
(iv) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is noquoted market price available, fair value is reasonably estimated. Since various assumptions and factors arereflected in estimating the fair value, different assumptions and factors could result in different fair value.
(v) Concentration of credit risk
As of the end of fiscal year under review, 100% operating receivables are from one particular major customer.
(2) Fair value of financial instruments

28

The carrying value on the consolidated balance sheet, fair values, and their differences as of December 31, 2022
are as follows.
(Unit: thousands of yen)
Carrying value on the balance

Fair value

sheet
Lease and guarantee deposits
Assets, total
Derivative transactions (*1)

Difference

84,69881,183△3,51484,69881,183△3,514(11,128)(11,128)—(Note) 1. Receivables and liabilities arising from derivative transactions are presented on a net basis and net liabilities are shown inparentheses.
(Note) 2. Cash and deposits, Accounts receivable–trade, Accounts payable–trade, Accounts payable–other, Income taxes payable
and Consumption taxes payable are omitted because they are cash or are settled within a short time and the fair value isalmost equal to the book value.
(Note) 3. The redemption schedule for monetary assets and securities with maturities after the closing date

Due in one year or
less
Cash and deposits
Accounts receivable–
trade
Total
(Notes)Due after one year
through five years—

6,282,554
2,084,915
8,367,470(Unit: thousands of yen)
Due after fiveDue after ten
years through ten
years
years
—
—

—

—

—

—

—

—

Lease and guarantee deposits are not included because it is not possible to clearly determine the return date necessary
to estimate the amortized amount of lease and guarantee deposits.

(3) Fair Value of Financial Instruments by levels
The fair value of financial instruments is classified into the following three levels based on the observability andmateriality of the
inputs used to calculate fair value.
Level 1: Fair value derived from quoted prices in active markets for identical assets or liabilities.
Level 2: Fair value derived from observable inputs that are not included in Level 1 inputs.
Level 3: Fair value derived from unobservable inputs.
When multiple inputs that have a significant impact on the fair value calculation are used, the fair value isclassified at lower level
category.
(ⅰ)Financial instruments measured at fair value
Classification

Level 1

Derivative transactions
Currency-relatedtransactions
Liabilities, total(Notes)item(Unit: thousands of yen)
Fair value
Level 2

Level 3

Total—

(11,128)—(11,128)—(11,128)—(11,128)

Net receivables and payables, which were derived from derivative transactions, are presented in net amounts, and any
for which the total becomes a net liability is indicated in parentheses.

(ⅱ)Financial instruments other than those measured at fair value
Classification(Unit: thousands of yen)
Fair value

Level 1

Level 2

29

Level 3Total

Leaseandguarantee
deposits
Assets, total——

81,183—

81,183

81,183—

81,183(Notes) Derivative transactions
Fair value calculations are based on quoted prices provided by counterparty financial institutions and are classified as Level
2 fair value.
Lease and guarantee deposits
Based on a reasonably estimated expected return period, the fair value is calculated based on the present value of the future
cash flows discounted by the Japanese government bond yields corresponding to the period until redemption, and isclassified as Level 2 fair value.

(Revenue recognition)(1) Information about breakdown of revenue from contracts with customers(Unit: thousands of yen)
Current Consolidated Fiscal Year
(From January 1, 2022 to
December 31, 2022）
Sales of Merchandise and finished goods

10,008,338

Revenue from contracts with customers

10,008,338

Sales to external customers

10,008,338(2) Underlying information in understanding revenue
Underlying information in understanding revenue is as stated in (Basis of consolidated financial statements),(Significant accounting policies), (4) Recognition of significant revenues and expenses.
(3) Information for understanding the revenue amount for the fiscal year under review and subsequent fiscal years(i) Balance of contract assets and contract liabilities
The Group has no balance of contract assets and contract liabilities. In addition, no revenue was recognized in
the fiscal year under review from performance obligations satisfied in previous fiscal years.
(ⅱ) Transaction price allocated to remaining performance obligations
The Group does not have any material transactions with an initial expected term of contract exceeding one
year. Further, there is no material amount of consideration arising from contracts with customers that is notincluded in the transaction price.

(Per-share information)(1) Net assets per share(2) Net profit per share
Average number of shares outstanding during the year

(Significant subsequent events)
None to be reported.

30

204.83 yen
30.20 yen
39,046,821 shares

Balance Sheet(As of December 31, 2022)

Item

Item

(Unit:
thousands ofyen)
Amount(Liabilities)
Current liabilities
Accounts payable–trade
Deferred income
Accounts payable–other
Income taxes payable
Provision for product changeover
Consumption taxes payable
Other
Non-current liabilities
Provision for retirement benefits

1,895,944
46,63318,803
1,135,794
401,066
16,331
245,324
31,9903,385
3,385

Amount(Assets)
Current assets
Cash and deposits
Accounts receivable–trade
Merchandise and finished goods
Semi-finished goods
Supplies
Advance payments
Prepaid expenses
Other
Non-current assets

9,289,713
6,259,561
2,084,915
293,757
175,170452
252,745
209,886
13,224
1,120,641

Property, plant and equipment

69,009Total liabilities

1,899,329

Buildings
Tools, furniture and fixtures
Accumulated depreciation
Intangible assets
SoftwareInvestments and other assets
Shares of subsidiaries andassociates
Deferred tax assets
Leasehold and guarantee deposits

64,931
73,159(69,080)
222,204
222,204
829,4270(Net assets)
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Retained earnings

8,099,352
17,548,459
17,523,357
17,518,459
4,898

744,728
84,698Other retained earnings
Retained earnings brought
forwardTreasury shares
Share acquisition rights

Total assets

10,410,354(Note) Amounts of less than one thousand yen are rounded down.

31(26,884,309)(26,884,309)(26,884,309)(88,154)411,672

Total net assets

8,511,025

Total liabilities and net assets

10,410,354

Statement of Income
January 1, 2022
( toFrom
December 31, 2022 )Item(Unit:
thousandsyen)ofAmountI. Net sales
II. Cost of goods sold

10,008,338
2,408,434

Gross profit
III. Selling, general and administrative expenses

7,599,904
5,627,706

Operating profit
IV. Non-operating income

1,972,197

Interest income
Foreign exchange gains

98
128,933

Other

2,925

V. Non-operating expenses
Commission fee

56,543

Share issuance cost
Other

45,867
540

Ordinary profit
VI. Extraordinary income

131,957

102,951
2,001,204

Gain on reversal of share acquisition rights

106,401

Profit before income taxes

106,401
2,107,605

Income taxes–current
Income taxes–deferred

390,552
531,030

Profit921,582
1,186,022(Note) Amounts of less than one thousand yen are rounded down.

32

Statement of Changes in Equity
January 1, 2022
( Fromto December 31, 2022 )(Unit: thousandsof yen)Shareholders’ equity
Capital surplus

Balance as of January 1, 2022

Capital stock

Legal capitalsurplus

Other capitalsurplus

Total capitalsurplus17,157,628

17,127,628

4,873

17,132,501

Cumulative effect of changes inaccounting policies
Restated balance

Retained earnings
Other retained
earnings
Retained earnings
brought forward(27,977,510)(92,822)

17,157,628

17,127,628

4,873

17,132,501

331,000

331,000

331,000

59,831

59,831

59,831(28,070,332)

Changes during period
Issuance of new shares
Issuance of new shares(exercise of share acquisitionrights)Profit1,186,022

Purchase of treasury shares
Disposal of treasury shares

24

24

Net changes of items other thanshareholders’ equity
Total changes during period
Balance as of December 31, 2022

390,831

390,83124

390,856

1,186,022

17,548,459

17,518,459

4,898

17,523,357(26,884,309)

Shareholders’ equity
Treasury shares

Balance as of January 1, 2022

Total shareholders’ Share Acquisition rights
equity(86,045)

6,226,573

Cumulative effect of changes
in accounting policies
Restated balance

Total net assets

519,099(92,822)(86,045)

6,133,750

6,745,672(92,822)

519,099

6,652,850

Changes during period
Issuance of new shares
Issuance of new shares(exercise of share acquisitionrights)Profit662,000

662,000

119,662

119,662

1,186,022

1,186,022

Purchase of treasury shares(2,165)(2,165)(2,165)

Disposal of treasury shares

56

81

81

Net changes of items other thanshareholders’ equity
Total changes during period(2,108)

1,965,601

33(107,426)(107,426)(107,426)

1,858,175

Balance as of December 31, 2022

(88,154)

8,099,352(Note) Amounts of less than one thousand yen are rounded down.

34

411,672

8,511,025

Notes to Non-Consolidated Financial Statements(Significant accounting policies)(1)Valuation basis and method of marketable and investment securities
Marketable and investment securities
Shares of subsidiaries and affiliates

Shares of subsidiaries are stated at cost determined by the movingaverage method.

Other marketable and investment
securities
Available-for-sale securities withdeterminable market value

Available-for-sale securities with a determinable market value arestated at fair value based on marketable value on the closing dateand other premises. Any valuation differences are included directly
in shareholders’ equity. Cost of securities sold is calculated by themoving-average method.

Available-for-sale securities
without determinable market value

Available-for-sale securities without determinable market value arestated at cost determined by the moving-average method.

Derivative transactions

Derivative financial instruments are stated at fair value.

Inventories

Merchandise and finished goods are stated at cost determined by
the first-in, first-out method, and semi-finished goods are stated atcost determined by the weighted average cost method. The amounton the balance sheet is calculated by reducing book value when thecontribution of inventories to profitability declines. Inventory items
are classified into separate categories for the purpose of detailed
monitoring of inventory movements and appropriate valuation.

(2)Depreciation and amortization of non-current assets
Property, plant and equipment
Depreciation of property, plant and equipment is computed by the(excluding lease assets)straight-line method.
The useful lives of major property, plant and equipment aresummarized as follows:
Buildings
3 to 18 years
Tools, furniture and fixtures
4 to 20 years
Intangible assets(excluding lease assets)

Amortization of intangible assets is computed by the straight-line
method.
Capitalized software costs are being amortized over the period of
the internal use of five years.

Lease assets

Depreciation of lease assets is computed by the straight-line method
over the lease term with no residual value.

(3)Deferred assets
Share issuance costs and bondissuance costs

Share issuance costs and bond issuance costs are recorded as expenses infull at the time of expenditure.

(4) Basis for translating assets and liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the spot
exchange rates prevailing on the closing date, and resulting gains or losses are credited or charged to income.
(5) Basis for reserves and provisions
Provision for retirement
The provision for retirement benefits is provided based on an estimatedbenefits
amount for retirement benefit obligations at the end of fiscal year underreview.
The Company applies the simplified method to calculate amounts ofprovision for retirement benefits and retirement benefit expenses. That is,35the amount of retirement benefit obligations are the payments required forvoluntary retirement as of each fiscal year end.
Provision for productchangeover

An estimated amount of expenses is recorded to prepare for expenses to be
incurred accompanying the changeover from the FD formulation to RTD
formulation of TREAKISYM®.

(6) Recognition of revenues and expenses
The Company recognizes revenue from the sale of merchandise and finished goods at the time of delivery to
the customer, as this is when the control of the merchandise and finished goods is transferred to the customer andperformance obligations are satisfied. Revenue from the sale of merchandise and finished goods is estimatedwithin the range in which it is highly probable that there will not be a significant reversal of the consideration
promised in the contract with the customer less sales rebates in accordance with the terms of the sales contract.
The amount of consideration expected to be refunded to the customer is recorded as a refund liability. The refund
liability is estimated based on the terms of the contract and past performance.

(Notes on changes in accounting policy)(Application of Accounting Standard for Revenue Recognition)

The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29; March
31, 2020; hereinafter “Revenue Recognition Standard”) from the beginning of the fiscal year under review. As aresult of the application of this standard, revenue will be recognized in the amount expected to be received in
exchange for the promised goods or services at the time control of the promised goods or services is transferred tothe customer.
Under the previous accounting standard, for transactions where the total amount of consideration the Company
is entitled to in exchange for the transfer of promised goods or services, i.e., the transaction price, is likely to be
reduced after a contract is signed with the customer, the Company revised the transaction price once the amount tobe reduced was fixed. However, under the new accounting standard, the Company makes a reasonable estimate of
the variable amount and subtracts it from the transaction price at the time the goods or services are transferred tothe customer. Further, under the previous accounting standard, the Company accounted for expected sales returns
by recording provisions for sales returns in the amount equivalent to gross profit; however, in accordance with theprovisions regarding variable consideration, the Company no longer recognizes revenue at the time of sale andrecords refund liabilities as “other” under the current liabilities section of the balance sheet.
The Company has followed the transitional treatment prescribed in the provision of Paragraph 84 of the Revenue
Recognition Standard and has applied the new accounting standard from the opening balance of retained earningsof the fiscal year under review, whereby the cumulative effect of retrospective application of the new accounting
standard prior to the beginning of the fiscal year under review is added to or deducted from the beginning balanceof retained earnings.
As a result, in the statements of income for the fiscal year under review, net sales increased by 62,962-thousandyen, operating profit and ordinary profit increased by 62,962 thousand yen, respectively, and profit before income
taxes increased by 62,962 thousand yen. In addition, the balance of retained earnings at the beginning of the period
decreased by 92,822 thousand yen.
Net assets per share, net income per share and diluted net income per share decreased by 2.38 yen, increased by
1.61 yen and increased by 1.59 yen, respectively, during the current fiscal year.

(Application of Accounting Standard for Fair Value Measurement)

The Company has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30;
July 4, 2019; hereinafter “Fair Value Measurement Standard”) from the beginning of the fiscal year under review.
In applying the Fair Value Measurement Standard, the Company has followed the transitional treatmentprescribed in the provision of Paragraph 19 of the Fair Value Measurement Standard and Paragraph 44-2 of the“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10; July 4, 2019) and will apply the new
accounting standard prescribed by the Fair Value Measurement Standard, prospectively.
The adoption of this accounting standard has no effect on the financial statements.

(Note to Significant Accounting Estimates)(1) Amount recorded in the consolidated financial statements for the fiscal year under review
Deferred tax assets recorded in the consolidated fiscal year under review: 744,728 thousand yen(2) Information regarding significant accounting estimates on the identified item(i)

Calculation method
Based on the company classification stipulated in the “Implementation Guidance on Recoverability ofDeferred Tax Assets” (ASBJ Guidance No. 26, February 16, 2018), the Company recorded deferred tax assets

36

for the deductible temporary differences and losses carryforward at the end of the fiscal year under review,to the extent that they can be used to reduce future tax burden. When recording deferred tax assets, taxable
income before adjustment for temporary differences, etc. is estimated based on the business plan.

(ii) Major assumptions

Taxable income based on future profitability is estimated according to the Group’s business plan. The
estimate is also based on certain assumptions that take into consideration significant uncertainties caused bysuch factors as the impact of sales volume of existing drugs on net sales and the impact of pipeline
development progress on tax adjustment items.

(iii) Impact on the consolidated financial statements for subsequent fiscal years
Any revisions to the assumptions underlying the estimates due to changes in the economic conditions, etc.,
may have a significant impact on the amount of deferred tax assets to be recorded on the consolidated financial
statements for subsequent fiscal years.

(Additional information)(Overdraft and commitment line contracts)
The Company has overdraft and commitment line contracts with three banks in a business relationship to
efficiently procure working capital. The status of the bank overdraft and loan commitments based on these contracts
at the end of the fiscal year under review is as follows:(Unit: thousands of yen)
Total amounts of bank overdraft limit and loan commitment line
3,150,000
Balance of borrowing outstanding—
Unused balance
3,150,000(Impact of COVID-19)

The outlook for the business environment remains uncertain, as COVID-19 infections remain a threat tohealthcare facilities and patients, altering patient care behavior and making patients more cautious about treatment.
Such impacts are considered in our accounting estimates such as the recoverability of deferred tax assets, etc.

(Balance sheet)

Monetary assets receivable from subsidiaries are as follows.
Short-term monetary assets receivable:

6,905 thousand yen(Statement of income)(1) R&D costs included in general and administrative expenses:
2,546,227 thousand yen(2) Transaction volume with subsidiaries and affiliates is as follows.
Transaction volume of operating transactions:

144,764 thousand yen(Statement of changes in equity)

Type and number of shares issued and treasury shares

Commonstock

At beginning ofcurrent period
Treasury shares

Increase

82,6182,750(Unit: number of shares)
At end of current
Decrease
period100(Notes) 1. Increase of 2,750 treasury shares in common stock is due to the purchase of shares less than one unit.
2. Decrease of 100 treasury shares in common stock is due to the sale of shares less than one unit to shareholders.

37

85,268

(Tax effect accounting)Significant components of deferred tax assets and liabilities
Deferred tax assets:(Unit: thousands of yen)
99,374Losses on valuation of inventories disallowed
2,359
Excess depreciation for lump-sum depreciable assets
1,112,916
Excess amortization for deferred assets
2,273,704
Research and development expenses disallowed
50,852
Accounts payable–other disallowed
1,036
Provision for retirement benefits disallowed
41,189Enterprise taxes payable disallowed
5,000
Provision for product changeover disallowed
2,534
Asset retirement obligations disallowed
114,101
Share-based compensation expenses disallowed
4,036,381
Loss carried forward
7,739,451
Subtotal of deferred tax assets(3,805,995)
Valuation allowances for loss carried forward(3,188,726)
Valuation allowances for deductible temporary differences(6,994,722)
Subtotal of valuation allowances
Total deferred tax assets

744,728(Transactions with affiliated parties)
Category

Name of Location
Capital orcompany orinvestment(thousands of
personyen)

Executive

Fuminori
Yoshida——Business details or
profession

Ratio of voting
rights and otherforms ofownership (%)

Representative Director,
President and Chief
Executive Officer of theCompany(Ownership)
Direct: 2.84

Relationships
with affiliatedparties

Transaction
details

Transaction
amount(thousands ofyen)

Account
title

Year-endbalance(thousands ofyen)

Exercise ofshareacquisitionrights27,195(35,000 shares)——(Note) This information describes the exercise during the fiscal year under review of share acquisition rights granted based on
resolutions of the Board of Directors meetings held on March 28, 2019.

(Notes on revenue recognition)

Underlying information for understanding revenue arising from contracts with customers
Underlying information for understanding revenue arising from contracts with customers is as stated in (Significant
accounting
policies), (6) Recognition of revenues and expenses.

(Per-share information)(1) Net assets per share(2) Net profit per share
Average number of shares outstanding during the year

(Significant subsequent events)
None to be reported.

38

204.95 yen
30.37 yen
39,046,821 shares

Audit report on consolidated financial statements by accounting auditor

Independent Auditor’s ReportFebruary 28, 2023
The Board of Directors
SymBio Pharmaceuticals Limited
Ernst & Young ShinNihon LLC
Tokyo, Japan
Tetsuya Tomita
Designated Engagement Partner
Certified Public Accountant
Kinuyo Matsuo
Designated Engagement Partner
Certified Public Accountant

OpinionPursuant to Article 444, paragraph 4 of the Companies Act, we have audited the accompanying consolidated financial
statements, which comprise the consolidated balance sheet, the consolidated statement of income, the consolidated
statement of changes in equity, and notes to the consolidated financial statements of SymBio Pharmaceuticals Limited
and its consolidated subsidiaries (the Group) applicable to the fiscal year from January 1, 2022 to December 31,2022.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, theconsolidated financial position and results of operations of the Group applicable to the fiscal year ended December 31,
2022, in accordance with accounting principles generally accepted in Japan.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities underthose 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 the Group 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 ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinion.

Other Information

The other information comprises the information included in the Group’s business report and its supplementaryschedules. Management is responsible for preparation and disclosure of the other information. The Audit andSupervisory 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 to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit 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, the Audit and Supervisory Committee for the Consolidated
Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for such internal control as management
determines is necessary 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 the Group’s ability tocontinue as a going concern and disclosing, as required by accounting principles generally accepted in Japan, mattersrelated to going concern.

39

The Audit and Supervisory 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 arefree from material misstatement, whether due to fraud or error, and to issue 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 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 tofraud 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 are appropriate in thecircumstances for our risk assessments, while the purpose of the audit of the consolidated financial statements is
not expressing an opinion on the effectiveness of the Group’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on theaudit evidence obtained, whether a material uncertainty exists related to events or conditions that may castsignificant 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 thedisclosures, and whether the consolidated financial statements represent the underlying transactions and events ina manner that achieves fair presentation in accordance with accounting principles generally accepted in Japan.
・ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Group to express an opinion on the consolidated financial statements. We are responsible forthe direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the Audit and Supervisory 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, related safeguards.

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 bedisclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

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Audit report by accounting auditor

Independent Auditor’s ReportFebruary 28, 2023
The Board of Directors
SymBio Pharmaceuticals Limited
Ernst & Young ShinNihon LLC
Tokyo, Japan
Tetsuya Tomita
Designated Engagement Partner
Certified Public Accountant
Kinuyo Matsuo
Designated Engagement Partner
Certified Public Accountant

OpinionPursuant to Article 436, Section 2, paragraph 1 of the Companies Act, we have audited theaccompanying financial statements, which comprise the balance sheet, the statement of income, the statement ofchanges in equity , the notes to non-consolidated financial statements and the related supplementary schedules of
SymBio Pharmaceuticals Limited (the “Company”) applicable to the 18th fiscal year from January 1, 2022 to December
31, 2022.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position
and results of operations of the Company applicable to the fiscal year ended December 31, 2022, 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 underthose standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements sectionof our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance withthese requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.

Other Information

The other information comprises the information included in the Group’s business report and its supplementaryschedules. Management is responsible for preparation and disclosure of the other information. The Audit andSupervisory Committee is responsible for overseeing the Group’s reporting process of the other information.
Our opinion on the financial statements does not cover the other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit 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, the Audit and Supervisory Committee for the Financial
Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance withaccounting principles generally accepted in Japan, and for such internal control as management determines is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue asa going concern and disclosing, as required by accounting principles generally accepted in Japan, matters related togoing concern.
The Audit and Supervisory Committee is responsible for overseeing the Company’s financial reporting process.

41

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free frommaterial misstatement, whether due to fraud or error, and to issue 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 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 financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances for our risk assessments, while the purpose of the audit of the financial statements is not expressing
an opinion on the effectiveness of the Company’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on theaudit evidence obtained, whether a material uncertainty exists related to events or conditions that may castsignificant 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 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 theCompany to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, andwhether the financial statements represent the underlying transactions and events in a manner that achieves fairpresentation in accordance with accounting principles generally accepted in Japan.
We communicate with the Audit and Supervisory Committee regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the Audit and Supervisory Committee with a statement that we have complied with the ethicalrequirements regarding independence that are relevant to our audit of the financial statements in Japan, and tocommunicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.

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 which is required to bedisclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

42

Audit report by Audit & Supervisory Committee

Report of the Audit & Supervisory Committee
We, Audit & Supervisory Committee Members, prepare this report of audit with regard to the execution of Directors’
duties during the 18th Term of the Company from January 1, 2022 to December 31, 2022. The methods and results of
the audit are as follows.

1. Methods and Contents of the Audit

The Audit & Supervisory Committee regularly received reports from Directors and employees regarding the contentsof resolution by the Board of Directors related to matters stipulated in Article 399-13, Paragraph 13, Item 1, B and Cof the Companies Act and the status of establishment and operation of the internal control system set up based on thesaid resolution, and requested additional explanation as necessary. The Committee has expressed its opinion andconducted an audit using the methods outlined below.

(i) We conducted the audit in compliance with the standards for audits by Audit & Supervisory Board
Committee set forth by the said Committee, and abided by the audit policy and division of duties. In
cooperation with the Company’s Internal Control Division, we attended important meetings andreceived reports from Directors and employees regarding their execution of duties, requesting additional
explanation if necessary. We also reviewed documents for important settlements, and investigated thestatus of operations and assets of the headquarters and key business offices. Regarding the Company’s
subsidiary, we communicated and exchanged information with Directors, etc. of the subsidiary, andreceived reports on the subsidiary’s business operations as necessary.
(ii) In addition, we monitored and inspected the independent position of the accounting auditor and theexecution of appropriate audits by the accounting auditor, and also received the reporting from theaccounting auditor with regard to the state of execution of its duties, requesting additional explanation
as deemed necessary. Furthermore, we received the notification from the accounting auditor that “thesystem to ensure that its duties are executed as appropriate (the items listed by the respective paragraphsof Article 131 of the Ordinance on the Accounting of Companies)” is maintained in accordance with“the standards for quality control of audits (Business Accounting Council, October 28, 2005),”
requesting additional explanation as deemed necessary.
Based on the methods described above, we reviewed the business reports and related supplementary schedules,
financial reports (including balance sheet, statement of income, statement of changes in equity, and notes to nonconsolidated financial statements) and related supplementary schedules, and consolidated financial statements(consolidated balance sheet, consolidated statement of income, consolidated statement of changes in equity, and notes
to consolidated financial statements) for the Term reported.

2. Results of Audit(1) Results of the audit of the business reporta. The business report and supplementary schedules fairly present the Company’s situation in accordance with laws
and ordinances and the Company’s Articles of Incorporation.
b. No misconduct in the execution of Directors’ duties or any material facts in violation of laws or ordinances or theCompany’s Articles of Incorporation was observed.
c. The contents of resolution by the Board of Directors with regard to the Internal Control System are appropriate.
Also, there is no matter to be noted as for the descriptions in the business report regarding such Internal Control
System and the execution of Directors’ duties.
(2) Results of the audit of the financial statements and related supplementary schedules
Both the methods used for and the results of the audit conducted by the accounting auditor, Ernst & Young
ShinNihon LLC, are appropriate.
(3) Results of the audit of the consolidated financial statements
Both the methods used for and the results of the audit conducted by the accounting auditor, Ernst & Young
ShinNihon LLC, are appropriate.

February 20, 2023
Audit & Supervisory Committee,
SymBio Pharmaceuticals Limited
Kiyoshi Watanabe
Full-time Audit & Supervisory Committee Member

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Kesao Endo
Audit & Supervisory Committee Member
Yasuhiro Tamo
Audit & Supervisory Committee Member(Note) Audit & Supervisory Committee Members Kiyoshi Watanabe, Kesao Endo, and Yasuhiro Tamo are Outside
Directors of the Company as stipulated in Article 2, Item 15 and Article 331, Paragraph 6 of the Companies Act.
End of Report
End of Document44