English translation

March 26, 2020

Annual Report(January 1, 2019 through December 31, 2019)
1. Business Performance of SymBio Pharmaceuticals Limited(1) Business conditions and operating results
Progress in the Company’s business for the fiscal year under review is as follows.
(i) Domestic[Issues concerning product defects]
As stated in the reasons for revisions to our earnings forecasts released on August 7, 2019,
foreign matter contamination and appearance defects were discovered in lyophilized
injection agents imported from Astellas Deutschland GmbH, a subsidiary of Astellas
Pharma Inc. Hence, shipments of TREAKISYM® 100 mg vials to the Company’s
distributor in Japan, Eisai Co., Ltd., faced further delays than originally anticipated. As aresult, net sales totaled 2,837,753 thousand yen for the fiscal year ended December 31,
2019, was down 36.4% compared to our initial forecast. Operating loss was 4,301,615
thousand yen (versus our initial forecast of loss of 3,587 million yen).
To prevent similar quality issues from recurring, the Company have filed complaints with
Astellas Deutschland GmbH and requested the manufacture and prompt shipment of
replacement product batches. Although the Company received the replacement batches, theinventory levels for TREAKISYM® remain low due to unreliable delivery dates andcontinuing high defect rates for a portion of replacement batches. The Company continues
to request that Astellas Deutschland GmbH to fulfill its obligations as our supplier. SymBio
will continue to negotiate and demand improvements from Astellas Deutschland GmbH toensure a stable supply of high-quality pharmaceutical products. Astellas DeutschlandGmbH has established the corrective and preventive action program (CAPA), but its
effectiveness has not yet been confirmed.
[Establishment of the Company’s own salesforce]
In October 2018, the Company began preparations to establish its own salesforce for thesale of TREAKISYM® after the expiration of a business partnership agreement with Eisai-1-Co., Ltd. (Eisai) in December 2020. The Company’s top management objectives are toattain profitability in the fiscal year ending December 31, 2021 and to achieve sustainablegrowth thereafter. By transitioning to its own salesforce, the Company plans to solidify its
future business development.
During the fiscal year under review, the Company continued to expand and train its teamof TREAKISYM® sales representatives, who will be the core of the Company’s own
salesforce. Upon completion of their training, sales representatives began conducting
regionally focused activities to provide information on July 1, 2019, and the Company madesteady progress toward establishing a nationwide salesforce by 1H FY 2022. During thefinal three months of the fiscal year under review, the Company made significant progressin recruiting the additional regional sales managers and TREAKISYM® sales
representatives necessary for a nationwide salesforce and our goal of improving ourdistribution and logistics capabilities. This achievement is in part due to the formation ofbusiness alliances with pharmaceutical wholesalers and division of our logistics center into
eastern Japan and western Japan. The Company is also establishing an enterprise resource
planning (ERP) system. Through these efforts, the Company made steady progress toward
establishing a high-performance and high-productivity salesforce.
[Anticancer agents: SyB L-0501 (lyophilized powder formulation), SyB L-1701 (ready-todilute (“RTD”) formulation), SyB L-1702 (rapid infusion (“RI”) formulation) (genericname: bendamustine hydrochloride; trade name: TREAKISYM®)]
The Company currently sells TREAKISYM®, a drug widely used in the field ofmalignant lymphoma, in Japan through its business partner, Eisai. The Company obtained
manufacturing and marketing approval for first-line treatment of low-grade non-Hodgkin’s
lymphoma (low-grade NHL) (Note 1) and mantle cell lymphoma (MCL) in December 2016,
for recurrent/refractory low-grade NHL and MCL in October 2010, and for chronic
lymphocytic leukemia (CLL) in August 2016. Further, the combination treatment (BRtherapy) of TREAKISYM® and rituximab was added to the Guidelines for Tumors of
Hematopoietic and Lymphoid Tissues 2018 published by the Japanese Society of
Hematology in July 2018, recommending TREAKISYM® as one of standard treatments for
all previously approved indications. As a result, TREAKISYM® gained its foothold as thestandard treatment for malignant lymphoma. By switching to a highly specialized internalsalesforce, the Company aims to achieve a market share that is on par with our market
shares in the U.S. and Europe.
In addition to the approved indications, the Company is conducting a Phase III clinical
trial for TREAKISYM® targeting recurrent/refractory diffuse large B-cell lymphoma (r/r
DLBCL). In November 2019, the Company announced the achievement of a favorable-2-response rate that exceeded expected levels, which represents a primary endpoint.
Currently, the Company is preparing to apply for approval for this indication, targeting thesecond quarter of FY 2020. The above trial is in response to the serious need at clinics andhospitals as there is currently no reliable standard treatment. Patient groups and relevant
academic societies have petitioned to the regulatory authorities for the approval of BR
therapy.
The Company entered into an exclusive license agreement (in Japan) for
TREAKISYM® liquid formulation (RTD and RI liquid formulations) (Note 2) with Eagle
Pharmaceuticals, Inc. (head office: New Jersey, U.S.) in September 2017. Following
consultations with the Pharmaceutical and Medical Devices Agency concerning RTD liquid
formulation products, the Company completed an application for approval in September
2019 and forecasts a launch in Q1 FY 2021. A clinical trial for RI liquid formulations beganin November 2018 primarily to confirm safety. The Company is steadily recruiting patients
since the enrollment of the first patient in April 2019. As of January 31, 2020, 31 patientswere enrolled. The Company aims to launch these RI liquid formulations in the first half of
FY 2022 following a prompt application for approval after the clinical trial. RI liquid
formulations significantly reduce the time required for administration to 10 minutes, downfrom the 60 minutes required by the currently available freeze-dried (“FD”) powder andready-to-dilute (RTD) formulations. This will greatly lessen the burdens placed on patientsand healthcare providers, enabling the Company to add significant value. Furthermore, theliquid formulations are protected by multiple patents that will make it possible to extend
the life of this product until 2031, increasing business value.
Further, as a result of the approval obtained in July 2018 of a partial change application
to the Company’s TREAKISYM® marketing authorization, TREAKISYM® can now be
used in combination with not only rituximab but also other new anti-CD20 antibodies forthe treatment of CD20 positive follicular lymphoma (FL), a common histologic type of lowgrade NHL. As a new treatment option, it is offered to patients in combination withobinutuzumab (Note 3), which was launched in August 2018. In March 2019, the Company
received approval for changes to a portion of its application concerning the use of
TREAKISYM® as a pretreatment agent for tumor-specific T-cell infusion therapy (Note 4).
This will allow TREAKISYM® to be used as a pretreatment for Kymriah® intravenous
infusion (Note 5), which was approved as the first chimeric antigen receptor T-cell (CAR-T)
therapy (Note 6) in Japan and included in the NHI price listings in May 2019. The status of
TREAKISYM® as a standard treatment for malignant lymphoma is becoming stronger as
its use as a pretreatment for regenerative medicine and other products continues to expand.
Two trials aimed at exploring further possibilities for TREAKISYM®, a Phase I clinical
trial examining TREAKISYM® as a treatment for progressive solid tumors and a pre-3-

clinical trial aimed at verifying the therapeutic effects of TREAKISYM® on systemic lupus
erythematosus (SLE), were concluded and achieved the initial objectives. However, theCompany suspended further development of TREAKISYM® in these areas. In order to best
utilize limited management resources, the Company made the strategic decision to prioritize
the domestic and overseas development of brincidofovir (mentioned below), an antiviraldrug for the treatment of infectious disease, for which the Company have newly acquired alicense.
(Note 1)

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

(Note 2)

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

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

(Note 4)

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

(Note 5)Kymriah® intravenous infusion (generic name: tisagenlecleucel; marketed by Novartis
Pharma K.K.): Kymriah® intravenous infusion is the first chimeric antigen receptor Tcell (CAR-T) therapy approved within Japan. The Company received manufacturing andmarketing approval for Kymriah® for use in the treatment of CD19 positive
recurrent/refractory B-cell acute lymphoblastic leukemia (B-ALL) and CD19 positive
recurrent/refractory diffuse large B-cell lymphoma (DLBCL) in March 2019. Kymriah®
intravenous infusion was included in NHI price listings in May 2019.

(Note 6)

Chimeric antigen receptor T-cell (CAR-T) therapy is a type of tumor-specific T-cell
infusion therapy that introduces genes that code chimeric antigen receptors (CARs) into
T-cells, amplifies these cells and then infuses them. These chimeric antigen receptors
are produced by combining the intracellular domains of T-cell receptors with the antigen
binding sites of antibodies capable of recognizing membrane antigens attached to tumor-4-

cells. In clinical trials using CARs to target CD19 that expresses on B-cells, CD19targeting CARs were introduced into T-cells that were later administered to patients with
B-cell tumors. These modified cells produced clear clinical effects.

[Anticancer agents: SyB L-1101 (intravenous formulation) and SyB C-1101 (oralformulation) (generic name: rigosertib sodium)]
U.S. licensor Onconova Therapeutics, Inc. (head office: Pennsylvania, U.S.)(“Onconova”) is conducting a global Phase III clinical trial (with trial sites in more than 20
countries) of the intravenous formulation of rigosertib for higher-risk myelodysplastic
syndromes (HR-MDS) in patients who do not respond to the current standard treatment
with hypomethylating agents relapse after treatment under the current standard of care, or
are intolerant to hypomethylating agents. The Company is responsible for clinicaldevelopment in Japan and began the trial in December 2015. Forty-eight patients wereenrolled as of December 31, 2019, and patient enrollment is in progress. According to an
October 2019 announcement from Onconova, global patient enrollment (final target of 360
patients) was more than 90% complete as of November 2019, and top-line results (primary
endpoints) are expected to be released in 1H FY 2020. Based on the results of the trial, theCompany is planning to apply for approval in Japan at the same time as in the U.S. andEurope.
As for the oral formulation of rigosertib, Onconova completed Phase I/II clinical trials
in the U.S. for the target indication of first-line HR-MDS (in combination with azacitidine(Note 7)), and results suggested that the oral formulation of rigosertib and azacitidine were
safe and effective when combined. The Company started a Phase I clinical trial in Japan inJune 2017 to confirm the tolerability and safety of the oral formulation of rigosertib forJapanese patients. We began patient enrollment with the first patient enrolled in October
2017 and completed the enrollment process in June 2019. After completion of this trial, theCompany plans to promptly conduct a Phase I clinical trial for combination therapy withazacitidine. Further, to apply for approval of the oral formulation of rigosertib in Japan nolater than in the U.S. and Europe, the Company plans to take part in a global trial for
combination therapy with azacitidine for the first-line treatment of patients with higher-risk
MDS, which Onconova is currently considering conducting. Data from the global trial wasannounced at the 61st American Society of Hematology (ASH) Annual Meeting andExposition in December 2019. Based on this data, Onconova announced that it is discussing
the design of a Phase II/III adaptive clinical trial testing this combination therapy as a firstline treatment for HR-MDS during the same month.
(Note 7)

Azacitidine (Vidaza®, marketed by Nippon Shinyaku Co., Ltd.): This hypomethylating
agent (for injection) was approved in 2011 upon successful confirmation of extended-5-

overall survival for the first time in the Phase III clinical trial for the indication of MDS,
and is currently used as a first-line drug for MDS patients who have difficulties inhematopoietic stem cell transplantation. MDS is a pre-leukemia, and decreased
expression in tumor suppressor gene due to excessive methylation of DNA is thought tobe related to the disease. Hypomethylating agents such as azacitidine are thought tosuppress progress to leukemia by restoring tumor suppressor gene with a deterrent effectagainst methylation of DNA.

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

already been found to have highly active antiviral effects, as well as a wide treatment
spectrum, through clinical trials conducted by Chimerix, Inc. in the U.S. and Europe. Basedon these findings, the Company will discuss the design of global clinical trials.
(Note 8)

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

(Note 9)

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

[Patient-controlled pain management drug: SyB P-1501]
In October 2015, the Company entered into an agreement with Incline Therapeutics,
Inc., a wholly owned subsidiary of US-based The Medicines Company (head office: New
Jersey, U.S.) for an exclusive license to develop and commercialize SyB P-1501 in Japan.
The Company, acting in the best interests of patients, temporarily suspended new patient
enrollment for SyB P-1501 from April 21, 2017 due to the concern of the continuity of The
Medicines Company’s business regarding the product.
The Company initiated arbitration against The Medicines Company on October 11,
2017 under the rules of the International Chamber of Commerce, seeking damages of 82
million U.S. dollar (approximately 9.0 billion yen) arising from The Medicines Company’s
repudiation of the license agreement.
Arbitration proceedings against The Medicines Company are ongoing. Novartis
International AG (head office: Switzerland) announced on January 6, 2020 that it hadcompleted the acquisition of The Medicines Company.
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(ii) Business outside Japan
SyB L-0501 is also marketed in South Korea, Taiwan, and Singapore, and sales of SyB
L-0501 in these countries progressed favorably at a level exceeding the Company’s
forecasts.
(iii) Licensing of new drug candidates
The Company conducts ongoing search and evaluation of multiple new drug candidates
for potential in-licensing to expand our research and development (“R&D”) pipeline. Our
aim is to create long-term business value as a profitable biopharmaceutical company withgrowth potential.
Additionally, the Company will proceed with the transformation into a global specialty
pharmaceutical company with the capacity to develop and commercialize new drugs in the
U.S., Japan, Europe, and other major global markets by actively acquiring rights to new
drug candidates using wholly owned subsidiary SymBio Pharma USA, Inc. as a global
business base.

(iv) Business results
Net sales totaled 2,837,753 thousand yen for the fiscal year ended December 31, 2019,
primarily reflecting product sales of TREAKISYM®, and overall net sales fell 26.0% year
on year.
Selling, general and administrative expenses totaled 5,166,366 thousand yen (+34.9%
year on year), including R&D expenses of 2,441,552 thousand yen (+33.2% year on year)
primarily due to upfront payments for the licensing agreement of brincidofovir, an antiviraldrug for the treatment of infectious disease and a new product under development, andexpenses associated with clinical trials for the intravenous formulations of TREAKISYM®
and the intravenous and oral formulations of rigosertib, as well as other selling, general andadministrative expenses of 2,724,814 thousand yen (+36.5% year on year).
As a result, an operating loss of 4,301,615 thousand yen was recognized for the fiscal
year ended December 31, 2019 (an operating loss of 2,656,072 thousand yen for theprevious fiscal year). In addition, non-operating income was 4,331 thousand yen, primarily
consisting of insurance claim income of 2,736 thousand yen. Meanwhile, non-operating
expenses were 79,372 thousand yen and primarily comprised foreign exchange losses of
54,755 thousand yen, share issuance cost of 13,932 thousand yen, and commission expensesof 10,457 thousand yen. Consequently, ordinary loss totaled 4,376,655 thousand yen(compared to an ordinary loss of 2,748,730 thousand yen in the same period of the previous-8-fiscal year) and bottom-line loss in the fiscal year ended December 31, 2019 totaled
4,376,258 thousand yen (compared to a loss of 2,752,533 thousand yen for the same periodof the previous fiscal year).
Segment information is omitted since the Company operates within a single segment,
which includes the R&D, manufacturing, and marketing of pharmaceutical drugs and otherrelated activities.
(v) Capital investment
The total amount of capital expenditures during the fiscal year under review was 225,773
thousand yen, mainly consisting of office investments and the purchase of appliances,
network devices and business software.
(2) Status of fund procurement
The company procured 3,771,425 thousand yen as a result of the exercise of share acquisitionrights associated with the 46th and 47th warrants (with Exercise Price Revision Clauses) in thefiscal year under review.
(3) Status of assets and profit and loss
(Unit: thousands of yen)
Fiscal year
Classification
Net sales
Operating profit (loss)
Ordinary profit (loss)
Profit (loss)
Loss per share (yen)Total assets
Net assets
Net assets per share (yen)FY 2016
The 12th Term

FY 2017
The 13th Term

FY 2018
The 14th Term

2,368,112(2,127,049)(2,316,806)(2,313,233)(58.82)
6,878,384
5,484,870
108.61

3,444,206(3,947,061)(3,976,784)(3,977,862)(79.78)4,252,284
3,239,402
50.00

3,835,530(2,656,072)(2,748,730)(2,752,533)(165.54)
6,239,423
4,901,799
212.23

FY 2019
The 15th Term(current)
2,837,753(4,301,615)(4,376,655)(4,376,258)(189.03)5,273,955
4,400,116
143.07(Note) The Company conducted a 1-for-4 consolidation of common shares on July 1, 2019. Loss per share andnet assets per share and have been calculated based on the assumption that this consolidation was
conducted at the beginning of FY 2018.

(4) Issues to be addressed by the Company
The Company is committed to focusing on the following key management objectives.
(i) Further expansion of the pipeline
In order to enhance the enterprise value as a specialty pharmaceutical company, we needto expand the pipeline through ongoing in-licensing of new drug candidates for-9-development.
The Company is conducting or planning development of the following anticancer agents:
SyB L-0501, SyB L-1101, SyB C-1101, SyB L-1701, SyB L-1702, and SyB V-1901, anantiviral drug for the treatment of infectious disease. Currently we are in discussion withcounterparties 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 pipeline
Promoting product life cycle management is also important to enhance enterprise value.
The Company will continue to aim to maximize returns from each drug under development
through indication expansion after the in-licensed drugs’ initial approval.
TREAKISYM® is approved for manufacturing and marketing in Japan for the indicationsof recurrent/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® also achieved primary endpoints in
its Phase III clinical trial for the indication of recurrent/refractory diffuse large B-cell
lymphoma (r/r DLBCL), and the Company is currently preparing to apply for its approval.
In addition, the Company intends to maximize the business value of TREAKISYM® bypromoting the product life cycle management of the product and is developing the
TREAKISYM® liquid formulation (RTD and RI liquid formulations) in-licensed from
Eagle Pharmaceuticals, Inc. (head office: New Jersey, U.S.).
The development of intravenous and oral formulations of rigosertib for the indication of
myelodysplastic syndromes (MDS) is currently progressing. Few useful therapeutic agentsare currently available for MDS, so it is an area with very high unmet medical need. With
respect to the global Phase III clinical trial of the intravenous formulation for the target
indication of recurrent/refractory higher-risk MDS conducted by Onconova, the Company
is conducting its clinical trial in Japan. As for the oral formulation, the Company hascompleted a domestic Phase I clinical trial as a monotherapy for the target indication oflower-risk MDS, and is currently conducting a domestic Phase I clinical trial to confirm thesafety of high-dose monotherapy for the target indication of first-line higher-risk MDS. The
Company is considering participating in global clinical trials after completing the Phase I
clinical trial. The development for the target indication of transfusion-dependent lower-risk
MDS will be considered based on the status of development by Onconova.
The Company is focused on maximizing the business value of TREAKISYM® andrigosertib by promoting product life cycle management through further indication
expansion. Furthermore, we will aim to maximize earnings by pursuing life cycle- 10 -

management related to brincidofovir, an antiviral drug for the treatment of infectious
disease, while transforming into a specialty pharmaceutical company with the capacity to
expand into global markets.
(iii) Preparation for the establishment of the Company’s own salesforce
Domestic sales of TREAKISYM® are currently handled through Eisai, in accordancewith the business partnership agreement the Company concluded in August 2008. Thisagreement is set to expire in December 2020 and, looking ahead to the fiscal year ending
December 31, 2021, the Company is planning to transition to its own salesforce.
Providing specialized medical drugs information will enable the Company to moreaccurately understand the needs of the market and respond more swiftly, allowing it tocontribute to the benefit of patients while aiming to maximize the business value of
TREAKISYM®. Furthermore, the Company strives to build a consistent salesforce with ahigh level of specialization in the field of hematological diseases. Through this effort, theCompany aims to achieve high business efficiency, ensure sustainable earnings growth, andmaximize shareholder value once the intravenous and oral formulations of rigosertib, which
are currently under development to treat myelodysplastic syndromes (MDS), join
TREAKISYM® in the product lineup.
With regard to brincidofovir, an antiviral drug for the treatment of infectious disease, wewill not only pursue domestic sales, but also consider global business development in allparts of the world, including Europe and the United States.
(iv) Global expansion for further growth
In addition to Japan, the Company identifies China, Hong Kong, South Korea, Taiwan,
and Singapore as strategic regions in Asia to move forward with business development.
However, with expanding medical expenditures due to the aging population in Japan,
and the advent of the “era of generic drugs comprising 80% of all drugs dispensed” as agovernmental policy of Japan, the business environment for innovative drug developers is
expected to remain extremely challenging. Such a policy may also be implemented by other
Asian countries.
Under these circumstances, the Company will promote global expansion aiming for
further growth. Utilizing its experience fostered through its business in Asia, the Company
will search, evaluate, and negotiate concerning new drug candidates that can follow
brincidofovir, an antiviral drug for the treatment of infectious disease, in order to acquire
their rights on a global scale.
(v) Securing personnel- 11 -

The Company places the highest priority on personnel as the Company’s principal
management resource. Without talent, we would be unable to make superior achievements
in terms of exploring, developing, and providing information concerning new drugs, andunable to develop and commercialize these new drugs on a global scale. We continually
recruiting talented people; especially after being listed, we have recruited the best andbrightest people in order to strengthen the management organization. Going forward, weplan to continue to further strengthen our human resources by providing on-the-job training
and employee development programs.
(vi) Financial
It is necessary for the Company to raise funds required for business activities such as
R&D expenditures as pipeline development and global business expansion progress and as
drug candidates increase in number.
Therefore, we make every effort to further strengthen the financial base by continually
diversifying the method of fund raising and curtailing costs through tight budget control.

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(5) Major business activities (as of December 31, 2019)
The Company regards underserved therapeutic areas that lack the development of new drugs,
despite significant unmet medical needs, as business opportunities. We engage in thedevelopment of new drugs with a primary focus on the treatment of rare diseases, mainly in theareas of oncology and hematology; search and evaluation, development and manufacturing tosales are the main activities of our business.
(6) Main office and employees(i) Main office (as of December 31, 2019)
Name

Location

Main office

Minato-ku, Tokyo(ii) Employees (as of December 31, 2019)

Male

80

Increase or
decrease fromprevious fiscal
year end
15 (increase)

Female27

Total or average

107

Classification

Number of
employees

Average age(years)Average numberof years of service

50.3

3.4

2 (increase)

46.4

4.4

17 (increase)

49.3

3.6

(Notes) 1. Number of employees refers to full time employees.
2. The above number of employees does not include 21 temporary staff.

(7) Status of parent company and significant subsidiaries
Not applicable.
(8) Status of main lenders (as of December 31, 2019)
Not applicable.

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2. Matters Related to Stock (as of December 31, 2019)(1) Total number of authorized shares
Common stock: 41,750,000 shares(2) Total number of shares outstanding
Common stock: 26,415,088 shares (excluding 22,593 shares of treasury stock)(3) Number of shareholders
32,754(4) Major shareholders (10 largest)
Name of shareholder

Number of shares held

Shareholding ratio

Fuminori Yoshida862,750

3.3%

Cephalon, Inc.

647,250

2.5%

SMBC Nikko Securities Inc.

538,300

2.0%

Daiwa Securities Co. Ltd.

293,350

1.1%

Eisai Co., Ltd.

208,350

0.8%

Matsui Securities Co., Ltd.

189,300

0.7%

Goldman Sachs International

185,075

0.7%Japan Securities Finance Co., Ltd.

183,900

0.7%

Kazuyuki Ota

157,700

0.6%

Nomura Securities Co., Ltd.

155,6220.6%(Notes) 1. By resolution of the 14th Ordinary General Meeting of Shareholders held on March 28, 2019,
the Company conducted a 1-for-4 consolidation of common shares on July 1, 2019. As a result,
the total number of authorized shares decreased by 125,250,000 shares and the total number ofshares outstanding decreased by 73,088,043 shares.
2. Shareholding ratio (%) indicates the percentage of shares outstanding held. Shares outstanding
is equal to the number of shares issued minus treasury shares.
3. After the end of FY 2019, all of the 47th warrants have been exercised by February 12, 2020.
As a result, the total number of shares outstanding has increased by 1,675,000 shares.

- 14 -

3. Matters Related to Share Acquisition Rights(1) Share acquisition rights held by the Company’s Officers that were issued ascompensation for services (as of December 31, 2019)
The 20th warrant
The 24th warrant
The 26th warrant
by resolution of theby resolution of theby resolution of theOrdinary General Meeting Ordinary General Meeting Ordinary General Meetingof Shareholdersof Shareholdersof Shareholders
on March 30, 2010
on March 30, 2011
on April 17, 2012
Number of shareacquisition rights

3,445 units

1,920 units

3,625 units

Number of shares to beissued upon the exerciseof share acquisitionrights (Note 4)

86,125 shares

48,000 shares

90,625 shares

Amount paid for shareacquisition rights

None

None

None

2,340 yen per share

2,728 yen per share

2,220 yen per share

Period in which exerciseof share acquisitionrights is possible

From: April 1, 2012
To: March 31, 2020

From: March 31, 2013
To: March 30, 2021

From: April 18, 2014
To: April 17, 2022

Status of possession by
Directors (excluding
Outside Directors) (Note 4)

1,800 units (1 holder)
45,000 shares

1,200 units (1 holder)
30,000 shares

2,600 units (1 holder)
65,000 shares

Status of possession by
Outside Directors

—

—

—

Value of property to becontributed upon theexercise of each shareacquisition right (Note 1)(Note 4)

- 15 -

The 30th warrant
The 37th warrant
The 40nd warrant
by resolution of the Board by resolution of the Board by resolution of the Boardof Directors meetingof Directors meetingof Directors meetingon May 14, 2013
on March 30, 2016
on March 29, 2017
Number of shareacquisition rights

1,160 units

2,200 units

2,800 units

Number of shares to beissued upon the exerciseof share acquisitionrights (Note 4)

29,000 shares

55,000 shares

70,000 shares

Amount paid for shareacquisition rights

None

27,200 yen per unit

20,300 yen per unit

(Note 2) (Note 4)(Note 2) (Note 4)(Note 4)1 yen per share

1 yen per share

Period in which exerciseof share acquisitionrights is possible

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

From: March 31, 2019
To: March 30, 2026

From: March 30, 2020
To: March 29, 2027

Status of possession by
Directors (excluding
Outside Directors) (Note 4)

645 units (1 holder)
16,125 shares

1,490 units (1 holder)
37,250 shares

1,450 units (1 holder)
36,250 shares

Status of possession by
Outside Directors

—

—

—

Value of property to becontributed upon theexercise of each shareacquisition right (Note 1)

3,196 yen per share- 16 -

The 43th warrant
The 48th warrant
by resolution of the Board by resolution of the Boardof Directors meetingof Directors meetingon March 29, 2018
on March 28, 2019
Number of shareacquisition rights

3,050 units

2,950 units

Number of shares to beissued upon the exerciseof share acquisitionrights (Note 4)

76,250 shares

73,750 shares

19,800 yen per unit

19,400 yen per unit

Value of property to becontributed upon theexercise of each shareacquisition right (Note 1)

1 yen per share

1 yen per share

Period in which exerciseof share acquisitionrights is possible

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

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

Status of possession by
Directors (excluding
Outside Directors) (Note 4)

1,450 units (1 holder)
36,250 shares

2,200 units (2 holder)
55,000 shares

Status of possession by
Outside Directors (Note 4)

250 units (1 holders)
6,250 shares

750 units (3 holders)
18,750 shares

Amount paid for shareacquisition rights (Note 2)(Note 4)(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 becontributed upon the exercise of each share acquisition right. Therefore, the stated value of
property to be contributed upon the exercise of each share acquisition right excluding thoseissued 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 share acquisition rights against cash compensation equivalent to theamount.
3. There are no share acquisition rights held by Audit & Supervisory Board Members.
4. The Company conducted a 1-for-4 consolidation of common shares on July 1, 2019. Numberof shares to be issued upon the exercise of share acquisition rights and exercise price have beenadjusted accordingly.

- 17 -

(2) Share acquisition rights distributed to the Company’s employees as compensation forservices during the fiscal year under review (as of December 31, 2019)

Number of share acquisition rights

The 49th warrant
by resolution of the Board of Directors
meeting on March 28, 20197,165 units

Number of shares to be issued upon theexercise of share acquisition rights (Note179,125 shares

Amount paid for share acquisition rights

19,400 yen per unit

3)

(Note 2) (Note 3)(Note 2)

Value of property to be contributed
upon the exercise of each shareacquisition right1 yen per share

Period in which exercise of shareacquisition rights is possible

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

Status of allotment to the Company’s
employees (Note 1) (Note 3)

6,185 units (82 holders)
154,625 shares(Notes) 1. Of the share acquisition rights mentioned above, 980 units (24,500 shares) have been
forfeited due to the retirement of employees.
2. The person who receives the allotment of share acquisition rights shall offset the amount tobe paid for the relevant share acquisition rights against cash compensation equivalent to theamount.
3. The Company conducted a 1-for-4 consolidation of common shares on July 1, 2019. Numberof shares to be issued upon the exercise of share acquisition rights and exercise price havebeen adjusted accordingly.

(3) Other important matters concerning share acquisition rights
Not applicable.

- 18 -

4. The Company’s Officers (as of December 31, 2019)(1) Names of Directors and Audit & Supervisory Board Members
Company position

Responsibility and significant concurrent
position

Name

Representative Director

Fuminori Yoshida

Chief Executive Officer

Director

Kenji Murata

Chief Financial Officer

Director

Shigetoshi Matsumoto

Director

Bruce David Cheson

Scientific Advisory Board, Lymphoma
Research Foundation
Outside Director, MorphoSys

Director

Rockford Douglas
Norby

Outside Director, Krystal Biotech Inc.

Full-time Audit &Kiyoshi Watanabe
Supervisory Board Member
Representative, Endo C.P.A Firm
Outside Director, Careerlink Co., Ltd.
Representative Partner, ABS Audit
Corp.
Partner, Tanabe & Partners Law Firm
Outside Director, Mirait Holdings Corp.
Outside Director, Rakuten Bank, Ltd.
Audit & Supervisory Board Member,
Toko Electrical Construction Co., Ltd.

Audit & Supervisory Board
Kesao Endo
MemberAudit & Supervisory Board
Eiji Ebinuma
Member(Notes) 1. Of the Directors, Shigetoshi Matsumoto, Bruce David Cheson, and Rockford Douglas Norby are
Outside Directors.
2. Kiyoshi Watanabe, Kesao Endo, and Eiji Ebinuma are outside members of the Audit & Supervisory
Board.
3. Shigetoshi Matsumoto, Kiyoshi Watanabe, and Kesao Endo have been designated as independent
officers pursuant to the provisions of the Tokyo Stock Exchange and registered as such with theTokyo Stock Exchange.
4. Kesao Endo possesses deep insight in finance and accounting, which he gained through his
profession as a certified public accountant.
5. Eiji Ebinuma is an attorney with specialized knowledge and extensive experience in law.
6. Changes in Directors and Audit & Supervisory Board Members during the fiscal year under review
are as follows:- Directors George Morstyn, Milton Grannatt, and Robin Campbell resigned upon expiration of theirterms of office at the closing of the 14th Ordinary General Meeting of Shareholders held on March
28, 2019.
- Audit & Supervisory Board Member Saneaki Ichijo resigned upon expiration of his term of officeat the closing of the 14th Ordinary General Meeting of Shareholders held on March 28, 2019.
- Kenji Murata was newly appointed as Director at the 14th Ordinary General Meeting of
Shareholders held on March 28, 2019.
- Eiji Ebinuma was newly appointed as an Audit & Supervisory Board Member at the 14th Ordinary
General Meeting of Shareholders held on March 28, 2019.

- 19 -

- Representative Director Kazuo Asakawa resigned on June 30, 2019. During his term, he also held
the positions of Corporate Officer, Executive Vice President, and Chief Commercial Officer.
7. The Company has adopted the Corporate Officer System. The Corporate Officers who do not holdconcurrent positions as Directors are as follows:
Managing Executive Officer
Shigeo Kimura
Corporate Officer
Nobuo Ishida(2) Summary of the contents of the liability limitation agreement
The Company has executed an agreement with each Director (excluding those who engage
in business execution) and each member of the Audit & Supervisory Board with respect to theliability in Article 423, Paragraph 1 of the Companies Act, setting forth that director liability will
be limited to the higher of 1,000,000 yen or the maximum liability amount set forth in laws andregulations in cases where the Director or member of the Audit & Supervisory Board has
performed their duties in good faith and without gross negligence.
(3) Compensation of members of the Board of Directors and the Audit & Supervisory
Board
Number of Directors or
Total Amount ofCompany Board
Audit & Supervisory
Compensation
Board Members Paid
(thousands of yen)
9145,670
Board of Directors(Outside: 6)(Outside: 38,046)
4
21,163
Audit & Supervisory Board(Outside: 4)(Outside: 21,163)
13
166,833
Total(Outside: 10)(Outside: 59,210)(Notes) 1. Salary in the event of a Director doubling as an employee is not included in the above compensation for
Directors.
2. The maximum amount of compensation for Directors was resolved as an annual amount of 130 million
yen at the Extraordinary General Meeting of Shareholders held on August 3, 2005. In addition to theaforementioned compensation, it was resolved that compensation for Directors in the form of shareacquisition rights as stock options be granted up to a maximum annual amount of 80 million yen at the
9th Ordinary General Meeting of Shareholders held on March 27, 2014. (Of 80 million yen, 30 million
yen was granted for Outside Directors, which was resolved at the 11th Ordinary General Meeting of
Shareholders held on March 30, 2016.)
3. The maximum amount of compensation for Audit & Supervisory Board Members was resolved as anannual amount of 30 million yen at the Extraordinary General Meeting of Shareholders held on June 30,
2011.
4. The number of Directors or Audit & Supervisory Board Members compensated as stated above includes
three (3) Directors and one (1) Audit & Supervisory Board Member who resigned at the closing of the
14th Ordinary General Meeting of Shareholders held on March 28, 2019, and one (1) Director who
resigned on June 30, 2019.
5. The total compensation paid includes expenses (for nine (9) Directors, a total of 67,922 thousand yen) in
connection with share acquisition rights as stock options for the fiscal year under review.

- 20 -

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

Name

Status of
Status ofattendance at the attendance at theOpinions at the Board of Directors
Board ofAudit &
meetings and the Audit & Supervisory
Directors
Supervisory Board
Board meetings
meetings
meetings

Director

Shigetoshi
Matsumoto

14 out of 14(100%)—Mr. Matsumoto expressed opinionsfrom an objective perspective
independent from the Company’s
management engaged in business
operations, leveraging his extensive
knowledge and experience with thebusiness practices of companies inthe same industry and with auditingwork.

Director

Bruce David
Cheson8 out of 10
(80%)

—

Dr. Cheson expressed opinions froman objective perspective independent
from the Company’s management
engaged in business operations,leveraging his extensive knowledge
and experience as a physician.

Director

Rockford
DouglasNorby

10 out of 10(100%)—

Dr. Norby expressed opinions froman objective perspective independent
from the Company’s management
engaged in business operations,leveraging his extensive experienceand knowledge regarding healthcarecompanies.

Full-time
Audit &
Supervisory
Board
MemberKiyoshiWatanabe

14 out of 14(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 listedcompanies in order to achieve highly
effective managerial surveillance.

- 21 -

Status of
Status ofattendance at the attendance at theOpinions at the Board of Directors
Board ofAudit &
meetings and the Audit & Supervisory
Directors
Supervisory Board
Board meetings
meetings
meetings

Position

Name

Audit &
Supervisory
Board
MemberKesao Endo

14 out of 14(100%)

14 out of 14(100%)

Mr. Endo actively expressed opinionsfrom a neutral perspective based on
the specialized knowledge andextensive experience he accumulated
as a certified public accountant inorder to achieve highly effective
managerial surveillance.

Audit &
Supervisory
Board
Member

Eiji Ebinuma

10 out of 10(100%)

9 out of 9
(100%)

Mr. Ebinuma actively expressed
opinions from a neutral perspective
based on the specialized knowledge
and extensive experience heaccumulated as an attorney in orderto achieve highly effective
managerial surveillance.

(Note) With regard to Directors Bruce David Cheson and Rockford Douglas Norby and Audit & Supervisory Board
Member Eiji Ebinuma, their status of attendance at the meetings is calculated from the Board of Directors
meetings and the Audit & Supervisory Board meetings held after their appointments on March 28, 2019.

- 22 -

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) Amount of compensation
Amount paid
Amount of compensation paid to the accounting auditor
concerning the fiscal year under review
Total amount of monetary and other property benefits to be paidby the Company

20,400 thousand yen
20,400 thousand yen(Notes) 1. Reasons for the Audit & Supervisory Board’s approval of the amount of compensation to be paid
to the accounting auditor
The Audit & Supervisory Board verified the contents of the audit planning by the accounting
auditor, performance of its duties in previous years, and status of planning and actual performance,
and as a result of a careful review on the adequacy 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 in accordance with the Financial Instruments and Exchange Act, are not distinguishedin the contract agreement between the Company and the accounting auditor. It is not possible todistinguish between compensation paid for these two types of audits; therefore the total amountthereof is stated.

(4) 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 the accounting auditor’s execution of duties, the Audit & Supervisory Board shalldetermine 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
Board shall dismiss the accounting auditor with the consent of all members of the Audit &Supervisory Board. If this is the case, an Audit & Supervisory Board Member selected by the
Audit & Supervisory Board shall report the dismissal of the accounting auditor and the reasonsfor such dismissal at the first General Meeting of Shareholders convened after the dismissal.

- 23 -

6. System to Ensure the Appropriateness of Operations(1) The corporate system to ensure that Directors, officers, and employees comply withlaws and ordinances, 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 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 the spirit of these regulations and forthorough compliance with the same. All business activities of the Company are based 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, appropriate risk management, and proper financial reporting. In
addition, an internal control committee has been established to ensure complete observanceof laws and ordinances, the Articles of Incorporation, and other internal regulations throughexhaustive surveillance.
(iii) Establishment of internal audit office
The Company has established an internal audit office as an independent organizational
unit which conducts regular audits and acts under the direct authority of the Representative
Director and President. Through such audits, objective assessments are made as to theeffectiveness 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 of internal controls by accepting advice and proposals concerning
recommended improvements to the maintenance and operation of systems.
(iv) Establishment of compliance reporting and consultation hot-lines
The Company has established compliance reporting and consultation hot-lines bothinternal to and outside the Company, and has designated compliance liaisons to respond toreports and requests for consultation from employees and aim 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.

- 24 -

(2) Corporate system for maintenance and control of information regarding theperformance of duties by Directors
The Company appoints an individual to be responsible for the general management ofcorporate documents and to appropriately maintain and otherwise control all important
documents containing information as to the performance by Directors of their duties in
addition to legally required records of proceedings of Shareholders meetings and Board of
Directors meetings, as provided in laws and ordinances as well as in the Company’s own“Rules for the Management of Documents.”(3) Corporate system for control of risk of loss, including in-house rules for such control
The Company 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 will swiftly respond to emergency situation by
establishing an emergency response headquarters managed by the Representative Director andPresident.
(4) Corporate system to ensure the efficient performance of duties by Directors(i) Directors, officers, and employees perform their duties in appropriate and efficientaccordance 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 precise 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 accordance with these plans. In addition, the Company establishes numericaltargets 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
The Company resolutely opposes anti-social forces that pose a threat to the order or safetyof society and forbids their participation in any and all business activities.
(6) Assistant to Audit & Supervisory Board Members
Audit & Supervisory Board Members may request that the Representative Director andPresident appoint an employee to act as an assistant to Audit & Supervisory Board Members.
Upon receiving such a request, the Representative Director and President shall make an- 25 -

appropriate appointment.
(7) Ensuring the independence of assistants to Audit & Supervisory Board Members from
Directors and the effectiveness of the Audit & Supervisory Board Members’
instructions to employees(i) Assistants to Audit & Supervisory Board Members shall not receive instructions concerning
their supporting duties from anyone other than Audit & Supervisory Board Members.
(ii) Matters such as personnel evaluation and transfer and disciplinary actions concerning
employees that assist Audit & Supervisory Board Members shall be subject to the priorconsent of the Audit & Supervisory Board.
(8) Corporate system for Directors and employees to report to the Audit & Supervisory
Board; corporate system for other reports to the Audit & Supervisory Board; andcorporate system to ensure the efficient performance of audits by the Audit &Supervisory Board(i) Any Director or employee shall promptly inform the Audit & Supervisory Board if andwhen he/she becomes aware of any circumstance that threatens to cause any significant
damage to, or could adversely affect, the Company.
(ii) Audit & Supervisory Board Members may participate in all matters that they judge to beimportant in terms of gaining a better understanding of decision-making processes,
conditions, and statuses of the Company’s businesses. Accordingly, they may attend Boardof Directors meetings, Executive Management Committee meetings, and other important
meetings and are also permitted to view key decision-making documents related to thesemeetings.
(iii) Audit & Supervisory Board Members may individually interview Directors andemployees in key positions of responsibility to obtain information regarding themanagement conditions of the Company’s businesses.
(iv) Audit & Supervisory Board 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 make reports to the Audit & Supervisory Board.
(9) Matters related to the treatment of expenses or obligations associated with the executionof duties of Audit & Supervisory Board Members, including the procedures for
prepayment or reimbursement of such expenses(i) The Company will respond without delay to claims for the prepayment of expenses madeby Audit & Supervisory Board Members under Article 388 of the Companies Act,- 26 -

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 Board Members.
(ii) The Company authorizes and shoulders expenses incurred when Audit & Supervisory
Board Members seek opinions or advice from external experts, including attorneys andcertified public accountants, if it is found necessary for the execution of their duties.
7. Summary of the Status of System to Ensure the Appropriateness of Operations(1) The Company is striving to instill a culture of compliance across the organization and ensure
appropriate operation of internal control systems through its communications with Directors
and employees, and through publication of information such as the basic policies regarding
internal control systems, corporate compliance conduct 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 participate inresolutions from an independent standpoint and monitor and supervise the management. Each
Audit & Supervisory Board Member carries out management audits as well.
(3) Full-time Audit & Supervisory Board Members attend important meetings such as the Boardof Directors meetings as well as Executive Management Committee meetings, and exchange
views with representative directors monthly.

- 27 -

Balance Sheet(As of December 31, 2019)
Item(Assets)
Current assets
Cash and deposits
Accounts receivable–trade
Supplies
Prepaid expenses
Advances paid
Consumption taxes receivable

Amount
4,887,491
3,910,830
549,275640
94,002
41,791
275,324

Other

15,626

Non-current assets
Property, plant andequipment
Buildings
Tools, furniture and fixtures
Construction in progress
Accumulated depreciation
Intangible assets
Software
Software in progress

386,463
75,491
47,486
66,241
21,513(59,750)
240,525
94,974
145,551

Investments and other assets
Shares of subsidiaries
Lease and guarantee deposits

70,446070,446

Total assets

5,273,955(Unit: thousands of yen)
Item
Amount(Liabilities)
Current liabilities
872,219
Accounts payable–trade120,913
Accounts payable–other639,482
Income taxes payable
87,756
Other
24,066
Non-current liabilities
1,619
Provision for retirement
1,619
benefits
Total liabilities(Net assets)
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Retained earnings
Other retained earnings
Retained earnings brought
forwardTreasury shares
Share acquisition rights

3,779,202
14,870,639
14,843,137
14,840,639
2,498(25,919,496)(25,919,496)(25,919,496)(15,077)
620,913

Total net assets

4,400,116

Total liabilities and net
assets5,273,955(Note) Amounts of less than one thousand yen are rounded down.

- 28 -

873,838

Statement of Income
January 1, 2019
( toFrom
December 31, 2019 )Item(Unit: thousands of yen)AmountI. Net sales
II. Cost of goods sold2,837,753
1,973,002

Gross profit
III. Selling, general and administrative
expenses

864,751
5,166,366

Operating loss

(4,301,615)

IV. Non-operating income
Interest income

235

Insurance claim income
Dividend income of insurance

2,736
1,282

Interest on tax refund
Other

76
0

V. Non-operating expenses
Commission fee

10,457

Share issuance cost
Foreign exchange losses

4,331

13,93254,755

Other

227

Ordinary loss

79,372(4,376,655)

VI. Extraordinary income
Gain on reversal of share acquisition rights
Loss before income taxes
Income taxes–current

4,197

4,197

3,800

(4,372,458)
3,800(4,376,258)

Net loss(Note) Amounts of less than one thousand yen are rounded down.

- 29 -

Statement of Changes in Equity
January 1, 2019
( Fromto December 31, 2019 )(Unit: thousands of yen)

Shareholders’ equity
Capital surplus
Capital stock

Balance as of January 1, 2019
ChangesperiodLegal capitalsurplus

Othercapitalsurplus12,972,579

12,942,579－

1,898,059

1,898,059

Retainedearnings
Other retained
earnings
Total capital
Retained
surplusearnings brought
forward12,942,579△21,543,238

of items during

Issuance of new shares(exercise of shareacquisition rights)

1,898,059

Net loss△4,376,258

Purchase of treasury shares
Disposal of treasury shares

2,498

2,498

Net changes of items otherthan shareholders’ equity
Total changes of items
during period

1,898,059

1,898,059

2,498

1,900,558△4,376,258

Balance as of December 31,
2019

14,870,639

14,840,639

2,498

14,843,137△25,919,496- 30 -

Shareholders’ equity
Treasury shares
Balance as of January 1, 2019
ChangesperiodTotal shareholders’equity4,371,902

△17

Share
Acquisitionrights529,897

Total
net assets
4,901,799

of items during

Issuance of new shares(exercise of shareacquisition rights)
Net loss

3,796,119

3,796,119△4,376,258△4,376,258

Purchase of treasury shares△20,871△20,871△20,871

Disposal of treasury shares

5,811

8,310

8,310

Net changes of items otherthan shareholders’ equity

91,01691,016

Total changes of items
during period△15,059△592,699

91,016△501,663

Balance as of December 31,
2019△15,0773,779,202

620,9134,400,116(Note) Amounts of less than one thousand yen are rounded down.

- 31 -

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 andaffiliates

Shares of subsidiaries are stated at cost determined by themoving-average method.

Other marketable and investment securities
Available-for-sale securities
with determinable market
value

Available-for-sale securities with a determinable market
value are stated at fair value based on marketable valueon the closing date and other premises. Any valuationdifferences are included directly in shareholders’ equity.
Cost of securities sold is calculated by the movingaverage method.

Available-for-sale securities
without determinable market
value

Available-for-sale securities without determinable market
value are stated at cost determined by the movingaverage method.

Derivative transactions

Derivative financial instruments are stated at fair value.

Inventories

Inventories are stated at cost determined by the weightedaverage method. The amount on the balance sheet is
calculated by reducing book value when the contributionof inventories to profitability declines.

(2) Depreciation and amortization of non-current assets
Property, plant and equipment(excluding lease assets)

Depreciation of property, plant and equipment iscomputed by the straight-line method.
The useful lives of major property, plant and equipment
are summarized as follows:
Buildings
3 to 18 years
Tools, furniture and fixtures
4 to 20 years

Intangible assets(excluding lease assets)

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

Lease assets

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

- 32 -

(3) Deferred assets
Share issuance costs and bondissuance costs

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

(4) Basis for translating assets and liabilities denominated in foreign currencies into Japaneseyen
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 orlosses are credited or charged to income.
(5) Basis for reserves and provisions
Allowance for doubtful
accounts

The allowance for doubtful accounts is provided at an amountdetermined based on the historical experience of bad debt withrespect to ordinary receivables and an estimate of uncollectible
amounts determined by reference to specific doubtfulreceivables from customers which are experiencing financial
difficulties.
For the fiscal year under review, no allowance for doubtful
accounts is provided due to no historical experience of bad debt
and no receivable balances that are deemed uncollectible.

Provision for retirement
benefits

The provision for retirement benefits is provided based on an
estimated amount for retirement benefit obligations at the endof fiscal year under review.
The Company applies the simplified method to calculate
amounts of provision for retirement benefits and retirement
benefit expenses. That is, the amount of retirement benefit
obligations are the payments required for voluntary retirement
as of each fiscal year end.

(6) Accounting for consumption tax
Transactions are recorded at amounts exclusive of consumption tax.

- 33 -

(Balance sheet)
Monetary assets receivable from subsidiaries are as follows.
Short-term monetary assets receivable:
1,540 thousand yen(Statement of income)(1) Inventories at fiscal year-end are stated after writing down based on the decrease inprofitability. The following amount is included within cost of sales as loss on valuation of
inventories.
Cost of sales: 187,840 thousand yen
A certain batch of TREAKISYM® 100mg was determined to be unsalable due to its poor
quality, which resulted in an inventory valuation loss.
(2) R&D costs included in general and administrative expenses:

2,441,552 thousand yen(Statement of changes in equity)(1) Type and number of shares issued and treasury shares(Unit: number of shares)

Commonstock

Sharesoutstanding
Treasury shares

At beginningof current
periodIncrease

Decrease

At end ofcurrent period

82,398,924

17,126,800

73,088,043

26,437,681

75

31,0508,532

22,593(Notes) 1. Increase of 17,126,800 shares issued in common stock is due to the exercise of share acquisitionrights.
2. Decrease of 73,088,043 shares issued in common stock is due to the 1-for-4 consolidation ofcommon shares conducted on July 1, 2019.
3. Increase of 31,050 treasury shares in common stock is due to the purchase of shares less than
one unit.
4. Of the decrease of 8,532 treasury shares in common stock, the decrease of 57 shares is due tothe 1-for-4 consolidation of common shares conducted on July 1, 2019, 6,775 shares to theexercise of share acquisition rights, and 1,700 shares to the sale of shares less than one unit.

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

2,265,950 shares(Note) Excludes share acquisition rights for which the commencement date of the exercise period has
not yet arrived.

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(Deferred tax accounting)Significant components of deferred tax assets and liabilities
Deferred tax assets:
Excess depreciation for lump-sum depreciable assets
Excess amortization for deferred assets
Research and development expenses disallowed
Accounts payable–other disallowed
Provision for retirement benefits disallowedEnterprise tax payable disallowed
Asset retirement obligations disallowed
Share-based compensation expenses disallowed
Loss carried forward(Unit: thousands of yen)
3,404
669,030
2,033,400
4,385
495
27,5091,458
162,750
4,063,034

Subtotal of deferred tax assets
Valuation allowances for loss carried forward
Valuation allowances for deductible temporary differences

6,965,465(4,063,034)(2,902,431)

Subtotal of valuation allowances
Total deferred tax assets(6,965,465)—- 35 -

(Financial instruments)(1) Financial instruments(i) Policies for financial instruments
The Company procures the funds necessary in light of the pipeline development plan
(primarily by third-party allotment and offering by new share issuance). A temporary
surplus fund is invested in financial instruments which are highly safe and liquid.
As a principle, the Company does not enter into derivative transactions for speculative
trading purposes but uses them within the scope prescribed in the Company’s internal rules.
(ii) Types of financial instruments and related risks
Operating receivables such as accounts receivable–trade and advances paid inconnection with joint development 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.
The Company intends to invest in marketable and investment securities which have arelatively low risk of falling below initial investments, however, it might entail a finite risk.
Operating payables such as accounts payable–trade and accounts payable–other are
mostly due within 75 days. Operating payables denominated in foreign currencies are
exposed to foreign exchange fluctuation risk.
The Company uses derivative transactions to avoid foreign exchange fluctuation risks
and enters into forward exchange contracts within the scope prescribed in the internal rules
based on balances of receivables and payables denominated in foreign currencies as wellas the actual volume of export and import transactions denominated in foreign currencies.
Lease and guarantee deposits are mostly security deposits related to leased officepremises and their refunds 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 Company’s internal credit policies for managing credit risk
arising from operating receivables, the Company’s marketing department periodicallymonitors the creditworthiness of major customers and monitors due dates and outstandingbalances 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.

- 36 -

The Company enters into derivative transactions only with financial institutions whichhave 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, and others)
The Company deposits cash primarily with financial institutions with high credit ratings.
For marketable and investment securities, the Company intends to avoid risks of falling
below initial investments by investing in securities with a satisfactory credit rating andinvestment period in accordance with the Company’s internal investment policies.
The Company enters into forward exchange contracts in order to avoid foreign exchange
fluctuation risks in connection with receivables and payables denominated in foreign
currencies.
Followed by appropriate authorization procedures prescribed in the Company’s internal
rules, the Finance & Accounting department executes and monitors derivative transactions.
Monthly transaction performances are reported to the Executive Management Committee.
3. Monitoring of liquidity risks (the risk that the Company may not be able to meet its
obligations on the scheduled due date)
Based on the report from each department, the responsible department of the Company
prepares and updates its cash flow plans on a timely basis and ensures to maintain theliquidity 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 no quoted market price available, fair value is reasonably estimated. Sincevarious assumptions and factors are reflected 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, all operating receivables are from one
particular major customer.

- 37 -

(2) Fair value of financial instruments
The carrying value on the balance sheet, fair values, and their differences are as follows.
(Unit: thousands of yen)
Carrying value on
Fair value
Difference
the balance sheet(1) Cash and deposits
3,910,830
3,910,830—(2) Accounts receivable–trade549,275
549,275—(3) Advances paid
41,791
41,791―(4) Consumption taxes receivable
275,324
275,324―
Assets, total(1) Accounts payable–trade(2) Accounts payable–other(3) Income taxes payable
Liabilities, total

4,777,222
120,913639,482
87,756
848,153

4,777,222
120,913639,482
87,756
848,153

—
—
—
—
—

—

—

—

Derivative transactions, total (*)(*) Receivables and liabilities arising from derivative transactions are presented on a net basis and net
liabilities are shown in parentheses.
(Note) 1. Fair value measurement of financial instruments and other matters related to securities andderivative transactions
Assets(1) Cash and deposits, (2) Accounts receivable–trade, (3) Advances paid, and (4) Consumption
taxes receivable
The carrying value is deemed as the fair value since these are scheduled to be settled in ashort period of time.
Liabilities(1) Accounts payable–trade, (2) Accounts payable–other, and (3) Income taxes payable
The carrying value is deemed as the fair value since these are scheduled to be settled in ashort period of time.
Derivative transactions
Forward exchange contracts
The fair value of forward exchange contracts is measured based on market quotes obtained
from financial institutions.
(Note) 2. Financial instruments whose fair value is extremely difficult to determine
Lease and guarantee deposits (carrying value of 70,446 thousand yen) are not included in theabove table since no market quote is available and their fair value is extremely difficult todetermine.

- 38 -

(Note) 3. The redemption schedule for monetary assets and securities with maturities after the closing
date(Unit: thousands of yen)
Due after
five years
Due after
through ten
ten years
years
—
—

3,910,739

Due after
one yearthroughfive years—

Accounts receivable–trade549,275———

Advances paid

41,791———

Consumption taxes receivable

275,324

Total

4,777,131

―
—

―
—

―
—

Due in one
year or less
Deposits(Transactions with affiliated parties)
None to be reported.
(Per-share information)(1) Net assets per share(2) Net loss per share
Average number of shares outstanding during the year

143.07 yen(189.03) yen
23,150,655 shares(Note) The Company conducted a 1-for-4 consolidation of common shares on July 1, 2019. Loss per sharehas been calculated based on the assumption that this consolidation was conducted at the beginningof FY 2019.

(Other notes)
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)
1,350,000
Total amounts of bank overdraft limit and loan commitment line
Balance of borrowing outstanding—
Unused balance
1,350,000(Significant subsequent events)
None to be reported.

- 39 -

Independent Auditor’s ReportFebruary 18, 2020
The Board of Directors
SymBio Pharmaceuticals Limited
Ernst & Young ShinNihon LLC

Hironao Yazaki
Certified Public Accountant
Designated and Engagement Partner

Koichiro Kitaike
Certified Public Accountant
Designated and Engagement Partner
Pursuant 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 of changes in equity, the notes to non-consolidated financial statements and therelated supplementary schedules of SymBio Pharmaceuticals Limited (the “Company”)
applicable to the 15th fiscal year from January 1, 2019 through December 31, 2019.
Management’s Responsibility for the Financial Statements and the Related Supplementary
Schedules
Management is responsible for the preparation and fair presentation of these financial
statements and the related supplementary schedules in accordance with accounting principles
generally accepted in Japan, and for designing and operating such internal control as management
determines is necessary to enable the preparation and fair presentation of the financial statements
and the related supplementary schedules that are free from material misstatement, whether due
to fraud or error.

- 40 -

Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements and the related
supplementary schedules based on our audit. We conducted our audit in accordance with auditing
standards generally accepted in Japan. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and the related
supplementary schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements and the related supplementary schedules. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements and the related supplementary schedules, whether due
to fraud or error. The purpose of an audit of the financial statements is not to express an opinion
on the effectiveness of the entity’s internal control, but in making these risk assessments theauditor considers internal controls relevant to the entity’s preparation and fair presentation of thefinancial statements and the related supplementary schedules in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating the appropriatenessof accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the financial statements and the related
supplementary schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
OpinionIn our opinion, the financial statements and the related supplementary schedules referred toabove present fairly, in all material respects, the financial position and results of operations of
SymBio Pharmaceuticals Limited applicable to the 15th fiscal year ended December 31, 2019 inconformity with accounting principles generally accepted in Japan.
Conflicts of Interest
We have no interest in the Company which should be disclosed in compliance with theCertified Public Accountants Act.

- 41 -

Report of the Audit & Supervisory Board
We, Audit & Supervisory Board Members, prepare this report of audit with regard to the
execution of Directors’ duties during the 15th Term of the Company from January 1, 2019 to
December 31, 2019, as the unanimous opinion of all the Audit & Supervisory Board Members
after careful discussion based on the audit reports prepared by respective Audit & Supervisory
Board Members, and report as follows.
1. Method and Contents of the Audit by the Audit & Supervisory Board Members and the Audit& Supervisory Board
The Audit & Supervisory Board formulated the audit policy and plan for the Term reported,
and received reports from the respective Audit & Supervisory Board Members with regard to thestate of implementation and results of audits as well as received the reporting from Directors andthe accounting auditor with regard to the state of execution of their duties, and requested
additional explanations as deemed necessary.
The respective Audit & Supervisory Board Members, in conformity with the standards foraudits by Audit & Supervisory Board Members that the Audit & Supervisory Board set forth andin accordance with the audit policy and plan for the Term, strove to collect information andimprove audit environments by communicating with Directors, the internal audit section, andother employees. We also attended Board of Directors meetings and other important meetings,
received the reporting from Directors and employees with regard to the state of execution of theirduties, requesting additional explanations as deemed necessary, reviewed documents forimportant settlements, and researched the situation of operations and assets. Moreover, withregard to the system to ensure that the execution of Directors’ duties described in the business
report was compliant with laws and ordinances and the Company’s Articles of Incorporation andother systems required to secure the appropriateness of operations as a stock company maintained
based on the contents of resolution by the Board of Directors with regard to the maintenance ofsystems stipulated by the Ordinance for Enforcement of Article 100, Paragraph 1 and 3 of theCompanies Act (hereinafter the “Internal Control System”), we received reporting on the statusof their establishment and operation from Directors and employees, requested additional
explanation as deemed necessary, and expressed our opinion. Based on the method describedabove, we reviewed the business report and supplementary schedules with regard to the Term
reported.

- 42 -

In addition, we monitored and inspected the independent position of the accounting auditor
and the execution of appropriate audits by the accounting auditor, and also received the reportingfrom the accounting auditor with regard to the state of execution of its duties, requesting
additional explanation as deemed necessary. Furthermore, we received the notification from theaccounting auditor that “the system to ensure that its duties are executed as appropriate (the items
listed by the respective paragraphs of Article 131 of the Ordinance on the Accounting ofCompanies)” is maintained in accordance with “the standards for quality control of audits(Business Accounting Council, October 28, 2005),” requesting additional explanation as deemednecessary. Based on the method described above, we reviewed the financial report (includingbalance sheet, statement of income, statement of changes in equity, and notes to non-consolidated
financial statements) and related supplementary schedules 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 inaccordance 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 oflaws or ordinances or the Company’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 thebusiness 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 method used for and the result of the audit conducted by the accounting auditor,
Ernst & Young ShinNihon LLC, are appropriate.

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February 18, 2020
Audit & Supervisory Board,
SymBio Pharmaceuticals Limited
Kiyoshi Watanabe, (seal)
Full-time Audit & Supervisory Board Member (Outside)
Kesao Endo, (seal)
Audit & Supervisory Board Member (Outside)
Eiji Ebinuma, (seal)
Audit & Supervisory Board Member (Outside)

End of Report

End of Document- 44 -