English translation

March 9, 2012

Annual Report(

From January 1, 2011
To December 31, 2011)

1. Present situation of the Company(1) Progress and achievement of business
An uncertain outlook for the state of the Japanese economy continued in Fiscal 2011 dueto the prolonged yen strengthening, economic worries in Europe, and concerns over theJapanese politics, while there were improvements in corporate earnings along with thegrowth of emerging countries and a sign of recovery in business conditions was seen.
In Japan’s pharmaceutical industry, the Japanese government has been implementing
policies to promote the use of generic drugs to reduce the overall medical costs. While thegrowth in the domestic market slows down, it becomes an important challenge to develop
new drugs that sell throughout the world. In response to this situation, corporate alliancesand mergers & acquisitions are in a rising trend globally as well as domestically.
In these circumstances, the progress of our business during Fiscal 2011 was as follows.
(i) Domestic
In Japan, the Company sells an anticancer drug SyB L-0501 (the generic name:bendamustine hydrochloride, the trade name: TREAKISYM®) through the business
partner Eisai Co., Ltd. (Eisai) for the indications of refractory/relapsed indolent nonHodgkin’s lymphoma (NHL) and mantle cell lymphoma (MCL).The sales of
TREAKISYM® had been steady after the launch in December 2010 and the Company’ssales of the product to Eisai were mostly in line with the plan.
With regard to the development of TREAKISYM®, patient enrollment was completed
for Phase II clinical trials (collaborative trial in Japan and South Korea) for the extended
indication of refractory/relapsed aggressive non-Hodgkin’s lymphoma in June 2011 andcontinued the administration to enrolled patients. We started Phase II clinical trials for theindications of indolent non-Hodgkin’s lymphoma and mantle cell lymphoma in November
2011. We also started Phase II clinical trials for the indication of refractory/relapsed
multiple myeloma in December 2011.
We continued the patient enrollment and administration for Phase II clinical trial of SyB
D-0701 (a transdermal antiemetic patch) for the indication of radiotherapy-induced nausea
and vomiting.

The pre-clinical trials continued to support the initiation of Phase I clinical trials for the
anticancer drug SyB 0702.

Meanwhile, the Company signed the licensing agreement with Onconova Therapeutics,
Inc. (United States) on July 7, 2011, which allows us to exclusively develop andcommercialize anticancer drugs SyB L-1101 (the intravenous form)/C-1101 (the oral
form) (the generic name: rigosertib) for Japan and South Korea. With regard to theseproducts, we continued preparations for domestic Phase I clinical trials (for SyB L-1101,
the intravenous form) for the indication of refractory/relapsed myelodysplastic syndrome(MDS).
(ii) Overseas
The sales of SyB L-0501 were steady in Singapore. SyB L-0501 was approved for theindications of chronic lymphocytic leukemia and multiple myeloma in South Korea on
May 31, 2011 and the sales started in October 2011. We sell the product through Eisai
in Singapore and South Korea as in Japan.
Furthermore, SyB L-0501 received the approval to manufacture and commercialize
from the Taiwanese authority on October 18, 2011 in consequence of the continued
negotiations with the authority by the business partner InnoPharmax Inc. (Taiwan).

(iii) Business Result Summary
As a result of the aforementioned developments, net sales totaled 1,882,521 thousand
yen for the fiscal year reported reflecting the sales of SyB L-0501 in Japan and Asian
countries, the start of development for the therapy for untreated indolent non-Hodgkin’s
lymphoma in Japan, and the milestone revenue booked for the sales approval for SyB L0501 in South Korea and Taiwan.
Selling, general and administrative expenses totaled 2,725,182 thousand yen,comprising research and development cost of 1,945,029 thousand yen for the accrual of
lump-sum contract payment associated with the in-licensing of product candidates (SyB
L-1101/C-1101) in addition to clinical trials and their preparations for multiple
indications for SyB L-0501, clinical trials for SyB D-0701, and pre-clinical trials for
SyB 0702 as well as other selling, general and administrative expenses of 780,153
thousand yen.
As a result, we posted operating loss of 2,066,846 thousand yen for the fiscal year
reported. Non-operating income was 56,382 thousand yen mainly because of subvention
from NEDO and non-operating expense was 84,919 thousand yen mainly due to IPO
preparation costs. As a result, we posted ordinary loss of 2,095,382 thousand yen andnet loss of 2,104,513 thousand yen for the fiscal year reported.
(2) Situation of fund raising(i) Fund raising
Fund raising activities implemented during the fiscal year reported are as follows.
Number ofIssue price per
Payment date
Classification
total issue priceissued shares
share
772,240
Third-party
February 17, 2011
11,032 shares
70,000 yen
allotment
thousand yen
1,215,760
Third-party
February 25, 2011
17,368 shares
70,000 yen
allotment
thousand yen
1,540 thousand
Third-party
April 21, 201122 shares
70,000 yen
allotmentyen
Third-party
10,500April 26, 2011
150 shares
70,000 yen
allotment
thousand yen
Public5,100,000
2,627,520
October19, 2011
515.20 yen
offering
sharesthousand yen(ii) Capital investment
Capital investment totaled 15,605 thousand yen in the fiscal year reported, mainly forthe introduction of sales management software. The funds for capital investment wereprocured from owned cash.
(3) Situation of assets and profit and loss in the fiscal year reported and the three preceding
fiscal years (units: thousand yen, except for per-share figures)
Fiscal year
Classification
Net sales

Fiscal 2008
4th Term

Fiscal 2009
5th Term

Fiscal 2010
6th Term

Fiscal 2011
7th Term (reported)

1,630,029

1,191,127

1,449,972

1,882,521

Operating profit (loss)

132,859(208,027)(612,793)(2,066,846)

Ordinary profit (loss)

24,169(214,072)(638,375)(2,095,382)

Net profit (loss)

20,987(217,872)(642,307)(2,104,513)

Net profit (loss) per share

364.58 yen(3,252.84) yen(5,933.47) yen(143.60) yen

Total assets

1,501,212

4,260,689

4,262,783

7,256,094

Net assets

1,306,602

4,053,758

4,083,064

6,605,564

22,292.02 yen

40,275.39 yen

36,541.74 yen

345.28 yen

Net assets per share(4) Issues to be solved by the Company
The Company will solve the following important issues:(i) Further expansion of pipeline
In order to enhance the enterprise value as specialty pharmaceutical company, we needto expand the pipeline through continually in-licensing of new candidate drugs fordevelopment.
We have four products in the pipeline and clinical trials are underway for an anticancer
drug SyB L-0501 and a transdermal antiemetic patch SyB D-0701. An anticancer drug
SyB L-1101 (the intravenous form), which we in-licensed in July 2011, is being
prepared for the initiation of clinical trials. We continue with ongoing efforts to inlicense an additional pipeline.
(ii) Pursuit of life cycle management of TREAKISYM® (SyB L-0501)
In order to enhance the enterprise value, it is critical to maximize returns from eachdrug candidate under development by adding new indications for developed candidate
drugs after their initial introduction in pursuit of life cycle management in addition to
in-licensing new candidate drugs.
TREAKISYM® has received the approval for manufacture and marketing with theapproved indications of refractory/relapsed indolent non-Hodgkin’s lymphoma andrefractory/relapsed mantle cell lymphoma. Phase II clinical trials are underway forrefractory/relapsed aggressive non-Hodgkin’s lymphoma, untreated indolent nonHodgkin’s lymphoma, untreated mantle cell lymphoma, and refractory/relapsed
multiple myeloma as additional indications. We will add new indications in pursuit oflife cycle management to maximize the value of TREAKISYM®.
(iii) Expansion to other Asian regions
The Company positions China (including Hong Kong), South Korea, Taiwan, andSingapore as our important strategic geographic domains in addition to Japan. In theseareas, high growth in economy and medical needs is expected and we consider thatthese areas will assume increasing importance in our corporate strategy.
Among our pipelines, we plan to develop and market SyB L-0501 and SyB D-0701 in
China (including Hong Kong), South Korea, Taiwan, and Singapore as well as Japan. It
is established by the result of market research that significant medical needs exist for
SyB L-0501 and SyB D-0701 in these countries. We also plan to develop and market
SyB L-1101/C-1101 in South Korea other than Japan. We will aggressively launchclinical trials and apply for marketing approvals in these Asian countries.
(iv) Securing people
The Company places the highest priority on people as the company management
resource. We cannot make superior achievements in exploring and developing new
drugs without talent. Also, a company that considers out-licensing drug candidates to us
critically evaluates the quality of our people in due-diligence. Hence, we plan to further
strengthen our human resources by continually recruiting talent and providing
development programs such as OJT and other trainings.
(v) Financial issue
There is a possibility that the Company raises funds necessary for business activities
such as R&D expenditures externally as the pipeline development progresses and thenumber of drug candidates increases. Therefore, we make every effort to strengthen thefinancial base by continually diversifying the method for fund procurement andreducing costs through a thorough budget control.
(5) Main contents of business (as of December 31, 2011)
The Company regards underserved therapeutic areas that lack the development of new
drugs despite extremely significant medical needs as business opportunities. We engage inthe development of new drugs focusing on the areas of oncology, hematology, andautoimmune diseases, from search, development and manufacture to sales as the maincontents of our business.
(6) Main offices and employees(i) Main offices (as of December 31, 2011)
Name

Location

Main office

Minato-ku, Tokyo(ii) Employees (as of December 31, 2011)
Classification

Number of
employees

Male

46

Female25

Total or average

71

Increase or
decrease fromprevious fiscal
year end
4

Average age(years)Average years ofservice

48.0

3.1

11

41.4

2.2

15

45.7

2.8

(Note) 1. Number of employees represents number of individuals in work.
2. Fifteen temporary employees are not included in the above number of employees.
3. Number of employees increased by 15 in the last one year primarily in order to strengthen thedevelopment division.

(7) Situation of parent company and significant subsidiaries
None to be reported.
(8) Situation of main lenders (as of December 31, 2011)
None to be reported.
(9) Other important matters concerning the Company’s present situation
The Company’s stocks were listed on Osaka Securities Exchange JASDAQ Growth on
October 20, 2011.

2. Matters related to stocks (as of December 31, 2011)
Common(1) Total number of issuable sharesstockCommon(2) Total number of issued sharesstock(3) Number of shareholders(4) Major shareholders (10 largest ones)
Name of shareholders

56,000,000 shares
19,130,825 shares(excluding 75 treasury shares)
4,840

Number of shares held

Percent of issued shares

Fuminori Yoshida

3,030,000

15.8%

Cephalon, Inc.

2,589,000

13.5%

JAFCO V2 Investment LP

2,308,800

12.1%

Eisai Co., Ltd.

833,400

4.4%

Waseda No.1 Investment LP

684,000

3.6%

Waseda Global No.1 Investment LP

500,000

2.6%

Osaka Securities Finance Company, Ltd.

313,400

1.6%

TNP On the road No1. Investment LP

254,000

1.3%

JAFCO V2-W Investment Enterprise Partnership

230,500

1.2%

DAIICHI SANKYO Co., Ltd.

200,000

1.0%(Note) The calculation of percent of issued shares excludes treasury shares.
(5) Other important matters related to stocks(i) Due to the new stock issuance through public offering with the payment date ofOctober 20, 2011, the total number of issued shares increased by 5,100,000 shares, andcapital stock and capital reserve increased by 1,313,760,000 yen, respectively.
(ii) Due to the stock split (at the ratio of 100 shares to each outstanding share), the total
number of issued shares increased by 13,890,591 shares.
(iii) The total number of authorized shares
The Articles of Incorporation were revised by the provision of the Companies’ Act
Article 184 (2) in conjunction with the stock split (at the ratio of 100 shares to each
outstanding share) effective June 2, 2011, and by the resolution at the Extraordinary
General Shareholders’ Meeting held on June 30, 2011, so that the total number ofauthorized shares has increased from 200,000 shares to 56,000,000 shares.

3. Matters related to stock acquisition rights(1) Stock acquisition rights possessed by the Company’s directors that were distributed ascompensation for services(i) Stock acquisition rights granted by the resolution by Extraordinary Shareholders’ Meeting
held on June 20, 2005 (1st series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
3,610-Number of shares subject to stock acquisition 361,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
500 yenstock acquisition rights-Period during which stock acquisition rights
From June 21, 2007
may be exercised
To June 20, 2015
-Situation of possession by the Company’s
directors and auditors
Number of stockacquisition rights

Number of subject
sharesNumber of holders

Directors (notincluding outside
directors)

900

90,0001

Outside directors

600

60,0003

Auditors---(ii) Stock acquisition rights granted by the resolution by Extraordinary Shareholders’Meeting held on September 1, 2005 (5th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
845-Number of shares subject to stock acquisition 84,500
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,000 yenstock acquisition rights-Period during which stock acquisition rights
From February 1, 2008
may be exercised
To September 1, 2015
-Situation of possession by the Company’s
directors and auditors

Number of stockacquisition rights
Directors (notincluding outside
directors)

Number of subject
sharesNumber of holders

60,0001

600Outside directors

-

-

-

Auditors---(iii) Stock acquisition rights granted by the resolution by General Shareholders’ Meeting
held on March 31, 2006 (6th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
130-Number of shares subject to stock acquisition 13,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,000 yenstock acquisition rights-Period during which stock acquisition rights
From April 19, 2008
may be exercised
To March 30, 2016
-Situation of possession by the Company’s
directors and auditors
Number of stockacquisition rights

Number of subject
sharesNumber of holders

Directors (notincluding outside
directors)

-

-

-

Outside directors

-

-

-

Auditors

20

2,000

1

(iv) Stock acquisition rights granted by the resolution by General Shareholders’ Meeting heldon March 31, 2006 (7th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
1,560-Number of shares subject to stock acquisition 156,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,500 yenstock acquisition rights-Period during which stock acquisition rights
From July 2, 2008
may be exercised
To March 30, 2016
-Situation of possession by the Company’s
directors and auditors
Number of stockacquisition rights

Number of subject
sharesNumber of holders

Directors (notincluding outside
directors)

500

50,0001

Outside directors

250

25,0003

Auditors

10

1,000

1

(v) Stock acquisition rights granted by the resolution by General Shareholders’ Meeting heldon March 31, 2006 (8th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
190-Number of shares subject to stock acquisition 19,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,500 yenstock acquisition rights-Period during which stock acquisition rights
From December 2, 2008
may be exercised
To March 30, 2016
-Situation of possession by the Company’s
directors and auditors

Directors (notincluding outside
directors)

Number of stockacquisition rights

Number of subject
sharesNumber of holders

-

-

-

Outside directors
Auditors

100-

10,000-1-(vi) Stock acquisition rights granted by the resolution by Extraordinary Shareholders’Meeting held on December 1, 2006 (9th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
540-Number of shares subject to stock acquisition 54,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,500 yenstock acquisition rights-Period during which stock acquisition rights
From January 24, 2009
may be exercised
To January 23, 2017
-Situation of possession by the Company’s
directors and auditors
Number of stockacquisition rights
Directors (notincluding outside
directors)
Outside directors
Auditors

Number of subject
sharesNumber of holders

50,000

1

500
-

30

3,000

1

(vii) Stock acquisition rights granted by the resolution by Extraordinary Shareholders’Meeting held on December 1, 2006 (11th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
250-Number of shares subject to stock acquisition 25,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,500 yenstock acquisition rights-Period during which stock acquisition rights
From March 3, 2009
may be exercised
To March 2, 2017
-Situation of possession by the Company’s
directors and auditors
Number of stockacquisition rights
Directors (notincluding outside
directors)

Number of subject
sharesNumber of holders

10,0001

100Outside directors

-

-

-

Auditors---(viii) Stock acquisition rights granted by the resolution by Extraordinary Shareholders’Meeting held on December 1, 2006 (12th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
730-Number of shares subject to stock acquisition 73,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,500 yenstock acquisition rights-Period during which stock acquisition rights
From August 29, 2009
may be exercised
To August 28, 2017
-Situation of possession by the Company’s
directors and auditors

Number of stockacquisition rights

Number of subject
sharesNumber of holders

Directors (notincluding outside
directors)

410

41,0001

Outside directors

180

18,0002

Auditors

50

5,000

1

(ix) Stock acquisition rights granted by the resolution by Extraordinary Shareholders’Meeting held on December 1, 2006 (13th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
1,210-Number of shares subject to stock acquisition 121,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,500 yenstock acquisition rights-Period during which stock acquisition rights
From August 29, 2009
may be exercised
To August 28, 2017
-Situation of possession by the Company’s
directors and auditors
Number of stockacquisition rights

Number of subject
sharesNumber of holders

Directors (notincluding outside
directors)

50

5,000

1

Outside directors

120

12,0001

Auditors---

(x) Stock acquisition rights granted by the resolution by Extraordinary Shareholders’Meeting held on September 30, 2008 (14th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
1,870-Number of shares subject to stock acquisition 187,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,200 yenstock acquisition rights-Period during which stock acquisition rights
From October 1, 2010
may be exercised
To September 30, 2018
-Situation of possession by the Company’s
directors and auditors
Number of stockacquisition rights

Number of subject
sharesNumber of holders

Directors (notincluding outside
directors)

1,410

141,000

2

Outside directors

360

36,0002

Auditors

100

10,0001(xi) Stock acquisition rights granted by the resolution by Extraordinary Shareholders’Meeting held on September 30, 2008 (16th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
850-Number of shares subject to stock acquisition 85,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,200 yenstock acquisition rights-Period during which stock acquisition rights
From October 1, 2010
may be exercised
To September 30, 2018
-Situation of possession by the Company’s
directors and auditors

Directors (notincluding outside
directors)

Number of stockacquisition rights

Number of subject
sharesNumber of holders

-

-

-

Outside directors
Auditors

150-

15,000-1-(xii) Stock acquisition rights granted by the resolution by Extraordinary Shareholders’Meeting held on September 30, 2008 (17th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
710-Number of shares subject to stock acquisition 71,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,200 yenstock acquisition rights-Period during which stock acquisition rights
From March 19, 2011
may be exercised
To March 18, 2019
-Situation of possession by the Company’s
directors and auditors
Number of stockacquisition rights
Directors (notincluding outside
directors)
Outside directors
AuditorNumber of subject
sharesNumber of holders

67,000

2

670
-

40

4,000

1

(xiii) Stock acquisition rights granted by the resolution by Extraordinary Shareholders’Meeting held on September 30, 2008 (19th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
125-Number of shares subject to stock acquisition 12,500
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
1,200 yenstock acquisition rights-Period during which stock acquisition rights
From March 19, 2011
may be exercised
To March 18, 2019
-Situation of possession by the Company’s
directors and auditors

Directors (notincluding outside
directors)

Number of stockacquisition rights

Number of subject
sharesNumber of holders

-

-

-

Outside directors
Auditor100-

10,000-1-(xiv) Stock acquisition rights granted by the resolution by General Shareholders’ Meeting
held on March 30, 2010 (20th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
3,610-Number of shares subject to stock acquisition 361,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
600 yenstock acquisition rights-Period during which stock acquisition rights
From April 1, 2012
may be exercised
To March 31, 2020
-Situation of possession by the Company’s
directors and auditors

Number of stockacquisition rights

Number of subject
sharesNumber of holders

Directors (notincluding outside
directors)

2,510

251,000

3

Outside directors

1,000

100,000

3100

10,0001

Auditors(xv) Stock acquisition rights granted by the resolution by General Shareholders’ Meeting
held on March 30, 2010 (22nd series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights
1,530-Number of shares subject to stock acquisition 153,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
600 yenstock acquisition rights-Period during which stock acquisition rights
From April 1, 2012
may be exercised
To March 31, 2020
-Situation of possession by the Company’s
directors and auditors

Directors (notincluding outside
directors)

Number of stockacquisition rights

Number of subject
sharesNumber of holders

-

-

-

Outside directors
Auditors

200-

20,000-1-

(xvi) Stock acquisition rights granted by the resolution by General Shareholders’ Meeting
held on March 30, 2011 (24th series of stock acquisition rights)(as of December 31, 2011)-Number of stock acquisition rights-Number of shares subject to stock acquisitionrights-Amount paid for stock acquisition rights-Price of assets invested in the exercise ofstock acquisition rights-Period during which stock acquisition rights
may be exercised-Situation of possession by the Company’s
directors and auditors
Number of stockacquisition rights

1,920
192,000
Free of charge
700 yenFrom March 31, 2013
To March 30, 2021

Number of subject
sharesNumber of holders

Directors (notincluding outside
directors)

1,620

162,000

3

Outside directors

300

30,0002

Auditors---(Note) With regard to the items from (i) to (xvi), “Number of shares subject to stock acquisition rights” and“Price of assets invested in the exercise of stock acquisition rights” were reflected by the changes in thenumbers due to the stock split as effective from June 2, 2011.

(2) Stock acquisition rights distributed to the Company’s employees as compensation forservices during the fiscal year reported
Stock acquisition rights granted by the resolution by Board of Directors meeting held on
March 30, 2011
-Number of stock acquisition rights
1,950-Number of shares subject to stock acquisition 195,000
rights-Amount paid for stock acquisition rights
Free of charge-Price of assets invested in the exercise of
700 yenstock acquisition rights

-Period during which stock acquisition rights
From March 31, 2013
may be exercised
To March 30, 2021
-Conditions for the exercise of stock(i) The holder of stock acquisition rights
acquisition rights
must be in a status of director, auditor,
advisor, or employee of the Company or
any of its affiliates at the time of
exercise.
(ii) Other conditions shall be pursuant to
the Stock Acquisition Rights Allotment
Agreement executed between the
Company and the holder of stockacquisition rights, based on resolutions
by General Shareholders Meetings andBoard of Directors meetings.
-Situation of allotment to the Company’s
employees
Number of stockacquisition rights
Employees of thecompany

1,950 (note)

Number of subject
sharesnumber of employees
allotted

195,000 (note)

59(Notes) 1. Of the stock acquisition rights mentioned above, 30 units (3,000 shares) had been forfeited due to theretirement of employees.
2. With regard to the items from (i) to (xvi), “Number of shares subject to stock acquisition rights” and“Price of assets invested in the exercise of stock acquisition rights” were reflected by the changes in thenumbers due to the stock split as effective from June 2, 2011.

(3) Other important matters concerning stock acquisition rights
No stock acquisition rights were allotted to collaborators during the fiscal year reported.

4. The Company’s executives (as of December 31, 2011)(1) Name and primary matters of directors and corporate auditors
Status in the
Name
Company
Representative
Fuminori Yoshidadirector and president
Director

Osamu Ogawa

Director

Hiroki Maekawa

Director

Lowell Sears

Director

George Morstyn

Executive Auditor

Masahiko Goto

Executive Auditor

Koshi Ohizumi

Auditor

Saneaki Ichijyo

Auditor

Chikara Shimazaki

Responsibility and additional important posts
in other companies
Chief executive officer
Senior corporate officer, Head of research& development division
Senior corporate officer, Chief financial
officer, Head of corporate division
Sears Capital Management Inc.
Chief executive officer
G & R Morstyn Pty Ltd.
Chief executive officer

Attorney (Partner, Anderson, Mori &Tomotsune)
Certified public accountant(Representative, Shimazaki accounting
office)(Note) 1. Of the directors, Lowell Sears and George Morstyn are outside directors.
2. The auditors Masahiko Goto, Koshi Ohizumi, Saneaki Ichijyo and Chikara Shimazaki are outside
auditors.
3. The outside auditor Chikara Shimzaki is the independent officer who does not have the potential tocause conflict of interests against general shareholders, the position that Osaka Securities Exchange
requires us to appoint.
4. The executive auditor Masahiko Goto experienced accounting work for years and has high insight onfinance and accounting.
5. The executive auditor Koshi Ohizumi experienced accounting work for years and has high insight onfinance and accounting.
6. The auditor Saneaki Ichijyo is an attorney and has high insight on corporate legal affairs.
7. The auditor Chikara Shimazaki is a Certified Public Accountant and has high insight on finance andaccounting.
8. Changes in directors and auditors during the fiscal year reported are as follows:- The director Shuichi Matsuda resigned at the closure of General Shareholders’ Meeting for the 6th
Term held on March 30, 2011.
- The auditor Koshi Ohizumi was elected and assumed the position at Extraordinary Shareholders’Meeting held on June 30, 2011.
9. The Company has adopted the corporate officer system. The corporate officers as of December 31,
2011 are as follows:Status in the
Company
Chief executive
officer
Senior corporate
officer
Senior corporate
officer
Corporate officer

Name

Responsibility

Fuminori Yoshida-

Osamu Ogawa

Head of research & development division

Hiroki Maekawa

Chief financial officer, Head of corporate
division

Albert Qin

Chief scientific officer(2) Total amount of compensation to directors and auditors
Classification
Number of persons paid
Directors
6(Outside) 3
Directors
4(Outside) 4
Total
10(Outside) 7

Amount paid (thousand yen)
76,449(outside) 9,751
21,822(outside) 21,822
98,271(outside) 31,573(Note) 1. Salary for employee in the event of a director doubling as employee is not included in the above
amount paid to directors.
2. The maximum amount of directors’ compensation has been resolved as the annual amount of
130,000,000 yen at Extraordinary Shareholders’ Meeting held on August 3, 2005.
3. The maximum amount of auditors’ compensation has been resolved as the annual amount of
30,000,000 yen at Extraordinary Shareholders’ Meeting held on June 30, 2011.

(3) Matters concerning outside directors(i) Director: Lowell Sears
a. Situation of additional posts of executives at other companies and relationship between
such companies and the Company
He holds an additional post of chief executive officer at Sears Capital Management
Inc.
There is no business transaction between the above company and the Company.
b. Situation of additional posts of outside director at other companies
None to be reported.
c. Relationship with particular related companies, such as main customers
None to be reported.
d. Situation of main activities during the fiscal year reported
The rate of attendance at Board of Directors meetings was 100.0%

e. Summary of contents of liability limitation agreement
An agreement has been executed setting forth with respect to the responsibility in
Companies Act Article 423 (1) that in the event that it is with good intentions andthere is no gross negligence in such outside director's performance of his duties,
higher of the amount of 1,000,000 yen or above legally set forth in advance or theamount set forth in laws and ordinances at the maximum shall be borne.
f. Amount of compensation received from the parent of the Company or its subsidiaries
None to be reported.
(ii) Director: George Morstyn
a. Situation of additional posts of executives at other companies and relationshipbetween such companies and the Company
He holds an additional post of chief executive officer at G & R Morstyn Pty Ltd.
There is no business transaction between the above company and the Company.
b. Situation of additional posts of outside director at other companies
He holds additional posts of outside director at GBS Ventures and Proacta. He also
holds additional posts at The Victorian Comprehensive Cancer Centre (Deputy
Chairman), The Cooperative Centre for Cancer therapeutics (Director),
Translational Innovation Australia (Director), Bio21 (Director), CiradianTechnology (Member of SAB), and Victorian Cancer Agency (Director).
There is no business transaction between the above companies and the Company.
c. Relationship with particular related companies, such as main customers
None to be reported.
d. Situation of main activities during the fiscal year reported
Situation of attendance at Board of Directors meetings
The rate of attendance at Board of Directors meetings was 100.0%
e. Summary of contents of liability limitation agreement
An agreement has been executed setting forth with respect to the responsibility in
Companies Act Article 423 (1) that in the event that it is with good intentions andthere is no gross negligence in such outside director's performance of his duties,
higher of the amount of 1,000,000 yen or above legally set forth in advance or theamount set forth in laws and ordinances at the maximum shall be borne.
f. Amount of compensation received from the parent of the Company or its subsidiaries
None to be reported.
(iii) Executive Auditor: Masahiko Gotoa. Situation of additional posts of executives at other companies and relationshipbetween such companies and the Company
None to be reported.
b. Situation of additional posts of outside director at other companies
None to be reported.
c. Relationship with particular related companies, such as main customers
None to be reported.
d. Situation of main activities during the fiscal year reported(1) Situation of attendance at Board of Directors meetings
The rate of attendance at Board of Directors meetings was 100.0%(2) Situation of attendance at Board of Statutory Auditors meetings
The rate of attendance at Board of Statutory Auditors meetings was 100.0%.
e. Summary of contents of liability limitation agreement
An agreement has been executed setting forth with respect to the responsibility in
Companies Act Article 423 (1) that in the event that it is with good intentions andthere is no gross negligence in such outside auditor’s performance of his duties,
higher of the amount of 1,000,000 yen or above legally set forth in advance or theamount set forth in laws and ordinances at the maximum shall be borne.
f. Amount of compensation received from the parent of the Company or its subsidiaries
None to be reported.
(iv) Executive Auditor: Koshi Ohizumi
a. Situation of additional posts of executives at other companies and relationshipbetween such companies and the Company
b. Situation of additional posts of outside director at other companies
None to be reported.
c. Relationship with particular related companies, such as main customers
None to be reported.
d. Situation of main activities during the fiscal year reported(1) Situation of attendance at Board of Directors meetings
The rate of attendance at Board of Directors meetings was 100.0%(2) Situation of attendance at Board of Statutory Auditors meetings
The rate of attendance at Board of Statutory Auditors meetings was 100.0%.
e. Summary of contents of liability limitation agreement
An agreement has been executed setting forth with respect to the responsibility in
Companies Act Article 423 (1) that in the event that it is with good intentions andthere is no gross negligence in such outside auditor’s performance of his duties,
higher of the amount of 1,000,000 yen or above legally set forth in advance or theamount set forth in laws and ordinances at the maximum shall be borne.
f. Amount of compensation received from the parent of the Company or its subsidiaries
None to be reported.
(v) Auditor: Saneaki Ichijyoa. Situation of additional posts of executives at other companies and relationshipbetween such companies and the Company
None to be reported.
b. Situation of additional posts of outside director at other companies
He holds additional posts of Supervisory Director at Nomura Real Estate Office
Fund, Inc.
There is no business transaction between the party and the Company.
c. Relationship with particular related companies, such as main customers
None to be reported.
d. Situation of main activities during the fiscal year reported(1) Situation of attendance at Board of Directors meetings
The rate of attendance at Board of Directors meetings was 100.0%(2) Situation of attendance at Board of Statutory Auditors meetings
The rate of attendance at Board of Statutory Auditors meetings was 100.0%.
e. Summary of contents of liability limitation agreement
An agreement has been executed setting forth with respect to the responsibility in
Companies Act Article 423 (1) that in the event that it is with good intentions andthere is no gross negligence in such outside auditor’s performance of his duties,
higher of the amount of 1,000,000 yen or above legally set forth in advance or theamount set forth in laws and ordinances at the maximum shall be borne.
f. Amount of compensation received from the parent of the Company or its subsidiaries
None to be reported.
(vi) Auditor: Chikara Shimazaki
a. Situation of additional posts of executives at other companies and relationshipbetween such companies and the Company
None to be reported.
b. Situation of additional posts of outside director at other companies
None to be reported.
c. Relationship with particular related companies, such as main customers
None to be reported.
d. Situation of main activities during the fiscal year reported

(1) Situation of attendance at Board of Directors meetings
The rate of attendance at Board of Directors meetings was 100.0%(2) Situation of attendance at Board of Statutory Auditors meetings
The rate of attendance at Board of Statutory Auditors meetings was 100.0%.
e. Summary of contents of liability limitation agreement
An agreement has been executed setting forth with respect to the responsibility in
Companies Act Article 423 (1) that in the event that it is with good intentions andthere is no gross negligence in such outside auditor’s performance of his duties,
higher of the amount of 1,000,000 yen or above legally set forth in advance or theamount set forth in laws and ordinances at the maximum shall be borne.
f. Amount of compensation received from the parent of the Company or its subsidiaries
None to be reported.
Each outside director appropriately advised and raised questions regarding resolutions
and reports by Board of Directors based on high personal insight of businessadministration, and from a standpoint that was independent from business operations.
Each outside auditor appropriately raised questions to fulfill the function of managementmonitor for resolutions and reports by Board of Directors based on high personal insightof business administration from an independent and neutral standpoint, and aggressively
raised questions and expressed opinions regarding resolutions and reports by Board of
Statutory Auditors in order to execute highly effective audits.
5. Situation of accounting auditor(1) Name of accounting auditor

Ernst & Young ShinNihon LLC(2) Summary of contents of liability limitation agreement
None to be reported.
(3) Amount of compensation
Amount paid
Amount of compensation to accounting auditor concerning the fiscal
year reported
Amount of compensation pertaining to services set forth in Certified
Public Accountants Act Article 2 (1)15,500,000 yen

The total amount of money and property benefit to be paid by theCompany to the accounting auditor

15,500,000 yen

(Note) 1. The amounts of compensations for the audits conducted in accordance with
Companies Act and the audits conducted in accordance with Financial Instruments andExchange Act are not distinguished in the contract agreement between the Company andthe accounting auditor. Practically speaking, it is impossible to distinguish thecompensations for these two types of audits; therefore the total amount thereof is stated.
2. The Company does not engage the accounting auditor to perform duties other than
auditing stipulated by Certified Public Accountants Act Article 2 (1).
(4) Policies for dismissal or non-reappointment of accounting auditor
The Company shall propose an agenda regarding the dismissal or the non-reappointmentof the accounting auditor to Shareholders’ Meeting, by an agreement of or a request by
Board of Statutory Auditors, in general, if it is deemed to be difficult for the accounting
auditor to execute its duties adequately as well as the dismissal of the accounting auditor
by Board of Statutory Auditors in accordance with Companies Act Article 340.
6. Summary of contents of resolutions concerning the establishment of system to ensure
appropriate operations(1) Corporate system to ensure that directors, other officers and employees comply with laws
and ordinances as well as the Articles of Incorporation in the process of performing
their duties(i) The Company has its Representative Director and President to make thoroughly known
to all of its directors, auditors, and employees (including contract employees,
temporary employees and subcontract employees) its policy that any and all corporate
activities should be based on the spirit of compliance with laws and maintenance of
ethics (hereinafter "compliance") by repeatedly urging them to abide by the spirit of
the Corporate Action Charter.
(ii) The Company promotes the activities for compliance with a compliance committee
composed of the director in charge of corporate division as the chairman thereof andthe senior directors and directors of relevant departments as members thereof to act as
the center of such activities.
(iii) The Company makes efforts to find and cure any and all unfair acts and practices as
early as possible through a compliance hot-line permanently installed outside theCompany. The Company also receives consultation from its employees with regard tocompliance-related problems through its liaison window permanently installed within
the Company for the purpose of receiving such consultation.
(iv) The Company has its own internal audit office to act under the direct control of
President, which not only verifies the condition of maintenance and operation ofinternal control from the viewpoint of effectiveness and efficiency of business,reliability of various financial reports and compliance for the purpose of guaranteeing
the quality of corporate management, but also makes evaluation and gives necessary
advice and suggestion for improvement with regard to the appropriateness andeffectiveness of corporate risk management.
(v) The Company actively engages in community service activities and any other activities
deemed to be beneficial to society as a good corporate citizen. The Company also
resolutely opposes antisocial forces and organizations that threaten the order or safetyof society as a whole.
(2) Corporate system for maintenance and control of information as to the performance bydirectors of their duties
The Company has the head of general affairs as the person responsible for generalmanagement of corporate documents 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, aswell as in its 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 performs the business of risk control under its basic policy and related
rules for such risk control. Usually the Company's permanent risk-management
committee, which is chaired by the director in charge of corporate division, keeps anorganizationally traversing watch on the condition of risk control, and takes
appropriate measures on a whole-company basis, if necessary. In case of emergency,
the Company will temporarily set up its headquarters for such case with its
Representative Director and President to act as the chairman thereof, and takenecessary measures in accordance with decisions made by such headquarters.
(4) Corporate system to ensure the efficient performance by directors of their duties(i) Directors, other officers and employees perform their duties as provided in theprocedural rules for appropriate decision-making under the "Rules for the Board of
Directors" and "Rules for the Internal Approvals" and other similar regulations.
(ii) The Company regularly holds the executive management committee as provided in the“Rules for the Executive Management Committee” for the purpose to assist the soundand appropriate decision by the Representative Director and President.
(iii) The Company develops its long-term business plan, and operates and expands its

business in accordance with such long-term plan. The Company also predetermines
numerical targets for each business year for inclusion in such long-term plan, andconducts the evaluation of business results and the control of budgets in comparison
with such numerical targets. The Company reports to Board of Directors every monthon the state of achievement of such numerical targets.
(5) Corporate system for the control of the statutory auditor's assistant appointed at therequest of such auditor(i) The Company at present has no employee to act as an assistant of the statutory auditor.
The statutory auditor, however, may require the Representative Director andPresident to appoint such assistant, and if and when so required, the Representative
Director and President shall appoint such assistant as far as deemed necessary.
(ii) Any employee shall, if and when he/she is ordered by the statutory auditor to perform
audit-related tasks, not receive any instruction or direction from the director in charge,
the internal audit section or any other similar section with regard to such order as isreceived from the statutory auditor.
(iii)-1 Board of Statutory Auditors gives any and all job-executing directors and important
employees an opportunity of hearing individually from such directors and employeeswith regard to jobs in their charge respectively.
(iii)-2 Any director or other executive officer shall, if and when he/she finds any factwhich threatens to cause any remarkable damage or adverse influence to theCompany, promptly inform the statutory auditor thereof.
(iii)-3 Statutory auditors may attend Board of Directors’ meetings, the executive
management committee and other important meetings for the purpose of grasping theprocess of important decision-making and the condition of business execution.
(iv)Board of Statutory Auditors holds meetings for mutual exchange of views andopinions with the Representative Director and President and independent auditors
respectively.

<Reference>
Stock acquisition right the Company had granted in the past, of which total 8,785 granted tothe directors/employees currently in-service as listed below, had been waived by the holders
and cesser thereafter until the end of February 2012.
Series
4th stock acquisition right

No. of Ex-holder

No. of stock waived

Employee, 150

Director (no including outside directors), 1

600

Employees, 5

225

Employees, 4

110

Director (not including outside directors), 1

500

Outside directors, 2

200

Employees, 7200Outside director, 1

100

Employees, 380

9th stock acquisition right

Director (not including outside directors), 1

500

10th stock acquisition right

Employees, 10

240

Director (not including outside directors), 1

100

Employees, 380

Director (not including outside directors), 1

410

Outside director, 1

90

Director (not including outside directors), 1

50

Outside director, 1120

Employees, 15430

5th stock acquisition right
6th stock acquisition right

7th stock acquisition right

8th stock acquisition right

11th stock acquisition right

12th stock acquisition right

13th stock acquisition right

Directors (not including outside directors), 2

1,410

14th stock acquisition rightOutside director, 1

180

15th stock acquisition right

Employees, 27

1,390

16h stock acquisition rightOutside director, 1

150

17th stock acquisition right

Directors (not including outside directors), 2

670

18th stock acquisition right

Employees, 32

800

19th stock acquisition rightOutside director, 1

100

Total

8,785

Balance sheet(as of December 31, 2011)(Unit: Thousand yen)

Item
(Assets)
Current assets
Cash and deposits
Accounts receivable
Security
Merchandise andfinished goods
Prepaid expenses
Advance
Uncollectedconsumption tax
Other
Fixed assets
Tangible fixed assets
Building
Fixtures andequipment(Accumulated
depreciation)
Intangible fixed assets
SoftwareLease assets
Investments and Other
assetsFixed leasehold
deposit and security
depositLong-term prepaid
expenses

Total assets

Amount7,178,392
4,558,714
162,409
1,952,533

Item(Liabilities)
Current liabilities
Accounts payable
Lease obligations
Other accounts
PayableAmount645,746
308,953719
277,898

207,467

Income taxes Payable

19,07379,038
124,589

advance received
Other

1,382
37,7194,783
2,691

17,407
7,358

Long-term liabilities
Lease obligations
Allowance forretirement benefits
Total liabilities(Net assets)

32,410Shareholders' equity

6,606,110(22,360)

Capital stock

6,024,610

12,7309,541
3,189

Capital surplus
Capital reserve
Earned surplus

5,994,610
5,994,610(5,413,091)

69,571
24,067
77,702

2,092
650,529

47,564

Other earned surplus(5,413,091)

23,264

Earned surplus
carried forward(5,413,091)

24,3007,256,094(Note) Amounts are rounded down to thousands.

Treasury shares
Appraisal andconversion variance
Other marketablesecurities appraisal
variance
Total net assets
Total liabilities and net
assets

(17)
(546)
(546)
6,605,564
7,256,094

Income statement
January 1, 2011 to( FromDecember31,
2011 )(Unit: Thousand yen)

Item

AmountI. Net sales
II. Cost of sales

1,882,521
1,224,185

Gross Profit
III. Selling, General and
Administrative expenses

658,336
2,725,182

Operating (loss)
IV. Non-operating income
Interest income
interest on securities
Income from subvention
Other

863
2,559
51,891
1,068

V. Non-operating expense
Interest expenses
Commission paid

668
21,967

Net share issuing expense
Foreign exchange losses
IPO preparation costs
Ordinary (loss)
VI. Extraordinary loss
Impact of application of
Accounting standard for asset
retirement obligations(Loss) before tax
Corporate tax, local inhabitant tax,
and local enterprise tax
Net (loss)(Note) Amounts are rounded down to thousands.

(2,066,846)

16,721
9,895
35,66556,382

84,919(2,095,382)

5,331

5,331
(2,100,713)

3,800

3,800
(2,104,513)

Statement of changes in shareholders' equity
January 1, 2011
( ToFromDecember
31, 2011 )(Unit: Thousand yen)
Shareholders’ equity
Capital surplus
Capital stock
Capital reserve
Balance as of December 31, 2010

Earned surplus
Total
Treasuryshares Shareholders’equityEarned surplus
carried forward

Other earned surplus

3,710,830

3,680,830

2,313,780

2,313,780(3,308,577)-

4,083,082

Amount of change during the fiscal
year
Issuance of new shares
Net (loss)

4,627,560(2,104,513)(2,104,513)

Purchase of treasury shares
Changes in items other thanshareholders’ equity during the
fiscal year reported (net amount)
Net change in other items thanshareholders’ equity during the
fiscal year
Balance as of December 31, 2011

(17)

(17)
-

2,313,780

2,313,780(2,104,513)(17)

2,523,028

6,024,610

5,994,610(5,413,091)(17)

6,606,110

Appraisal and conversion variance
Other marketable securities
appraisal varianceTotal Appraisal andconversion varianceTotal Net assets

(18)

(18)

4,083,064

Balance as of December 31, 2010
Amount of change during the fiscal
year
Issuance of new shares

4,627,560

Net (loss)(2,104,513)

Purchase of treasury shares
Changes in items other thanshareholders’ equity during the
fiscal year reported (net amount)
Net change in other items thanshareholders’ equity during the
fiscal year
Balance as of December 31, 2011

(Note) Amounts are rounded down to thousands.

(17)
(527)

(527)

(527)

(527)

(527)

2,522,500

(546)

(546)

6,605,564

Notes on non-consolidated financial statements(Important accounting policies)(1) Standard and method for appraisal of assets
Marketable securities
Other marketable securitiesThose with market price
By market value method based on the market price on theaccounting date (appraisal variance shall all be handled bydirect input into net assets and the sales price shall becalculated by moving average method).
Those with no market price Cost method based on moving average method
Inventories
By cost method based on total average method (balance sheet
value is calculated by writing down the book value reflecting
decreased profitability).
(2) Method for depreciation of fixed assets
Tangible fixed
By straight-line depreciation method
assetsPeriod of depreciation for major items are as follows:(excluding lease assets)
Building 2 to 18 years
Equipment & fixtures 4 to 10 years
Intangible fixed
By straight-line depreciation method
assetsSoftware used by the Company are depreciated based on the(excluding lease assets)availability period in the company (5 years)
Lease assets
Depreciation is calculated on the straight-line method over thelease period as the useful period, assuming no residual value.
Non-ownership-transfer finance leases that commenced prior
to March 31, 2008 are handled by the accounting procedurepursuant to the method concerning ordinary lease transactions.

(3) Accounting method for deferred assets
New share issuing expense The full amount shall be handled as expenses at the time ofoccurrence.

(4) Standards for converting assets and liabilities in foreign currencies into Japanese yen
Monetary debts and credits in foreign currencies are converted into Japanese yen at the
spot exchange rate on the final day of the term, and exchange differences are handled as
profit or loss.
(5) Accounting method for provisions
Allowance for bad debt
For future loss due to bad debt, the amount of nonrecoverable
debt is estimated based on historical rate for general credit andinspected result for doubtful credit.
For the fiscal year reported, allowance for bad debt is notrecorded because there is no doubtful credit.

Allowance for retirement
benefits

It is accounted for based on an estimate of retirement benefits
liability as of the end of the fiscal year reported for the purpose
to provide for payment of employee retirement benefits.

(6) Accounting procedure for consumption tax and local consumption tax
By tax-excluded method.
(Change in accounting method)
Effective from the fiscal year reported, the Company has adopted new accounting standards,“Accounting Standard for Asset Retirement Obligations” (ASBJ statement No. 18, March 31,2008) and the “Guidance on Accounting Standard for Asset Retirement Obligations” (ASBJ
guidance No. 21, March 31, 2008).
Due to this change, operating loss and ordinary loss increased by 1,906 thousand yen andloss from tax and net loss increased by 7,238 thousand yen for the period. Also, fixedleasehold deposit and security deposit in investments and other assets decreased by 5,331
thousand yen.
(Notes on balance sheet)
None to be reported.
(Notes on income statement)
R&D spending included in general and administrative expenses

1,945,029 thousand yen

(Notes on statement of changes in shareholders’ equity)(1) Type and number of issued and treasury shares
Number of
Number ofshares at the end Increase during Decrease during
shares at the endof previous
the fiscal year
the fiscal yearof the fiscal year
fiscal year
reported (shares) reported (shares)
reported(shares)Commonstock

Issuedshares111,737

Treasury shares-19,019,163-

19,130,900

75

-

75

(Note) 1. Increase in number of shares outstanding of common stock by 19,019,163 shares is due to an increaseof 28,572 shares by third-party allotment, an increase of 5,100,000 shares by new stock issuance byoffering, and an increase of 13,890,591 shares by 100-for-1 stock split as at June 2, 2011.
2. Increase in number of treasury shares of common stock by 75 shares is due to the purchase of
fractional shares.

(2) Number of shares subject to stock acquisition rights issued as at the end of the fiscal year
reported
Common stock 1,512,000 shares(Note) Excludes stock acquisition rights of which the commencement date of exercise
period has not yet arrived.
(Notes on deferred tax accounting)Breakdown of main reasons for deferred tax assets anddeferred tax liabilities
Deferred tax assets
Overdepreciation of assets to be written off one-time
Overdepreciation of depreciable assets
Overdepreciation of deferred assets
Denial of R&D spending
Denial of trade account payable
Denial of other accounts payable
Denial of allowance for retirement benefits
Denial of local enterprise tax payable
Denial of asset retirement obligations
Loss carried forward
Sub-total deferred tax assets(Valuation allowance)(thousand yen)
1,702
763
265,563345,528
7,737
27,129
745
6,988
2,751
1,343,142
2,002,052(2,002,052)

Total deferred tax assets-

Deferred tax liabilities
Total deferred tax liabilities
Net deferred tax assets-(Notes on fixed assets used under lease arrangements)
Finance lease transactions other than those in which the ownership of the lease propertytransfers to the borrower(1) Amounts equivalent to original cost, accumulated depreciation, accumulated impairment
loss, and ending balance of leased properties
Classification

Amount equivalent to Amount equivalent toAmount equivalent tooriginal cost
accumulated depreciation ending balance(thousand yen)(thousand yen)(thousand yen)

Fixtures andequipment---

Software

-

-

-

Total

-

-

-

(2) Amount equivalent to balance at end of term for unexpired lease payments
Amount equivalent to balance at end of term for unexpired lease payments
Within 1 year
- thousand yen
Longer than 1 year
- thousand yen
Total- thousand yen(3) Paid lease payments, amount reduced from lease asset impairment loss, amounts
equivalent to depreciation and interest payment, and impairment loss
Paid lease
1,561 thousand yen
payments
Amount equivalent to1,437 thousand yen
depreciation
Amount equivalent
14 thousand yen
to interest payment(4) Method for calculating depreciation
By straight-line depreciation method with the residual value as zero and the lease period
as the period of depreciation.

(5) Method for calculating the amount equivalent to interest
By interest method with respect to the method of allocation to each term, with thedifference between the total amount of lease payments and the amount equivalent to theacquisition costs of the lease properties as the amount equivalent to interest.
(Impairment loss)
There are no impairment losses allocated to lease assets.
(Note) Non-ownership-transfer finance leases that had commenced prior to the first accounting period whenlease accounting was adopted are handled by the accounting procedure pursuant to the method
concerning ordinary lease transactions.

(Notes on financial instruments)(1) Situation of financial instruments(i) Policies relating to financial instruments
The Company procures the funds necessary in light of the pipeline development plan
(primarily by new share issuance through third-party allotment and offering).
Temporary surplus fund is invested on financial products which are highly safety andliquidity.
(ii) Description of financial instruments and their risks
Accounts receivable and advance related to joint development, both operatingreceivables, are exposed to the credit risks of customers and joint development partners.
Operating receivables denominated in foreign currencies suffer foreign exchange
fluctuation risks.
The company intends to select securities which have relative low risk for falling below
par. However, it might carry a finite risk.
Most of trade accounts payable and other accounts payable, both operating payables,
are due within two months. Again, operating payables with foreign currencies suffer
foreign exchange fluctuation risks.
Most of fixed leasehold deposit and security deposit are security deposits related torented offices and their redemption is subject to the credit risk of the lessees
Lease obligations related to finance lease transactions are primarily for the purpose offund raising for capital investment, and the maturity date is five years from theaccounting date at the longest.
(iii) Risk control structure for financial instruments
1. Control of credit risk (the risk of contractual default by business partners)

Regarding operating receivables, the Company’s marketing department regularly
monitors the conditions of major business partners and tracks the due date andbalance by account according to the credit administration rule so as to swiftly detect
the possibility of bad debts due to deteriorating financial conditions and reduce theiradverse impacts.
2. Control of market risk (fluctuations risks of foreign exchange and interest rates)
The Company deposits money primarily in financial institutions with high credit
ratings.
The Company attempts to avoid risk of marketable securities falling below par byselecting those with certain higher ratings and investment period in accordance with
the Company’s fund management rule.
Operating receivables and payables denominated in foreign currencies are settled at
the spot exchange upon receipt and payment because more risks are involved incarrying deposits in foreign currencies considering the frequency of occurrence.
3. Control of liquidity risk related to fund procurement (risk of insolvency on thepayment date)
The Company manages liquidity risk by the department in charge formulating andrevising the cash management plan in a timely manner based on the reports fromother departments.
(iv) Supplemental explanation related to fair market values of financial instruments
Fair market values of financial products include the value based on market price andalso reasonably estimated price. Fluctuations are factored in the calculation of fairmarket valued. As such, they may vary by using different assumptions.

(2) Matters related to fair market values of financial instruments
Book values on balance sheet, fair market values, and their differences as at December
31, 2011 are as follows:(1) Cash and deposit

Book values onbalance sheet(thousand yen)
4,558,714

Fair market values(thousand yen)

Differences(thousand yen)

4,558,714-(2) Accounts receivable

162,409

162,409-(3) Marketable securities

1,952,533

1,952,533-

124,589

124,589-

69,571

69,571-

6,867,818

6,867,818-(1) Trade accounts payable(2) Lease obligations(short-term)(3) Other accounts payable

308,953

308,953

-

719

719

-

277,898

277,898-(4) Income taxes payable(5) Lease obligations(long-term)
Total liabilities
Total derivativetransactions

19,073

19,073

-

2,691

2,691

-

609,336609,336

-

-

-

-

(4) Advance(5) Uncollectedconsumption tax
Total assets(Note) 1. Method of calculating fair market values of financial instruments and mattersrelated to marketable securities and derivative transactions
Assets(1) Cash and deposit, (2) accounts receivable, (4) advance, (5) uncollectedconsumption tax
These items are settled in a relatively short term and fair market values arenearly equal to book values; hence, book values are used.
(3) Marketable securities
The price of bonds is based on that indicated by financial institutions.
Liabilities(1) Trade accounts payable, (3) other accounts payable, (4) income tax payable
These items are settled in a relatively short term and fair market values arenearly equal to book values; hence, book values are used.
(2) Lease obligations (short-term), (5) lease obligations (long-term)Book value of lease obligation is used as proxy for its fair market value becausethere is proximity between the present value calculated by discounting the total
amount of principal and interest with the discount rate that is assumed for newly
entered lease transactions and the book value.
Derivative transactions
None to be reported as the Company is not engaged in any derivative transactions.
(Note) 2. Items with difficulty to assess fair market values
No market price exists for fixed leasehold deposit and security deposit (the bookvalue on balance sheet is 23,264 thousand yen) and it is deemed difficult to assessfair market value; hence, it is not included in the table above.
(Note) 3. Redemption schedule of monetary credits and marketable securities with maturity
after the closing date.
Classification

Within 1 year
(thousandyen)(1) Cash and deposit(2) Accounts receivable
Securities
Of which held-to-maturity
securities
(1)
Bond
(2)
OthersAdvance
Total

4,558,714
162,409

Longer than 1
year and shorter
than 5 years(thousand yen)－－

Longer than 5
year and shorter
than 10 years(thousand yen)－－

Longer than
10 years(thousandyen)－－

200,000
1,752,263
124,589
6,797,976

－
－
－
－

－
－
－
－

－
－
－
－

(Note) 4. Repayment schedule of lease obligations after the closing date.

Classification

Longer than Longer than Longer than Longer than
1 year and 2 years and 3 years and 4 years and Longer thanshorter than shorter than shorter than shorter than 5 years
2 years
3 years
4 years
5 years(thousand(thousand(thousand(thousand(thousand
yen)
yen)
yen)
yen)
yen)

Within 1
year(thousandyen)

Lease obligations(short-term)
Lease obligations(long-term)
Total

719

-

-

-

-

-

-

673

682

692

642

-

719

673

682

692

642

-

(Notes on for-rent properties)
None to be reported.
(Notes on profit/loss on equity method)
None to be reported.

(Notes on transactions with related parties)
Parent of the Company and major corporate shareholders

Category

Name ofcorporations

Major
corporate Cephalon,shareholde Inc.
rs

Major
JAFCO V2
corporate
Investment
shareholdeLP
rs

Percentage
Relationshipof votingwith related
Content ofrightspartiestransactions
owning/ow
ned
Equityinvestment
Subscription to
Business
13.5%
third-party
alliance for theowned
allotment
development(Note 1)and marketingof products
Subscription to
12.1%
Equitythird-party
owned
investment
allotment(Note 2)

Transaction
amountItem(thousandyen)

Remainingbalance772,240--

1,063,860--

Transaction terms and the decision-making policy thereof(Note) 1. This was a part of third-party allotment executed on February 17, 2011. The issue
price was determined with reference to the price calculated on the discounted
cash flow method.
(Note) 2. This was a part of third-party allotment executed on February 25, 2011. The issue
price was determined with reference to the price calculated on the discounted
cash flow method.
(Note) 3. JAFCO V2 Investment LP became a major shareholder of the Company on
February 25, 2011, and the transaction amount pertains to transactions thereafter.
(Notes on per-share information)(1) Net assets per share(2) Net loss per share
Average number of shares during
the term

345.28 yen
143.60yen
14,655,716 shares(Other notes)
The Company has overdraft and commitment line contracts with three banks in a business
relationship to efficiently procure working capital. Amounts of borrowing available based onthese contracts at the end of the fiscal year reported are as follows:Total amount of overdraft limit andcommitment line
Balance of borrowing outstanding
Net amount

1,350,000
thousand yen- thousand yen
1,350,000
thousand yen(Significant subsequent events)
None to be reported.

*The “Annual Report” and “Business Report” published on March 7, 2014 are the same
document.